Friday, November 17, 2017

FUability(c): Longevity Risk & Fear of Outliving Money The Heart of The Matter




FUability(c): Longevity Risk  &
Fear of Outliving Money The Heart of The Matter

          When all is said and done, risk to a personal financial objective is ‘not making the goal.’
          The question typically usually overlooked by planners isn’t the naming of the objective/goal but what the goal/objective represents in terms of payoff (gain) or avoidance.

          Yes, there is question of one’s longevity probability – which is based to genetics, life style, luck of the draw, etc.
          But underneath, when scratched, the espoused euphemism of longevity risk, is the dreaded  fear of outliving ones’ money (resources). The question is what is further underneath this fear of outliving one’s resources?
          The seeking to avoid outliving one’s money is to continue to have FUability© (some dress this up as financial independence) but even more so: not being beholden, dependent, taking crap, having to kiss ass, and or be on Medicaid. Thus being beholden, dependent, taking crap, having to kiss ass, be on Medicaid – goes potentially fraying shattering the fabric one’s sense of self being decimated being a ward, sniveling, or worse being nice to one’s good for nothing relatives and with an obsequious smile as one is ‘put up with’ and ‘patted on the head.’

Transference of the Risk of Being Beholden
(to maintain FUability(c))

You can pay me now or pay me later (a hell of a lot more- jds)
Fram Oil Commercial

          Now when insurance is distilled to its essence it is the transference of risk – at the cost of a small loss to minimize or prevent a large loss. Period – end of sentence. Insurance was never meant to be an ‘investment’ nor thought of that way. Yet as a result of the industry’s manipulation, the public thinks of insurance too often as an investment and therefore ‘their loss’ as an investment loss – rather than incurring a small loss (called premiums) to avoid a large loss accepting the small loss like their accept the cost of a motor oil change for maintenance of their car.
         
          So, for example, one may have resources that at the 95% confidence level will fund ‘the longevity risk.’ But what if there is the need for a skilled or assisted care – which can run $95,000 a year? Longevity risk – so to speak – or the fear of outliving one’s resources – often does not take this into account – which goes to the heart of being beholden, dependent, taking crap etc and exhaustion of assets – regardless of otherwise longevity probability?

          When in practice, I loved when a couple would say, if there is a need for home health care – assisted care – we’ll take care of each other. Now unless they could self insure the risk and their asset disposition according to their desires upon their passing were adequately funded, I’d ask the husband (or insignificant other) to lay on the ground, and have the wife (or insignificant other) now pick him up 7 times.

          Talk about caregiver fatigue. (Note: there are two different roles to be performed by two different individuals: one who cares about you and one who cares for you ((even may have to wipe one’s tushie)). But that’s another issue.)

          Given this fear of being beholden – taking or wiping tushie – also consideration should be given to the a reverse mortgage credit line as well as longevity annuities. (Note on these longevity annuities (you buy in your 60’s and they pay large let’s say at 85) – which are mediocre at best in my opinion – both one’s health, genetics, and strength of the insurer are critical to consider. And present ratings of insurers are no damn guarantees for the future See below)

          The reverse annuity credit line – rather than reverse annuitizing –offers and increasing fall back – if necessary – buying time if used – from having to kiss meir tuchis and be beholden. 

          Techniques aside of trying to manage prevent/minimize not outliving one’s money,  the reality of not outliving one’s money is about sense of self: independence (FUability(c) to be profane) versus beholden. And that is the crux of the issue.
          What are the present tradeoffs (remember per Thomas Sowell ‘there are no solutions only tradeoffs’) one is willing to make to increase the probability of FUability (not being beholden) versus one’s present standard of living and other goals?

