WINDOW ON WALL STREET: Is retirement confidence warranted?

Posted by on Mar 27, 2014 in Uncategorized | 0 comments

The Employee Benefit Research Institute is a nonprofit, nonpartisan research organization that produces original research on retirement and post-retirement plans, income adequacy and the economic security of the elderly. EBRI researchers have frequently testified before Congress on health, savings and economic security issues. In its research paper, “The Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis,” published in January, EBRI reported the results of its computer model of retirement income adequacy — defined as the probability of having enough retirement income to meet usual expenses, such as housing and food, plus uninsured health care costs, including long-term care —were between 55 to 58 percent. Lower-income households have about an 84 percent chance of running out of money in retirement. More specifically, EBRI calculated that the average family needed another $48,000 in retirement assets to have a comfortable retirement. Any reduction or elimination of Social Security benefits increased the individual income shortfall dramatically and made it impossible to enjoy sufficient income throughout retirement. In its “Retirement Confidence Survey” just released, EBRI reported that confidence in retirement security was up, although Americans were ill prepared to retire comfortably. For the most part, worker savings remain low, and only a minority of workers seems to be taking the necessary steps to prepare for retirement. Not very surprising, the survey found confidence is highest among those who participated in either a 401(k) plan or an IRA. What is troubling is only 44 percent of workers or their spouses have tried to estimate the income needed to have a comfortable retirement. This level has held constant over the past decade reports EBRI. The large majority of workers or their spouses who indicate they lack a retirement plan of any type say their total assets are less than $1,000. For those with a plan, the average balance is $126,000. Over the past five years, workers with meager savings have increased by 50 percent. The idea of savings seems to be disconnected from the act of savings itself. To my mind, the most effective way to save is to budget saving as an expense and include saving as a consumption item. Beyond participation in a retirement plan there appears to be no significant reason to explain the confidence expressed. The warning signs about Americans lack of preparation for retirement have not changed. Workers were in no better position than they were in findings reported in previous EBRI surveys. Without calculating what their actual retirement needs are, there is nothing but guessing rather than assessing their situation. People make assumptions about how financially secure they will be in the future based on how well the economy or the...

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10 Health Services Commonly Excluded from Health Plans Under ACA

Posted by on Mar 18, 2014 in Uncategorized | 0 comments

While I do not sell health insurance, I do write on the topic from time to time. With the continuing changes in the ACA aka Obama Care it is useful to do a timely update. The new Affordable Care Act law does not mean everything will change. Experts say many services that were excluded prior to the law remain unchanged. They examined over 3,000 health plans in 2014 to see which services were the most commonly excluded. Their data showed that about 80 percent of exclusions were unchanged prior to and immediately after the new law taking effect. The following were the top 10 services most commonly excluded. 1. Weight Loss Surgery Nearly 60 percent of plans exclude this type of surgery following the new health care law taking effect. Prior to that, 90 percent of plans excluded weight loss surgery. Experts said they were surprised that 40 percent of programs still excluded the surgery and similar programs as well due to the high rate of obesity in the United States. However, counseling and screening for obesity is provided as preventative care without the need to pay upfront. 2. Eye Exams For Adults Slightly more than 60 percent of plans exclude this benefit, which experts say is disappointing due to the many benefits of eye exams. They point out that optometrists can detect diabetes and other health problems early on with this simple type of exam. Not many providers offer standalone vision plans. While 50 percent of large employers offered standalone dental plans, less than 20 percent offered standalone vision plans. 3. Private Nursing Care More than 65 percent of plans now exclude this benefit. However, that number improved within the span of one year. In the past, more than 90 percent of plans excluded private nursing care. 4. Infertility Treatments Experts said more than 65 percent of plans exclude fertility treatments. This number was down from before. The amount of plans excluding these treatments before the new law took effect was nearly 95 percent. Since the average cost of each cycle is over $12,000 and most people need multiple cycles, the procedure was widely inaccessible for most people before the new law’s introduction. 5. Regular Foot Care More than 70 percent of plans now exclude routine foot care, but the number was higher before the new law started. Researchers say that the law has a large influence on the individual market for health insurance, but they said the effect on most of the excluded services was less extensive. 6. Acupuncture Nearly 85 percent of plans exclude acupuncture, but more than 90 percent of plans excluded it prior to the Affordable Care Act. Researchers said that acupuncture is a...

