Posts filed under 'Financial Planning'
Our Comment by J. David Lewis – For a good long while, many financial advisors have recommended long-term care insurance for almost every client situation. The articulated reasons are many. I have known of advisors who expressed concern clients may need long-term care and the advisor get blamed for not arranging the coverage, no matter what the resources of the client.
There have been a few well written articles to help understand who needs the expensive coverage and who does not. The expense seems counterproductive, when the articulated reason is preserving an estate for heirs. Premiums deplete estates with certainty. We do not know if there will be claims that preserve an estate. For people who want estate preservation, I usually say “Let’s gather your heirs to ask if they want to pay premiums from the estate they might get. They are the people to benefit from claims - if there are any.”
Now, we see people with extraordinary difficulty making claims. Recently, a client was dismayed to find that his policy would pay significant total claims for four years, but the only qualified benefit now is $50 per month. They do not need many available services now. After years of premiums, claiming $50 per month would begin using the 48 months total claim period. This situation is consistent with the following article.
By TARA SIEGEL BERNARD; Published: June 7, 2013 NYTimes.com
One of the big reasons people buy long-term care insurance is to avoid burdening a spouse or grown children when they can no longer care for themselves.
But some family members are shouldering another type of burden: one that involves piles of paperwork and repeated phone calls, as they are forced to navigate a labyrinth of requirements to collect benefits that the insured spent many years paying.
“There is no possible way an elderly person who is ill and needs help can possibly do this work,” said Fiona Havlish, who coordinated her father’s home care in Pottstown, Pa., before he died last year, a week after his 90th birthday. “It took six to eight weeks to get the insurance into place, and this was working on it every single day. It was an incredible amount of work.”
More via Fine Print and Red Tape in Long-Term Care Policies – NYTimes.com.
Contact J. David Lewis directly with DLewis@ResourceAdv.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986 and is selected to join its National Board of Directors on September 1, 2013. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 64890
June 11th, 2013
By J. David Lewis
I am writing to recommend a The New York Times, ‘Your Money’ column for anyone who expects college savings plans to provide all their children need to become independent. In financial planning, we see college savings plan discussions everywhere.
One of the more curious things I see is families who start paying for kindergarten with full expectations of funding the best in private schools through college – maybe graduate schools. While they are paying for the beginning steps, they often express concerns about saving specifically for college. It doesn’t seem to occur to them that they are on a steadily escalating annual education expense, with college only one more step on the long set of stairs. In my own case, when my son went from Webb School of Knoxville to The University of Tennessee, the annual direct cost of his education went down. His total support remained about the same, primarily because he moved out of our home.
Through the years, I have tried to convey these observations when discussing college savings. I remind people what they say on airplanes, “Put the oxygen mask on yourself before helping others.” People struggling with their own wealth accumulation, or even their monthly expenses, display considerable guilt that they may not save enough for their children’s first college pick.
These observations support my understanding that a sufficiently large and well structured net worth is much more important than saving for specific purposes. If you have a solid Net Worth Statement relative to your expectations; college, retirement, big weddings, travel and many other amenities of life are simply not problems. This is why we work to focus our client relationships on building assets (particularly investment assets) and reducing debts. Strong and growing net worth mitigates many financial concerns. Paying attention to its trajectory helps consider whether things we want are necessities, amenities or luxuries we really cannot afford.
With my observations as background, I came to an excellent ‘Your Money’ column by Ron Lieber of The New York Times – “From Parents, a Living Inheritance.” This quote, on helping adult children, really got my attention; “The parents of adult children don’t have good answers to this question; they simply write checks, if they can. Patrick Wightman, a postdoctoral fellow at the University of Michigan, points to data showing that nearly 60 percent of 23- to 25-year-olds report receiving some kind of financial assistance from their parents.” If you are worried about saving for your ten-year-old’s college, how does this feel?
Many times, clients have mentioned financial support for their children or grandchildren, with very little elaboration. We see evidence of support that is not mentioned. Again from the column – “Most people don’t like to talk about it, but the people you spend a lot of time with, the stories come out over lunch or a drink.” Apparently, something like 60% of young folks receive help from parents who rarely mention it to their friends. I wonder if parents would feel less lonely on this subject if they just talked as openly about it as they talk about college expenses.
