Retirement Planning Doesn’t End at Retirement by Grant Barra

            As millions of Americans transition from full-time work to retirement, they move from the life stage of asset accumulation to a new stage – distribution planning. Instead of trying to acquire and build up savings for retirement, they are now repositioning their assets to provide an income they can rely on for the rest of their lives.

            The impact of this shift, which is beginning right now for the initial waves of millions of baby boomers, cannot be overestimated. Born between 1946 and 1964, these boomers will need to plan for a retirement that could last for more than 30 years. So, it’s not only those close to retirement, but an entire generation that may need professional help to ensure that their portfolios will provide an income throughout their lifetimes.

            There are several key risks that can undermine the success of a retirement plan – longevity, inflation, asset allocation, fund withdrawal rate and last, but certainly not least, health care expenses.

Underestimating the Risk

            Many people underestimate what their life expectancy is and therefore risk outliving their assets. The facts indicate that at least half of the population may outlive the average life expectancy. A successful lifetime income plan can help retirees prepare for living well into their 90s as there is a very real possibility that people will live 20, 30 or even 40 years in retirement.

            The anticipated longer retirements and the impact of inflation make it more important than ever that portfolios include investments with the potential to outpace inflation. It’s also of paramount concern to provide income protection for the surviving spouse in the event of long-term care needs for an unhealthy partner.

            Many retirees think they need a conservative portfolio. But, given the anticipated length of their retirement, this could create a heightened risk of outliving their assets. A key to long-term success may lie in balancing portfolio income with portfolio growth.

            Obviously, a conservative withdrawal rate would dramatically increase the likelihood of retirees not outliving their assets. A good financial advisor can help people understand how much they need to save to meet their lifestyle goals, and what is a realistic withdrawal rate.

            Rising health care costs coupled with inadequate medical insurance coverage can have a devastating impact on a lifetime income plan. Addressing this risk may mean targeting savings specifically for health care and purchasing long-term care insurance.

Sporty Forties

            Looking at the differing needs for various segments within the baby boomer generation may make more sense if we divide them into age groups. Let’s consider the first group as those who are currently ages 40-49. These are the youngest baby boomers. They are too busy to think too much about retirement planning right now. They have multiple financial goals, including college savings, retirement, children’s needs and housing costs.

            The important risks for this group to consider are longevity and asset allocation. These people really need to understand the value of extra years of compounding on their savings. They also should look into a growth-oriented portfolio so they can take advantage of long-term equity performance. Some questions to consider:

• What events could capsize your current retirement savings plan?
• Has market volatility impacted your savings?
• Will you be paying college tuition for your children?
• How would you prioritize all of your different financial goals?

Possible solutions to these issues are: risk tolerance and subsequent proper asset allocation, college savings planning, health insurance, life insurance, disability insurance and deferred variable annuities.

Nifty Fifties

            The next segment includes those who are currently ages 50-59. They are now beginning to think about retirement and are uncertain whether they have saved enough. They probably don’t know how to put together a retirement income estimate themselves, and they are concerned about life’s changes: kids leaving home, aging, new goals and directions.

            These individuals should be thinking about longevity, an appropriate strategy to provide for growth until retirement age and how they will meet their needs during a long retirement. They should be looking at transitioning their asset allocation plan to take advantage of the next 5-15 years before retirement.

            Now is the time to discuss life and health coverage in retirement, including obtaining long-term care insurance, discontinuing disability insurance and looking at the options for supplemental health insurance coverage at retirement. Questions to consider:

• Your retirement could last 25-30 years or more. Are you prepared financially?
• Do you know how much you will be spending in retirement?
• How is your long-term portfolio holding up?
• Do you feel comfortable about your retirement savings plan?

Possible solutions for people in this age group include reviewing their asset allocation plan, taking advantage of catch-up provisions in their IRAs and employer-sponsored plans, consolidation of assets for more efficient management, and fixed or variable annuity products. Now might be a good time to also consider living benefit riders on variable annuities.

Super Sixties

            Finally, those individuals who are 60-69 years of age. Their key concerns might be wondering whether they have saved enough for retirement, wondering about their health prospects and concern about taking care of children and grandchildren financially.

            Issues to consider include planning for the possibility that they will live longer than they think, asset allocation review, health coverage and the risk of inflation eroding their spending power. Questions to consider:

• How much can you expect to receive from Social Security or your pension?
• Would you like to help fund your grandchildren’s education?
• Have you thought about protecting your spouse or partner if something should happen to you?
• Can we discuss the retirement income potential of your portfolio?

