When I’m Sixty-Four: Long-Term Healthcare In Retirement

The Most Complex Insurance Explained, Part 2

In 1967, the Beatles released the song, “When I’m Sixty-Four.”  The lyrics are a preemptive plea to secure a relationship even when the realities of old age set in.  Now, as the nation’s largest generation whistles this tune into retirement, the question seems less rhetorical:

Who is going to take care of us in retirement?

Not everyone will need long-term care insurance (LTC), but everyone needs a long-term healthcare plan.  Your long-term care plan should incorporate the following: facts about you (and your spouse, if applicable), your age, your personal health, longevity of lineage, your retirement income and assets, your tolerance for risk, the costs and demographics of long-term care in your geographic area and information about any long-term care insurance that you own or have considered owning.

This post is the second in a two-part series.  You can read the first on Long-Term Disability (LTD) by clicking HERE.

Long-Term Care Insurance

One very important thing to remember is that Medicare does not cover the costs of most long-term care needs. Allen Hamm, in his book, Long-Term Care Planning, shares the following statistics:

  • 71 percent of Medicare recipients mistakenly believe Medicare is a primary source for covering long-term care.
  • 87 percent of people under the age of 65 mistakenly believe their private health insurance will cover the cost of long-term care.

You May Not Drive A Racecar, But You Still Need Life Insurance: Lessons from Danica Patrick

Originally in ForbesSince her early 20s, Danica Patrick has driven a racecar for a living, speeding 200 miles per hour around a crowded track bordered by concrete walls. It’s dangerous. Really dangerous. And she recognizes that.

“There are things that happen in the car that you can’t plan for and that are out of your control, like a tire blowing on you or an engine blowing up or a crash that happens in front of you or someone hits you,” Patrick told me in a recent interview. “So no matter what your skillset is, those things just happen. Absolutely it is a risk.”

But it’s a risk that she has chosen to manage, in part, with life insurance. Patrick has owned life insurance since she started racing, and the subject is important enough to her that she now advocates on behalf of Life Happens, a nonprofit founded to help consumers make smart insurance decisions.

Commendable though it sounds, I wanted to know more about why. Why was she motivated to buy life insurance at an age when most people don’t even think about it? Why did she feel she needed life insurance—then and now?

The Millennial Guide To Managing Risk With Insurance

Originally in Forbes“I’m too [fill in the blank] to worry about insurance.” If you’re a millennial, there are plenty of words you could choose from to complete that sentence. Perhaps “young,” “poor,” “busy” and “skeptical” are good ones (for starters).

You might have enough insurance.  You might even have too much.  But I’d bet you don’t have as much as you need in some categories, too.  Regardless, ignorance is neither blissful nor beneficial at any age, so let’s ask and answer the questions below, reviewing the most prominent types of insurance that may—or may not—be important for you to consider.

First, allow me to offer a fundamental insurance lesson that will serve you well now and into the future: Don’t just buy insurance. Instead, manage risk.

I offer the following Risk Management Guide as a template for making insurance decisions in my book, Simple Money:

Risk Management Guide

10 Things You Absolutely Need To Know About Life Insurance

Originally in ForbesLife insurance is one of the pillars of personal finance, deserving of consideration by every household. I’d even go so far as to say it’s vital for most. Yet, despite its nearly universal applicability, there remains a great deal of confusion, and even skepticism, regarding life insurance.

Perhaps this is due to life insurance’s complexity, the posture of those who sell it or merely our preference for avoiding the topic of our own demise. But armed with the proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.

To help, here are 10 things you absolutely need to know about life insurance:

  1. If anyone relies on you financially, you need life insurance. It’s virtually obligatory if you are a spouse or the parent of dependent children. But you may also require life insurance if you are someone’s ex-spouse, life partner, a child of dependent parents, the sibling of a dependent adult, an employee, an employer or a business partner. If you are stably retired or financially independent, and no one would suffer financially if you were to be no more, then you don’t need life insurance. You may, however, consider using life insurance as a strategic financial tool.

