Long Term Care in the Wall Street Journal

Just read a great article breaking down some of the issues surrounding Long Term Care Insurance.

http://online.wsj.com/article/SB10000872396390443890304578006581060363270.html?mod=googlenews_wsj

 Here are some of the highlights. 

Long-term-care insurance is the financial equivalent of gum surgery: something that is often seemingly necessary, but just as often avoided at all costs.
Now, to add to its unpopularity, soaring prices are prompting consumers to rethink how much coverage they need and to experiment with other types of policies.
 Long-term-care policies help pay for nursing-home, assisted-living and home care costs. In just the past year, premiums have risen by as much as 17%, according to the American Association for Long-Term Care Insurance, a trade organization for insurance agents.
 Yet the need for some kind of long-term-care planning remains greater than ever, experts say. Seventy percent of individuals over age 65 will require prolonged care at some point during their lives, according to the National Clearinghouse for Long Term Care Information website, which is maintained by the U.S. Department of Health and Human Services.\

Fortunately for those who hope to buy long-term coverage, a growing number of alternatives to traditional insurance are gaining in popularity. Sales of hybrid products—those that combine some type of life insurance with a long-term-care benefit—have been rising as traditional policies have faded. Limra says sales of such "life combination" products jumped 56% in 2011, the third consecutive year of double-digit gains.

Talking with one of my life insurance companies the other day about their hybrid products and they are a really neat tool to provide both a benefit to your children and offset some of the costs of Long Term Care.  

If you are interested in learning more or have any questions call us at 229-246-4483 or email me at andy@reynoldsjeffords.com

Summertime, Cake, and Life Insurance

Summer is over, and college students are heading back to campus to pursue their dreams. This is a special time of year when young adults get to choose their paths in life. Unfortunately, not everyone has college education as an option.

September is Life Insurance Awareness month. This year’s spokesperson is Buddy “Cake Boss” Valastro, the star of TLC’s popular reality television show “Cake Boss.” Buddy did not have the opportunity to go to college because his father prematurely died shortly after Buddy’s 17th birthday. Buddy had to drop out of high school to run his family’s business, which meant working 12 to 18 hours a day, six days a week and managing over 30 employees. 

Buddy says: “If there had been life insurance, I know things would have been a lot easier. I could have hired more people, worried less and had time to grieve.”  Watch his story here :  http://www.youtube.com/watch?v=0smkDFSGiZ8&feature=youtu.be

Buddy’s story has a happy ending. He has turned Carlo’s Bake Shop into a household name. He has learned from his father’s mistake and has purchased life insurance to protect his family’s needs. 

Life Insurance Awareness month is an excellent time to review your life insurance needs and coverage. At Reynolds-Jeffords Insurance we want to develop a long-lasting relationship with you. We would love the opportunity to sit down with you during Life Insurance Awareness month to put a plan in place that can protect your family’s financial future.

Please visit the Life Foundation’s website, www.lifehappens.org, to watch Buddy’s story.

Don't hesitate.  Take a few minutes.  Think about what you want out of life.  Think about what you want for your childrens' lives.  Call us at 229-246-4483.  Email us at info@reynoldsjeffords.com or come by our office on West Street, in Bainbridge.

Annuities vs. Stocks

Read an article about the Dow dropping today... Lots of concerns for the stock market these days - Fixed annuities may not return a huge percentage on your investment, but since they are guaranteed you will be getting something for sure, and if you invest in the wrong stock you could lose everything. If you still want to get a rate of return based on the market you could try fixed indexed annuities instead as well. Of course any wise investor understands the value of a balanced portfolio, so the comparison of annuities vs stocks is a simplified one because there is no reason you couldn’t have both an annuity, a handful of stocks, some mutual funds and a mix of bonds and other secure investments.

By the Way - We sell fixed indexed annuities - we feel that they are the perfect balance between growth and security.  

Reviewing Your Homeowner's Policy

When was the last time you updated your Homeowner's Insurance? Have you ever updated your coverage at all? These are important questions to ask yourself. If you have not reviewed and updated your homeowner's coverage recently there could be several reasons why you may now be underinsured.

Have you:

1. Recently Remodeled Your Home
2. Made a Big Purchase - Jewelry is the most common thing people overlook
3. Made Safety Improvements to Your Home - added an alarm, etc.
4. Made Changes in Your Household or Lifestyle - kids in college, empty nester
5. Have a New Furry Family Member

If you have done any of these recently to your home you may now be in need of an updated Homeowners Insurance policy.  Whether your coverages need to be adjusted up or down, it pays to take a look every so often.  Come by, call, or email us and we can get started.

