Retirement: How Ready Are You?

Retirement: How Ready Are You?

January 9, 2015 – “Apples, peaches, pumpkin pie….”

Remember that?

If you once lived in a house without satellite, cable or, heck, even color television, you likely recognize this familiar jingle as part of something you shouted, before opening your eyes, when you were “it” during a neighborhood game of hide-and-go-seek you played as a kid.

You might even recall the Jay & the Techniques song of the same title still occasionally played on oldies stations.

For my part, it’s the second stanza of the popular kid game phrase which came to mind as I finished taking The American College Retirement Income Literacy Quiz earlier today.

“…Who’s not ready holler I.”

As recently reported on CNBC and in several newspapers – USA Today, Washington Post, and Chicago Tribune among them – many of us from the Leave It to Beaver generation are simply NOT ready for retirement.

[CLICK HERE] to Quiz Yourself on Your Own Retirement Literacy

The New York Life Center for Retirement Income at The American College commissioned an online survey to “assess retirement literacy among individuals who are nearing or already in retirement.”

One of the most comprehensive surveys on retirement income literacy ever conducted, the RICP® Retirement Income Literacy Survey covered a host of retirement basics topics such as:

Social Security claiming options,

Medicare and health insurance planning,

Company retirement, IRAs and Investments,

Life insurance, Long-term care, Etc.

The “I’s” have it

Only 20% of those surveyed received a passing score of 60% or better.

ID-10094861With an average score of only 42%, the majority of survey respondents – and by extrapolation, Americans – are not knowledgeable enough about some very basic choices they’ll need to make leading up to and during retirement.

Fortunately, having spent the better part of 2014 earning my Retirement Income Certified Professional® designation through The American College, I had enough retirement knowledge fresh in my brain to be able to pass the quiz with flying colors.

I got a 91%.

But honestly, even though I’ve been in the insurance industry for nearly all of my adult life, until about a year ago I seriously doubt I would have scored nearly as well. I may not have even passed myself.

I strongly encourage you to take a few minutes to take the quiz for yourself to see how you fare.

Then, when you have questions about anything relating to your own retirement situation, don’t hesitate to call us to let us know how we can help you get ready for this important transition.

Because remember the song’s refrain:

“Ready or not, you shall be caught!”

(Image courtesy of stockimages at FreeDigitalPhotos.net)

2014 Reflections, 2015 Intentions

December 24, 2014 – A year ago, we prognosticated that 2014 would be “the year of the annuity” based on financial articles we were reading at the time.

Boy, was it ever!

Thanks to the faith and confidence our loyal clientele continue to place in us, 2014 was Finn Financial Group’s BEST YEAR EVER in terms of number of people we were able to help and number of structured settlement and other specialty annuities we placed on their behalf. This past year:

We helped claims associates close files while cost-effectively satisfying their obligations under the Medicare Secondary Payer Act;

We created dozens of structured settlements for minors which will help parents put their children through college;

We designed income tax-free settlement cash flows, many coordinated to work hand-in-hand with Special Needs Trusts to maximize their value, that will help catastrophically injured plaintiffs live their lives free of financial worry;

We designed and conducted training seminars and webinars for casualty companies, the CPCU Society, attorney groups and private law firms;

We helped plaintiff attorneys save money on taxes and secure their own futures by helping them structure their attorney fees;

We analyzed and evaluated options for baby boomers seeking to lock in their own future guaranteed cash flows with retirement funds and savings they didn’t want to risk losing and wrote a lot about the choices they face in The Finn Blog’s retirement section;

I personally re-dedicated myself to educational excellence with the goal of better serving my clients by earning my Retirement Income Certified Professional® designation through The American College and enrolling in the inaugural Master Structured Settlement Consultant course through the National Structured Settlements Trade Association.

All this in addition to the numerous mediations attended, consultations conducted, and questions answered combined to make this one very successful year.

We are extremely honored and grateful for the opportunities you give us to be of service.

Next Year?

So if 2014 was the year of the annuity, what does 2015 hold in store annuity-wise?

I’m so glad you asked!  Look for:

Longevity Annuities – We wrote about this our July 1, 2014 Finn Blog right after the U.S. Treasury announced longevity annuities were going to be an official part of the retirement landscape.  Fortune also has an article this month entitled “Why 2015 is the year for longevity annuities.”

