(Almost) All Comebacks Are Possible (Day 14)

One of the reasons I prefere life insurance over all other products I work with is that it's the only catastrophe where a comeback is impossible.  Once you're dead, you're dead.  Life insurance prevents a personal disaster from also being a financial disaster.




Now that I've talked insurance, let's talk baseball!  Today's finish was one of the best finishes that I didn't see.  I didn't even get to hear Denny Mathews.  Instead I got John Kruk and some other windbag the radio.  The only good thing about it was that they were dead wrong when they declared the KC team dead after the Astros (when the heck did they move to the American League, by the way?) hit back to back homers and took a 6-2 lead in the bottom of the 7th inning.  I saw this on my computer screen while the commentators went on and on about how great the Astros were and how the Royals were done, couldn't come back from this deficit, etc.

I hadn't realized that it was an afternoon game until I got a text from my friend Gary "The Carrot" Davis, with whom I watched most of last year's playoff wins at Buffalo Wild Wings.  The way they had been hitting, I had my doubts about their ability to come back.  I even texted Gary, "I guess I'll be saving $ and time from not watching.  And more running miles".  That text was at 2:55 p.m., as I was getting ready to head out the door to parent teacher conferences. 

But before I left, the Royals quickly loaded the bases and had Lorenzo Cain at the plate with no outs.  I listened on earbuds and got text updates as the Royals scored 5 in the inning to take 1 run lead into the bottom of the 8th.  It wasn't easy, but I turned the radio off while talking to teachers, so I missed the 2 last inning insurance (see, I'm still talking about "insurance") runs supplied by Hosmer's homer. 


Now I just have to figure out how to squeeze a couple of days of insurance work into tomorrow so I can enjoy most of Wednesday night's game 5 clinching win for the Royals!

Kansas City Royals--Friday Favorite (Day 12)

Every day is a good day to be a Royals fan.  Some days, like today, are better than others.


The Royals have been my favorite baseball team for almost as long as they've had a team.  Because of players like Amos Otis (my favorite), Buck Martinez, and Bo Jackson?  Because of their beautiful park?  Because they've won the World Series one more time than the Chicago Cubs have in the time I've been alive?  No.  It's because of two men who most people have never heard of, Royals broadcasters Fred White and Denny Mathews.


Growing up I loved playing baseball and learning as much as I could about it.  Fred and Denny gave me my baseball education on KMA, my local radio station.  I listened to almost every game from the mid-70's to the mid-80's.  I learned what "hitting for the cycle" was when John Mayberry did it August 5, 1977.  They kept me awake way past my bed time relaying Jim Colburn's no-hitter on May 14, 1977, and many other nights, especially those when they were up against the Yankees.  They were too classy to say anything bad against the Yankees, but their descriptions of those losses turned me into a lifelong Yankee hater.


Fred was replaced in 1999 (huge mistake, in my opinion) and passed away in 2013, but I still do get to hear Denny occasionally when I'm within range of a Royals broadcast.  Nobody does it better.  How can a team who makes me feel like a 10 year old again not be a Friday Favorite? 

Paychecks and Playchecks (Day 11)

Most people seem to have forgotten that the 401(k) plan has mostly replaced the pension plan.  In the not so distant past, people worked for the same company for 20 or 30 or more years, with the reward for loyalty to the company was that at some point they would be able to continue to get a regular paycheck without continuing to work.  That was supposed to what happened with 401(k) plans, but with the employee rather than the employer having control.  But that hasn't been what happened, for various reasons like I wrote about recently (Follow the Money and Don't Die With This).


This is not advice on what insurance product to use, or even whether or not an insurance product is the right tool for the job (I usually think it is, but I'm biased.  Think for yourself too).  All I'm saying is that you need to have a plan so that, unlike a large percentage of people in retirement, you know that you have enough cash flow and liquid money to cover everything.  Even if something goes wrong.  Because it will.  Which means that if you're counting on dividends, rent being paid on time, or other non-guaranteed investments for your paychecks, you need to either change your plan or have a good back up plan


When I say, "enough cash flow and liquid money to cover everything", I don't mean just enough to cover the bills.  I mean enough to cover buying a different car if you need it, to buy someone special a really cool wedding present, to take a trip with friends, etc.  When you were in your 20's (or even if you're there or haven't reached that age yet), did you sit around with your friends and say, "All I want is enough of a paycheck that I can eat  two or three times a day and keep the electricity turned on?"  Of course not.  So why plan your retirement on having just enough to pay the bills.  Don't sell yourself short.  Plan to have enough in your regular checks to both "pay" and "play".

"How Much Did He Leave?" "All Of It" (Day 10)

Yesterday I wrote about what I see people do most often with retirement money, and said that instead of just complaining about their mistakes, I would offer some solutions.  As I often say, this isn't insurance advice.  Without sitting down with you and discussing the specifics of your situation, I can't make an informed recommendation.  What I'm posting here is very general, something to use to open a discussion with me or another professional and figure out an action plan, not something to take action on right now. 


People often tell me something along the lines of, "I want my money to run out the day I die, and the check to the funeral home to bounce".  They understand the old saying of "You can't take it with you."  However, they almost never actually spend their retirement money that way.  Just like a business, 401 (k) and IRA plans should have an "exit strategy" from the beginning.


