In addition to offering financial incentives to meet, they also touted their reputation as honest and old fashioned. The kicker to me was no service or management fees to go along with their planning services. As if all this was somehow going to be free and the planning they would provide would be without cost. As I read this, I could not help to think why so many people view financial advisors with feelings of skepticism. I understand that advertising means covering the benefits of what you provide but give me something that is believable. The whole advertisement screamed “too good to be true”! I wonder how many people responded saying yes I would love all of these benefits for free. Hey if I act now do I get a free toaster!?

Yes, this may sound harsh but I simply find this type of communication with the public a huge disservice within my profession as a financial planner. Many families want and need trusted advice concerning their financial future during retirement. They also want someone with whom they can depend on to shoot straight with them regardless of the circumstances. If this company would have disclosed how they were paid or what was required to get the benefits they were offering, I would have respected the offer. With this being said, here is a great way to see if your potential or current advisor really has your back.

I call this the “strings attached” discussion. What I mean here is what possible setbacks or trade- offs will have to be made in order to proceed with an offer or recommendation. Far too often, for fear of losing a sale or a client, many advisors never disclose the downsides of their planning options. Next time you are in a meeting, if you are not hearing any “strings attached” to get the benefit being discussed, it is time to pack up and find a new advisor. You should never have to ask “what are the downsides” in a meeting, they should be offered proactively from the person you are trusting to get you to the finish line.

Until next time…

Insurance companies are now offering annuities with additional income benefits to help cover the costs of long term care. Certain provisions in these policies provide considerable income for care at home or in a nursing facility. They also pay the income directly to you, in most circumstances, so you can control where the money is spent for care. Perhaps the biggest advantage is the lack of medical underwriting that is needed. Typically, underwriting only involves a financial review and whether you are currently receiving care in a facility. Again this could be an advantage to someone with previous health concerns or someone who does not like the “use it or lose it” approach with traditional long term care insurance.

Keep in mind however that you are using your money for this income benefit first. Also some plans may have a waiting period, along with proof of claim to generate the additional long term care benefit. With this being said, the guaranteed payouts from these plans could provide significant protection for you and your spouse if you are married. Income benefits may far exceed your initial funds invested and protect the rest of your estate. Also if the funds are not used for income, the cash value of the annuity is usually passed to the beneficiaries with interest.

There are several options to evaluate when using this strategy. Make sure you have a trusted professional who understands your financial picture as well as planning for long term care costs. This combination is your best defense to choosing the best plan for you and your family!

Develop a healthy morning routine – Yes, this could be said about anyone but I especially think this is important for someone who is retired or transitioning into retirement. I have seen many folks who, when retired, lose their morning routine because they are no longer working. Instead of rolling out of bed without purpose each day, develop a set routine of positive activities that will carry positive momentum throughout your day. Walking, working out, reading positive and uplifting material along with a full and healthy breakfast will get you moving in the right direction. Having multiple cups of coffee while watching or reading all the negative headlines in the news will do nothing but cause added anxiety and stress. If you can, reduce your dependency on all the sensational headlines of the day and focus on what you “can” control about your day, not the latest gossip or problems that can give you a perverted and paranoid view of the world.

Kick procrastination to the curb – One friend and client of mine, who retired several years ago, said he and his wife take 10 minutes at the end of each day and write down 3 things that are priorities for them to finish the next day. This gives them a sense of accomplishment and purpose for each and every day. It does not surprise me that they maintain a high energy level because they hold themselves accountable and feel rewarded when they complete their goals each day. If you are having problems with getting things done, try to set up a similar plan and try it for 30 days. I have a feeling that once this routine is established, you will want to continue this as part of your day to day routine well after the 30 days have come and gone.

Break through the “Paralysis through Analysis” research cycle – The amount of information and content available through media and the internet is fast and easy. Google and other search engines allow someone to research almost anything to a level of exhaustion. I myself have spent hours reading material on different topics. By the time I was done, I was more confused than if I had done nothing. For example, my son had a bad cough recently and by the time I was done researching his cough on the internet, I thought he was going to die…seriously! When my wife and I took him to the doctor, he simply had a sinus infection. I have come to find out, without mental filters, the internet can also be a curse. Many retirees who are “emotionally fresh” understand that the internet is not a trusted resource. If you still don’t believe me, next time you are on the computer Google the terms Revocable Trust or Annuity. I came up with 22 million plus hits. By the time you read all of this information you would be dead! How would you complete or finish anything?

I sincerely believe the ideas discussed above would be beneficial in recharging your mental battery regardless of how old you are. Remember to stand guard at the gate of your mind. You only have one brain and what you feed it will shape your thoughts and emotions in your everyday life.

Over the past year, many employers have been looking into different options and comparing fees to determine if changes should be made with their current 401k plans. This will make it a more level playing field in determining the “value” of your 401k plan vs. other retirement vehicles. In addition, many employees will want to pay close attention to the investment choices offered. Low cost funds should become more available as employers will want to keep fees in check.

All of the following will do nothing but improve what I consider to be an overdue measure in this industry. The overhaul of how fees will be disclosed should be a game changer and allow easier decision making for employers and employees. I would still like to see greater access to professional advice for many workers who need help growing and maintaining their retirement accounts but this definitely is a step in the right direction. Reducing fees by just .5% over a 30 year time frame (which many employees will work) could put thousands of dollars back into your retirement account. With social security and pensions under increased pressure, protecting your hard earned investment dollar should be front and center for your retirement future. Until next time..

http://www.askmattdicken.com/media-player.asp?id=132

http://www.chesterfieldobserver.com/news/2012-01-25/Family/How_to_finance_health_care_for_seniors.html

This could very well be the million dollar question for many families who will have to depend on distributions from their investments during retirement. What exactly is the 4% withdrawal rule? It simply means that if you balance your investments (stocks and bonds) and factor in inflation, you should be able to outlive your retirement savings during a 30-year retirement by simply taking 4% from your investments per year, starting the year you retire. Sounds easy enough, right? I also hear many retirees tell me that this is the advice the bank or brokerage firm gave them when they started distributions from their investments during this time.