          One thing to consider – the work free retirement (if your kids’ censoring smug confiscating colleges haven’t pirated your resources delaying or causing you to be a Greeter at Walmart™) is phasing the amount needed into two or three segments: the go go years, the slow go years, and the no go years. Typically, the highest amount needed is for the go go year trending downward thereafter – but still all the more reason for transferring risk (i.e. long term care, reverse mortgage credit line, and maybe even longevity annuities) just in case the go go years caused gone gone assets in the no go years – and one’s FUability(c) is compromised. Worse is especially having ‘to be nice’ to your good for nothing – ‘give me, buy me, take me – it’s coming to me’ kids’ who have forgotten all you paid for their worthless higher education at the expense of your retirement. Remember – what did you do for me today? isn’t a disease that is cured as it always latent.

          Planners love to reinforce the scare of ‘outliving one’s money’ without getting to the heart of the matter – fear of being beholden. Since money is just a medium of exchange for goods and services, the question becomes strategizing not just with risk transference tools, THE distribution/withdrawal strategies of the week, but how to deal with the dread – that affects health & wellness – with family members. Given that 19% of seniors are now technically orphans (no family) how else to deal with these anxiety even terror concerns holistically.
Yes, as my dad would say, money doesn’t buy happiness but it doesn’t buy poverty either. But the fear of being beholden, real or imagined – and not unusually imagined even if not real,  is an impoverishing that impoverishes the individual with or without family.

* Remember Mutual Benefit (AAA+ rating), Confederation Life, Home Life, New England Mutual etc – all top rated – down the tube – (actually merged out so no one would say down the tube). And what is within these highly rated insurers and their so called guaranteed products – bonds, real estate, etc. So the guarantee is only as good as the strength of the insurer which can change. Even so, strong insurers have been known to jettison risk – which BS explanations – ie. Met Life jettison’s many of its lines, and now the rumor per Wall Street Journal – Manufacturers Life (owner of John Hancock one of the largest long term care insurers) losing its ass on long term care policies is looking to spin off (get the hell off the risk) the Hancock policies to a new company. Thus, spread your risk in your Long Term Care policies and longevity annuities.

Sunday, October 15, 2017

After Satisfaction (ENOUGH), What?



After satisfaction (ENOUGH), what?

After satisfaction, what?
Rabbi Abraham Heschel
                                                                            
          In Latin, satis – as in satisfactory (a mere ‘c’ on a report card) – means ‘enough.’
          After “enough”, what?
          More??? OR
          Re-igniting Meaning IN one’s life!

ENOUGH Jewish Personal Financial Life Planning© healing personal financial anxiety, puttin’ money in its place, to elevate, transcend, align, & connect (Tzavta) to one’s assignment-significance: what one is meant to do, meant to be—‘ENOUGH(sm)’ to live on; ENOUGH to live for©

Jim (Yaakov) Schwartz,
ENOUGH(sm)’ Jewish Personal Financial Life Coach

Monday, September 11, 2017

Response to WSJ Article: "What's Your Tolerance for Investment Risk? Not Probably Not What You Think



To: The WSJ Editors
 RE: to the feature "What's Your Tolerance for Investment Risk? Not Probably Not What You Think

Things not worth doing are not worth doing well or as Gypsy Rose Lee stated, 'things worth doing are worth doing slowly.'

Risk tolerance measures have become 'ala carte du jour' in personal financial planning - putting the cart before the horse.

Context context context - precedes and frames risk tolerance - which means the goal quantified, prioritized (with tradeoffs) comes first - then risk tolerance is but a clarifying test.

In particular, one could have an geologist - a wildcatter by nature. He tells the planner (this is a true story) he likes to take risk. But in the context of his personal financial goals - he already has made his goals - so why sacrifice what one needs for what one doesn't need? (It usually winds up in 'bleeding.') The question for this individual - was becoming 'independent' of his independent business - conversion of asset composition to make the goals (slow down prior to retirement and then retirement - in phases). It anything - to make this client's goals - required a tradeoff of lower volatility meaning lower rates of retire - rather than going with his 'risk tolerance' from the outset - drill baby drill

Context, context, context.