Fixed Indexed Annuities  – The Insured Retirement Institute (IRI) believes this market-linked hybrid is poised to be a “bright spot” in annuity selection during the coming year.

Widely available for those doing regular retirement planning, earlier this year we told you about an indexed-linked structured settlement and structured attorney fee option, offered by Pacific Life, available to our clients who are settling personal, physical injury claims.

Oh, there will be more.  And we pledge to stay on top of it.  Whatever the year, whatever your need, rest assured we’re committed to being here to help you.

“Helping people with their guaranteed cash flow needs.  That’s what we’re all about.”

So as the 2014 Structured Settlement and Annuity season draws to a close, we leave you with all best wishes for a most joyous holiday season and a healthy, happy and very successful year ahead.

Skaters

Happy Holidays from Finn Financial Group!

IRS on S&P 500 Linked Structured Settlement: It Works!

September 13, 2014 – Every Friday morning, when the Internal Revenue Service releases its written determinations to the public as required by law, not much fanfare is usually made of the event.

(Insert chirping crickets soundtrack here)

But with the release of Private Letter Ruling 201435006 on August 29, 2014, everyone involved in the resolution of personal, physical injury claims will want to be aware of this particular PLR and understand its implications.

Stock Index Up IconThat’s the date the IRS publicly declared it would accord an S&P 500 linked structured settlement annuity the same tax treatment as traditional, non-indexed structured settlements.

As always PLRs cannot be cited as precedent even though they are commonly viewed as very strong indicators of how Treasury will interpret existing law.

Subscribers to the Finn Financial Group e-newsletter may recall our April 16, 2014 issue which introduced our clients to a then-brand new structured settlement option being marketed by Pacific Life called the . . .

Structured Settlement Indexed Linked Annuity Payment Adjustment Rider

Fulfilling our promise made to readers at the time, the anticipated PLR is now available on the irs.gov website.  (Just click the link in paragraph two)

Since we laid out the particulars of Pacific Life’s indexed option sufficiently last April, no need to go into the details again here. Just click the orange words above to read our newsletter.

Suffice it to say, though, that an S&P 500 linked structured settlement annuity, while not appropriate for everyone, can certainly fill a void in certain situations.

Case in point:  Several of our clients in their fifties have already benefited from indexed annuities we placed for them using their own personal retirement funds. 

Based on that success, we believe this option has unique advantages to plaintiff attorneys who structure their fees.

So don’t forget to ask for an indexed option next time you reach out for structured settlement illustrations.

Even though we’re certain traditional fixed structured settlements will still dominate the settlement planning landscape, cash flow that might increase in the future may prove too attractive to pass up for many.

Both Sides, Now . . . and Later

Angel HairI’ve looked at life from both sides now from win and lose and still somehow it’s life’s illusions I recall.

I really don’t know life at all.

August 29, 2014 – Almost fifty years ago, a blossoming 24-year old singer songwriter just a few years removed from her Saskatchewan homeland, wrote a song which would go on to rank, at No. 171, among the greatest songs of all time according to Rolling Stone.

Joni Mitchell says she drew inspiration for “Both Sides, Now” while on a plane reading Saul Bellow’s Henderson the Rain King and looking out the window at the clouds.  But I’m not convinced she wasn’t actually reading a copy of Vaughn & Vaughn’s Fundamentals of Risk and Insurance instead.

(Stay with me. You’ll understand the connection in a bit.)

After all, insurance is all about risk management and people paying money for protection.

They pay money for a life insurance policy that promises heirs will be compensated should an untimely death occur;

They pay a lump sum of cash in exchange for an annuity which promises guaranteed future lifetime income to protect them against the risk of running out of money in old age.

But before handing over any sum of cash for something as seemingly nebulous as an insurance promise, safety minded consumers usually need a key question answered first:

“How SAFE is my money?”

In a word, “VERY!”  

Even if we limit our focus to the worst financial catastrophe in recent memory, the Great Recession years of 2008-2011, you can’t help feeling secure about the safety of your purchase after considering these few facts:

FACT No. 1:  According to the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), only 8 life insurers were placed in liquidation during this time.

FACT No. 2:  Compare that to the 415 bank failures occurring during the same time period according to the Federal Deposit Insurance Corporation’s Failed Bank List.

Yet despite a superior track record, many people still avoid life insurers because they perceive banks to be the less risky choice.  These folks, like the song says, “really don’t know life (insurance) at all.”

