By Teresa Kuhn, JD. RFC, CSA
President, Living Wealthy Financial
There’s a certain amount of trust and faith required when entering into a business relationship, as well as a fair amount of reliance on companies to follow accepted practices and do the right things for their clients.
And, while most of us realize that the way products are marketed may be the polar opposite of how they actually work, we continue to have faith that what we are being told about the things we buy is at least somewhat truthful.
As some of the most trusted and respected entities, American life insurance companies have been successful mostly because ordinary people have put so much faith in them and their promises.
Throughout our country’s history, people have bought insurance policies that last for years, often entire lifetimes. They do this believing that the insurer would never violate their trust by failing to honor the original policy terms or by doing things that would harm them financially.
Most people, for example, never expect the company to suddenly exercise a provision in the contract that would have an adverse financial consequence for them.
Unfortunately, however, such trust may no longer be justified.
Except for whole life insurance policies, most other permanent life insurance policies have a right to increase the cost of insurance built into their contracts.
In the past, most people did not pay much attention to this particular provision simply because insurers realized it would be bad business for them to use it. Increasing the cost of insurance (COI) was just something that was seldom, if ever, done.
Recently, though, unprecedented types of premium increases have begun to hit consumers. These rate hikes call into question the trustworthiness of some insurance companies and threaten the entire industry.
At least four major insurance carriers have published significant rate hikes with no warning to consumers.
These rate hikes result from increases in the cost of insurance (COI) companies charge their existing customers.
For those of you who may not know what COI is, it is the pure insurance protection portion of a policy and is tied to mortality risks.
In the past, COI increases have been unthinkable and consumers have relied on the implicit and explicit promises of life carriers that they will never have COI increases. The breaking of this promise by four big insurance companies virtually guarantees that others will follow.
There’s nothing subtle about these premium increases, either. Policy holders are getting bills with anywhere from 40% increases in premiums to over 100 percent! Such increases come at a time when health insurance, automobile, and other insurance premiums are also increasing.
The impact on older Americans, especially those over age 65, is tremendous. This is because the highest COI rates occur as people approach and surpass their expected mortality.
So why are these carriers suddenly starting to raise these rates and what can you do to avoid having this happen to you?
To understand the reasons for this situation, you need to know a little bit about how life insurance works.
Nearly all permanent life insurance policies, including indexed universal life, whole life and variable life, use projected COI to help determine how the policy will be priced.
Even “guaranteed universal life” contains a mortality component found on the company’s side of the risk equation.
If an insurance company’s projections are off and more insureds die than expected in a particular group, the company can pass those additional costs along to their policyholders.
This has always been a possibility, but until this year, COI rate hikes were very rare. Insurance companies realized that doing this would create massive PR headaches and potentially tarnish their public image.
Now however, major insurers such as Transamerica say they can no longer afford to maintain public perception at the expense of profitability.
The company recently revised COI costs for a huge block of universal life insurance business written in the 1990’s and now requires all proposals for these policies to be illustrated at the guaranteed mortality rate, guaranteeing large rate increases.
Another large issuer of universal life insurance,
Voya Financial has also notified many of its’ universal life policyholders about coming rate increases.
AXA , which is the largest insurance company in the world, also recently increased COI rates for a block its’ universal life policies. These policies, in addition to being singled out due to bad mortality rates, were also chosen according to premium payment patterns.
Universal life and flexible premium policies let owners choose how much they pay each year, provided there is sufficient cash value in the policy.
In addition to adverse mortality rates, the Fed’s stubborn insistence on maintaining ZIRP (zero interest rate policies) has had a negative effect on customers’ abilities to fund policies.
If you have one of these types of policies and you’ve experienced rate increases such as those above, you should contact our office. We’ll suggest alternate strategies that may help you offset some of these increased costs.
As an advisor and agent, I can’t believe that insurance companies would have such callous disregard for their loyal policy holders. The consequences of increasing COI are not reflected in a bunch of numbers on the company balance sheet, but rather in the daily lives of people, especially older Americans who must somehow deal with this blow to their budgets.
On a positive note, I work hard to ensure that none of my clients will ever experience such devastating impacts on their budgets. At Living Wealthy Financial we are extremely selective about the companies we use to implement our Bank on Yourself® strategies.
We know that other permanent life solutions shift the risk back onto the insured, which in effect means the INSURED is now responsible for making the insurance company’s guarantees work. How crazy is that?
