Mark Brunell’s Career Earnings of $50 Million . . . Gone!

March 9, 2012 – With the NFL Scouting Combine recently concluded and Draft Day fast approaching, many college football players, no doubt giddy with anticipation, will soon be eagerly awaiting that life-changing phone call from an NFL team which will hopefully set them on the path to stardom and financial independence.

A select few will sign contracts worth millions upon millions of dollars they could only dream about only a few years earlier.

Many more will sign less bountiful, but still very lucrative, contracts commensurate with their talent and market value.

The lucky ones who remain healthy will parlay their talent into long NFL careers that will pay them an accumulated sum of money designed to ensure a lifetime of prosperity.

But for one such player who has “been there, done that,” the end result is shaping up to be far different than planned.

According to “Jets Quarterback Mark Brunell’s Catastrophic Financial Path,” the three-time Pro Bowler “blew all his money with lousy investments into nine businesses.”  Bankruptcy court filings reveal his plans to begin a $60,000 per year job as a medical sales rep once his playing days come to an end.

By all accounts, Mark Brunell is a great guy with a heart of gold and tremendous work ethic.  But his tale of woe is proof that neither these qualities nor athletic prowess on the gridiron assures anyone success with money matters.

Problem Not Isolated to NFL Players

Even though a disproportionately high percentage of former NFL players end up “bankrupt, divorced or unemployed” according to ex-Green Bay Packer Ken Ruettgers who helps retired players who are down and out, the problem is not unique to this demographic.

A comprehensive study of personal injury plaintiffs who reject structured settlement offers and accept cash settlements instead does not exist; however, stories about people who spend their settlements faster than anticipated abound.

Mark Brunell’s story is certainly not a happy one.  But at least he is young and can yet recover from his misfortune.  When plaintiffs are anticipating large personal injury settlements, it’s usually because their ability to support themselves in the future has been seriously compromised.

They cannot afford to take risks!

For this reason, a structured settlement should serve as the foundation of any individual’s post-settlement financial planning strategy.  It affords them the BEST opportunity to cost-effectively guarantee they will not outlive their money and end up penniless.

In its pamphlet, “Structured Settlements: Your Future. Guaranteed,” the National Structured Settlements Trade Association highlights several of the unique advantages structured settlements offer.

Retirees, Too, Benefit From Lifetime Income

In addition to personal injury plaintiffs, soon-to-be retirees looking to convert their life savings into guaranteed, secure cash flows should look to lifetime annuities which are the most cost-effective and least risky asset class for generating guaranteed retirement income for life, according to the scholarly work of two Fellows of the Wharton Financial Institutions Center in their article Rational Decumulation.

Let Us Help

Whether you’re in need of structured settlement expertise or seeking to roll-over your 401(k) or IRA, we can help.  As specialists in offering financial solutions with your long-term financial security in mind, we’re here to help.

Thank you for the opportunity to be of service!

Because Your Longevity Risk is Increasing, That’s Why!

With apologies to our younger readers, remember the 1977 Dannon commercial that linked the high centenarian population of then-Soviet Georgia to eating yogurt?

What a difference a generation makes!

When Congress passed the Social Security Act in 1935, average life expectancy at birth was only 62.81 years.  By 2050, that number is projected to rise to 83.86 according to data360.org which is a small group of non-partisan, “just the facts, ma’am” folks who like crunching numbers.

Further, in its article last November entitled “Who’s Old?  More turn 90 in U.S., redefining aging,” USAToday, citing research from the National Institute on Aging, reports that there are currently nearly 2,000,000 Americans aged 90 or older, up threefold from just thirty years ago.

So what does this mean for you and me?

For those without pensions, it means that following the conventional wisdom of investing retirement funds and withdrawing at a fixed rate, your chances of running out of money have just gone up.

Put another way, you need to either:

Hope you don’t live as long
Save a bunch more money
Re-budget to a lower withdrawal rate
Hope for higher returns

Or, take the easier way out and:

Buy an annuity!

More specifically, buy an annuity that provides guaranteed income for life.  Effectively, you can create your own “personal pension” that assures income you can never outlive.