Conversations about education funding have been silently replaced with supporting adult children. Ten years ago, these parents probably thought college expenses were an event on the horizon. How long should people expect to help their children? Another quote reads; “When they get in trouble, I don’t want them to go so far downhill that they’ll never get out.” How should we think about this issue when talking to young parents, who will have adult children someday, that may or may not need family assistance beyond college? How much should we warn them?
I asked Chris Brown, who is a Senior Finance Major at The University of Tennessee and a part-time employee of Resource Advisory Services, what he thought of Mr. Lieber’s column and “60% of twenty-something’s” receiving help from parents. He responded:
“I would say it depends on the capacity of the family’s financial ability to help the kids. If you’re talking mainly about parents who have the ability to help, I would think that 60% number would be higher. But I think that 60% shows how many parents CAN help as opposed to how many parents DO. In my experience, if they can they usually do. My generation seems to be spoiled more than most. That being said, I’m in the same boat as the 27 year old high school teacher. Being a first generation college student, my parents don’t have the means to help me and both my brothers. Like Ms. Wilson, I don’t resent those who do get help from their parents. I actually have a sense of pride in being independent and 100% accountable for myself. I feel like I’ll be better prepared in the long run. Probably a longer response than you were looking for, but you can imagine this is kind of a big dividing line between peer groups in the college atmosphere.”
A cynical view is that parents who can afford those “best schools” equal adult kids who get/need parent support for years after those schools. Parents who cannot afford those schools equal kids who live on the edge. Who knows who is better off? A short while before my mother died she said, “We just did the best we knew how to do raising you all. If we messed up, you have a long time to straighten it out.”
My 28 year-old son works freelance on video crews. I asked what he thinks his friends get from parents. He doesn’t seem to know much about the assistance they get. Generally, his friends don’t talk about these issues either, even with the parents supplying the aid. A conversation he described involved a young man who didn’t know how his health or car insurance is paid. The friend had reasonably steady work. All this failure to talk about these issues seems “out of whack.”
If the aid is given, without talking about what it means and where it is supposed to lead, the risk of helping the children remain dependent seems almost certain to increase. How can they become independent? A couple of years ago, I met three generations of a family on a remote Nebraska ranch. I bet those parents help their adult children in hundreds of ways and they all know what it all means to them.
When I have considered the tough decisions on assistance for my son, I have paid attention to how hard he works at making progress. I have been his business consultant over many lunches. This has kept me convinced his aid is probably moving him toward independence. His “gigs” keep getting more complex and frequent, with higher daily rates. His progress from two years ago is impressive. If he had a “day job,” he couldn’t develop the network so critical to this profession. He volunteered a few days on a movie, which lead to a series of his best paying jobs. Collecting from someone who didn’t pay an invoice was probably one of his better learning experiences. I hope he has time to straighten out whatever mistakes I have made.
It seems to still come down to the same fundamental solution. Build a strong Net Worth Statement, with ever increasing assets (particularly diversified investments) and decreasing debts. Along the way use tools like tax deferred retirement and tax advantaged education savings plans for efficiency. Be careful about burdening your enjoyment of life with “specific saving-purpose guilt.” All the while, find ways to enjoy your life. Make this philosophy the example for your children, so they can fix whatever you did wrong.
The Resource Advisory Services Mission Statement - Developing relationships that help people build and enjoy wealth, through our commitment to excellence in comprehensive financial planning services, where we gladly accept fiduciary responsibilities for understanding and serving each client with an exceptionally high level of ethical integrity.
Mr. Lieber finished “From Parents, a Living Inheritance” with mention of a family loan fund he more fully described a week later in another column titled “Borrowing From Your Family, by Design.” I look forward to meeting a family that wants to establish one of these resources for the future of their family and wonder if it might fit into my estate planning. We have five grandchildren now and who knows what they might need years from now?
Click here to read “From Parents, a Living Inheritance.”
Click here to read “Borrowing From Your Family, by Design.”