Sure, whole life might not seem as “sexy” as these other types of insurance, but how much of your savings can you afford to risk? I would guess your answer is “none.” If that’s the case, then you need a strategy that reflects the true purpose of insurance- to pass risk from the INSURED to the COMPANY, not vice-versa.
If you are working with a stock company, versus the mutual companies with whom I work, then you should know that those stock companies are geared toward making decisions designed to maximize their shareholder’s wealth…not yours. That means that in the long run they are not too motivated to do what works best for policyholders.
PS: If you have a universal or variable life insurance policy that is with a stock company, or are thinking of purchasing one, and you’d like us to analyze it and make recommendations at absolutely no cost or obligation to you, then call our office now at(800) 382-0830.
by Teresa Kuhn JD, RFC
President, Living Wealthy Financial
“How would another drop of 49% or more in the market affect your current standard of living or your future security?”
– Pamela Yellen, Bank On Yourself.com
We’ve seen these signs before…
Extreme uncertainty and nervousness in the markets that translates to volatility and ultimately losses.
While no one knows for sure if these extreme ups and downs portend another recession, many experts are drawing attention to some nearly identical behavior patterns that occurred prior to the 2008 recession.
One of those experts, demographer Harry Dent, claims the stock market bubble we have today is the biggest ever.
His colleague David Stockman is even less optimistic, saying in a recent edition of his newsletter that, “The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.”
What is for certain in all of this, though, is that Wall Street’s trick or trick pumpkin is slowly rotting away, and having less of your money mingled with the rot seems like a prudent idea.
“Are you tired of worrying about his day in and day out?”
I continue to believe that building up cash in a well-designed Bank On Yourself policy is the only way to regain the peace of mind you may have lost being on Wall Street.
Having the the use, liquidity, and control offered by a Bank On Yourself policy can give you a lot more flexibility and the ability to take advantage of bargains when you find them.
Don’t have a policy yet or need a quick review?
Call our office at (800)382-0830 Monday-Friday to arrange a consultation.
from Pamela Yellen’s Bank on Yourself Newsletter.
Sign up for Pamela Yellen’s newsletter by clicking HERE!
There are three words that could have the biggest impact on whether you enjoy a comfortable retirement… or you have to struggle and forego life’s luxuries – and even life’s necessities.
But almost no one is talking about these three words. And there’s a good chance you’ve never even heard of them.
These three words could have more impact on your retirement lifestyle than living longer than you expected… or than being forced to retire sooner than you planned (which happens to nearly 50% of Americans, according to the Employee Benefit Research Institute).
The three words may sound a little technical, but I’m going to make them brain-dead simple to understand.
The three words are: sequence of returns. Specifically, the “unfavorable” kind.
It’s a fancy way of saying that retirees who have a big portion of their assets in equities and mutual funds face the very real risk that the market will fall as they are withdrawing money from their accounts.
Many people plan to use the widely recommended “4% rule,” which advises retirees to take out no more than 4% of the value of their retirement accounts (adjusted for inflation) each year. Studies show that rate of withdrawal has a good chance of making your money last as long as you do. (It should be noted that more recent studies show that a 3% annual withdrawal is the maximum needed to make your money last.)
That means that if you have $100,000 in your retirement accounts, you can safely pull out $4,000 a year using the 4% rule. If you have $500,000, you can withdraw $20,000 a year, and if you have $1 million in your account, you can take out $40,000 a year.
If you haven’t thought much about what kind of lifestyle withdrawing 4% a year from your accounts would give you, I’m guessing you might be feeling a little queasy right about now. (Oh! And don’t forget to take whatever you’ll have to pay in taxes that you deferred in your 401(k) or IRA off the top of that number!)
It’s easy to see that if we experience another market crash of 50% or more – as has happened twice since 2000 – as you’re nearing or already in retirement, it could have a devastating impact on how much you can withdraw each year.
If your million-dollar 401(k) suddenly becomes a 201(k) worth $500,000, withdrawing 4% will provide you only $20,000 a year, instead of the $40,000 you had planned on.
But here’s where it gets really sticky… timing is everything…
When you run the calculations, you discover that the impact of a market decline in the first few years of retirement is even worse than in later years. It turns out that when you begin to take withdrawals, market volatility has a far greater impact than rate of return.
An unfavorable sequence of returns may make you have to cut back significantly on your retirement lifestyle, or force you to work longer than you had planned.
The BIG problem, of course, is that there is no way to accurately predict when the next market crash will happen, or where the markets will be when you’re ready to retire. We may be at the beginning of the next major crash… or several years away from it. Nobody knows for sure.
One way to protect yourself from this very real threat to your retirement lifestyle is to diversify your assets.
