LifePlan Advisors Group "Your Guide to Lifetime Financial Security and Independence" Tue, 15 Oct 2019 12:57:53 +0000 en-US hourly 1 Beware, The Annuity Salesman Cometh Tue, 15 Oct 2019 12:55:41 +0000

Be on guard, for the annuity salesman cometh, and he/she is poised to take advantage of you, your lack of knowledge, and yes, even your fears.

This breed of salesperson is most often seen at luncheon and dinner seminars, which are marketed heavily to retirees, for retirees have the money. As the infamous bank robber Willie Sutton, when caught robbing banks for the umpteenth time, was asked why he continued to ply his trade, Willie purportedly replied, “… because that’s where the money is.” 

It is also retirees who have the greatest concern, even fear; fear of the stock market, and fear of whether they’ll have enough money to last a lifetime.

It is these fears that so many annuity salespeople prey upon. They tout the lifetime income benefits of annuities and guarantees built into the contracts, while at the same time stoking the twin fears of the next great stock market crash, and the terrible consequences of running out of money before running out of life.

But what so many annuity agents leave out are the negatives, negatives that can come back to bite the annuity owner if there is not full disclosure, and far too often full disclosure is sorely lacking. Many retirees are not told of the painfully high and long term surrender penalties if cash is needed, or the excessive built in commissions paid to the salesman, upwards of 10%, even higher in some cases. And in the world of finance high costs usually means a bad deal for the investor.

Various hidden fees, long term surrender penalties, and ever changing terms of many annuity contracts can trip up even the most wary of investors. It has become clear to me that many annuity contracts clearly put the interests of the company and agent first, and well, you know whose interests bring up the rear.

Does this mean all annuities are bad, and that no one should ever invest in them? Absolutely not! One of my favorite expressions is I’ve never met an investment vehicle I didn’t like. Stocks, bonds, CD’s, mutual funds, annuities, real estate, gold, precious gems, I like them all, and have used, and continue to use many of them in my managed portfolios. And the fact is, under the right terms and circumstances, annuities can fit very nicely into many clients financial plans.

What it all boils down to is the importance of two of the cardinal rules of successful investing. One, suitability and two, terms. Suitability simply means, is this investment appropriate for your needs? Does it fit your tolerance for risk, is it tax advantaged if that’s important to you, is there cash flow if that’s one of your requirements, is there a growth element to it if that’s important and necessary? In short, does this investment vehicle meet your personal, financial, emotional and psychological needs and requirements?

The second element is terms. Are the terms fair and reasonable? Are the costs, including front end sales charges/commissions, back end charges/surrender fees, internal operating charges if any, and any other fees or expenses incurred fair and reasonable? Is the maturity date or holding period reasonable and fit within your needs?

In the end all investment vehicles must be carefully analyzed in detail before one makes a commitment. Each investor must understand the pros and cons, either through self analysis and/or with the help of a trusted financial advisor, an advisor who puts the interests of his/her clients before his own, and before any company he/she may represent.

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Widowed, Ripped Off, and Alone Tue, 15 Oct 2019 12:11:35 +0000

She’s an intelligent woman, seemingly well to do and living in a high rise condo in Florida. Retired, active lifestyle, involved in many activities with her friends, giving of herself to her community, church, and local charities. She did everything right, at least right for her generation, place and time in her life.

She was the loving wife of an auto company executive. She kept a beautiful home, entertained lavishly, and hosted parties for her husband and his business colleagues. She was always there for the children, active in the community, in short, she lived the American dream.

But below the surface was fear, uncertainty, and pain. What’s happening here, how did it happen, and can she save herself?

Why is she now living a nightmare, through no fault of her own?

There are many reasons, for her life was and is complex. But high on the list is the fact she relied entirely on her husband to make all the financial decisions throughout their years together. After all, he was an MBA and a financial wizard. He ran the company’s financial division and had an extremely successful career. But he did something neither counted on, nor planned for. He died.