And while rolling over your 401(k) proceeds into a lifetime annuity is a pretty good idea, those anticipating personal injury settlements have a unique opportunity to address their own longevity risk with guaranteed future cash flows that are 100% income tax-free!

Every week we’re helping people secure their futures with income tax-free structured settlements and pension rollovers.  It just makes so much sense for so many people.

Plus, many of the smartest attorneys I know routinely structure their attorney fees to address their own longevity risk on a  tax-deferred basis and are happier for their decisions.

We are passionate about this particular topic having found a plethora of evidence that leaves us little choice but to conclude that lifetime annuities are the absolute best way to ensure that any long life you live is a financially secure one.

For further reading, we hope you’ll find some of our past newsletters helpful:

Live Longer . . . Buy Annuities

A Paycheck for Life

Young Workers:  Make Mine Guaranteed

Income Floor Strategy for Retirement

Annuities Are The New Black

So here’s to a long life for you and yours!  Please let us know how we can help you create your own “personal pension.”

We’ll be here eating yogurt waiting for your call.

“Anyone can get old.  All you have to do is live long enough.”

— Groucho Marx —

For most, the realization starts to take root when you hit the age 30 milestone.

For others, it’s age 40.

But without a doubt, by the time that AARP application hits your mailbox at age 50, you begrudgingly begin to accept that some facets of your life just “ain’t what they used to be.”

• Maybe your eyesight begins to fade.
• Or any hair you have left takes on a founding fathers hue.
• You wonder when they started letting nine year olds drive cars.
• Scales begin lying to you on a regular basis.
• Sports skills wane:
• You can no longer catch up with a 90 MPH fast ball.
• Or dunk anything other than a donut

But just when you thought that aging was a passport to marginality and obscurity, some good news surfaces.

In his article Why geezers give the best investment advice, MarketWatch money and investing editor Jonathan Burton points out that “middle aged people make fewer mistakes with finances than those who are older or younger.”

Quoting one of the authors of the study, he goes on to suggest that you consider working with a financial professional between the ages of 43 and 63, because this represents the “cognitive sweet spot” for optimum financial decision making.

At this point in our blog, it’s worth a mention that the Finn Financial Group just so happens to be owned by a feller who falls smack dab into the middle of that sweet spot.  Maybe this is why so many clients continue to seek us out.

Or maybe it’s just because we know where to find the best early bird specials!

Either way, we’re happy to be validated and proud to be of service to all. 

Even you young whippersnappers are always welcome!

Center for Retirement Research at Boston College

Among the growing body of academic research focusing on retirement vulnerability, a Special Project of the Center for Retirement Research at Boston College provides additional insights into one of the challenges facing all of us who worry about living comfortably during retirement.

Running out of money.

This project, called the National Retirement Risk Index (NRRI) measures the share of retirees “at risk” of being unable to maintain their pre-retirement standard of living during their golden years.

In its October, 2010 Fact Sheet entitled The NRRI and Annuities, the project compares and analyzes three common strategies for converting one’s nest egg into cash flows necessary to live comfortably during retirement:

The Annuitization Approach:  Use life savings to buy an annuity which guarantees income for life

The 4% Draw Down Approach:  Invest life savings, earn interest or dividends and “draw down” 4% of the balance each year until gone

The Interest Approach:  Live off whatever interest one’s life savings can generate

The good news is that all three options still leave most people in fairly decent shape.

But by not annuitizing, some retirees increase their risk of running out of money by as much as 36% over some of the other approaches.

IRONY:  Those in the highest income brackets are at significantly greater risk of having to cut back during retirement than their lower income counterparts by not annuitizing.

In reality, a combination of all three of these strategies makes a lot of sense for most people.

But anyone who fails to consider annuitizing at least some of their nest egg is not paying enough attention to the new three r’s.

And we all remember what happened to kids in school who didn’t pay attention to the original three r’s.

The Annuity Puzzle

Why does human nature permit an individual to choose Option A over Option B even when overwhelming evidence assures even the most casual observer that Option B is the superior choice?

Ever chosen unwisely when dating?  Marrying?  Buying a car, a house or a stock?  Ever fail to follow a doctor’s advice?  Ever skip taking vitamins you know are good for you?