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Monthly Ezine

Posted by on Mar 17, 2014 in Uncategorized | 0 comments

Monthly Ezine U.S. Government Looks at Life Insurance to pay for long term care In response to the growing need to address the absence of long term care plans by consumers, the U.S. Department of Health and Human Services Administration on Aging ( has tried to educate and inform Americans about their options for using life insurance policies to pay for all or part of long term care services. These options include using the life insurance death benefit to pay for long term care, critical illness, viatical benefits through acceleration of the face payout, and finally selling the policy into a life settlement. Two of five adult Americans are caring for an older family member who is aging in place with the number increasing each year as the population ages. While traditional long term care plans provide care today, now or in the near future, life insurance policies can be structured to do the very same by selling the policy to a third party and placing the proceeds from the sale into an irrevocable trust that pays benefits directly to the long term care providers who are chosen to provide care. By converting the death benefit into a long term care payment stream, helps seniors and their family members who are struggling to pay for in-home services and the costs of other private duty care givers. AARP Public Policy Institute published a 2013 study that concluded the supply of family caregivers will drop from seven potential caregivers for each senior over age 80 to four potential caregivers by 2030 and then drop even further to three potential caregivers by 2050. The private duty home care industry has a full blown lobbying effort to promote consumer choice and is backing the use of life insurance as a living benefit. If you have the “old” kind of life insurance now is a good time to see if the “new” life insurance can work for you and your loved ones. If you have not addressed the problem now is a good time to examine your options. What if? During the past 17 years Americans have watched our nation’s national debt grow from a budget surplus to almost $18 trillion in debt. The federal government shows no sign of correcting this problem treating the deficit and spending as a giant ATM machine with an inexhaustible supply of cash. Today the federal government spends 76% of the federal budget on Medicare, Medicaid, Social Security, and interest on the national debt. Assuming the Congress and the Administration will make no serious effort to reform entitlements and reorder spending, those costs will climb to over 92% of the federal budget by 2020. David Walker, former controller...

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WINDOW ON WALL STREET: Re-examining the 4 percent withdrawal rule

Posted by on Mar 13, 2014 in Uncategorized | 0 comments

One of my all-time favorite movies is “Groundhog Day.” Bill Murray finds himself in a time loop condemned to relive each day. Eventually, he begins to re-examine his life and ultimately performs positive acts. Then all ends happily. Within the academic world, the 4 percent rule in retirement is being set aside for a plan with greater income flexibility. Whether this approach is becoming mainstream is unclear to me at this time. The 4 percent safe withdrawal rule simply states that in retirement each year 4 percent can be withdrawn from a portfolio for income and subsequently increased by an additional 3 percent to cover inflation. Market turmoil in 1999 and 2008, combined with today’s low interest rates, have created an environment within academic circles and among advisers questioning whether the 4 percent rule is the best approach when stock market returns are volatile and bonds are not doing well. As in Groundhog Day, the 4 percent withdrawal rule is undergoing continual review. A “white paper” released by J.P. Morgan Asset Management advocates a dynamic approach to retirement income withdrawal strategies. Rather than sticking with 4 percent as an absolute, the approach is to use 4 percent as a rule of thumb because, in practice, people do not behave in the way the rule suggests they “should.” The J.P. Morgan withdrawal model emphasizes protecting purchasing power during retirement by providing inflation-adjusted income. It also is in opposition to the required minimum distribution approach, which determines withdrawal rate amounts based on life expectancy. The goal is to provide lifetime income without running out of money or exhausting capital. These two objectives can be contradictory priorities as there is a need to strike a balance between lifestyle needs and wants and longevity risks. The thrust of the Morgan study is to permit retirees to make income withdrawals from their portfolio throughout their lives, while also maintaining their lifestyles. Each person will define his or her lifestyle, as well as how to spend money in light of market performance. Before the idea of flexibility in the withdrawal rate began to gain some traction in the adviser community, professors Wade Pfau, Michael Finke and David Blanchett wrote papers criticizing the 4 percent rule and offering alternatives. Pfau, for example, sees the problem as whether to base retirement income on withdrawal rates based on historical returns or should the focus be on basic retirement needs? As he put it, “do you want to focus on the probability of failure or the magnitude of failure?” There are two schools of thought. One is probability, based on the 4 percent rule, and the other is ‘safety first’ — making sure retirement needs are met. The probability...

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Obama Budget Raises Questions About Social Security Claiming Strategies

Posted by on Mar 8, 2014 in Uncategorized | 0 comments

Obama Budget Raises Questions about fate of Claiming Strategies Robert Quiller, an American journalist wrote “as we grow older our bodies get shorter and our anecdotes get longer.” We now have a major update in Social Security Claiming Strategies. On page 154 of President Obama’s proposed budget there is a call for “eliminating aggressive social security claiming strategies.” When I called the SSA I was told they would get back to me. When they do I will let you know. It is unclear which strategies would be eliminated and how would they be implemented and accomplished. Would that mean the end of file and suspend? That would be tricky as this strategy was authorized in 2000 by the Senior Citizens’ Freedom to Work Act. If Congress needs to act it might take time. If it can be accomplish by executive order or some other administrative procedure the change can happen quickly. A quick change example is end of the redo or restart option through payback. If you want further information please shoot me an email or call me at 908-791-3831 ext. 102. Better yet if you have not taken me up on my offer of a free consultation do it before you lose out. Sincerely, Frederick (Fred) Saide, Ph.D. Founder and...

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