He died but left her with a sizeable pool of investment assets, life insurance, and a fine home, seemingly more than enough for her to continue a comfortable lifestyle. But there were two crucial things she lacked. She did not have a high financial I.Q, and she did not have a trusted financial advisor. Having just one of the two would have protected her, but unfortunately having neither led to a number of unwise decisions, which ultimately led to severe financial difficulties later.

After the death of her husband she moved to Florida, purchased an upscale condo, and developed new friends and activities. Because her pool of assets was ample she was able to draw income from it to support her lifestyle. Her financial advisor, whom she had retained due to her husbands relationship, soon advised her to make changes in her portfolio, changes he said would be beneficial to her.

With her agreement, but also with lack of understanding, her investment portfolio soon began to resemble the high flying NASDAQ and technology indices of the late 1990’s. As long as the market was going up, everything seemed fine. She was making substantial monthly withdrawals from her portfolio, and her accounts continued to grow. Life was good.

But then, things began to go badly. The market began to swoon in 2000 and her account began to decline precipitously. She began to worry but her advisor said, “Oh, don’t worry honey, the market always comes back in the long run. I’ll keep a close eye on it for you.” And every now and then over the next few years, the market did bounce back, at least temporarily. But it didn’t come back to its previous level. She continued to trust her advisor, and her accounts continued to lose value. Over the next three years, with continued withdrawals and market declines, she lost over 50% of her money!

By the time I met her in late 2002 she was a nervous wreck, and didn’t know where to turn. Because of her new found distrust of financial advisors, she brought her son along to our meeting. After a lengthy discussion I agreed to analyze her situation and in a second meeting, provide a full written report, including recommendations to help turn things around.

Upon careful analysis two glaring details jumped out at me. First and most obvious, her investment portfolio was totally unsuitable for her needs and life situation. Her primary objectives were protection of capital and supplemental monthly income, but her portfolio consisted largely of technology and telecommunications stocks and mutual funds.

But there was more. The costs of her portfolio were egregious! The financial advisor, and I use the term loosely in this case, had “diversified” her portfolio across six different front end load (commission) mutual fund companies, even though every company had dozens of its own branded funds. This had the unfortunate consequence of costing her far higher commissions than necessary.

You see, load fund companies have what are called breakpoints at different investment levels. For example, the load might be 5% on the first $25,000 invested, 3% on the next $75,000, and only 1% over $100,000. By spreading her accounts over so many fund companies she did not receive the full benefits of these lower loads from any of the companies. Therefore her total commission costs were much higher than otherwise would have been the case. Of course, her advisor benefited from these higher loads as his commissions were tied directly to them.

As promised I returned to the client with my report and recommended course of action, which included radical adjustment of her portfolio to meet her needs for income and substantially lower risk. I presented our fee-based asset management program as an alternative, based on it’s objectives of protection of principal and income production.

At this point her son interjected and declared another financial advisor was unnecessary and instead, he would help her. (This from an individual who previously stated he had no specific financial expertise and had himself lost over 50% of his investments in the Bear Market).

We parted company on good terms but I could only wonder what would become of this fine woman who had done so many positive things throughout her life but was now dependent on the advice of an incompetent and unethical financial advisor, and a son who was well intentioned but as financially illiterate as she.


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Why Many Retired Women Live in Poverty And What You Can Do to Prevent It Mon, 07 Oct 2019 21:44:31 +0000

Retirement for women is different than for men, and unless this fact is recognized and acknowledged, a woman’s retirement may become something less than golden. My intent in this article, based on 28 years of experience in the financial services industry, is to discuss what women can, even must do, to assure their years in retirement are some of the best years of their lives.

There are many reasons for women living in poverty during their ‘Golden Years’. Below are some you may recognize, and suggestions and solutions you may wish to consider.

Problem #1: Many women rely too heavily on their spouse

For income during the working years, for pension and social security benefits during retirement, and for ongoing financial guidance and advice throughout the years, with unforeseen and tragic results in many cases. (3 of every 5 elderly women face retirement without a husband).