As a follow-up to our last newsletter, A Paycheck for Life, which focused on the value of income annuities as part of an overall retirement plan, the New York Times recently featured an article that delved even deeper into this particular quandary.

Entitled The Annuity Puzzle, the article contrasts the retirement choices of two twin retirees with identical net worth.

One retiree has a pension that provides lifetime monthly income.  He is very happy with his situation and has the peace of mind knowing he can never outlive his money.

The other retiree, whose money accumulated in a 401(k) over the years, could easily buy the same happiness and peace of mind by purchasing an annuity to meet his lifetime income needs.  But he balks.  As a result, he is less happy and has less peace of mind than his sibling.

Hence the article’s title, The Annuity Puzzle.

Much the same way people refuse to take vitamins even when they admit to their many benefits, fewer people buy annuities than could benefit from them.

This particular theme is one we continue to study and feel similar perplexity over.  In October of 2009, we wrote about the value of life annuities in our newsletter/blog entitled Live Longer – Buy Annuities which features an interesting mix of scholarly research and coincidental statistics leading readers to the conclusion that annuities are good for you.

In fact, the more we study the always-emerging academic research on this topic, the more we become convinced that the happiest retirees are going to be those who can sleep well at night knowing they’ve secured their future with life annuities.

So take your financial vitamins!  You’ll sleep better at night and, if statistics are accurate, you’ll live longer as a result.

GAO Report Emphasizes Annuities as a Smart Choice for Retirement Security

Last month, the United States Government Accountability Office (GAO), in its Report to the Chairman, Special Committee on Aging, U. S. Senate, made an extremely strong case for annuities in retirement planning.

Entitled Retirement Income: Ensuring Income throughout Retirement Requires Difficult Choices, this report was prepared in response to a Request for Information (RFI) published jointly by the Department of Treasury and Department of Labor early last year (75 FR 5253) as part of the government’s broad effort to promote retirement security.

The report could not have been more straightforward about its findings.  The opening sentence bluntly states:

“Financial experts GAO interviewed typically recommended that retirees systematically draw down their savings and convert a portion of their savings into an income annuity to cover necessary expenses, or opt for the annuity provided by an employer-sponsored DB pension instead of a lump sum withdrawal.” 

The authors go on to provide compelling evidence that income annuities help retirees avoid the following risks everyone faces when they retire:

• Risk of underperforming assets
• Risk of outliving one’s assets (Longevity risk)
• Risk of inflation diminishing one’s purchasing power (when an inflation-adjusted annuity is purchased)

Not surprisingly, the American Council of Life Insurers (ACLI) welcomed the findings and agreed with the conclusions.

                “This report demonstrates that for many people, annuities represent more than a choice – they are a necessity.”

Dirk Kempthorne,
President & CEO
American Council of Life Insurers

Annuity vs. “Draw Down” Strategy

Financial planners frequently recommend a “draw down” strategy for meeting one’s financial needs during retirement.

This strategy requires a retiree to allocate assets across various investments designed to earn a certain rate of return and then systematically withdraw enough each year to live on in hopes that rates of return, financial needs, portfolio balance and life expectancy will all align properly to ensure the retiree has enough money until death.

In effect, they self-insure their longevity risk.

This recommendation often makes a great deal of sense and can be part of an effective strategy but it requires some guesswork, particularly as it pertains to life expectancy.

The risk of living too long (and ending up broke) is very real given everyone’s increasing life expectancy, also referenced in the study.

In one of the most overlooked explanations on the case for life annuities, the study’s authors conclude, ” . . . it is more efficient to pool the risk of outliving one’s assets than to self-insure . . .”

That’s what insurance is.  That’s what annuities do.

A lot of people buying a lot of annuities ensures that those who do live “too long” will have the money they need when they need it.

Essentially it guarantees them a “paycheck for life.”

Seems people have a penchant for going “Back to the Future.”

“Old” ideas get a fresh coat of paint and are recycled for the next generation who embrace them as their own.