This is where we circle back to Joni Mitchell because one of the most under-appreciated realities of life insurer’s business model lies in how they manage their risk.

Few people take the time to realize that life insurers, quite literally, look at life from both sides, now!  At least their actuaries do.

Consider this:

Every term life insurance policy is effectively a “bet” between you and the life insurance company about how long you will live.

That risk is priced according to the actuarial projections (i.e. “odds”) of you living beyond your normal life expectancy (NLE).

Same is true with annuities.  Except in reverse.  Here, you are betting you will “beat” the odds and live beyond your NLE.

But either way the life insurer’s chances of solvency (or, honoring their promise to you) are enhanced because they have you covered on both sides.  This is a big plus for consumer security.

Think about it:  For every life insurance policy that’s a “win” for them (i.e. they don’t have to pay out any death benefit proceeds) because a person lives longer than projected, there’s another person in their pool with an annuity who also lives a long life and the insurer “loses” because they are obligated to keep paying benefits.

In a way, the life insurer is “betting” on both teams where both teams win!

Extrapolate this across a large enough pool of policyholders underwritten by a highly rated life insurer with years of experience and you have a reasonably good assurance the life company will deliver on its promise.

In other words, your money is safe.

CAVEAT Understand that this general information does not extend to every single insurer and consumers still need to do their own due diligence on the solvency and viability of any individual life insurance purchase.  But as an industry, it’s got a great track record.

So whether you’re considering a structured settlement, retirement annuity, life insurance policy or any of a host of other offerings from this stable industry, remember how good your chances are.

Don’t let the clouds get in your way.

Treasury Green Lights New Retirement Safety Net Option

July 1, 2014 – Your retirement safety net options just got a whole lot better.

Effective today, 401(k) plan participants now can choose to dedicate a portion of their retirement funds toward the purchase of “longevity insurance,” otherwise known as a deferred income annuity, in an effort to shore up their retirement security.

Here’s a good summary of what’s taken place from today’s New York Times.

These final rules now permit individuals to hedge their bet against one of the greatest risks to their retirement security – running out of money!

woman_and_bicycleBecause the road of life is of unknown distance making it critical to prepare for what’s around the next turn, prudent travelers will want to make sure they pack enough money for their journey so they can pay whatever tolls they might encounter along the way.

It’s especially critical to make sure you have enough funds for later on down the road when other cash resources may have been used up.

Social Security helps by providing you with income you can never outlive.

Pensions, once the staple of the American workforce but now nearly extinct, do the same.

But beyond that, conventional retirement planning leaves it up to you to be smart enough or lucky enough to manage your accumulated wealth in such a way that it will sustain you throughout your retirement.

Many financial professionals recommend planning on spending down your wealth over a thirty, sometimes forty, year time period.

There’s one major problem with this approach:

You don’t know how long you’re going to live.

What if you hit the 30-year or 40-year mark and are still kicking?

Wouldn’t having a little extra “just in case” security help you sleep a little bit better at night?

Longevity insurance helps solve this problem and these new Treasury rules make it possible for you to create your own pension-like cash flows you can never outlive.

Let us know how we can help!  We’re happy to assist you with creating your own safety net with any retirement funds you want to set aside to secure your future.

By allocating as little as ten percent of your funds, you can create a future security blanket that will give added assurance that you can take care of yourself in your later years.

Fad soal agat!

Life Expectancy Calculator

April 7, 2014 – If you’re tired of those boring life expectancy tables that lump everyone into two categories – male and female – to estimate how long you’re most likely going to live, have we got a calculator for you.

Old_ManThe Living to 100 Life Expectancy Calculator is a free online, interactive tool which factors users’ responses to questions about family history, medical data, eating and social habits and so on to formulate a more individualized life expectancy estimate tailored to the input provided.

In addition to helping people see what their present statistical life expectancy might be, the calculator can serve as a “To Do’ list for people seeking to modify their lifestyle choices in hopes of improving longevity.

It can also serve as a wake-up call for those who don’t fully appreciate the longevity risk we all face.

(That’s why the guy in the purple sweater above looks so grumpy.  He failed to plan for the possibility of a long life.)

Only Social Security, pension income and life annuities can assure cash flow throughout life regardless of life expectancy.

You probably will receive Social Security.

You possibly have a pension.

But even if you have both, you almost certainly could benefit from purchasing some additional life annuity longevity protection with your retirement proceeds.