Problem #2: Work Patterns

Women often have irregular work patterns, due to marriage, children, care giving and other responsibilities. This often leads to women not earning full pension benefits, or any benefits at all.

*Only 32% of retired women who have worked in the private sector had pension benefits, whereas well over half of men received them. *U.S. Census Bureau

Even when women do earn pensions, their benefits tend to be a fraction of what men receive because of their lower earnings and complicated vesting schedules that penalize them for moving in and out of the workforce. For these reasons men’s pensions tend to be upwards of two and a half times that of women.

Problem #3: Divorce

In all too many cases a divorce occurs, sometimes even later in life, and the financially inexperienced woman is set adrift in unknown waters. Often times the assets are divided in what appears at first glance to be equal, but the woman’s share may include the family home with a hefty mortgage payment, while the husband gets the pension and 401k plan, assets that will serve him well during his retirement years.

In addition, the ex-husbands income is not disturbed, while the woman’s income may be dependent on temporary alimony and/or child support. Whatever income she is able to generate by going back to work, often with little or no job skills and being out of the work force for many years, brings lower pay, therefore lower future pension and social security benefits.

Problem #4: Widowhood

Upon the husbands death the pension often ceases and social security benefits usually decrease, putting the widow in a financial bind.

One-third of women who become widowed are younger than 60. Half of all women who become widowed are younger than 63.

Widowhood can severely jeopardize a woman’s economic prospects. Elderly widows receive, on average, only $5,964 a year in Social Security benefits as compared to an average of $14,580 for the joint Social Security benefit received by a married couple.

Only 21 percent of widows receive survivor pensions based on their husbands’ benefits.

Of those who do receive a benefit, half receive less than $4,800 per year.

According to the *U.S. Census Bureau, 80% of women live longer than their spouses and often by many years — 14 years on average. The risk here is if she tries to maintain her current living standards she may deplete her savings over time. As health expenses or long term care needs arise she may be forced to reduce her standard of living, or spend down assets in order to get assistance. Neither of those choices bode well for her quality of life.

*U.S. Census Bureau

Solutions, Recommendations and Strategies

First, educate yourself about the family finances. Make sure you have a good overview and understanding of what assets are owned, how they are titled, who the beneficiaries are, etc. Prepare yourself to manage your own finances, as the odds say you will need to do just that at some point. Make sure you are named on all family accounts as owner, co-owner, or beneficiary. This establishes your legal right to these assets should the marriage end in divorce, death, or even if your partner becomes incapacitated.

Next, build what I call the Three-legged Stool of Lifetime Financial Security:

1) Inflation protected lifetime income

2) Growth/income investments for future needs

3) Long term care protection in the form of assets or insurance, or some combination of both

Some of the solutions to ensure your lifetime security could consist of:

1) your social security retirement benefit

2) a secondary inflation adjusted income you can’t outlive

3) a prudently managed growth/income account to keep pace with the cost of living

4) a creative and flexible method of protecting your potential long term care needs

5) time tested strategies of ensuring you pay no more than your fair share of taxes

Last but not least, seek out the assistance of an independent, experienced financial advisor, preferably one who is compensated by fee for service, much like an attorney or tax accountant. This would rule out the commission driven advisors, where there is a distinct conflict of interest.

Many of my clients are single, mature women, so I have been a witness to what they have experienced through my 28 years of advising and guiding them. My experience in working with them has given me insight into their unique needs, and has perhaps qualified me to better serve them, both during their working years, and throughout their retirement years as well.

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Annie’s Story: Early Retirement Gone Bad Sun, 15 Sep 2019 12:41:36 +0000

She retired young, 49 to be exact, and made the big move from the dreary rain soaked Northwest to the land of palm trees and eternal sunshine. But all was not well, and the consequences of misguided judgment would soon come home to roost.

Annie had been in banking for 30 years, most of those years at that same stuffy old bank. So when the retirement party came around, well, Annie was ready. She had already picked the area of Florida that would become her new hometown, and was ready to make the cross country trek and settle into her new community.