Of course, one could argue -- well, that's all well and good for one who has made his goals - wrong. The question is where is one on the glide path - to make the goal(s) and what retrofitting rates of return and 'risk' (so to speak) can be endured or is necessary.

The framework is the goals - the amount, the duration, the start, the after tax after inflation 'risk adjusted' rate of return required - and then risk tolerance - in context - with tradeoffs - is a check point.

jim schwartz, author ENOUGH(sm),
          Trust Me, I'm Not A Veterinarian
        co founder NAPFA
        1985 (Fee Only) Personal Financial Planer of the Year
         RETIRED (& recovering) Personal Financial Planner
        blog: healingfinancialanxiety.blogspot.com

Sunday, September 10, 2017

The "Overlooked" Family Member In Personal Financial Living Planning(c)



The “Overlooked” Family Member In Personal Financial Living Planning©

Yes – our companion animals despite the following:

(1)  90% plus consider their dog(s) part of the family
(2)  70%++ of dogs sleep in their ‘guardian’s bed
(3)  Speaking of the label ‘guardian(s)’ – even a Farmers’ commercial referred to guardians/owners now as ‘pet parent(s)’ – not to mention the ongoing Subaru campaign starring dogs in the driver’s seats (what next new Honda SUV – The Hounda?)
(4)  Expenditures on companion animals increased 8%++ annually even during the recession
(5)  The fastest growing demographic of companion animal co-habitation age 50+ with 3 or more dogs and or cats
(6)  19% of seniors (age 65+) are technically orphans – no family. Who do you think take on the primary role of companionship – family for these individuals?
(7)  Our companion animals don’t cost $250,000++ to raise another $100,000+++ to send to college to only come home jobless, living in the basement – resenting parents. (Do the cost benefit!!)

The Most Important Things In Life Aren’t Things

When speaking to audiences relative to our dogs and cats (be it on over vaccination, my book Trust Me: I’m Not A Veterinarian in 2008, etc, I begin my talk with the following audience participation question:

“Remember when you were in elementary school – in particular first grade when the teacher asked you to put your head down & cover your eyes. Then your teacher (mine was Ms. Reed) would precede to ask a question for you to raise your hand – yes or no? Humor me. Please do the same. Now, raise you hand – no peeking your neighbor to your left or right especially if it is your spouse – raise your hand if your tell your dog you love him or her more often than your spouse or insignificant other?”
When the tittering laughter dies down and I reiterate the question, unless the guy (usually unmarried) was on the make, 95% to 100% would raise their hands. Worse, I’d follow up with the question, ‘while keeping your heads down still, how many say  ‘I love you daily to your dog by 4 or more times to your dog than your spouse/significant other?’ With hesitation and a bit of embarrassed laughter the raised hands percentage was similar.
Once, I followed up with asking a show of hands as to ‘how many have in your wallets (not just smartphones) a picture of their kids and or grandkids? Most raised their hand. Then, I then would ‘ask how many have a picture or pictures of their dogs?’ Just as many or more would raise their hands. ( I didn’t tempt the fates a third time asking for hands of those with a picture of their spouse in their wallets.)

The Most Important Things In Life Aren’t Things

Focusing on our overlooked ‘members’ of the family presents a great unmet opportunity for personal financial living planners relative to client’s living and continuation (estate) values, concerns and objectives for their companion animals.
In particular, in the personal financial living planning fact find sessions – consider asking the following:

          Relative to your companion animals protection?

(1)  Have you considered pet health insurance? If not, why not? If so, which one? Do an audit (see below)
(2)  Do you have special instructions (medical otherwise) in your refrigerator (first responders look in the refrigerator as to your own medications anyway)
(3)  Do you have a USB for your pet’s collar in case of being lost and any special health concerns (like pcpetid www.finnypetproducts.com)
(4)  On your front and back doors in case of fire etc – do you have stickers (hopefully fire and or chemical resistant) to alert responders?
(5)  In case of separation or divorce, do you have a ‘prepuptial agreement?’
(6)  Do you have a pet protection agreement naming successor guardians if necessary due to incapacitating disability or death (legal zoom has one for less than $50)
(7)  More importantly, do you have a pet trust set up to be funded upon your passing with instructions?