Four Reasons Why You Can't Plan to Retire EVER!

It is impossible for you to plan for retirement using the approach that most educational and professional organizations in the financial industry teach. There are four reasons why you can't use classical financial planning strategies to retire:

1. You can't predict future inflation.
2. You can't predict future equity returns.
3. You can't predict future tax rates.
4. You can't predict how long you'll live.

... and neither can your clients.

To understand this more clearly, let’s look at each of these elements individually.

1. Inflation

Price inflation (the cost of goods and services) varies from year to year, and monetary inflation (the undue expansion of the money supply) is determined entirely by central banking policy and may influence price inflation significantly. You won't know what either inflation rate will be 20 years from now, or how it will affect you or your clients. You won't know the future cost of goods and services, and you won't know how much you need to save for their retirement at age 65, 67, 70, or any other arbitrary retirement age.

While many financial advisors expect inflation to be between 2 and 4 percent over the long-term, this is a wide fluctuation in and of itself and can make a dramatic impact on how much your clients' money is worth. If inflation is 0 percent, for example, then $1 would be worth $1 30 years from now. If it runs 3 percent, then that same dollar is only worth $0.40. What if inflation is higher than 3 percent? Lower than 3 percent? All of that impacts how much you need to accumulate for their future.

2. Investment returns

The traditional approach to retirement planning recommends that at least some of our money should be invested in equities. This naturally requires you (or your client) to be able to predict future investment returns so that the client knows how much to save, and you know what investments to recommend.

The problem with predicting stock market returns over the short-term is that the market moves unpredictably and is, for practical purposes, totally random. Long-term predictions are also impossible, and this is best understood through a "Monte Carlo analysis." If you haven't played with any of the planning software available these days, these simulators all use a "Monte Carlo" type of analysis that is supposed to randomize investment returns for your client. 

However, Monte Carlo simulators, and every other mathematical model that is predictive, have the same problem that no one likes to talk about. The software, and the very method itself, is entirely deductive. What does that mean? Well, you've probably heard of deductive reasoning before, right? A well-known deductive argument goes something like this:

All men are mortal;

Socrates is a man;

Therefore, Socrates is mortal.

All deductive arguments have two premises and a conclusion that is deduced from the first two premises. This is important in understanding the flaw in Monte Carlo simulators. On the surface, all deductive arguments make sense, but what you have to ask yourself is: how do I know the premises on which the deduction is based are true?

In other words, how do you know that "all men are mortal" and that "Socrates is a man?" If the only thing you're relying on is the deductive argument presented, you don't know. More importantly, you can't know. The deductive argument doesn't prove that "all men are mortal" and that "Socrates is a man." All it really tells you is that if all men are mortal, and if Socrates is a man, then "Socrates is mortal." So, how does all of this relate to Monte Carlo simulators?

Well, the simulator's math is perfect, but it relies on inputs that you give it. You must specify an assumed rate of inflation, an average rate of return, life expectancy, and a few other assumptions. How do you know any of the assumptions are valid? You don't. You can't. Like the deductive argument above, the only thing the simulator will tell you is that if inflation is a certain percent, and if you receive certain investment returns, and if you live to a certain age, then your retirement savings have a certain percent chance of supporting you to old age.

Here is a simplified version of what Monte Carlo would do for you. Let's say you invest $100,000 and earn an average of 12 percent annually. An average of 12 percent could look like this:

Yr 1 = 20% = $120,000

Yr 2 = 4% = $124,800

Yr 3 = -10% = $112,320

yr 4 = 24% = $139,276

yr 5 = 22% = $169,916

Now, let's repeat this example but use a straight 12% rate of return:

Yr 1 = 12% = $112,000

Yr 2 = 12% = $125,440

Yr 3 = 12% = $140,492

Yr 4 = 12% = $157,351

Yr 5 = 12% = $176,234

Now, let's compare that with another scenario involving one down year in which you lost a catastrophic 40% (similar to what many people went through in 2008):

Yr 1 = 25% = $125,000

Yr 2 = 30% = $162,500

Yr 3 = 20% = $195,000

Yr 4 = 25% = $243,750

Yr 5 = -40% = $146,250

Now, stretch this out over 20 or 30 years. All of these scenarios average 12%, but give you an actual compounded return that is all over the place. What if your average return is lower than 12 percent? How could you know that in advance? Even if you rely on past performance of the market, and guess 7 percent annually, that still doesn't solve the issue of when those returns are earned during your investment time horizon. The when is almost more important that knowing what the rate of return is because you need to buy low and sell high. You need to know when you can cash in their investments.