She had carefully developed her plan with the guidance and help of her financial advisor, an experienced veteran of nearly 20 years in the investment world. She was rolling over her 401k, stuffed with the accumulation of 30 years of labor and investment, to an IRA. It would be prudently managed by her advisor. Everything looked rosy. It was 1999. The first year went well. Annie settled in, busied herself with home and garden, met new friends, and rekindled her relationship with family members who had lived in the area for many years.

The first cracks in Annie’s financial plan began to appear in less than two years. You see, Annie had no pension or other income so she relied on withdrawals from her new IRA rollover, worth well over one half million dollars when she retired. The plan was to draw income from the IRA at a fairly high rate until she reached age 62. She could then lower the IRA withdrawals because her income would be supplemented by social security retirement benefits. It sure looked good on paper.

But there was a huge flaw in the plan, and it began to show in 2001. The flaw was the financial plan did not account for a possible severe and long term ‘Bear Market’, and of course that’s exactly what came to pass. This contributed to a very dangerous decline in Annie’s account values, and a lot of sleepless nights for her as well.What had gone so wrong? Unfortunately for Annie it was the ‘perfect storm’ of events. First, we experienced a severe 2½ year market decline early in her retirement years. Contributing to the calamity was the decision, made jointly by Annie and her experienced advisor, that it was OK to withdraw 7% per year from her portfolio for income needs. This was not a prudent decision. And finally, there was no backup plan for Annie’s long term financial protection in case something didn’t work out as planned. This series of events resulted in Annie’s account values being reduced from the original one half million plus to $374,000 by October 2002, which as it turned out, was the market bottom. And remember, this is the nest egg that must sustain Annie for another 30 plus years!

There is a happy ending to the story however. Annie’s portfolio has recovered along with the markets recovery. But Annie’s most important savior turns out to be a small business she bought in her new hometown. It captured her interest and she bought it more as a new endeavor to add to her life’s’ fulfillment rather than a money making plan. It doesn’t produce a lot of income but it will go a long way toward providing a successful financial future for Annie. That’s because the business includes a significant amount of real estate, and that real estate has appreciated in value a great deal over the last few years. When the time arrives the business and real estate can be converted to income producing vehicles like bonds, annuities, and mutual funds.

And what has become of Annie’s financial advisor, the one who guided her down the path to near ruin? Well, I am that advisor, and through all the ups and downs Annie and I continue to maintain our relationship. We both learned valuable lessons from that experience, and I have used those lessons to become a better advisor; better able to help and serve my clients in ways that protect their financial interests throughout our journey together.

Why I Do What I Do Tue, 03 Sep 2019 13:47:19 +0000

People often ask me what I do and of course I explain. Another question, though rarely asked, is why I do what I do?

The answer to that question was driven home recently by a call I received from an elderly retiree. Her husband had died some years earlier, so in many ways she was on her own. Her knowledge of financial matters was limited and she had no relationships with anyone who could provide professional guidance. No one to turn to for answers to the many questions she had, or the many questions she did not know to ask.

Our conversation revolved around the financial dilemma she had been dealing since her husband died. He had handled the money through the years so his death left not only a void in her heart, but also a lack of knowledge and skills in finance necessary to make her way through life.

The long and short of it was she had burned through their modest savings. In order to make ends meet she was using credit cards for the necessities of life. She was thousands of dollars in debt and just couldn’t cope with the constant stress and pressures of trying to meet her monthly obligations.

She asked me if she should consider bankruptcy as a way to free herself of this terrible weight. She said bankruptcy had previously been unthinkable, but there seemed to be no alternative.

She’s the reason I continue to provide my services to retirees. Over the years I’ve talked to many who lost 20%, 30% or more of their life savings in the stock market. Not once, but twice in the last twenty years alone!