The Top 5 Ridiculous Reasons NOT To Buy Life Insurance–With Anthony Anderson

Originally in ForbesAnthony Anderson is a funny dude. The Emmy-nominated actor has been making people laugh on television and in film for 20 years. But now he’s bringing his sense of humor to a surprisingly unfunny topic—the need for life insurance.

The big question I had for him was: Why? Why, with your career exploding and recent Emmy nomination (for lead actor in the show Black-ish), are you investing time and effort to be the spokesperson for Life Insurance Awareness Month?

“I know firsthand from friends and other family members who’ve never had a policy, who’ve never thought about having a policy.  And then all of a sudden someone passes in their family and they don’t know what to do,” Anderson told me.

Fair enough. Many people aren’t even aware of the need for life insurance, and that lack of education is a big concern for Anderson, and a major driver of his dedication to public awareness.  But as we continued our conversation, it shifted focus. What it seemed to begin revealing were some of the tragically comic, ridiculous reasons that many people choose not to buy life insurance. Here are the Top 5:

5) I’ve got more important things to insure.

“People insure their flat screen televisions, they insure their cars, they insure jewelry, but they don’t insure themselves,” says Anderson with a chuckle. He’s also evidently frustrated by this reality. “If it weren’t for themselves, they would have none of those things to insure.”

The Top 10 Places Your Next Dollar Should Go

Originally in ForbesThere is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it.

Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right thing with your moola — like saving for the future, insuring against catastrophic risks and otherwise improving your financial standing. And while every individual and household is in some way unique, the following list of financial priorities for your next available dollar is a reliable guide for most.

Once you’ve spent the money necessary to cover your fixed and variable living expenses (and yes, I realize that’s no easy task for many), consider spending your additional dollars in this order: 

Boomer Esiason: NFL Great Turned Life Insurance Advocate

Things are super at the Super Bowl“Today is your day to go out into the world.  You’re going to be great!”  This affirmation is one of a precious few memories that National Football League great, Boomer Esiason, can vividly recall about his mother, who died when he was only seven.

She was the “Belle of the Ball,” according to Esiason’s grandparents and older sisters—a beautiful singer, dancer and piano player who “would light up a room” with her blond hair and blue eyes, inherited by her only son.  But Boomer was not old enough to own these recollections himself.  Those memories endear him to the woman he can barely recall, but his enduring memories are limited to only two.  The first was sitting on his mother’s lap while she tied his shoes on the first day of kindergarten, whispering prophecies that would indeed come true.  The second and last memory was being denied access to her hospital room as she died of ovarian cancer.  Young Boomer was relegated to sitting in a courtyard, the scene emblazoned in his memory, as his mother would occasionally come to an overlooking window to catch a glimpse of her boy.

Living With A Broken Heart

Almost 30 years later, in 1996, Esiason found himself at that same hospital visiting his maternal grandmother shortly before her passing.  But that time, as an adult with children of his own, he recalls looking from his grandmother’s room, fixating on the very courtyard where he once sat contemplating the loss of his mother.  There was so much that he didn’t—couldn’t—understand as a child that he was able to comprehend as a husband and a father.

Boomer’s father, Norman, was a member of the Greatest Generation, a World War II veteran who took advantage of the G.I. Bill.  He worked his way into a solid job, but his wealth was in his family, not his balance sheet.  The loss of his wife—her income, of course, but especially her presence—had a significant negative impact on their household.  But quiet, reserved and proud, he never once considered complaining or outwardly lamenting the financial difficulties he endured after the passing of his wife, even shielding his children from the reality.  Boomer recalls at the age of 16, lingering as his dad finished the weekly examination of household finances so that he could ask for five dollars to take his girlfriend out, a favor he was rarely denied.