What if a portion of your savings were in an asset that is guaranteed to grow by a larger dollar amount every year? That would be a favorable sequence of returns that translates into financial peace of mind for life.
Such an asset exists, and it’s called Bank On Yourself. It’s never had a losing year in more than 160 years!
It also lets you fire your banker and become your own financing source for your cars, vacations, a college education, business expenses and more.
And the best part is that it’s easy to find out UP-FRONT what your bottom-line guaranteed numbers and results could be if you added Bank On Yourself to your financial plan!
Call our office today at 800-382-0830 to find out more about adding Bank on Yourself to your financial plan.
January 26, 2015 10:00 AM
The 401(k) is often considered the no-brainer, gold standard of retirement plans. But far from being a bedrock retirement plan, the 401(k) started as an experiment in 1981 and still has to prove itself.
Those who decided to be a 401(k) lab rat in the first test group are just starting to get back their results. After 30-plus years of faithfully funding their new retirement plan, it’s time to retire. As you’ll see, the last 15 years have not been kind to them, but that should have been no surprise. The supposedly dependable 401(k) is not your best choice for retirement. Not by a long shot.
I’ve worked with hundreds of professionals. Most of them diligently saved in a 401(k), but once I explain the risks, they’re eager for alternatives. Here are 13 dangers of a 401(k) for you to consider.
1. You can be wiped out overnight.
A report on CBS’s 60 Minutes TV show asked of 401(k)s, “What kind of retirement plan allows millions of people to lose 30-50 percent of their life savings just as they near retirement?”
Unlike other investments that are protected from losses, your 401(k) rises and falls with the stock market where you have absolutely no control. Retirement planners will tell you the market averages 8-11 percent returns per year. That may have been true last century, but this century has seen that turned into a fiction. From 2000 to 2015, the market was up just 8.4 percent total when adjusted for inflation, or 0.56 percent per year, and that was after a substantial market rally.
Do you want to live your ideal life only if the market cooperates?
Find out the other 12 reasons your 401(k) is your riskiest investment by clicking here.
RENOWNED ADVISOR TERESA KUHN FINDS HOPE AND SECURITY– FOR HERSELF AND HER CLIENTS – IN BANK ON YOURSELF
Securities, the President/CEO of Living Wealthy Financial Group
Uses the Revolutionary System to Help Hundreds of Clients
Teresa Kuhn finds it fascinating how the use of certain words in business can fool people. The renowned financial advisor – now President/CEO of Austin, TX based Living Wealthy Financial Group — had worked in the Securities Industry while pursuing her degree in finance at the University of Miami. Teresa soon found that she did not feel comfortable working with products that could cause her clients to lose their savings overnight. Despite their name, securities are not secure investments and can be negatively impacted by fluctuations on Wall Street, real estate, and the economy.
She returned to the financial world in the mid-90s working for a large real estate developer, after several years as a personal injury attorney. She started investigating, and came to realize that everything she had been taught in business school and law school about how money and the law really works was, in her words, a “big fat lie.”
Reading G. Edward Griffin’s groundbreaking 1998 book “The Creature from Jekyll Island: A Second Look at the Federal Reserve” opened her eyes to who really controls the money supply in the U.S. She learned that “Securities” was just a clever name for investments that offered no security at all.
Kuhn also came to believe that Wall Street and banks have brainwashed people into believing that they have no choice except to expose their money to risk in order to prosper. “Wall Street has spent billions programming us that they’re the only solution to retirement planning,” she says. Following a time of deep disillusionment, she made her way back into the financial world – finding a path to be of service to others on her own terms – and has made it her life’s mission to let people know that they do have alternatives.
Knowing that she needed a new path that was congruent with how she knew money really worked, she continued working with real estate and other safe money strategies before discovering the power of Bank on Yourself, the tried and tested money management system, branded by Pamela Yellen that has led thousands of people to safeguard their finances and build wealth. This system has been proven for more than 160 years and used by hundreds of thousands of people.
With hallmarks that include true financial stability (i.e., real security for the investor) and increased cash flow and access to it, Bank On Yourself is an innovative, non-traditional approach to money management that, by creating financial security in uncertain times, has led thousands of people – including Kuhn herself – to safeguard their finances and build wealth.
Since Kuhn started her first Bank On Yourself policy in 2005, she has, via her firm Living Wealthy Financial Group, helped hundreds of individuals, families and business people protect their loved ones and grow their wealth without risk or worry, reduce their taxes and achieve their dreams of financial security. She is one of only 200 financial advisors in the U.S. who have successfully completed the rigorous training program and continuing education required to become a Bank On Yourself Authorized Advisor – and is currently one of the system’s top advisors in the country. At the present time, she and her husband David have eight Bank On Yourself policies.