So the bottom line is this. I ‘do what I do’ in order to help as many retirees as I can. My calling is to help them protect their lifetime income, their nest egg, and their ability to enjoy life. And to help them avoid, in the words of one of my clients, of ever becoming a ‘burden to their children’, or worse, becoming a ‘bag lady’.

Our Brief Moment Tue, 27 Aug 2019 13:31:44 +0000

I recently returned from a business meeting in the heartland, Topeka Kansas. I went there expecting the usual, some creative financial planning and investment ideas, as well as the current thinking of people in the business of giving investment advice.

Was I ever wrong! I came away with a totally different perspective of how and why this career field provides me with such great satisfaction and sense of accomplishment. As well as a deeper understanding of what is truly important about what I do, what we all do, every day. 

You know the great philosophical question of the ages. The one that asks, “why am I here?” Or, put another way, “what is the meaning of life?”

I am now confident, for the first time in my life, that I know the answer. It is so very simple, yet absolutely profound. 

I believe we are all here to serve the highest purpose we are willing and able to undertake. I know I come to this realization somewhat late in life, and many may ask what took me so long.

I now understand it’s not particularly important I provide financial guidance for a handful of friends and clients. It’s not that I have learned the strategies of tax reduction, or the comparative advantages or disadvantages of one financial strategy over another.

No, it’s something of far greater value than all of that. For me the meaning of my life is to help, in some small measure, my friends, family, clients, those I love and hold dear, successfully navigate this great journey we call life. 

I am a guide, a steward to all who will allow me this privilege. My purpose is to demonstrate by word and deed, quickly and often, my love and concern for their happiness, and their well being. 
We are here for but a brief moment, and it is so very important what we do with the time we are allotted. And so I will strive to do all I can, every day, to accomplish my task. This is my pledge, my mission, my great understanding. 

So this trip has changed me, forever. For that I thank all who sponsored and participated in the educational program that I’m sure has done far more for me than intended.

And so we continue, together, on our remarkable journey.

A Reverse Mortgage May Have Saved Her Life Tue, 20 Aug 2019 18:36:13 +0000

Margie was a vibrant and active woman, younger in spirit and vitality than her 76 years would seem to indicate. But problems were mounting, life was closing in, and Margie was just about at her wits end.

You see, Margie’s beloved Bill had died some years ago, and his generous pension died with him, as it did not pay a spousal benefit. To compound Margie’s financial problems, due to Bill’s death her social security income was greatly reduced as well.

Margie was able to hang on for a few years by reducing her activities. She resigned from the local golf club where they had been members for more than thirty years, and curtailed her favorite activities with friends. Fewer lunches together, fewer theater dates, and travel was definitely out of the question.

But now things had progressed to a point that was no longer tolerable, even dangerous to Margie’s health. For you see, because of increases in day to day living expenses Margie was faced with making even deeper cuts in her lifestyle, and not just in those areas we might see as luxuries.

It had now come down to reducing her grocery bill, and worse, cutting her prescription pills in half to make them last longer. Some of these medications were of extreme importance to Margie’ quality of life, and even life itself.

There were medications to lower her blood pressure and heart rate, others to combat her diabetes. Without these medications Margie’s life was actually at risk, and she knew it.

Added to this of course was the stress Margie now experienced, knowing she was putting herself at risk, but not knowing what to do about it.

One day Margie saw an ad for what was called a ‘reverse mortgage’, a term with which she was unfamiliar. The ad described in some detail what a reverse mortgage was and how it could help a person in her situation.

Margie and Bill, like many, had relied on their pension and social security to provide a lifetime retirement income, but now much of that was gone due to Bill’s death. However, again like many, Margie and Bill had purchased their home many years ago, it was fully paid for, and had increased in value a great deal over the years.

Yes, Margie was ‘house rich and cash poor.’ But the ad gave her a glimmer of hope. Maybe this reverse mortgage could work for her.

The following day Margie called the mortgage specialist who had run the ad. She visited Margie at her home, explained the details of how the program worked, and told her there were many safety provisions in place to protect homeowners.

