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Insurance and Investments

UPDATE : Insurance and Investments
A good financial strategy is not just about “making money;” it is also about protection.

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Some people mistake investing for financial planning. Their “financial strategy” is an investing strategy, in which they chase the return and focus on the yield of their portfolio. As they do so, they miss the big picture.

Investing represents but one facet of long-term financial planning. Trying to build wealth is one thing; trying to protect it is another. An effort must be made to manage risk.

Insurance can play a central role in wealth protection. That role is underappreciated – partly because some of the greatest risks to wealth go unnoticed in daily life. Five days a week, investors notice what happens on Wall Street; the market is constantly “top of mind.” What about those “back of mind” things investors may not readily acknowledge?

What if an individual suddenly cannot work? Without disability insurance, a seriously injured or ill person out of the workforce may have to dip into savings to replace income – i.e., reduce his or her net worth. As the Council for Disability Awareness notes, the average length of a long-term disability claim is nearly three years. Workers’ compensation insurance will only pay out if a disability directly relates to an incident that occurs at work, and most long-term disabilities are not workplace related. Disability insurance can commonly replace 40-70% of an individual’s income. Minus disability coverage, imagine the financial impact of going, for instance, three years without work and what that could do to a person’s net worth and retirement savings.1

What if an individual suddenly dies? If a household relies on that person’s income, how does it cope financially with that income abruptly disappearing? Does it spend down its savings or its invested assets? In such a crisis, life insurance can offer relief. The payout from a policy with a six-figure benefit can provide the equivalent of years of income. Optionally, that payout can be invested. Life insurance proceeds are usually exempt from income tax; although any interest received is taxable.2

Most people want a say in what happens to their wealth after they die. Again, insurance can play a role. At a basic level, those with larger estates may use life insurance to address potentially large liabilities, such as business loans, mortgage payments, and estate taxes. An ILIT may also shield the cash value of a life insurance policy from “predators and creditors.” Beyond that, a sizable life insurance policy can be creatively incorporated into an irrevocable life insurance trust (ILIT), through which an individual can plan to exclude life insurance proceeds from his or her taxable estate.3

Yes, the estate tax exemption is high right now: $5.49 million. Even so, if a person dies in 2017 while owning a $5 million life insurance policy and a $500,000 home, his or her estate would be taxed. An ILIT would be a useful estate-planning tool in such a circumstance.3

Why do people underinsure themselves as they strive to build wealth? Partly, it is because death and disability are uncomfortable conversation topics. Many people neglect estate planning due to this same discomfort and because they lack knowledge of just how insurance can be used to promote wealth preservation.

The bottom line? Insurance is a vital, necessary aspect of a long-term financial plan. Insurance may not be as exciting to the average person as investments, but it can certainly help a household maintain some financial equilibrium in a crisis, and it also can become a crucial part of estate planning.

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1 - [6/27/16]
2 – [3/27/17]
3 – [3/21/17]

GREG OLIVER/// 9238946`238946`238946p-92386-9847`-98237489

Have a Plan, Not Just a Stock Portfolio

Design 23

Have a Plan, Not Just a Stock Portfolio
Diversification still matters. One day, this bull market will end.


In the first quarter of 2017, the bull market seemed unstoppable. The Dow Jones Industrial Average soared past 20,000 and closed at all-time highs on 12 consecutive trading days. The Nasdaq Composite gained almost 10% in three months.1

An eight-year-old bull market is rare. This current bull is the second longest since the end of World War II; only the 1990-2000 bull run surpasses it. Since 1945, the average bull market has lasted 57 months.2

Everyone knows this bull market will someday end – but who wants to acknowledge that fact when equities have performed so well?