Contact J. David Lewis directly with DLewis@ResourceAdv.com. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 61283
October 11th, 2012
by J. David Lewis
Even in the days when our newsletters were paper, I promised myself I would not clutter readers’ lives unless I felt I had something significant to say. Some colleagues say we should buy content to contact people on-time every month. I don’t go along with the philosophy that writing takes too much time. Material written by others cannot really reflect Resource Advisory Services’ philosophy. Sometimes, I recommend something written by others, as I did in our last two newsletters – two months and four months ago. They can be found on the Resource Advisory Services Blog. The next may be in a few days or it could be awhile.
In a staff meeting last week, I was encouraged to describe my experience applying for Medicare. We hear a lot about concerns as people approach this process and little from people who have done it. I will get to that in a moment. The same day, I received the National Association of Personal Financial Advisors’ e-Newsletter with links to three excellent resources for finding financial advisors:
“The SEC just released a new resource entitled Investor Bulletin: Top Tips for Selecting a Financial Professional. The really exciting part is that they reference NAPFA’s Pursuit of a Financial Advisor Field Guide on the page of Additional Resources. You will note we are the only non-regulatory body mentioned.” The other link is CNN/Money’s “Ask How Your Financial Advisor is Paid” video. These links are worth sharing among people you know.
Now, for Medicare – Around June, a flood of Medicare supplement insurance offers began appearing in my mail. The vocabulary was foreign and the volume could puzzle anyone. They all implied that the decision on the plan is monumental. No wonder people feel overwhelmed with this stuff. I had heard that some prescribed drugs could lead to one company over the others but had little guidance otherwise.
Eventually, I decided to browse the Social Security website to educate myself a bit. Maybe I could learn how to read this stuff. That first visit didn’t give much useful information, except that I could apply for Medicare online. When I attempted it, I found I should wait until three months before my 65th birthday month – August for me. So, I turned to the insurance question.
I have probably had BlueCross BlueShield health insurance more than 85% of the time since I was first aware of health insurances – including my parents’ plan. So, I am inclined to stay with a company that has served me well. On the BlueCross website there were two Medicare plans that appealed to me. One cost nothing. The other appeared to be about $50 per month. Since I know the full cost of my employer provided coverage this was amazing. Yet, these estimates were without my prescription information.
There is a much more expensive BlueCross Medicare plan. Since I am satisfied I can handle the maximum out-of-pocket expenses for either of the less expensive plans, why pay someone to take this risk? Insure for the losses that would be devastating, not convenience. Sure, it will be inconvenient if events lead to spending the maximum out-of-pocket amount. I don’t know whether that will happen. If I elect to pay the higher premiums, those premiums are a certain expense.
I mentally set the whole thing aside, until the offers in my mail were more than normal one day and I was eligible to apply for Medicare. The link is www.Medicare.gov. On the opening page, two yellow rectangle buttons can get you started. “Apply for Medicare” should take less than thirty minutes. I don’t remember searching for information I couldn’t remember. Apparently most people can complete the whole application by following those steps. In my case, the last page said; “Your benefit application was received on … We cannot complete processing of your claim until we have received and verified all documents.”
They needed my birth certificate. The Social Security Administration was missing information from it. The young man helping me told me the information would have been collected if I had interacted with Social Security for almost anything in the past. He was very professional, almost caring. The wait to see him was reasonable, in a room that could handle many more than were there that day. I can remember Dad talking about my brand new Social Security card and signing it. I don’t remember ever going to a Social Security office. I still have the same cards, but they sent me a new one. It doesn’t look much different. The Medicare card should arrive soon, after which I can apply for Medicare supplement insurance. I was there about thirty minutes. It could have been much longer if that waiting room was full.
The young man also told me there is a tool for comparing supplement plans on www.Medicare.gov. This is the other yellow button on the opening page. Following it is easier than comparing plans on the BlueCross website. The tool needs basic information I could remember, plus data from my prescriptions. I breezed through it faster than the Medicare application. At the end, there was a list of the insurance companies and policies, with very clear information about total annual cost estimates, including out-of-pocket and premiums. For me, three vendors were obviously better than the rest. BlueCross was there with the two plans I found earlier. Premiums were slightly higher. I can sign up on that page as soon as I get that coveted Medicare Card.