Monte Carlo simulators are not advertised as predictive of future investment performance, but they almost have to be (at least implicitly). How else would it calculate your probability of success or failure? It would have to rely on its ability to predict investment returns in order to generate its probabilistic scenarios. At the end of the day, these programs "look cool" but don't tell you anything useful or practical.

3. Taxes

This is fairly easy to understand. Taxes, of course, are determined by politicians and none of us knows who will be elected 20 or 30 years from now, much less in the next election. You won't know what tax policy will be, and you don't know how to minimize the impact of taxes 20 years from now.

4. Death

This one is pretty obvious, and it makes it impossible to predict how long you will need savings to last. Even if you use annuities to guarantee an income, there is the problem of not knowing how much total savings is needed to produce the income necessary for you to survive.

Next week, I’ll discuss why, while it's impossible to succeed at traditional retirement planning, it's not impossible to make a financial plan. 

This article was written by David C. Lewis

David C. Lewis, RFC, is the founder of Twin Tier Financial, a financial planning and coaching company based in Raleigh, N.C. To read more articles by David, or if you have any questions about this article, please visit: www.twintierfinancial.com.

Even During an ElectionYear...

"While the resistance of Republican governors has dominated the debate over the health-care law...a number of Democratic governors are also quietly voicing concerns about" the Medicaid expansion provision, as "at least seven Democratic governors have been noncommittal about their willingness to go along with" it. The Post notes that "the range of state leaders expressing unease suggests that implementing the law could be rough going, with divisions not always breaking along party lines." Meanwhile, the National Governors Association, as well as the Republican Governors Association and the National Association of Medicaid Directors, sent "a letter to Secretary of Health and Human Services Kathleen Sebelius this week with a voluminous list of queries."

Full Article Here - http://www.washingtonpost.com/national/health-science/2012/07/12/gJQAF4RAfW_story.html

Suze Orman HATES this!!

      If there is one thing we can count on in life, it’s change.  Life insurance is one of the best tools we can use to protect our families when an unexpected death could bring financial difficulties their way.

     Due to the ever-changing nature of our lives, choosing a life insurance policy with flexibility ensures that your family will have the right protection at the time they need it.  Universal life insurance offers that potential

     From marriage to a new home, to children or the loss of a job, a universal life policy can change as your circumstances change and provide effectively for your family in the event you’re no longer with them.  A term life policy provides benefits for only the “term” of the policy.  If you live beyond the term, the policy may be renewed if you are in good health and willing to pay a higher premium.  Otherwise, there is no coverage.

     In contrast, a universal life policy is permanent protection.  When it is purchased, it is intended to be in place for your entire lifetime as long as premium payments continue to be made.  The unique structure of a universal life policy allows you to add coverage when you have children, increase coverage when a second mortgage is taken on for a vacation home, or even decrease coverage in later years when final expenses are the primary financial goal.

     All of this can be done with one policy—a policy you can qualify for today, when you’re as young as you’ll ever be and hopefully in great health.   We represent over 27 different life insurance carriers, so we can narrow down exactly the policy that works for you and your unique situation.  That's just one reason to deal with an independent agency.

Detailed Analysis of the Supreme Court Decision

Here is more info... from the National Assoc. of Health Underwriters, which we belong to.
Very good breakdown of all the changes.