In 2013, she co-authored (with Yellen) the bestselling book “The Secret to Lifetime Financial Security,” which includes chapters by other industry mavericks who are changing the world’s views on finances. Kuhn also shares her expertise over the local airwaves, hosting Living Wealthy Radio, a financial fitness and life-style program on Austin’s talk radio 1370 AM KJCE from Noon to 1 p.m. on Sundays. The program features interviews with some of the top experts on personal finance, credit and lifestyle. She also teaches seminars and has created various webinars to educate prospective clientele about Bank On Yourself and the nuts and bolts of investing in dividend paying whole life insurance.
“Economies rise and fall, banks go under, stock markets fluctuate…but the Bank on Yourself strategies give control back to individuals as it takes control away from institutions,” Kuhn says. “This book gives more Americans access to the principles that allows people to take back control of their financial security. I was honored that Pamela approached me to contribute to its success.”
Yellen is quick to tout Kuhn’s passion in sharing the Bank On Yourself system with her clients and everyone else in her sphere of influence: “Teresa embodies the concept of ‘mastery’. Teresa set her mind to mastering every aspect of it and has succeeded at doing that. She is a consummate professional and her clients can be absolutely confident that no detail of their financial plan will fall through the cracks. Teresa has my highest recommendation.”
For Kuhn, a major part of being a Bank On Yourself advisor is the challenge of teaching her clients to think differently about their finances from the concepts that have been ingrained upon them their whole lives. “We are taught that 401(k)s and IRAs are the way to build retirement funds,” she says, “but we should also be building up savings that are not dependent on fluctuations in the market but are safe and secure. So if you need to buy a car, make a down payment on a house or lose your job, you have that money accessible. Most of my clients have been taught to save some but invest the rest, but the remainder of this money is at risk.
“I tell them, ‘After you have a foundation in place, if you choose to invest your other money the conventional way, that’s fine,” Kuhn adds. “We work with everybody, evaluating and analyzing where they are today and educating them, filling in the gaps about Bank On Yourself to see if it makes sense for them and can provide the right solution based on their objectives and current resources. For me, Bank On Yourself is foundational and most individuals, families and business owners can benefit from it. I believe that when people feel safe and secure, they become better investors because they’re not worried about losing all their money. But for whatever reason, if they don’t qualify or are not in a position to save money, we will work with them to find a better place to park their money.”
She has learned the importance of being flexible so as to best serve their needs. Some clients, for instance, have a big nest egg and some want to put money from their savings into Bank On Yourself, while others want to save money or put it into IRAs. Others want the money they will pass down to the next generation protected. Still others want to save money for their kids’ college in a safe place, or simply save money to retire on. “It’s all about what my clients are trying to accomplish,” she says. “Our process is about digging deep into finding that out. We create a three years from now scenario, asking ‘What would have to happen for you to have made progress towards your goals?’ The answer to that helps determine whether Bank On Yourself is the right fit.”
Kuhn says her main goal with her Bank on Yourself clients is that their financial foundation be rock solid so they can sleep well at night – and should they die prematurely, there would be money left behind for their family and loved ones. Because of the many nuances and complexities of the Bank on Yourself system, she suggests that prospective clients do some reading and research on it before they meet with her. As part of her investment in solid prospects, she is happy to send potential clients books and CDs with information about Bank On Yourself.
“If they are willing to invest the time, I will invest the tools, so that when they do the research, they will see that this really works, which is win-win,” she says. “My clients sleep soundly at night knowing that their money is safe in their Bank On Yourself policies and have it growing for retirement. They have the full support of myself and my staff when questions or additional needs arise. My bottom line is to make sure that my clients never lose a dollar of their savings to fluctuations in Wall Street, real estate or the economy.”
JOHN MAULDIN SEPTEMBER 3, 2013
Retirement can be an unpleasant prospect if you’re not ready for it. This week’s Outside the Box is in in-depth report on Americans’ retirement prospects, which comes to us from Dennis Miller, a columnist for CBS Market Watch, and editor of Miller’s Money Forever. It’s not just the Boomers who are trying (often in vain) to retire this decade; it’s also Gen-Xers, who are the most indebted generation (and the one that saw their assets depreciate the most in the Great Recession). The Millennials haven’t been spared, either; in fact, over time they may be the hardest-hit, since near-zero interest rates are keeping them from compounding their savings in the early years of their careers, when the power of compounding is greatest. In addition, the difficult post-college job market and sky-high levels of student loans have kept most Millennials out of the stock market, and they are far less likely than previous generations to open a retirement savings account.