I hope this will help calm those who approach the application. If nothing else, it should help you, or someone around you, toss all that useless mail.
Added as of October 13, 2012:
A client responded to my Medicare application story – “David, Welcome to the over 65 age group. Medicare can be a very confusing subject for a lot of people – what plan to take and which way to turn. If I had what AARP wastes on paper I could smoke those big cigars and drink the best wines.” So, I am adding a few words.
I came home one evening to find that someone had actually come to my house to “help” me decide on a plan. They left a brochure and business card. There had been a similar offer by phone. I wonder how much commission there is in selling these plans.
My Medicare card arrived and I apply for a supplement online. The application was straightforward. On this visit, I discovered my Medicare monthly premium will be more than the $99 I expected earlier. Income from work gets me one of those “tax breaks for the rich.” The supplement is still $50.
Amazingly, mailed brochures seemed to stop very soon. A curious one was from the company I chose online – for their more expensive choice. I first though it was paperwork to be completed, which may have inadvertently “upgraded” my application. The next day a letter from the correct plan and a three-page form arrived, to verify I would not be covered by other health insurance. There was also a 1 ½ inch stack of six booklets – postage over $5. The package tells me more current information may be available online.
I also received several pages of questionnaire from Social Security Administration, to determine whether I qualify for Medicare premium assistance. This is an adventure. I can’t wait to see what happens next.
Contact J. David Lewis directly with DLewis@ResourceAdv.com. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 61112
October 3rd, 2012
Our Comment by J. David Lewis – Believe it or not, I am glad to see services like these. Many people need and deserve financial planning help. Far too many have told us they didn’t think they had enough to be our clients, when we have been able to help them in many ways. A minimum fee structure, instead of requiring a minimum portfolio, permits us to help several clients who now have growing resources. We will do all we can to help those who are serious about improving their resources, even to the point of helping them find one of these services.
By EMILY GLAZER
You dont need a high net worth or complicated investments to create a financial plan.
There are a crop of new resources that let you get financial-planning services on the cheap. For a flat or hourly fee, a certified financial planner can help you develop a savings plan, get your budget in order and pay down debt. Enlarge ImageClose Andy Rash
But keep in mind that you get what you pay for—so dont expect any of the bells and whistles of a full-service financial-planning or brokerage firm. Some financial planners dont offer any investment advice. And most of the consultations are done over the phone and via email. Whats more, some financial experts warn that this isnt a solution for every investor since the quality of financial advice can be limited. And you may want to do some due diligence on the financial planner you are considering.
See if these tools will be useful for you via How to Find Financial Planning Help – WSJ.com.
Contact J. David Lewis directly with email@example.com or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 58522
April 1st, 2012
Our Comment by J. David Lewis – When I read this tonight, I was struck by how timely it is. Late in 2011, we prepared a relatively complex Recommendations Report for a couple interested in retiring a few years from now. Less than six months later, we learn the retirement date may be very soon, due to changes by the employer. No one could have predicted this change of expectation when we were working on the project. I am convinced the decisions were sound when they were made. Now, we are deciding what needs to be reconsidered. In our world, this sort of thing is not exceptionally unusual.
By Carl Richards
“Whether we like it or not, life is not static. We don’t live in bubbles. And even though one day may look very much like another, life is rarely the exact same every week let alone from year to year. Perhaps the basics stay the same — work, school, relationships — but little things change, and we learn to adapt to those changes.
We need to think the same way about money. Even after we make smart decisions life will continue to happen.
The decision to save money each month may need to change if someone loses a job. The decision to have another child may mean that you need to buy a new car sooner than planned. The decision to retire early may be put on hold after a health emergency. In each example, no one did anything wrong; life happened.”
Read Carl Richard’s article via There Is No Perfect or Permanent Financial Plan – NYTimes.com.
Contact J. David Lewis directly with firstname.lastname@example.org or share your thoughts on this topic below. He founded Resource Advisory Services in 1985. National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986. He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family. 57375
January 23rd, 2012