Almost everyone is aware of the difficult economic times we are currently in. It’s going to get worse before it gets better. We offer advice, direction, and points of guidance to the public to help individuals, families, small businesses, and their employees to keep the coverages they have and/or obtain the coverages that are most appropriate for them. We limit our coverage to life insurance, medical coverage and accident/sickness income protection. Medicare supplementary coverages and retirement funds are also covered. Qualified and non-tax-qualified retirement funds can be both qualified or unqualified. We will split this commentary into three parts, as the unemployment rate is expected to rise to 10% in 2009, which would put the country in deep recession (some would even say depression).
1. Unemployed people and/or businesses that have been or are in danger of going under. The remaining 90% of those who are still earning a living, regardless of whether they are employees, self-employed or small-business owners.
3. The disabled and the retired. We will restrict the timeframe to any kind of economic recovery/stabilization to two years for our purposes. Let’s say 2011, 2011. Things will likely look better by then. Let’s hope this is true. So let us begin.
1. What can a trusted consultant, an insurance-oriented professional or financial advisor do for those who are unemployed? Fair question. It is a fair question. It is obvious that the first step is to turn your search for a job or to start a business into a full-time job. There is plenty of work out there. It might take some time, or even a very long time. This is the priority, even if one is not very wealthy. There are still some things you can do until the problem of employment is resolved.
A. This is where you can tap into cash withdrawals or loan funds for those who have cash value annuity and cash value life insurance policies. It is private, accessible, doesn’t require qualification, and funds are not obligated to be repaid. It is important to start repayments as soon as things improve. There are also automatic premium loan features that can be added to life policies. Dividends can be tapped if they are available. Annuities, whether tax-qualified or not, are less accessible but still available. You can use this to put food on the tables, pay for the car or make the payment, pay the doctor and prepay premiums on any other insurance than auto.
B. Insurance-oriented financial professionals develop strategies that will maintain all or most coverages, as well as allow for living expenses. This allows for the easy access to funds from retirement plans. Depending on age, the 10% income penalty and the additional tax liability of qualified distributions will determine whether or not one is subject to the 10% tax penalty. However, money is what matters most. Many people have company 401 (k), IRAs, and SEPs. If you are pushed against the financial wall, some of it will have to be used. It doesn’t matter how low the account balances are. Cash is the first priority. Social Security retirement income is available to those over 62. You should be aware that one can expect a substantial reduction in income at these young ages. Money is still money.
C. Next, you can use credit cards. This situation was recognized by a well-known financial advisor who changed her mind about accelerating the payment of all card balances. In light of the extraordinary depthening recession, the new recommendation is to pay the minimum monthly to keep your cards in force. It is a bad idea to use credit cards when you aren’t working. However, it can be done in the short-term. It would be a mistake to extend the time limit for credit cards. This could lead to very unpleasant consequences. As the old joke goes one can pay his Master Card with his Visa Card. Although the Credit Card Companies are tightening up, this is still a viable option in the short-term —–again. There is no loan qualification.
D. Finally, you may be able to move in with your family or friends for a time. Because of a low income or insufficient income, you can apply for Medicaid. This is a program that provides very low-cost or free income-tested medical care. For example, in Houston, Texas, there is the Harris County Hospital, Medical Center and its outlying facilities. These can be found in your locality, county, or state. There are VA Hospitals and Medical Facilities for Veterans. For children, there are S-CHIP insurance programs. Many more services are available for free or very low cost, and many can be found by doing a search on the Internet. For more help, call your Advisor. If things get really difficult, consult an attorney to discuss the federal bankruptcy laws. Debts can be discharged, restructured, and everything is frozen from creditors for long periods. This legal process can save your life if done correctly and under the guidance of an attorney.
2. The Employed. The Employed. This segment of the population has plenty of breathing room and wiggle room. Conservation is the goal. It is encouraging that Americans are doing this. These habits are changing and will continue to change even after the economy improves. Here are some suggestions:
A. There is always money coming in, regardless of whether there are two income-earners or one in the family. If a spouse loses their job, they might be added to the married partner’s family or group policy. This will allow them to maintain medical insurance. All life, disability income, and medical insurance coverages can be prepaid. All other coverages should remain in force. Reduce costs and increase deductibles wherever possible. This is how you maintain the safety net. All money that is not tax-qualified can be saved. Banks, credit unions and money market funds are the best places to save money. Annuities are also a good option. Save enough money to cover at least eight months’ living expenses. Many retirement funds should be moved into fixed funds, and out of risk funds. Contributing to qualified plans regularly reduces taxes and saves money. Nobody knows where the risk funds will go in the next two-years and beyond. It is better to take losses and preserve what you have than continue to ride it out for the older segment of the population. You can argue that this can be avoided if you are young enough. The risk funds will likely recover over time. This is corporate America. Keep faith, we will recover.