NAHU Members: Here is a detailed analysis of today’s Supreme Court ruling, courtesy of our retained counsel, Ernst & Young: US Supreme Court Upholds Affordable Care Act The US Supreme Court today (June 28, 2012) upheld the Affordable Care Act (ACA), ruling that the law’s individual mandate is a constitutional exercise of Congress’s power to impose taxes. With the Court’s decision, compliance efforts likely will move ahead at full speed with major provisions of the ACA becoming effective in 2013 and 2014. In a 5-4 decision, Chief Justice Roberts, joined by Justices Ginsberg, Breyer, Sotomayor and Kagan, concluded, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” In the Court’s analysis of the ACA’s Medicaid provisions, it held that it would be unconstitutional for the federal government to withhold all Medicaid funding in order to force states to comply with the Medicaid expansion. Chief Justice Roberts wrote, “Nothing … precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.” The Court ruled that the Anti-Injunction Act, which limits lawsuits challenging a tax before it is assessed, does not apply because Congress specifically provided that the penalty payment enforcing the individual mandate would not be treated as a “tax.” Notwithstanding acceptance of Congress’s penalty label for purposes of application of the Anti-Injunction Act, the Court ruled that for purposes of determining whether the individual mandate is constitutional, the penalty payment falls within Congress’s general power to tax and, therefore, is upheld. The decision arises from cases brought by the state of Florida (and joined by 25 other states), the National Federation of Independent Business, and several individuals challenging the constitutionality of the individual mandate and the Medicaid expansion. The cases were later consolidated. In their dissent, Justices Kennedy, Scalia, Thomas and Alito wrote that the law should have been struck down in its entirety. With the exception of the limitation on the federal government’s authority to withhold Medicaid funding, all provisions of the ACA stand and compliance efforts likely will move ahead at full speed. In preparation for the major coverage expansion to occur under the ACA in 2014, the Administration is expected to release a host of regulations dealing with the definition of minimum essential coverage, employer coverage and reporting requirements, and an array of new taxes and fees. Clients should be aware of provisions of the law set to take effect in 2013 and 2014, including those listed in the table below. Provisions of the Affordable Care Act That Take Effect in 2012, 2013 and 2014 2012 • Medicare hospital value-based purchasing program • Increase in physician quality reporting requirements in Medicare • Additional Medicare pilot programs on alternative payment methodologies, e.g., accountable care organizations • Increased requirements for hospitals to maintain not-for-profit status • Fees from insured (including self-insured) plans transferred to the Patient-Centered Outcomes Research Trust Fund 2013 • Increase Medicare payroll tax by 0.9% on high-income earners • Impose a 3.8% tax on net investment income of high-income individuals • $500,000 cap on health insurers’ deduction for executive compensation • Eliminate employer deduction for Medicare Part D subsidy • FSA limitations • Excise tax on medical device manufacturers and importers • Medical expense deduction floor increases to 10% • Nationwide bundled payment pilot begins in Medicare • Increased Medicaid reimbursement for primary care • Medicare physician comparison data available to the public • Reductions in Medicare payments for select hospital readmissions • Expanded coverage of preventive services by Medicaid 2014 • Employer mandate and individual mandate • Employer and insurer reporting requirements • New health insurance market reforms take effect • State health insurance Exchanges established • Premium tax credits and cost-sharing subsidies available to certain individuals in Exchange insurance products • Medicaid expansion to new populations (100% federal match to states for newly-eligible populations through 2016) • Annual fee on health insurers • Medicare/Medicaid DSH payment cuts begin • Independent Payment Advisory Board (IPAB) issues first report to Congress if Medicare spending exceeds growth target Post-2014 • Excise tax on high-cost employer-sponsored coverage (2018) Political reactions The Court’s ruling will not end the political debate over health care, which will remain a central issue in the 2012 elections and beyond. The law stands as the centerpiece of the domestic record of President Obama, who today said, "Whatever the politics, today's decision was a victory for people all over this country whose lives will be more secure because of this law and the Supreme Court's decision to uphold it." The President added, "With today's announcement it is time for us to move forward to implement and, where necessary, to improve this law." In comments in response to the ruling, presumed Republican presidential nominee Gov. Mitt Romney said, "What the Supreme Court did not do on its last day in session, I will do in my first day in office. I will act to repeal Obamacare." Following the release of the decision, House Majority Leader Eric Cantor (R-VA) announced that the House on July 11 will hold a vote on legislation to repeal the ACA in its entirety. The measure likely will pass the Republican-controlled House, but it is unlikely to advance in the Democratic-controlled Senate. Repeal of the ACA has been a primary focus of congressional Republicans and remains a central objective of many Republicans’ campaigns in the November elections. Efforts to repeal all or part of the law will remain difficult unless Republicans maintain control of the House, win the presidency, and win at least a majority in the Senate in the November 2012 elections. Republicans to date have not coalesced around a proposal to replace the ACA. Further efforts to control rising health care costs, including reforms to federal health entitlement programs and health-related tax expenditures, will be at the center of budget and deficit-reduction debates that are expected to dominate Washington after the November elections. Background on the law The Affordable Care Act was enacted in March 2010; it comprises the Patient Protection and Affordable Care Act of 2010 (which President Obama signed on March 23, 2010) and the Health Care and Education Reconciliation Act of 2010 (which the President signed on March 30, 2010). The primary goals of the ACA are to: (i) expand coverage to an estimated 32 million Americans without health insurance; (ii) reform the delivery system to improve quality and drive efficiency; and (iii) lower the overall costs of providing health care. To accomplish the goal of expanding coverage, the ACA mandates that all Americans maintain a minimum level of health coverage (the so-called individual mandate) or face a tax penalty. The law expands Medicaid coverage and provides federal premium tax credits and cost-sharing subsidies to assist low and moderate income individuals without affordable employer-sponsored insurance in obtaining health insurance through state-based insurance Exchanges. The ACA mandates, for the first time, that employers with 50 or more full-time employees provide certain minimum benefits or pay penalty fees. The law also implemented insurance market reforms, including a ban on exclusions for pre-existing conditions, premium rate restrictions, extension of dependent coverage through age 26, and mandatory coverage of preventive services. A mix of Medicare and Medicaid reimbursement cuts; provisions to reduce fraud, waste, and abuse in those public programs; other delivery system reforms; and a series of tax increases on individuals, corporations and the health industry are used to offset the cost of the law. For more information A video highlighting key elements of the Supreme Court's decision will be available on www.ey.com. Any U.S. tax advice contained in the body of this e-mail was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Small Business Health Insurance and ObamaCare