In every guardian’s life, the time will come to help their companion animal pass on – I prefer graduate – until again as away never gone. The veterinarians’ compassionate as they may be typically will tell the guardian ‘you’ll know when’ which was not acceptable to me.
So in my 2008 book, Trust Me: I’m Not A Veterinarian, I created a simple spread sheet – as a tool to help for knowing when by the same title. Vertically down the first column were factors such as Acute Pain (cries/ whimpering/can no longer walk; Chronic Pain (can’t get up without help, stiff, gets up slower and slower, doesn’t want to be touched); as well as other categories and subcategories including Mobility; Dignity: Eating; Indifference; and Other. And horizontally was sequentially days 1 thru 14 or greater. Each day the guardian from 1-10 (1 being worst) would rate the factor – looking at the trend.
Knowing When is a tool to help make decision – just a tool – but better than just making the decision during this emotional onslaught of should I, could I, if I don’ts. Etc.
I believe this tool has helped more than a few during a very emotional of time – and your clients might appreciate this.

Now let’s talk Pet Health Insurance.
First, full disclosure: In 2007 I was awarded as the inventor a patent (only 1 out of 1000 at the time in the ‘705’ category since 1977) to bundle pet health insurance on homeowner’s, health, and other policies. Conceptually, given lower acquisition costs this should reduce premiums  be more convenient and without the gotchas described below.
Second, Schwartz’s Law on Insurance selection (not just for pet health insurance): what good is a Mercedes (excellent coverage), if the care has no gas (the insurer is not financial strong), and in the shop all the time (high complaint ratio ((note complaint ratios reflect only closed complaints – so multiply by 4 to 5 times)))?

In Britain, 30% have pet health insurance while in Sweden and Switzerland the pet health insurance market penetration has been estimated at 50%. So then why after 30 years, 200 million dogs and cats in US households growing at 5% (200% faster than kids) and America spending as much as 20%++ more than its European counterparts, is there less than a 2% penetration of pet health insurance in the U.S.?

Because the policies have been poo like handing one an umbrella when it isn’t going to rain (one past insurer indicated after a deductible 80% coverage up the a $10,000 maximum. However, not only was the the $10,000 limited to $2500 per incident but the per incident had ‘inner limits.’ A hypothetical example, a $2,000 back situation should be covered even with a $2500 per incident limit yet the inner limit for the procedure was $400 and that was before the deductible and 20% copay rendering the payment less than $300. Today, in a beauty contest of uglies the standalone policies are getting somewhat better. Even today’s policies are less than ideal given practices such as:

(1)       Slow claim payment – (one major AAA rated company – who subsequently left the market – was fined several times in Colorado under the prompt claims statute)
(2)       A major affinity endorsed pet health insurer – says they have an 80/20 policy after a $500 deductible but for example on a $600 claim, take 20% off the top to arrive at $480 (and so instead of getting $80 – viola – no reimbursement!). No kidding.
(3)        Others play the per incident game saying you have $10,000+ coverage but only $2500- to $3000 per incident
(4)       Then there is diarrhea symptom exclusion game. 30%+ of puppies get diarrhea. Then if a puppy (assuming the wait period is over) has some other illness where there is diarrhea a symptom of the new illness – they try to exclude the illness as preexisting
(5)       Of course there is the bilateral exclusion game – an insured has a hip problem that is fixed. Three years go by and the guardian has secured another insurer. The other hip needs repair – sorry – even after three years – even after any exclusion period of being free in clear – no coverage
(6)       How about the slow walk of ‘seeking additional veterinary information’ and they hold up the claim – seeking other hospitals of pets you ‘owned’ health information they didn’t even cover