Just think of all the successful TV shows that focus on a particular historical period in time but are produced a decade or more after the actual era:

• The Roy Rogers Show
• The Untouchables
• Happy Days
• That 70’s Show
• Mad Men

Whether drawn by nostalgia or simply a re-evaluation of something that once was taken for granted, our gravitation toward these and similar shows teaches us much about our values.

Not unlike the the young worker in post-Great Recession America when it comes to retirement security as it turns out.

According to Charles Wallace, writing for Daily Finance in his article “Why Young Workers Want a Good Old-Fashioned Pension,” a recent Towers Watson survey revealed that young workers value certainty more than was previously believed.

” . . . the percentage of young workers who cited their pension
plan as a reason for staying with their current employer
jumped from 28% two years ago to 43% now.”

Charles Wallace,
Daily Finance

Pensions, once a staple in corporate America that lured so many young people to a particular employer were shunned in recent years as employees sought self-directed riches in the pension-replacement retirement vehicle, the 401(k), which came to dominate the employer retirement landscape.

But the statistics on defined contribution plans like 401(k)s reveal that they have been an overall poor substitute for pensions. The average 401(k) balance is only about $60,000 according to the Center for Economic Policy and Research.

In addition, according to the Employee Benefit Research Institute (EBRI), the share of employees in a traditional defined benefit pension plan has fallen from 62% in 1979 to just 7% in 2009.

The Towers Watson survey suggests this trend may have bottomed out and may soon be on the rise again.

The world seems to have become far less certain these past few years. It’s little wonder then that people are again longing for some good old-fashioned security.

Speaking of which, we can help!

In addition to our core business of providing structured settlement products and services to a broad spectrum of clients across the country, our firm regularly assists clients looking for other types of highly secure, guaranteed cash flows. We can help you with:

• 401(k) and IRA conversions to annuities:
• “Pensionizing” your nest egg;
• Structuring Attorney Fees;
• Structuring Sales of Appreciated Assets;
• Structuring Realtor and Business Broker Commissions;
• Annuitizing Savings;
• Structuring Celebrity Endorsements

For additional information on all we offer relative to retirement security beyond structured settlements, please check out some of our archived blogs and newsletters on these topics.

Wishing you continued success, thank you for the opportunity to be of service. Please call anytime we can help.

The same tax deferral benefit enjoyed by contingency fee lawyers for years is now available for another group of professionals often looking for a sensible tax break:  Business Brokers and Real Estate Agents.

This is terrific news for any realtor or business broker who has always sought a way to safely and conveniently defer taxes on commissions they earn for implementing deals for their clients.  The benefits to this method of planning are many:

• Deferring income taxes allows this group of professionals to balance out the highs and lows of a very cyclical business;
• Sums deferred earn pre-tax interest offering the same advantage as 401(k) and similar plans;
• Participants can arrange their income needs around marginal tax brackets to keep more of what they earn;
• Brokers can potentially avoid or reduce their Alternative Minimum Tax (AMT) bite;
• Those with long-range financial goals can secure their futures by arranging supplemental, tax-advantaged cash flows in their retirement years guaranteed by a highly rated life insurance company.

Typically, when a realtor or business broker facilitates a sale, they are paid a commission based on a percentage of the sales price of the business or property.  Commission is paid in the year of the sale at closing and the agent or broker promptly (and presumably begrudgingly) estimates the amount of this sum they need to set aside for Uncle Sam.

But now, thanks to a major life insurance company, successful agents and brokers can now arrange to more effectively manage their commissions.

Allstate Life, rated A+ by A. M. Best, announced today that they are rolling out this attractive option as an enhancement to the Structured Sale offering made available through a limited distribution channel several years back.  Through an arrangement with Allstate International Assignments, Ltd. which currently handles their Structured Sales offering, those who qualify can take advantage of this unique opportunity.

When compared to earning commissions, paying taxes and investing the remainder, some professionals estimate they would need to earn a rate of return well in excess of the historical stock market average just to equal what the Structured Commission pays (depending on assumptions made about future tax brackets).  The difference here, of course, is the lack of stock market risk since guaranteed payouts are considered “risk-free” in financial planning parlance.

CAVEAT:  Key to implementation is the phrase “those who qualify.”  The Business Broker or Realtor must be considered a “Service Provider” pursuant to Section 409A of the Internal Revenue Code.