“I know that he lived with a broken heart,” the younger Esiason confessed.  “He died in 1999 on Thanksgiving, of all days, at the age of 77.  But from the time that my mother passed away in 1968 to 1999, I never saw my father with another woman in all those years.  He raised me with a broken heart and I think I was his escape.”  Indeed, Boomer gave his dad something to cheer about.  After setting 17 school records at the University of Maryland, he was drafted into the NFL by the Cincinnati Bengals in 1984.  In 1988, he led the Bengals to the Super Bowl and was voted Most Valuable Player of the league.  His dad was also able to see his son retire from football and begin a successful broadcasting career that continues to this day.

Today, however, Boomer’s passion for football seems eclipsed only by his desire to pass on the life and financial lessons that he has learned through experience.  So when Boomer was asked to be the spokesperson for Life Insurance Awareness Month by the LIFE Foundation, it was an easy decision.  “This absolutely fits what has happened to me in my life for a number of reasons,” Esiason told me as he opened the window into his life beyond the gridiron.  “When I became an NFL football player and decided to have kids in the early 90’s, I recognized that I didn’t want to have happen to my kids what happened to us, as [we were] struggling when I grew up.”

Further compounding the importance of life insurance for Boomer and his wife, Cheryl, is the fact that their son, Gunnar, has cystic fibrosis, a genetic disease that primarily attacks the lungs and often compounds the impact of other illnesses.  Day-to-day medical expenses are high, and the cost of finding a cure, higher still.  So in addition to the $100 million raised by the Boomer Esiason Foundation to benefit all CF patients, Esiason sees life insurance as vital to ensuring that his son has the financial resources necessary to continue his push toward a cure.  “If I don’t protect [Gunnar’s] future and I don’t protect my family’s future, then if we ever found ourselves in the situation that I found myself in when I was seven, it would be an unmitigated disaster and my kids and my wife would not be able to sustain the life that we’re fortunate to live now.”

Boomer and his best-friend, Tim O’Brien, made the decision to acquire adequate life insurance for their respective families together in the early 1990’s.  Later that decade, O’Brien helped move the Boomer Esiason Foundation headquarters “closer-to-heaven,” to the 101st floor of the World Trade Center’s North Tower.  While thankfully all of the Foundation’s full-time employees were absent the morning of September 11, 2001, Esiason lost over 200 friends, among them, Timothy O’Brien, husband and father of three children, ages seven, six and four when he died.

There is no financial strategy or product that can return a life when it’s been taken, but the life insurance conceived in Tim O’Brien’s foresight allowed his family to grieve properly and to move forward deliberately, without fear that their livelihood was also at risk.  There is no athletic accolade that will reprogram Boomer Esiason’s brain with memories of tender moments with his mother at his high school or college graduations, his wedding or the birth of his children, but the financial and life lessons learned from her loss and the endurance demonstrated by his father are already being passed on to future generations.

“My business is me.”

“I don’t have stock options and I don’t own companies,” Esiason told me.  “My business is me.”

Although I’ve never been asked to provide color commentary for the Super Bowl, and most of the people I know have never been voted the MVP of the most valuable sports league in the world, the same can be said for most of us: My business is me.  Your business is you.  Have you really done adequate financial and life insurance planning to ensure that those you love would be cared for even beyond the demise of your business—you?

Most people avoid conversations about life insurance because we generally don’t like to brood over the topic of our own demise, and many attach a hard-sale stigma to the life insurance business, using that as a rallying cry for inaction.  Death’s inevitability considered, a fear of it is certainly understandable, but meaningful discussions on the topic can be surprisingly life-giving.  And while the entire financial industry has more work to do in its evolution from sales to advice, the stereotype of pushy life insurance salesmen coercing you to sign your life away is grossly overstated.  Besides, neither of these concerns reduces the importance—the responsibility—of planning for the unexpected.