As a taxpayer, I'm upset.  As a member of the middle class, once again, I'm upset.  As a health insurance agent, I'm upset.  If I was a doctor, I would be upset.  I was certain that the individual mandate would not pass.  It won't impact many of the businesses I work with because they have less than 50 employees, and many of the regulations are aimed at businesses with 250 employees or more.  But as a taxpayer and citizen, we will all be impacted.

“Under PPACA, small-business owners are going to face an onslaught of taxes and mandates, resulting in job loss and closed businesses," says Dan Danner, president and CEO of the National Federation of Independent Business, in a statement issued shortly after the announcement by the Court.

I agree - everything is going to get more complicated and add to the burden's many businesses face.  

Others see it as a victory for small-business owners. Barry Moltz, OPEN Forum contributor and author of Small Town Rules: How Big Brands and Small Businesses Can Prosper in a Connected Economy,says that the decision furthers the notion that insurance should not be tied solely to where you work.

I disagree - not a victory

"With the changing nature of the very fabric of employment, this is a victory for solopreneurs and very-small-business owners who will no longer have to remain in a job or pay huge individual premiums to insure their families," Moltz says.

I disagree - solopreneurs and very small business owners would be crazy to quit their job and almost certainly start paying huge individual premiums

Implications of the Act

In essence, the Supreme Court's ruling affirms that the Obama administration's individual mandate is a constitutional law. As such, almost all Americans must buy health insurance or face a fine.

Limitations were imposed upon how much buy-in individual states must give to the Medicaid program, targeted at the disabled and low-income.

Possible effects of the decision for small businesses are twofold:

Lower health care costs. If Obama's plan works the way it's supposed to, and every American who can afford health insurance buys in, overall costs of coverage—and the premiums attached—should theoretically go down. That's because more participation means a deeper pool of payers, and a lower amount of risk represented by uncovered individuals.

Not gonna happen... When has government policy ever had the intended effect of Saving consumers money.  And even if we save money on our insurance premium, covering the huge influx of non-paying pool members with tax dollars will be a Lose for most middle-class taxpaying citizens.

Expensive fines for noncompliance. On the other hand, lower costs in general may be of little consolation to small businesses that exceed the Affordable Care Act's 50-employee threshold. In such cases, the "employer-mandate provision" kicks in. Fines for not covering those 50+ employees can ratchet up to $3,000 per employee per year.

$3000 per employee per year is chump change compared to the potential costs of insuring everyone in your company

Mike Periu, financial expert and OPEN Forum contributor, says that while the ruling leaves "great uncertainty" in regard to its impact on business operations and HR policies, for some the result will clearly be higher costs.

"What we do know is that payroll taxes, personal capital gains taxes and operating expenses will go up, especially for successful business owners," Periu says. "It also sets the precedent that taxation can be used as a penalty against consumers and business owners to induce them to buy things they may otherwise not want to buy."

Steve Caldeira, president and CEO of the International Franchise Association, says that the act "does not provide solutions to the cost and access issues it set out to address," and as such, his organization will "continue to work with Congress to fully repeal the law."

Here's the full article 

Health Insurance and Broccoli - What's the Connection?

Great Article on the current Healthcare debate.

http://www.nytimes.com/2012/06/14/business/how-broccoli-became-a-symbol-in-the-health-care-debate.html?_r=1&ref=todayspaper

(Personally, we love broccoli.)