Although it’s been almost a decade since this website landed on Time magazine’s list of “50 Coolest” sites, we think it’s still pretty neat and hope you enjoy trying it out for yourself.

Then, when you realize you’re likely to be around a lot longer than you realized, give us a a call so we can help you analyze your unique situation and plan your transition to retirement so you won’t run out of money.

Our 5th Anniversary

shutterstock_98285102-1April 1, 2014 – Five years ago, in the midst of the greatest economic calamity in more than three-quarters of a century, Finn Financial Group opened its doors for business with a pledge to help others “achieve maximum financial success and security through the effective use of structured settlements and other specialty annuity products and services” designed to improve their lives.

Witnessing so many people suffer financial and emotional distress during The Great Recession despite years of following conventional wisdom and “doing everything right” factored heavily into the direction we chose for our company.

In short, we wanted to help people feel safe and secure about their future.

So with over 30 years of structured settlement, insurance and education expertise, Finn Financial Group was born and today we celebrate an important milestone anniversary and reflect upon those we’ve helped along the way by providing:

Structured settlements for physically injured plaintiffs and their families

Tax-advantaged structured settlements for non-physical injury claims

Structured attorney fees

Retirement annuities and 401(k) rollovers

Present value analyses for claims associates and attorneys

Service to the structured settlement, claims and legal communities through volunteerism, publications, educational seminars and webinars

We are most appreciative of those whose ongoing vote of confidence and encouragement has made it possible for our firm to flourish when so many  others didn’t survive these past few years.

We value the opportunity to be of service more than we can ever adequately express and look forward to continuing to serve as your trusted resource for years to come.

Please call anytime we can help you or anyone you know who can benefit from our area of expertise.

THANK YOU for allowing us to help secure your future and Best Wishes for YOUR continued success!

Social Security, Pensions and Annuities

February 28, 2014 – For years, many “experts” in the financial advice-giving business have cautioned clients to shy away from annuities when it comes time to getting serious about retirement planning.

Setting aside the possibility that this bias against annuities may have more to do with lack of education or a personal financial self-interest that lies elsewhere than a true dislike of annuities, one is left to wonder:

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Why can’t annuities and traditional investing coexist?

Well, it turns out they can.  And we believe they should.

Which makes “Breaking the 4% rule,” a white paper unveiled a few months ago by J.P Morgan Asset Management, so special.

Here are a few reasons why you may wish to take this paper very seriously:

It represents a break from the past – For many years, economic conditions and the mean age of Americans supported the 4% withdrawal approach to retirement planning.  But with baby boomers heading for the exits en masse over the coming decade and economic confidence iffy, strategies must adapt.

Its focus on Decumulation, not Accumulation – The mindset required for successful nest egg building is fundamentally different than the one needed when it comes time to preserve and draw down the retirement funds acquired over a career.

It actually embraces annuities – Honest!  Well, “embraces” may be a bit strong since you actually have to look for it.  “Recognizes the importance of” may have been a better choice of words.  But it is there and its inclusion speaks volumes.

We’re actually OK with the fact that the importance of annuities as part of one’s overall financial plan wasn’t placed front and center in this particular paper.  It was, after all, produced by J.P. Morgan Asset Management (emphasis added).

“. . . retirees with little or no lifetime income have a greater risk of poorer outcomes later in retirement than retirees with higher levels of lifetime income.”

But the J.P Morgan Dynamic Retirement Income Withdrawal Strategy which serves as the cornerstone of their paper, specifically considers lifetime income as one of their five key factors in achieving optimum retirement success.

“Greater lifetime income, from sources such as Social Security, pensions and lifetime annuities allows retirees to increase both their withdrawal rates and equity allocations.”

While the paper is a good read, we’re guessing most of you are less interested in analyzing formulae better suited for the set of Good Will Hunting than you are hearing about the highlights.

“Wealthier retirees should be more conservative in their asset allocation, with larger fixed income allocations.”

So we took the liberty of interspersing some of our favorite passages between the paragraphs above even if some of the conclusions seem a bit obvious.

A baby step maybe.

But J.P. Morgan’s apparent acceptance of the important role lifetime annuities, along with Social Security and pensions, play in addressing the longevity risk everyone faces, could signal a changing attitude toward this proven retirement security blanket.