Possible solutions to these issues: asset allocation and diversification, catch-up provisions for IRAs and employer-sponsored plans, consolidation of assets for more efficient management, assessing your life insurance coverage, long-term care insurance needs or annuity laddering. Conversion to a Roth IRA might be considered. Additional considerations:

• Checking your beneficiary designations for all accounts
• Discussing required minimum distribution options
• A health care power of attorney, or living will
• Systematic withdrawal plans
• Estate planning considerations

The transition from full-time work and asset accumulation to retirement and asset draw-down brings a new set of financial decisions. The main challenge – achieving potential lifetime income solutions – is a serious one.

Education is of paramount importance. No matter which age group you currently are in, understanding how to, and adequately planning for, your retirement takes effort. It’s important that you understand the issues you currently are facing and the issues you will face as you get closer to retirement.

It’s education that will last a lifetime.

- Grant Barra

Grant M. Barra, LUTCF, CLF®
Connect with me at www.linkedin.com/in/gbarra

How Much Life Insurance Do You Need? by Grant Barra

            It’s a question most insurance professionals hear many times every day – How much life insurance do I really need?

            It’s a great question to address, especially now as the life insurance industry is conducting a public awareness campaign to encourage consumers to take stock of their life insurance needs.  Barra & Associates an Insurance and Financial Services Brokerage is proud to be among the organizations supporting this industry-wide effort.

            The main purpose of life insurance is to provide financial security for your family. It helps to ensure that when you die your family will have the financial resources it needs to provide for your spouse, children, an elderly parent or some other dependent.

            Life insurance also may be used to meet a variety of long-term financial planning goals. It can help provide educational funds for your children or funds for your own retirement.

So How Much is Enough?

There are no hard and fast rules for determining how much life insurance is enough, because no two families have exactly the same needs. You may be single, supporting no one but yourself. Or, you may be single, supporting an elderly father or mother. You may have several children, but also two incomes and considerable net worth. Or, you may have several children, be dependent on one income and have few back-up resources.

Whatever your situation, if you are providing financial support for people who are depending on you, you probably need life insurance. However, there are several things to keep in mind when you buy life insurance, since the proceeds can be used in a variety of situations. For example, the proceeds can:

·         Provide ready cash for final expenses. These expenses could include funeral costs, medical expenses, probate fees and estate taxes

·         Pay off outstanding debts – not only hospital bills, for example, but a mortgage or an auto loan

·         Provide replacement income in amounts necessary to cover:

·         A readjustment period of two or three years after your death. Even if you are a two-income family, it takes time to adjust to one paycheck instead of two. If you were the sole breadwinner, with young children at home, your spouse’s need for a readjustment period is obvious

·        The period while children under age 18 are still at home and dependent; also, the college years

·        The years between the time the youngest child becomes independent and the time the surviving spouse reaches retirement age

·        The period after the survivor retires and receives Social Security or a pension

In general, determining how much life insurance you need means deducting the sum total of the income that would be lost upon the insured’s death from the sum total of your family’s ongoing financial need. It also means calculating the impact of inflation and building in enough “extra” to counteract inflation’s effects.

It may seem complicated, but it’s an exercise well worth doing. It’s also one you don’t have to tackle alone. A life insurance professional can help determine how much life insurance your family will need over time, based on the extent of your financial responsibilities and the kinds and amounts of your other resources.

Take the time today, to help ensure your family’s financial security. Talk to your insurance professional. 

- Grant Barra

Grant M. Barra, LUTCF, CLF®
Connect with me at www.linkedin.com/in/gbarra

Protect an Important Asset – Your Identity by Grant Barra

            Identity theft is one of the fastest growing white-collar crimes in the United States – two major factors fueling this fire are the rise in credit applications over the Internet and the tremendous proliferation of credit cards.

            Identity theft occurs when someone uses your specific identifying information, such as your Social Security number, to acquire goods or services in your name. A thief can use basic personal information, along with a false address, to get credit cards and other forms of identification, such as a driver’s license. When any of these events occur, an identity has been stolen.

            Typically, the majority of damage is done very quickly, sometimes within days, before the victim is even aware of a problem.

Identity Thieves Act Fast and will:

• Open a new credit card account, using your name, date of birth and Social Security number. When they use the credit card and don’t pay the bills, the delinquent account is reported on your credit report.
• Call your credit card issuer and, pretending to be you, change the mailing address on your credit card account. Then, your imposter runs up charges on your account. Because your bills are being sent to the new address, you may not immediately realize there’s a problem.
• Establish cellular phone service in your name.
• Open a bank account in your name and write bad checks on that account.
• Safeguard Your Identity.