Annuities are a safe and interesting way to move or put money. These are extremely safe and provide decent interest rates. Fixed and guaranteed plans should be specified with fixed minimum interest rates, as well as current declared rates. Annuities can be long-term, such as 10, 20, 30 or more years. Although results may vary depending on future interest rates, here’s a strategy that will work for conservatives (which is almost everyone): One person has seen his/her risk accounts drop from $200,000 to $100,000. It’s possible to put the money you have left in an annuity ($100,000.) and it will all return or at least most of it within 17-19 years. Many illustrations have been run, both using projected and guaranteed current interest rates. It happens. There is little to no risk. You will sleep more soundly. An advisor in tax can help determine net outcomes. In the event of funding that is not tax qualified, it may be possible to long-term recapture losses originally sustained. Do not attempt this at your own risk. There are issues of suitability, risk tolerance, compliance, understanding/disclosure, and the like. This is a more suitable technique for middle-aged people; retired persons might find it less attractive.
B. B. Employers typically pay a significant portion of the cost for employees’ coverage. When the cost of family coverage is added, the employee must be alert. Nationally, 18% of workers do not include family members in their plans. Some work in jobs that offer both group and private coverage. Others leave their children uninsured. Still others have no coverage whatsoever. You can save money by combining private and group insurance. This can be done with the help of an insurance professional. There are many differences between private and group insurance. Everyone is happier and clearer if they make informed decisions. Combining higher deductibles with Health Savings Accounts, or in the case where group coverage is available, Health Reimbursement arrangements can also help save money. To get the right advice, licensed professionals should be consulted.
C. Check to see if there are any cash value life insurance policies; if not, buy more. If this coverage is kept long enough, it can be a lifesaver when you need money. This becomes a safe way to save money. They are owned by individuals; they are also owned by companies and their key employees. The benefits must be used for a legitimate reason.
D. Shop around for the best deals from reputable insurance companies and agencies for any type of coverage you need. This is very important for the consumer. Comparing similar plans can lead to significant differences in almost any type of insurance.
E. There is a lot more to say for employees, but it is best to seek out qualified financial advice. These ideas and techniques are targeted at the middle class, it is obvious. Although we are often surprised by some of these ideas, the very wealthy are likely to already have the majority of it. They are also relatively immune from recessions and other economic downturns.
3. The Disabled and the Retired. These two distinct groups have their own advantages and disadvantages.
A. A. 2. Many of the information in this article is likely to be familiar to them: trusts and wills, powers and appointment, creative beneficiary arrangements and business succession plans. Proper amounts and ownership of life insurance. And many other details that are best handled in conjunction with lawyers. We are financial advisors and professionals in insurance, and we do our jobs well to the benefit of clients.
B. B. Recovery from severe retirement erosion and emergency set aside capital accounts are the main issues. It is true that seniors are living longer and face the greatest fear of running out of income and assets before their life ends. Annuities can help rebuild assets. Annuities have the advantage of providing an income that can never be lost. This is known as the single premium instant annuity. It is important to consult with an insurance advisor in order to fully understand the options and make the right decisions.
C. Most seniors have Medicare for medical care and insurance to cover that care. Many seniors also have private insurance that provides additional coverage, which is approved by Medicare. This includes prescription drug copay benefits. These parts are usually taken care of along with Social Security pension income. Private and company pensions can also be supplemented in the distribution phase. VA health benefits are important for Veterans. Long Term Care insurance is a type of coverage that is often overlooked. This insurance covers almost all exclusions in health insurance. This coverage is for people who are not only sick or injured but also become incapacitated and unable to do their own healthcare. This is a unique type of insurance that covers the entire cost of care. On three levels —-in-home, adult day care facilities and institutionalized nursing homes, Certified Caregivers are responsible for taking over. In additions to providing health insurance benefits, LTCi is also an estate and financial conservation/preservation tool, protecting assets and income. For an individual aged 65 or older, there are 50% chances of this happening. However, for a couple of the same age, 70% of the time either one or both of them will require this type of care. An average cost for one incident is around $250,000. This is why it is important to have coverage if you are able to qualify for the underwriting process. The premium will be lower for those who are younger than you. Consult an insurance professional. This sector is most likely to require life insurance for final expenses. Each situation should be assessed to determine if estate tax and associated cost clearance are possible. This could result in greater face coverage depending on the liabilities.
3.1 The Disabled on Social Security Disability income and Medicare sub-category has some points. It is preferably with some type of Supplementary coverage and usually below 65 years old.
A. A. Many of these plans can be purchased at a low or even no monthly cost to the beneficiary —-the correct way to say this premium is $0/mo. To the beneficiary. Some Disabled are eligible for LIS, which provides better coverage. Some Medicare Disabled can get both Medicare and their state Medicaid coverage. This allows them to obtain supplementary coverage for sickness and accident. The beneficiary pays $0/month.
B. This group is reasonably well covered for health insurance, but they are very vulnerable with regard to income/spending/inflation. They usually have only Social Security for the disabled, which is generally not much.
C. There are many programs that provide assistance at no or minimal cost, whether they be in a city, county, state or federal level. These programs can be found by a competent professional. Internet can be a great help.
To people who have questions, need clarifications, require expanded explanations, request services searches and research, want financial and estate preservation/conservation services, or need coverages and the explanation of them, work with a financial planner, insurance professional, or a fee-based consultant. There are many ways to help anyone in these financial times. Those of us who work in the business/profession of this can assist you. We don’t charge any fees at all! One thing is certain: we are in for tough times, but we will persevere. This is what Americans do.