We hope so.  Because we really think these doggone annuity things are the cat’s pajamas and deserve a place in everyone’s retirement strategy conversation.

(NOTE:  The Finn Financial Group does not provide investment advice and is not affiliated with J.P. Morgan)

Lump Sum Cautionary Tale

February 7, 2014 – You don’t have to look too hard to find stories about people who are worse off because they completely undervalued the concept of planning for the future.

People who choose today at the expense of tomorrow.

I’m talking about people who opt for a lump sum of cash instead of the periodic payment options available to them when they win the lottery, trigger their pension benefits or settle a personal injury claim.

For many, the allure of “having their money and having it now” is too powerful and they forfeit the overwhelming advantages that accompany guaranteed future income.

As we mentioned in one of our blogs last month, the completely independent, nonprofit, noncommercial National Endowment for Financial Education (NEFE) estimates that . . .

” . . . 70% of all people who suddenly receive large amounts of money will lose that money within a few years.”

Today, we have another one to add to our list of sources of lump sum misery courtesy of CNN/Money:

“Reverse Mortgages: Safer but far from risk-free.”

home_loanA few of our favorite quotes from the article:

” . . . many borrowers have run into problems because they took their payment as a lump sum and spent the cash too freely.”

” Homeowners who choose the lump sum option could see their payouts reduced by 10% to 18% . . . “

” Monthly payments usually work out better anyway, especially for those who live longer.”

Although Fred Thompson, Henry Winkler, and a host of other well-known paid endorsers are convincing when touting the benefits of reverse mortgages, the article does a good job highlighting the risks that remain.

Especially with lump sums.

Our firm does not offer reverse mortgages so we will refrain from advising on them other than to say make sure you understand what you’re getting into if you or someone you know is considering one.

We will, however, go out on a very sturdy limb reinforced by mountains of evidence to suggest that anyone choosing a reverse mortgage will be better off if they choose the lifetime income option instead of a lump sum.

Where’s the fourth bucket?

January 7, 2014 – Some seemingly sensible retirement planning ideas just don’t hold water when scrutinized.

Take Jane Bryant Quinn’s article, “Don’t Be Too Cautious,” appearing in this month’s AARP Bulletin for instance.

While the underlying premise of her article – allocating one’s retirement funds into a series of “buckets” designed to maximize retirement cash flow while protecting against loss – is well-intentioned, it leaves the reader with a false sense of the very security retirement is supposed to provide in the first place.

The web version of the article even carries the unfortunate and misleading headline “Securing Income for Life.”

In other words, her bucket has a hole in it.

Stocks and Risk

While stocks historically increase the value of one’s portfolio over long periods of time, they cannot be relied upon to deliver certainty, especially when it comes to timing their conversion to cash flow.

One of the more irresponsible passages surfaces in paragraph eight:

“By the time your bond bucket runs low, your bucket of stocks will have grown in value, maybe by a lot.”

Empty pocketsOr, maybe not at all.

Maybe your bucket of stocks will contain shares of companies managed by the same guys who ran Enron into the ground.

Maybe you won’t mind eating at soup kitchens or moving in with your kids if your stock bucket leaks.

Besides, how does Ms. Quinn know what stocks will or won’t do?  Or when?

The article is filled with similar assumptions that stocks “will” increase at just the right time and this recommended bucket approach “could” make your retirement “potentially” greener “if” certain things come to pass.

But words like could, potentially and if are not synonyms for security.

Ms. Quinn knows this and should have done the 50-plus crowd a better service by apprising them of the inherent risks of her strategy.

Sure, it might work out but who wants to take chances with money they can ill afford to lose?

Just add a fourth bucket

Perhaps if she simply added a fourth bucket to the mix, one for annuities, she could legitimately classify this as a true “Securing Income for Life” strategy.

After all, outside of pensions and Social Security, life annuities are the only way to guarantee you will never run out of money.

Even the wisdom of the long-touted 4% draw down strategy she hangs her hat on throughout the article is being called into question as this Wall Street Journal article, “Say Goodbye to the 4% rule,” from last March illustrates.

We don’t disagree that Ms. Quinn’s suggestion has some potential.

We aren’t against incorporating stocks into one’s overall retirement strategy.

We just firmly believe that annuities have earned the right to be included in ANY conversation about assuring lifetime security in retirement and were disappointed such a respected author would omit them from an article in a periodical wielding such powerful influence.

Finn Financial Group