Overly exuberant investors might want to pay attention to the words of Sam Stovall, a longtime, bullish investment strategist and market analyst. Stovall, who used to work for Standard & Poor’s and now works for CFRA, has seen bull and bear markets come and go. As he recently noted to Fortune, epic bull markets usually end “with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.”2

History is riddled with examples. Think of the dot-com bust of 2000, the credit crisis of 2008, and the skyrocketing inflation of 1974. These developments wiped out bull markets; this bull market could potentially end as dramatically as those three did.3

A 20% correction would take the Dow down into the 16,000s. Emotionally, that would feel like a much more significant market drop – after all, the last time the blue chips fell 4,000 points was during the 2007-09 bear market.4

Investors must prepare for the worst, even as they celebrate the best. A stock portfolio is not a retirement plan. A diversified investment mix of equity and fixed-income vehicles, augmented by a strong cash position, is wise in any market climate. Those entering retirement should have realistic assessments of the annual income they can withdraw from their savings and the potential returns from their invested assets.

Now is not the time to be greedy. With the markets near historic peaks, diversification still matters, and it can potentially provide a degree of financial insulation when stocks fall. Many investors are tempted to chase the return right now, but their real mission should be chasing their retirement objectives in line with the strategy defined in their retirement plans. In a sense, this record-setting bull market amounts to a distraction – a distraction worth celebrating, but a distraction, nonetheless.

1 – [3/31/17]
2 – [3/9/17]
3 – [4/3/14]
4 – [4/3/17]

Teacher Appreciation Week


The first full week in May is Teacher Appreciation Week – a time when parents, students, and communities thank classroom teachers for their dedication and affirm the difference they make.

I, too, recognize all the great work you do in every week of the school year. You and your colleagues are experts – you share your knowledge in just the right way, with devotion and innovation that truly makes a positive impact on your students. What you do in the classroom helps to improve the world.

My appreciation of the role you play is never-ending.

Thank you,

Should the Self-Employed Plan to Work Past 65?

Should the Self-Employed Plan to Work Past 65?
Some solopreneurs think they will “work forever,” but that perception may be flawed.

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About 20% of Americans aged 65-74 are still working. A 2016 Pew Research Center study put the precise figure at 18.8%, and Pew estimates that it will reach 31.9% in 2022. That estimate seems reasonable: people are living longer, and the labor force participation rate for Americans aged 65-74 has been rising since the early 1990s.1,2

It may be unreasonable, though, for a pre-retiree to blindly assume he or she will be working at that age. Census Bureau data indicates that the average retirement age in this country is 63.3

When do the self-employed anticipate retiring? A 2017 Transamerica Center for Retirement Studies survey finds that 56% of U.S. solopreneurs think they will retire after 65 or not at all.4

Are financial uncertainties promoting this view? Not necessarily. Yes, the survey respondents had definite money concerns – 28% felt Social Security benefits might be reduced in the future; 22% were unsure that their retirement income and accumulated savings would prove sufficient; and 26% suspected they were not saving enough for their tomorrows. On the other hand, 54% of these self-employed people said that they wanted to work in retirement because they enjoyed their job or profession, and 67% felt working would help them remain active.4

Is their retirement assumption realistic? Time will tell. The baby boom generation may rewrite the book on retirement. Social Security’s Life Expectancy Calculator tells us that today’s average 60-year-old woman will live to age 86. Today’s average 60-year-old man will live to age 83. Leaving work at 65 could mean a 20-year retirement for either of them, and they might live past 90 if their health holds up. Even if these Americans quit working at age 70, they could still need more than a dozen years of retirement money.5

You could argue that an affluent, self-employed individual is hardly the “average” American retiree. Many solopreneurs own businesses; doctors and lawyers may fully or partly own professional practices; real estate investors and developers may have passive income streams. These groups do not represent the entirety of the self-employed, however – and even these individuals can face the challenge of having to sell a business, a practice, or real property to boost their retirement savings.

Successful, self-employed people over 50 need to approach the critical years of retirement planning with the same scrutiny and concerted effort of other pre-retirees.

Look at the years after 50 as a time to intensify your retirement planning. This is the right time to determine how much retirement income you will need and how much more you need to save to generate it. This is the time to evaluate your level of investment risk and to think about when to collect Social Security. This is the time to examine your assumptions.