This is just a sampling of the gotchas (I could give examples of even worse) – no wonder less than 2% market penetration after pet health insurance has been in the United States for over 25 years.
Still, the need existing for real affordable, convenient, no gotcha pet health insurance – and it will be coming – not because it is the right thing to do --- but because – are you ready for why --- driver assisted and driverless cars.
It is estimated by the industry itself – of the $200 billion annual auto insurance property and casualty premiums – 60% or over $120 billion will go away per year over the next 10+ years. And where else is there a 200 million property and casualty market growing at 5% that is less than 2% penetrated? At 30% penetration is potentially a $50 billion premium partial replacement that given reduction of lapse of policy percentage on homeowners policies (another discussion) alone should be disproportionately be equivalent of more than $50 billion in auto insurance premiums in terms of profit on this line of business.

So here’s a checklist to consider in suggesting per health insurance for the most overlooked family member in personal financial living planning

(1)       Strong underlying insurer (still no ironclad guarantee as we have seen the likes of Mutual Benefit Life, Executive life but a non rated insurer, C rated, B rated – forget it and the heck with assurances of ‘a strong reinsurer’ underneath)
(2)       Get the complaint ratio of the insurer from the NAIC website  (www.naic.orgon) on the insurer’s property and casualty business – which should be lower than the average and then multiply by 5.
(3)       Take only a yearly deductible – no per incident, no ‘reasonable and customary definitions,’ and no inner limits per illness or accident
(4)       Have a minimum of $15,000 per year coverage and replenishment of the $15,000 each year
(5)       No hereditary illness exclusions
(6)       Coverage as standard of alternative medicine under the supervision of a veterinarian

I shall leave you with a story but first a little background.

My yarmulke has a the Star of David surrounded by four interlocking paws. I am often asked what the symbol stands for (other than a Jewpee’ to cover my balding spot). Actually, the best way to explain it ironically is the movie Knight & Day (starring Tom Cruise & Cameron Diaz) and personal story.
For those who didn’t see this movie, wWith on hand above his head, Cruise told Diaz – ‘with me’ and taking his hand then below his waist signaling, ‘without me’ and of course Diaz reversed the sequence by the end of the movie.
So…three boys were going to the City Line Center Saturday matinee movie. Going past Greenhill Rd. (one way to the movies ((the other via City Line and Haverford Ave in Philly))) they noticed that the back door to the cinema is ope and there is no one in sight.

Two of the boys sneak into the theatre without paying. The other boy goes around to the front of the cinema and pays his admission.

After the movie let out, the three boys get together again. The two that sneaked in poke fun at the one who paid saying, 'you dummy. There was no one around to catch us sneaking in. And we looked left and right, east and west, north and south before sneaking in to make sure.’

The paying boy replied, ‘but you failed to look up!’ and as well you forgot to look down at your dogs beside you, who look up to you, and remind you of God above.’

Thank God for dog.

The Most Important Things In Life Aren’t Things

Saturday, September 9, 2017

The Necessity of More as a Test (Nes)* of & for Enough (Shaddai)




The Necessity of More as a Test (Nes)* of & for Enough (Shaddai)

Is More, better, NOW**  but a necessary test of and for Enough (Shaddai)?

          In the animated film, Megamind, super-villain of aforementioned name Megamind (the voice of Will Ferrell) kills his nemesis good-guy hero  Metro Man (Brad Pitt). Thereafter, Megamind becomes bored since there is no one left to fight. Meagmind ‘turns’ (in rasslin vernacular) becoming a hero engaging villain Titan (Jonah Hill) using his powers now for good

          But herein lies the question, ‘would there be any heroes without adversaries -  villains?’ How can one be heroic the challenge? How can coal become the diamond without pressure?’ How can clothes get clean without the agitator in the washing machine?

          In Judaism, there is the yetzer tov (the good inclination) and the yetzer hara (some say evil others say adversarial inclination. And yet, as Rabbinical thought goes, without the yetzer hara no one would even go to work.