Now to be fair, if the market does well, especially in the early years of your retirement, this withdrawal rule may serve you well. In fact, you may even be able to increase your distribution rate depending on the increased value of your investments. But what could happen if you start taking this 4% distribution during a bear market? An article in the August 2011 issue of the Journal of Financial Planning addressed this problem. The study, from Wade D. Pfau, Ph.D, covered the topic of minimum withdrawal rates that were safe for various time periods.

What it uncovered was striking to say the least. Assuming your portfolio was invested in 60% stocks, safe withdrawal rates during periods of market downturns could reduce your safe withdrawal rate well under 4%, assuming a 30-year retirement. For example, if you retired in 2000, your predicted safe withdrawal rate drops to 2.7%. It even drops further in 2008 (1.5%) and 2010 (1.8%). We all know that the market has been relatively flat over the past 10+ years. With the significant downturns during the years covered above, the chance of running out of money cannot be overlooked.

I have discussed this problem for years, because stock market volatility simply reduces the chance for a safe retirement. Dependable distributions from your retirement investments cannot come from just a stock portfolio. I personally witnessed more than a few retirees going right back to work after the 2008 stock market correction, because they felt trapped taking money from investments that dropped 30% or more in just a few months! Building a personal pension using well-diversified, income-producing investments and annuities can stabilize your income needs during retirement.

Retirement is a marathon, not a sprint. Consistent, reliable sources of income will help you manage the ups and downs of the economy during your later years.

Here’s what I learned about insurance that totally shocked me, and it affects all life insurance, from term insurance to large trust-owned life insurance.

•  The life insurance industry has a standardized pricing system for life insurance called the Commissioners Standard Ordinary Mortality Rates (often referred to as CSO). The most recent mortality study was done in 2001, and that table is referred to as the 2001 CSO. Prior to 2001, the last CSO table was calculated in 1980. Prior to 1980, the CSO table was formulated in 1958.

•  The 2001 CSO table represents a REDUCTION in policyholder cost of 30% from the 1980 CSO. So, imagine a policy issued based on the 1980 CSO table vs. a policy based on the 2001 CSO table. It costs 30% less. So, if you want death benefit, you can afford a 30% higher death benefit or have a 30% lower premium expense for the coverage you want. If you are building cash value, there is 30% less drain on your premium to cost, allowing your cash value to grow faster and larger minus the added expense load.

•  Here’s where the shock starts. The 1980 CSO tables were not enforced until January of 1989. Think about it this way: There’s this new “thing” and you know it’s coming, but you’re not required to implement it. And once you do, it reduces your income 30%. How fast are you going to jump on that? Not too quickly, right? Same for the insurance industry. So, a lot of policies issued in the 80s were priced with the 1958 CSO tables, not the newer, better priced 1980 CSO.

• But it gets worse! Let’s say you bought insurance in 1988. Obviously, the 1980 CSO table applies, right? Likely, NO! In fact, it’s very possible that the 1958 CSO tables apply to that 1988-issued life insurance policy’s pricing. Rates from the 1980 table vs. the CSO cost tables of 1958 were 40% less expensive; and since then, the 2001 CSO tables have been published and are 30% cheaper than the 1980 CSO tables.

If you follow the math above, we are talking about a cost factor that is 70% higher than today’s cost for a policy issued in 1988. To put that into proper perspective: If a gallon of gas costs $4 today and you added a 70% unnecessary mark-up to that gallon of gas, it would cost you $6.80 at the pump. I’m guessing, you’d pull out of that station and drive down the road to the station that offered $4 gas, wouldn’t you?

So, are you overpaying for your life insurance?  I encourage you to take a look at your policy, or have an insurance professional take a look.  You may be surprised at what you find.  After all, don’t we all want to feel like we are spending our money wisely?

Jimmy Barrett, from WRVA Talk Radio asked me to be on his show again.  This time we discussed the possibility of our government defaulting on loans, how this can effect credit ratings and how this will effect all of us.

 As a result, it’s essential for retirees on a fixed income to factor the ever-increasing  costs of these necessities into their retirement financial plans.

 Here are a couple of solutions to consider when fighting inflation:

•  Stock dividends – Carefully selected companies with a long track record of paying and increasing dividends each year can be a viable option as an income source.  This should be well diversified and your risk tolerance needs to be taken into consideration when developing an income plan to fight inflation.
•  Fixed annuity laddering – Converting fixed annuities to income at different points in time, or purchasing multiple annuities that mature at different times, can provide an extra source of income to compensate for inflation or handle other unforeseen financial needs.  Set up properly, this can provide greater flexibility with assets that are not needed for income purposes and provide additional growth for future needs as well.

 Each of these tactics can be very effective depending on the retiree’s individual situation in terms of age, time horizon and risk tolerance. A qualified retirement financial professional can help you decide which inflation protection strategy would work best for you.

 The key thing to remember is government calculations of inflation may provide little assistance to real world costs in your social security check and shouldn’t be ignored. Just as protecting your saved dollars is imperative, it’s also important to protect the purchasing power of those saved dollars.