You can safeguard your identity through these precautions:

• Don’t carry your Social Security card, birth certificate or passport in your purse or wallet, except when needed.
• Don’t print your Social Security or driver’s license number on checks.
• Sign credit cards immediately. Keep photocopies of the front and back of credit cards in a safe location. This will help cancel the cards if stolen.
• Don’t leave receipts from credit cards, back accounts or ATM transactions lying in the open.
• Shred mailings that include unused financial solicitations such as pre-approved credit cards.
• Make sure your mailbox is secure and remove mail as soon as it arrives.
• Don’t provide Social Security or credit card numbers over the telephone or Internet unless you’ve initiated the contact.
• Contact a major credit reporting company at least annually to review your file.

Should identity theft occur, notify credit card companies immediately; if the credit card is reported missing before charges are made, the cardholder owes nothing. If you suspect someone is using your Social Security number, contact the Social Security Administration at 1-800-269-0271.    

   

- Grant Barra

Grant M. Barra, LUTCF, CLF®
Connect with me at www.linkedin.com/in/gbarra

Long-Term Care: Don’t Underestimate Your Need For Coverage by Grant Barra

            Aging baby boomers and new medical technology that prolongs life have increased the need for long-term care. Long-term care is something Americans of any age should be thinking about, but most people are not aware of or prepared for the cost.

            Long-term care refers to a wide range of medical and non-medical services – including custodial help with daily activities, nursing care and skilled nursing services – for people who are physically or mentally unable to care for themselves. Home health care, adult day care, respite care, assisted living and nursing home care all fall into the category of long-term care.

Long-Term Care Insurance Critical for Any Age

            A long-term care insurance policy can help cover the expenses incurred for long-term care. Many people mistakenly assume that long-term care insurance is only for the elderly, but a third of all individual long-term care policies are purchased by people younger than 65. The coverage is critical for a person of any age; plus, it can be more economical to purchase such coverage when younger.

            Anything can happen to anyone at any time resulting in the need for some sort of care. It is not uncommon to find a person in their 30s in a nursing home because of a debilitating accident.

Other Coverages Inadequate

            Other types of insurance or government programs don’t provide the amount of coverage available in a long-term care policy.

1. Health insurance policies typically do not cover long-term care costs such as nursing homes or assisted living facilities. Also, most policies don’t pay for adaptive equipment, special transportation needs or home modifications.
2. Many Americans assume that Medicare will cover these costs. However, coverage is limited and may still require large out-of-pocket expenses. Also, Medicare pays for skilled nursing facility care only after a discharge from a three-day hospitalization. It does not pay for custodial or intermediate care, and the majority of care provided in nursing homes is custodial, which includes assistance with dressing, eating and moving around.
3. After an individual has exhausted all of their assets, they may qualify for coverage under Medicaid. However, with Medicaid an individual and their family members lose choice over the care received.

            A long-term care policy can save you from having to deplete your assets for care and can prevent you from being at the mercy of the state. In some sense it’s lifestyle preservation to ensure you have a choice in your care. At the same time, it’s asset preservation – it allows you to pass something to your heirs.

It Pays to Shop Around

Here are some things to look for when shopping for a long-term care policy:

1. Purchase a policy from a company that is financially strong. Be sure they will be there when you have a claim.
2. Select an agent who is experienced with long-term care and with whom you feel comfortable. 
3. Consider purchasing compound inflation protection because the cost of care is expected to increase considerably over the next 10-20 years.
4. Weigh the difference between a lifetime policy and a limited benefit policy. In many cases, the premium difference between a five-year policy and a lifetime policy is minor.

- Grant Barra

Grant M. Barra, LUTCF, CLF®
Connect with me at www.linkedin.com/in/gbarra

Term Life Insurance Provides Affordable Lifestyle Protection by Grant Barra

            You’ve worked hard to establish a comfortable home and lifestyle for your family. So why not protect it? If you have a growing family and want to provide for them in the event you die prematurely, you’ll want to consider purchasing life insurance.

            And term life insurance can be one of the most economical ways to provide that protection for your family.

            Term life insurance is considered a “pure” insurance product in that it does not build cash values – it provides a specific benefit for a specific period of time. Some term life products also offer additional benefits, including provisions for unemployment and residential damage, and an accelerated death benefit – meaning that most of the death benefit is paid to you upon diagnosis of an illness if your life expectancy is determined to be 24 months or less.