Some of the commonly held myths held by many were dispelled by the specialist. No, a person does not lose their home. Yes, the heirs will still inherit the home if the homeowner desires. No, monthly payments by the homeowner are not required at any time.

In fact, if the homeowner wishes, he or she can actually receive monthly checks, or simply take an open credit line and use the available cash as she sees fit, or both.

After a number of counseling sessions, including one mandated by an agency of the federal government, Margie signed the papers and received her reverse mortgage loan. She opted for the monthly check because she reasoned this would supplement her current income and allow her to live the life she was accustomed to, and more importantly, allow her to live her life healthy and stress free.

The details of a reverse mortgage are beyond the scope of this article, but feel free to contact us to receive a Free Report on ‘Answers to Your Questions About Reverse Mortgages.’

Jeri’s Story – How Inexperience and Bright Lights Led to Disaster Tue, 13 Aug 2019 18:39:42 +0000

She was a hard working single woman, owned her own business, and seemed headed toward a comfortable retirement just a few years away. Unfortunately she became blinded by the bright lights of the ‘New Economy’ and technology boom. What she didn’t know is those bright lights shielded the horrors of a looming disaster, and she would not be able to extricate herself until it was too late.

I met Jeri at a class I was conducting on retirement planning at the local community college. She asked for a no obligation meeting and so at a later date we sat down to explore her needs and objectives.

Jeri was a middle aged small business owner and her most pressing objective was to assure a comfortable retirement, just ten years away. She had put away a fair amount of money into her small business retirement plan and now felt professional management was necessary as it was more than she felt qualified to handle, and it was everything she had.

She related the story of placing money with another financial advisor some years ago but felt she had been taken advantage of due to her own naiveté and inexperience. The prior advisor had placed her money in ultra conservative annuities and Jeri later learned the one who made out best was the advisor. Commissions were high, and returns were low.

This experience soured Jeri on the advisory profession so she took control of her money and invested in bank certificates for a few years. Because interest rates were relatively high her account grew in value very nicely. Things had changed however. Rates were low and Jeri had been hearing and reading about the excellent returns provided by the stock market and she wanted to take a closer look.

She felt comfortable with me due to the classes and also because I managed money on a fee basis; that is, my clients did not pay and I did not receive commissions. My compensation was strictly a quarterly management fee. She felt that was fair and removed potential conflicts of interest inherent in commission compensation.

We proceed to open Jeri’s accounts and placed her in our Moderate Risk, growth oriented management program. Things went well for a couple years and Jeri’s accounts grew in value, right within the range one would expect from a moderate risk portfolio.

I then began to field phone calls from Jeri suggesting we should increase the risk level of her accounts because some of her friends were getting much higher returns than she. She told me about another money manager who got 20% to 25% returns two years in a row, and the 13% per year we attained for her was no longer sufficient.

I told her I could not in good conscience move her to a higher risk level because everything I knew about her screamed moderate risk investor. Because she pressed the issue I said I could not do what she asked but she could certainly move her accounts to the advisor she was touting. And that’s just what she did.

Over the next few weeks I began receiving purchase confirmations of what her new advisor was buying for her. It was a mix up by the brokerage firm and I informed them of that fact and they soon fixed it. Meanwhile I recorded the purchases and tracked their performance over the next two years or so.

It was an unmitigated disaster. The portfolio was composed of relatively unknown (at least to me) small company stocks, and the account lost over 50% of its value through that two year period.

I just hope Jeri was able to get out and salvage the bulk of her portfolio, because I’m afraid many people did not. You see, the period I’ve described was 1997 – 1999 during the technology boom and later the bust of 2000 -2002 when she was with the other advisor.

I guess the moral of the story is to be certain the level of risk is suitable for you in everything you do. One of the biggest mistakes I see in the investment world is so many people take far more risk than is appropriate for them, and the irony is they don’t have to do it. There are many quality investments and investment management strategies that will get you where you want to go, and the journey can be made in relative ease and comfort.