1 - [3/2/17]
2 – [1/7/14]
3 – [12/24/16]
4 – [1/31/17]
5 – [3/9/17]

K. Fisher is a Robo-Advisors? vs. YOU NEED A Human Advisors?

K. Fisher is a Robo-Advisors? YOU NEED A Human Advisors?

You may have seen my firm’s ads screaming,”I Hate Annuities.” Folks ask why………….
SIMPLE they wants to move your SAFE MONEY into a RISK PRODUCT with tons of on going FEES !?


If an investor chooses a non-human financial advisor, what price could they end up paying?


Investors have a choice today that they did not have a decade ago. They can seek investing and retirement planning guidance from a human financial advisor or put their invested assets in the hands of a robo-advisor – a software program that maintains their portfolio.

Why would an investor want to leave all that decision making up to a computer? In this era of cybercrime and “flash crashes” on Wall Street, doesn’t that seem a little chancy?

No, not to the financial firms touting robo-advisors. They are wooing millennials, in particular. Some robo-advisor accounts offer very low minimums and fees, and younger investors who want to “set it and forget it” or have their asset allocations gradually adjusted with time represent the prime market. In the 12 months between July 2014 and July 2015 alone, invested assets under management by robo-advisors more than doubled.1

Even so, only 5% of investors responding to a recent Wells Fargo/Gallup survey said they had used a robo-advisor, and fewer than half those polled even knew what a robo-advisor was.2

A cost-conscious investor may ask, “What’s so bad about using a robo-advisor?” After all, taxpayers and tax preparers use tax prep software to fill out 1040 forms each year, and that seems to work well. Why shouldn’t investors rely on investment software?

The problem is the lack of a human element. Investors at all stages of life appreciate when a financial professional takes time to understand them, to know their goals and their story. A software program cannot gain that understanding, even with input from a questionnaire.

The closer you get to retirement age, the less appealing a robo-advisor becomes. The software they use can’t yet perform retirement planning – and after 50, people have financial concerns far beyond investment yields. Investment management does not equal retirement planning, estate planning, or risk management.2

Additionally, robo-advisors have never faced a bear market. They first appeared in 2010. Passive investment management is one of their hallmarks. How adroitly will their algorithms respond and rebalance a portfolio when the bears come out? That has yet to be seen.2

Does a robo-advisor have a fiduciary duty? Many investment and retirement planning professionals assume a fiduciary role for their clients. They have an ethical and legal duty to provide advice that is in the client’s best interest. How many robo-advisors have developed the discernment to do this?3

The robo-advisor “revolution” may be fleeting. Why, exactly? The whole robo-advisor business model may invite the demise of many of these firms. Robo-advisors pride themselves on low account fees, but as CNBC reports, those fees are now so minimal that many robo-advisors are having a hard time making back their client acquisition costs. Ultimately, robo-advisors may be remembered for the way they stimulated the financial services giants to offer low-minimum, low-cost investment tools.4

In fact, hybrid platforms have also emerged. Some robos now offer investors the chance to talk to a real, live financial advisor as well as actual financial planning services when an account balance surpasses a certain threshold. At the same time, some of the major brokerages have introduced robo-advisor investment platforms with potential human interaction to compete with the upstart investment firms that challenged their old-school approach.5

It appears the traditional approach of working with a human financial advisor may be hard to disrupt. The opportunity to draw on experience, to have a conversation with a professional who has seen his or her clients go through the whole arc of retirement, is so essential.

Some investors will never talk to a financial advisor in their lives. Just why is that? TIAA (formerly TIAA-CREF) surveyed 2,000 adults online and found some answers. Of those who hadn’t consulted financial advisors: 55% feared it would be too expensive, and 49% said it was “hard to know which sources or whom I can trust.” Forty percent were unsure of what questions to ask a financial professional, and 38% said that it would be awkward discussing their finances with someone else.1

These responses point to uncertainty about the process of financial and retirement planning. The process is really quite worthwhile, quite illuminating, and quite helpful. It is not just about planning to improve “the numbers,” it is also about planning ways to sustain and improve your quality of life.

1 – [2/28/16]
2 – [1/18/17]
3 – [2/21/17]
4 – [6/14/16]
5 – [2/15/17]