The only thing unusual about the way September 11, 2001 unfolded for me in Orange County, California was the fact that my alarm went off at 4:00 o’clock. 

In the morning.

Not normally an early riser, I was scheduled to participate in a settlement conference in the Bay Area that day and logistics required such an early wake-up call.   

Had I not been so expense conscious, I would have flown up the night before, stayed in a hotel, dined at one of the infinite number of excellent restaurants in San Francisco and returned after the conference. 

But my thrift convinced me the better option was driving to Riverside County where I could catch the first flight out of Ontario (John Wayne Airport has a curfew preventing planes from departing before seven o’clock in the morning) and return the same day.

The forty-five minute drive to the airport was typical.  It was early enough that traffic was not a problem and I listened to my local sports talk radio station to see what scores or trades I might have missed from the night before.

But I was running a bit late.

It was going to be tight but I pulled into a reasonably close parking space, quickly grabbed my computer, walk-ran to the terminal, dashed up the stairs to my gate, presented my driver’s license, and answered the silly obligatory security questions (“Are you carrying any firearms?”) before finally catching my breath.

“Whew!  Just made it,” I smile-commented to the gate agent as most of the other passengers were finishing boarding.

While waiting for my boarding pass, I glanced up at at the television monitor tuned to CNN and caught a glimpse of World Trade Center showing smoke flowing out of some of the windows. 

“Wow!  Looks like a pretty bad fire,” I thought to myself as I headed down the jetway, the last passenger to board. 

The clock read 5:48 a.m.

The Southwest flight to Oakland always takes a pretty reliable eighty minutes, the carrier priding itself on its on-time arrivals and departures.  As soon as the plane lifted off, I eased into my customary power nap.

About an hour into the flight, my bio-clock knew it was time to wake up as we’d be landing soon.  But as a stirred, I quickly sensed we were in a holding pattern.  I felt like Del Griffith in Planes, Trains & Automobiles as I mentally paraphrased one of his lines from the movie.  

“Six bucks says we’re not landing in Oakland.”

About twenty minutes after our scheduled landing, still high above land, the captain finally gave us an update.

“Ladies and gentlemen, we’re being re-routed to San Jose this morning.  Apparently some terrorists flew planes into the World Trade Center and there are still some planes that may contain hijackers . . . “

I have no idea what he said after that.  Talk about a message that gets people’s attention. 

Centre Court matches at Wimbledon could never generate as much head twisting as everyone scanned the plane, eyeing fellow passengers half-suspiciously for reassurance and a possible explanation.   

Were we, too, going to crash?  Was our time up?

A few minutes after that first announcement we learned we were going to be landing in Oakland after all.  Soon, we landed to what looked more like a Used Jet Lot than an airport.  No flights were departing and the gates were jampacked.

After a few oddly quiet moments with everyone getting caught up on the news once we deplaned, I realized this was going to be no ordinary day.  I also realized my return flight was going to be cancelled so I’d better work on some contingency plans.

I rushed to the Avis counter to get my car.  Standing behind a passenger and his wife who needed to get back to Texas being told there were no cars available, I awaited my turn.

“One full size vehicle returning this afternoon, sir?”

The wheels in my head turned. 

Were terrorists going to bomb the bridges?  Surely those would be optimum targets. 

Were planes going to be grounded for days? 

Will gas stations run out of gas? 

Will hotels be full if I’m forced to stay here?  I don’t want to end up at the Y.

“Sir?”

“Yes,” I lied, “yes, returning this afternoon.”

I knew full well I was not going to that settlement conference and I knew I was not returning my car to Oakland Airport.  I was going to immediately begin the six-and-a-half hour trek straight back to Orange County while it was still possible.

Once safely en route, I finally checked my voicemails to hear a frantic message from my distraught wife.  The news stations were announcing that some planes were still unaccounted for and it was very easy that day to expect the worst.

Her relief when I called to tell her I was okay was palpable.

I called to let the claims representative know I would not be joining her at the settlement conference in Santa Rosa.  To this day, one of less than a handful of cancelled business appointments in my career. 

Back at Ontario, the airport was on lock-down and I discovered my car had been towed.  It was unclear when I’d be able to pick it up.  Looked like the Avis-mobile was going to be mine for awhile longer.

I arrived safely back home to a world I knew would never be the same.

I was conscious of the fact that I now had a third “Do You Remember Where Were You When . . .” moment to add to the other two watershed events of my lifetime:  The Kennedy Assassination and The Beatles First Ed Sullivan Show Appearance.

But this was different.  I was older and this was different. 

Very, very different.

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Tax Savings Strategy Helps Save You Money, Secure Your Future

Background

In yet another example of the adverse consequences stemming from some implanted DePuy metal-on-metal artificial hip devices, a number of San Diegans claim their hip surgeries poisoned them.