This is not a problem the government is going to be able to fix. One way and another, Social Security will do less for people in coming years, not more. We are all going to be more dependent upon our own resources if we want to have anything that resembles what we have come to think of as a secure and comfortable retirement.
Social Security benefits can represent a big stack of cash. A typical monthly benefit of $2,200 has a present value well over $500,000. Consider all your Social Security options carefully to avoid making a costly mistake.
Like all government law, Social Security is not a simple piece of legislation. Since the Social Security Act became law in 1935, hundreds of amendments have added to the complexity. To make the best decision, you must consider health, income before retirement, income during retirement and taxes.
Retirees cannot rely on commonly held beliefs. Don’t assume that simplistic rules such as “Always file for early benefits” or “You need to stop working to receive benefits” are correct. Specific cases break every rule of thumb. And these one-size-fits-all answers leave many retirees failing to maximize the benefits they have earned.
The decision is even more critical for women. For 42% of single women older than 62, Social Security is their sole source of income. Women on average outlive men. Thus planning for retirement is much easier for men, who tend to have more assets and die young. Widows are twice as likely to live under the poverty line as men who have lost their wives. And the poverty rate for elderly single women is 23% compared with just 5% for retired couples.
Couples must take their joint longevity into account before either one files for benefits. The person with the longer life expectancy will inherit either a wise or a foolish decision that will last a lifetime. Given that a husband’s benefits are often higher and the wife’s life expectancy longer, each case needs to be analyzed carefully.
Consider for illustration the case of James and Linda Miller. James was born in 1950 and is turning 62 this year. He will receive $2,384 a month at age 66, his full retirement age. Linda is three years younger and expects to receive a smaller benefit.
About three quarters of Americans file for Social Security benefits before their full retirement age. This mistake is statistically most costly when the husband chooses to begin claiming at age 62. In this case, such a mistake would cost the Millers $152,046 in lifetime income.
Assuming normal life expectancies, Linda should file for benefits at age 63. James will be age 66 at that point and have the opportunity to pursue an often overlooked Social Security loophole. He can choose to file only for his spousal benefit and delay filing on his own benefit until age 70. We call this “File as a Spouse First,” or “FAASF.” You can see the results of this optimal strategy listed in the table. Each box represents the amount of total lifetime benefits that would be sacrificed if James and Linda did not file at their optimal ages.
The box representing when Linda is age 63 and James is age 70 captures the highest lifetime benefit. The highlighted box represents the ideal age combination when James is eligible to begin collecting his FAASF benefit while delaying his personal benefit.
Unfortunately, many people file after considering only one or two isolated options. The Social Security Administration’s new online filing system enables quick decision making. People can easily submit their request without any professional advice or planning.
But before filing, you obviously should be informed about all the options. To begin, you need to know your personal Social Security earnings and the projected benefits for both you and your spouse. You can request an estimate at www.ssa.gov/estimator and then print the results. Or call the Social Security Administration at 800-772-1213. For a general review of Social Security, start by reading “Retirement Benefits” (Publication No. 05-10035) online.
Social Security planning is crucial for everyone. People with significant assets should carefully consider both the lifetime benefits and tax consequences of Social Security in light of their overall portfolio strategy. For the less well off, Social Security benefits will dictate their retirement lifestyle. Proper planning could well determine what they can afford to eat.
By Tom Hegna
Published May 11, 2012 FOXBusiness
With traditional safety nets such as company pensions and Social Security dwindling, many of the 78 million baby boomers are left trying to answer one question: “Who’s going to pay my retirement paycheck?”
Annuities are one investment that more and more prospective retirees are considering. These financial products are created by the insurance industry, and offer a lot more flexibility and advantages than other investments. Here are a few reasons why you should think about adding them to your retirement plan:
By Dana Anspach
June 18, 2013, 11:00 a.m. EDT
About 10 years ago, I said to my dad, “Dad, I think I’m done making stupid mistakes.” Wouldn’t it be nice if I’d been right.
Mistakes are part of life. Some are easier to recover from than others. When it comes to money — and time — the closer you are to retirement the less time you have to recover from bad money moves. Don’t take any chances.
Here are the 10 money moves you need to avoid as you get near retirement:
1. Invest the same old way
The same investment approach that got you this far will work just fine in retirement, right?