            But the most important reason to purchase term life insurance is to provide your family with financial peace of mind . . . the money to preserve their way of life in the event you no longer are around to provide for them.

Do I Need Life Insurance?

            You are not the first person to question whether you need life insurance, or ask whether you have enough coverage. Following are five common questions about the need for adequate protection:

1. Why is life insurance important? Life insurance is the best way to protect against financial hardship caused by the premature death of a primary wage earner. Americans with other sources of financial assets or income expect to use life insurance to help pay bills and to maintain their lifestyles if the primary wage earner dies.
2. I have life insurance with my employer. Isn’t that enough? No, it probably isn’t enough. Coverage through your employer is typically limited to one year’s salary and chances are great that you’re underinsured. Can one year’s salary, paid in a lump sum, take care of the bills and give your family the time they need to recover?
3. What does it mean to be prepared if the primary wage earner dies? In this regard, “being prepared” means a family has the money to take care of funeral expenses, monthly bills, etc., if the wage earner dies. If your family relies on your steady paycheck every month, life insurance can help provide the financial resources needed so they can get back on their feet.
4. I don’t think I have enough money to buy life insurance. Is it expensive? There are various forms of life insurance, all of which can be affordable depending on your needs. The first step is to ask an insurance representative for a no-obligation quote.
5. I see the need for life insurance, but where do I begin? Simple. Just ask an insurance representative for a no-obligation quote and to discuss your life insurance options. A financial professional can also periodically review the terms, provisions and options of your life policies.

Term life insurance can be an affordable way to give your family one of the greatest gifts possible – the peace of mind knowing that if something should happen to you, the money will be there  . . . to protect your family’s home, your family’s way of life, your family’s future.

Contact a professional insurance agent today to review your financial protection needs.

- Grant Barra

Grant M. Barra, LUTCF, CLF®

Connect with me at http://www.linkedin.com/in/gbarra

Life Insurance Essential in Estate Planning by Grant Barra

You need estate planning. It doesn't matter how much you make. It doesn't matter where you work. What matters is whether you want to decide where your assets - no matter how great or small - end up after you die. Or would you rather have someone else make those decisions?

Estate planning is how you make sure that your assets - your lifetime accumulations - pass to your heirs in a manner of your design. It's how you make sure your family is secure, and your assets end up where you want them. It's taking care of your family, your business - whatever is important to you.

Proper estate planning, whether through a will or some other vehicle, will make sure you, and not the state, decide where and how your assets are distributed after your death. Life insurance can give you options that make your planning an easier process. There are two basic ways in which life insurance can assist in your estate planning:
1. Estate Enhancement - primarily for younger families and those families with children. Adequate life coverage that protects a family from financial loss due to a premature loss of life can help pay for future college tuition, mortgage payments, medical bills, etc. Tax-free life benefits can help the surviving spouse and children maintain their standard of living.
2. Estate Liquidity - primarily for older folks with somewhat larger estates. Those individuals who are worried about federal and state death taxes can use life insurance proceeds to help pay those taxes. Many times, people with significant assets have those assets in "hard" form - they are hard assets, meaning that they are not easily or quickly sold. Your home, jewelry, artwork, cars and other material possessions are some examples. If those assets must be sold quickly to pay taxes that are due a few months after death, chances are you are not going to get top dollar for those assets. Life policy can remove that concern.

There are more advanced uses of life insurance, many of which are geared toward business owners. Some of those examples follow:
• Estate Equalization for Family-Owned Businesses - Family businesses operated by parents with one or more children are often in need of liquidity when the parents die, as a majority of the estate is "tied up" in the business. A Life policy provides a way to pass the business to interested heirs while being fair to those children outside the business.
• Buy-Sell Funding - Life coverage can be an indispensable tool enabling surviving co-owners of a business to own and continue the business without outside intrusion, while the deceased owner's heirs obtain debt-free assets from the estate.
• Key-Person - Business owners use "key-person" policies to help replace earnings associated with the loss of employees whose unique talents and knowledge made them valuable assets of the business.
• Credit Enhancement - Life insurance is often used to stabilize a business concern's financial position and serves as a valuable asset to pledge as collateral.
• Informal Funding for Deferred Compensation - An important ingredient in any deferred compensation plan that is "non-qualified" is life insurance. Such policies owned by and payable to the employer remain a primary building-block of all such plans.

For more information on how life insurance can play a valuable role in your estate planning, be sure to visit with your financial advisor.

Grant M. Barra, LUTCF, CLF®
Connect with me at www.linkedin.com/in/gbarra