Shaddai: God, God Almighty, God All Sufficient, Enough

After rasslin’ with the angel and also becoming alternatively Israel in spiritual matters, Jacob to appease, make peace (repay??) Esau for securing the birthright under duress as well as impersonating Esau for Isaac’s blessing, Jacob had prepared to offer Esau a king’s ransom   (also while confronted by Esau’s 400 men/army).

Esau finally ‘reluctantly’ accepted the offering supposedly due to Jacob’s ‘insistence’ despite Esau’s assertions of ‘having plenty, having enough, having much” aka MORE. Obviously, Esau’s statements of having ‘enough, all, everything, plenty’ wasn’t enough as acceptance was rationalized as an accommodation to Jacob’s urging.
Jacob, the conniver turns hero stating that he ‘has everything, he has all’ (per translations) meaning ‘all and everything’ is God – Shaddai (who is ‘enough’). Thus, for Jacob (now alternatively Israel after rasslin’ with the ‘angel’) and now confronting Esau - Shaddai was enough (everything, all).
The MOREal: More was a test of & for Enough (Shaddai) for Jacob to alternatively become Israel. And More is a testing of our faith in Shaddai being ‘Enough’ – an underlying trial of our MOREality choosing Shaddai or More.
Thus, the question: How can there be Enough- Shaddai without the test of More?

For now over 40 years I have written about more vs enough.  Over those years, ENOUGH(sm) has evolved in definition from ‘clientele realizable goal determination coordinated with orderly plans for their desired payoffs’ to ‘healing personal financial anxiety, puttin’ money in its place, to elevate, transcend, align and connect to one’s significance/assignment – what one is meant to do, meant to be – enough to live for, enough to live on.’ And while ENOUGH(sm) has evolved,  the More More More paradigm, heuristic, filter unquestioned pretense of personal financial planning– has remained constant as ‘the savior.’  More remains the ever present foil and it would seem the necessary adversary of ENOUGH(sm).  

Thus,  is appears that More More More is a derivative of the the yetzer hara - the Yetzer More (the More/ MOREon inclination). This yetzer More inclination if not genetic otherwise has become so acculturated (across political and economic systems regardless of rationalizations otherwise). This yetzer More inclination  is akin to the villain necessary for there to be heroes for the coal to become the diamond. This yetzer More tests faith in 1) Shaddai as enough and secondarily 2) of one’s adaptability and resourcefulness derived from Shaddai.
The More More More – yetzer More Inclination presents itself in a binary from the profane to the profound (if one reads the following from the bottom to the top rather than top to bottom in the following):

    THE More More More BINARY LADDER Designation

if you are WORTHY you are god                  whereas if you are
 (just 1 'o' difference from GOOD)                WORTHLESS you are DRECK.        
                             é                                                       é
if you are GOOD, you are WORTHY             if you are BAD, you are 
                                                                     WORTHLESS                               
                             é                                                       é

if you are a WINNER, you are GOOD             if you are a LOSER, you                             
                                                                     BAD
                             é                                                       é

if you are a BETTER, you are better you're a WINNER
if you are WORSE, you are a  LOSER
                             é                                                       é

if you are MORE - you are a BETTER           if you get LESS you are a
            WORSE
                             é                                                       é

If right get -- MORE                                      you get LESS
          é                                                                é
you are RIGHT                                              you are WRONG
          é                                                                é
if you are useful, of service, functional            if you are NOT very useful, of service functional

          Yet, the yetzer More isn’t & won’t be vanquished (as it will only be displaced like a squeezed balloon). The question is how does one deal with the yetzer More as it’s one thing to fight the dragon, another to slay the dragon and a third to embrace the dragon – in a sense grapplin’ with the angel as Jacob did to also become Israel.
And that’s the test of More versus Shaddai
CHEWish on This© More OR LE$$

* Nes in Hebrew means not only ‘test’ but also ‘miracle’
** More, better, NOW! has a habit of becoming less, worse, later