But there’s more. 

Certain paperwork must be prepared by someone representing the life company (as of now, just Allstate) who has been authorized to implement these special-purpose transactions.  Because of the unique nature of this particular offering, the distribution channel has historically been limited to those familiar with the special paperwork and sequence of events which must be strictly adhered to in order for the matter to be properly consummated.  Do NOT assume your neighborhood insurance agent will be familiar with this.

So for now, since this particular missive has run longer than intended, suffice it to say “We Can Help!”  The Finn Financial Group is proud to be among a select group of firms in the United States chosen to help effectuate Structured Sales and the accompanying broker and agent commission deferral.  Call for an analysis or for additional information BEFORE the transaction is complete.  Because timing is everything, it’s critical the terms of the deferred commission be chosen before the sales agreement is finalize and the deal concluded.

You’ve spent a career laser focused on advocating for your clients.  You’ve tried cases.  You’ve negotiated settlements.  But now you’re thinking it may be time to “hang up the laces,” hand the reigns over to someone else and head for the barn.

Mixed metaphors aside, are you ready for this transition?

Risk is inherent in the life of any successful plaintiff attorney.  It’s what you’ve lived for.  And let’s face it.  If it was easy, anyone could do it.  Many don’t have the stomach for the uncertainty.   The competition.  You do.

Ironically, it is precisely this comfort with risk taking that leaves many plaintiff attorneys in a precarious position when they decide to retire.

Personal retirement savings accounts invested in funds promising growth potential may have been wise right out of law school.  But when retirement beckons, future happiness requires a philosophical shift in risk tolerance.  Your willingness to take risk, so attractive during your years as a practicing attorney, can obliterate your life savings if a shift away from risk is not considered.

The solution, according to an abundance of recent research, may be just an annuity away.

What is an Annuity?

Perhaps you’ve structured your attorney fees throughout your career.  If so, congratulations!  You understand the value of fixed annuities and have a jump start on the concept.  You’re a few steps ahead of the game.

But if you’re among the 70% of Americans who have no idea what an annuity is, you owe it to your future to watch the short video, What is an Annuity? from the Insurance Information Institute.

Fixed annuities can offer plaintiff attorneys the security they could never count on when complete strangers were deciding their client’s fate.

So, go ahead.  Direct your own verdict!  Look into getting yourself a fixed annuity.

“Make Your Money Last a Lifetime.”

That’s the title of a December 1, 2010 article by personal finance expert Jane Bryant Quinn in her most recent AARP Bulletin column “Financially Speaking.”

On a personal and professional level, I’m always drawn to articles about retirement planning in hopes of gleaning some new nugget of wisdom I can use for myself and our clients. But, frankly, I’m usually disappointed.

After all, how many times do we need to read about the basics of saving more, spending less, diversifying investments and cutting up credit cards? If it was only that easy, right?

But the last few paragraphs of this particular article caught my eye because the author describes the Income Floor Strategy as one of three popular methods of creating a lifelong stream of income.

According to Ms. Quinn, the Income Floor Strategy allows you to:

” . . . provide for your basic income needs by buying an annuity with lifetime payments that start at the date you expect to retire.”

She goes on to identify a 2010 study by Gallant Distribution Consulting Research which:

” . . . found that more than half of financial planners now prefer the bucket (another method she describes in the article) or income approach.”

Since I was unable to turn up a copy of the study she referenced after a cursory search of the Internet I cannot speak to any methodology used or even its authenticity; however, this conclusion tracks with a number of other studies we’ve written about in the past.

NOTE: For further reading, you may also like some of our archived newsletter posts:

• Live Longer . . . Buy Annuities
• Too Old for Financial Security?
• Annuities Are The New Black

One thing that cannot be denied: People crave financial security!

Our firm was founded with a commitment to helping people achieve long-term financial stability in their lives. We’re proud that the structured settlements and related specialty annuity products and services we offer have played a vital role in helping translate that goal into a reality for many.

Please call anytime we can help YOU secure YOUR future! Wishing you the happiest of holidays and best wishes for a prosperous year ahead.