Boomer Esiason doesn’t sell life insurance.  He’s an ex-pro football player, an NFL commentator and the chairman of a foundation in support of the cystic fibrosis cause.  I don’t sell life insurance.  I’m a fee-only financial advisor, an educator and a writer.  Both of us, however, wholeheartedly support the LIFE Foundation’s initiative to bring awareness to the vital role of life insurance within financial planning in the month of September.  Consider utilizing their life insurance calculator and description of the different types of life insurance as a first step in that journey.  Feel free to ask me questions about your specific situation in the comments section or via email at tim at timmaurer dot com.  But please don’t let “Look into life insurance” be another important to-do left undone.

If you enjoyed this post, please let me know on Twitter at @TimMaurer, and if you’d like to receive my weekly post via email, click HERE.

How Insurance Works, In 90 Seconds

Every time we experience a calamity, like Hurricane Sandy if you’re on the east coast, it reminds us that there are risk factors in life beyond our control.  Through insurance, we transfer these catastrophic risks we cannot bear to insurance companies, but knowing HOW INSURANCE WORKS is vital to understanding why, how and what we need to insure.  Take the next 90 seconds to more thoroughly understand HOW INSURANCE WORKS:

[youtuber youtube=’http://www.youtube.com/watch?v=2rxYK40avGQ&feature=youtu.be’]

Annuity Audit App

This is the 10th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

It is my hope that this is an extremely brief exercise for you, but many people who have long-term relationships with folks in the insurance, brokerage, or banking industries have a lifetime of annuities built up.  If that is your scenario, it is very important that you do this exercise to get a handle on where your money is and what it is doing (or not doing).

When you did your Personal Balance Sheet or Mutual Fund Audit App, you probably pulled together the statements for any annuities you own.  These statements often lack the information you’ll need for this exercise, so I also want you to pull together each of the contracts you received at the inception of your annuity policies as well.  Then, using the App (link below), fill in the information cataloging the following: owner[i], annuitant[ii], beneficiary[iii], contract value, surrender value, cost basis (the sum of your contributions), and the surrender schedule.  Some of this will be on your statement, but the remainder will be in your policy contract. You may have to do some digging.

Once you’ve collected the information, the analysis should start with a diagnosis of the investment value.  If it is a fixed annuity, you’ll know very quickly if the rate is competitive with today’s rates.  If it is a variable annuity, examine how it has performed versus the various benchmark indices.  If it is an equity indexed annuity, the chances are very good that it is not a phenomenal investment, but it also probably has a very long and steep surrender charge which may make it prohibitive to move at this time.

If you determine you’d prefer to be out of an annuity contract, here are the questions to ask:

  • What, if any, surrender charge exists?
  • Is the surrender charge cost prohibitive?
  • How much longer will the surrender charge last?
  • How much have you contributed (what is your cost basis)?
  • How substantial would the tax impact be (would you have to pay a lot in taxes)?
  • Is there a gain on which you would have to pay a penalty if you are under age 59½?

Again, remember to make these decisions slowly because there are many moving pieces with annuities.  It is best to speak with a fee-only Certified Financial Planner™ practitioner AND a Certified Public Accountant prior to making any final decisions.

Click HERE to access the Annuity Audit app!


[i] The person who made the investment in the annuity

[ii] The person upon whose life the actuarial calculations in the annuity policy were based (this is often the same person as the owner)

[iii] The person or people to whom any annuity proceeds will be directed upon the death of the annuitant

Home and Auto Insurance App

This is the seventh exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can find the backdrop for the exercise HERE or just jump right in with the instructions given below:

In order to know if your home and auto insurance policies are providing you with the appropriate levels of coverage, you’ll want to collect the declaration pages for all of your home, auto, condo, and renter policies.  The Application Exercise online will provide a chart to fill in your various coverage limits next to our recommended minimum limits.

After you’ve tailored your desired limits with the help of an independent planner who does not accept commissions or referral fees for the sale of insurance, you can use the Application Exercise to shop your coverage with several carriers.

Click HERE to access the app!