ABC affiliate Channel 10 in San Diego recently featured a report which focused on 62 year-old hip replacement patient Tony Stauffer who describes his painful ordeal.  The link includes an embedded video segment of the news story.

Stauffer’s attorney, John Gomez, laments the FDA’s fast-tracking of the recalled DePuy devices which may have exacerbated the problem.  Mr. Gomez represents several dozen San Diego area plaintiffs pursuing damages against DePuy.

For a personal testimony on why our firm is so interested in this particular litigation, patients and attorneys are invited to watch a short video we produced for patients pursuing remedy.

Go to ASRHipSettlement.com to view the video on our firm’s YouTube channel.

For those lucky enough to have avoided joint replacement surgery thus far in their lives, a helpful article appeared recently in The Huffington Post.

Entitled 13 Must-Know Facts About Joint Replacements, the article shares some timely tips for those who are contemplating surgery.

While our firm continues to follow the DePuy Hip Recall with great interest and understands this article comes too late for many, we’re pleased to share this constructive news for those are understandably anxious about joint replacement surgery.

NC House:  $500,000 caps on MedMal Noneconomic Damages

Continuing a trend across the country, the North Carolina House voted to override Gov. Beverly Perdue’s veto of legislation that caps medical malpractice noneconomic damages at $500,000 for medical malpractice cases.

This North Carolina change tracks with similar tort reform efforts and court decisions recently occurring in Texas, Oklahoma, Pennsylvania, West Virginia and other states from coast to coast.

Expect this trend to continue.

Not surprisingly, different interests line up on different sides of this debate:

Insurance Industry:  Argues tort reform and caps are necessary to help keep premiums affordable.

Legislatures:  Argue tort reform is necessary to attract businesses who would otherwise flee states with “unfriendly” business climates.

Plaintiff Attorneys:  Argue caps artificially limit an aggrieved plaintiff’s ability to receive fair compensation and give some defendants a “free pass” since they can make business decisions favorable to their bottom line without regard to the public’s well being.

Although the DePuy Hip Recall is primarily a products liability exposure for parent company Johnson & Johnson, it’s reasonable to assume that any successful tort reform efforts will ultimately inure to the benefit of the defendant in this litigation and similar mass torts.

The hit HBO documentary Hot Coffee takes the subject of tort reform head-on.

In addition to showing how tort reformers manipulated the “jackpot justice” theme that emerged from the infamous McDonald’s coffee lawsuit, one of the segments in the film provides evidence that confutes the insurance industry argument that tort reform lowers premiums.

Whichever side of the debate you come down on, it’s a safe bet that we’ll see this capping trend continue until/unless enough money gets on the other side of the argument.

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.

Life/Health Industry Admitted Assets Increased 7.1% in 2010

Admitted assets for the top 200 writers of life/health insurance increased approximately $404 billion during 2010 according the most recent edition of Best’s Review.

Structured Settlement Markets Shine

Eight of the twelve life markets active in the structured settlement industry saw their admitted assets increase an average of 10%, more than 40% better than their industry peers.

BONUS Statistic:  Combined, these twelve life markets, with admitted assets in excess of $1.9 trillion, constitute approximately  36% of ALL the admitted assets for the entire U. S. life/health industry.

Safety, Security and Lots of Money

These data reassure clients who choose structured settlements that their faith in this alternative-to-cash is well founded.  Likewise, attorneys who structure their fees can also feel secure in knowing their hard-earned fees are backed by companies with lots of commas on the asset side of their ledgers.

Congratulations to our structured settlement life industry partners for serving as a beacon of hope amid a sea of financial gloom during this post-Great Recession period.  (Rankings in parentheses)

MetLife (1), Prudential (2), John Hancock/Manulife (3), American General/SunAmerica (4), New York Life (7), Pacific Life (15), Allstate (21), Symetra (38), Mutual of Omaha (43), USAA Life (48), Liberty Life Assurance Company of Boston (56) and Berkshire Hathaway (63)

We wish all these excellent life markets continued “struccess” and look forward to continuing to partner with them as we help our clients secure their financial futures.

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.

Recalled DePuy Hip Problem Growing in Ireland

Two recent articles further illustrate the far-reaching nature of the DePuy Hip Recall. 

The Irish Independent recently featured an article which claims 113 Irish patients have already endured two hip surgeries due to the faulty hips while as many as 3,500 might be next in line to suffer.

Further north, the Belfast Telegraph adds another 200 patients to the potential problem list with a partial article which promises a first person account of the suffering.

Worldwide, it is estimated that over 93,000 patients are potentially affected by the recall.   Johnson & Johnson, DePuy’s parent company, has tentatively set aside nearly one billion dollars to handle the lawsuits stemming from the defective device.

Our firm continues to monitor this matter with great personal interest.

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.”