These are some possibilities that in many cases are better than holding on to tax-deferred money until it gets passed to beneficiaries or a nursing home.

• Start a guaranteed income stream from the retirement funds and use it to buy a life insurance policy.  Often the best option is one that also provides a benefit if you need long term care.  Advantages:  Taxes on withdrawals are spread out over multiple years, and proceeds from life insurance to designated beneficiaries are not normally taxed.  Depending on age, health, etc, life insurance benefit could be more than the value of the retirement savings, even not figuring in tax advantages.  Depending on options chosen, beneficiaries may get both the life insurance benefit and more regular income.  At least they won't get everything as taxable.
• Gradually convert to Roth IRA.  You pay taxes on that part when you convert it, but it is later passed on without the taxes hitting all at once.  With some planning, you can offset the amount you convert with other deductions so you pay little or no tax on the money.  For example, I've had customers balance the Roth Conversion with deductions like large medical bills, HSA contributions, business losses/investments, work layoffs, etc.  I haven't had anyone do it, but it would be ideal to take a year off work to travel, live off savings, and do a Roth Conversion to turn money that's never been taxed to money that will never be taxed.  All without every paying any taxes on that money.  Do this only AFTER consulting with a tax advisor.  That's better than getting a surprise at tax time, and if the tax advisor is good, he or she often has ideas on how to do it even better than you and I think of doing it.
• Give it directly to a charity each year.
• Give a portion as gifts to family each year, paying a small amount of or no tax as you go.  With both this and the charitable giving, you get to see the benefits of your gifts, which is a lot better than saving on taxes.  They might even take you out fishing or water skiing on their new boat.

Those are just a few options.  A key to any of them is to have a plan for long term care.  Notice I didn't say, "long term care insurance" or "to pay for the nursing home".  The insurance part is sometimes involved in the plan, but just having a policy isn't enough, and often is not the best way to plan for it.  Nor is a nursing home always the best option.  But they are full of people who didn't plan because they didn't need a plan because, "I'm never going to the nursing home".

"Don't Die With This" (Day 9)

"Don't die with this".  I heard that from a company employee talking about one of their insurance products.  I found it refreshing, because usually a company wants a customer to keep a policy forever.  I wrote about that a few days ago so I'm not going to rehash it now, but if you want to read it,  just click this link for last week's "Follow the Money" post.


One of the things I complain about is people complaining about something without working toward a solution.  This is part one.  I will also discuss solutions in another post.




Unfortunately, way too many people die with too much tax-deferred money.   I have seen the same thing happen over and over again.  To the point that whenever I get an email from an insurance company talking about the huge amounts of tax-deferred money that's going to be passed on in the coming years, I always think, "Damn!  I should have been a boat salesman!"  Make sense?  No?  Let me explain.




Here is the pattern I see repeatedly:  person follows "expert" advice and puts everything he or she can into an IRA and/or 401(k).   They work like crazy until they and/or their spouse is eligible for Social Security and/or Medicare.  Then they quit their job.  They don't want to withdraw any of the money they saved because they would have to pay taxes on it.   So they scrape by on Social Security, worrying about money, thinking of their retirement savings as something that they will use to cover nursing home costs and/or pass on (almost always to their kids).




Then when they hit age 70 1/2  they start taking RMD's (Required Minimum Distributions), which isn't a whole lot in the first few years, but the percentage required goes up each year.  They pay the taxes, but let everything else sit there.  Then eventually they either go to a nursing home or die.  What happens then?  Most commonly, if they go to the nursing home, they spend through their money, then go on Medicaid if the money runs out.  How much enjoyment did they get out of it?  None.  If they are lucky enough to die either without having to go in a nursing home or before the money runs out, then that's where I think, "I should have been a boat salesman!"  Because from what I've seen, if two 60ish year-old kids inherit the money, at least one of them buys a boat.




Nothing wrong with buying a boat, if done the right way, but what happens time and time again is they "get a deal", make an impulse buy, and since they don't want to have payments, pull out the money to pay off the boat.  Then the tax bill comes.  The withdrawn money is taxable, piled on top of their earned income tax liability (usually when in their peak earning years, with all their tax deductions grown up and out of the house), and they withdraw more money to pay the taxes, which adds to next year's tax bill.  They repeat until the money is gone, which doesn't take long.


Who wins in this scenario (besides the IRS)?  Not the person who saved up all this "retirement money".  They didn't use it for retirement.  The one who now owns "a hole in the water you fill with money"?  Maybe.  But the big winner is the boat salesman.  So "Don't Die With This!".  At least not until I open a boat dealership.

Spinal Tuning Center--Friday Favorite (Day 5)

Day 5 of 100 consecutive days of writing for publishing is now day/week 1 of "Friday Favorite".  I've been thinking for some time that I would like to regularly write about products or businesses that I particularly like.  I'm finally doing it.


Today's Friday Favorite is Chad Rohlfsen of The Spinal Tuning Chiropractic Center.  Ironically, this Friday Favorite isn't open on Friday, and I chose a medical practice that doesn't accept medical insurance.


I love supporting businesses who go against the norm because they believe their way is better.  That's exactly what Chad does with his membership practice.  Since (as far as I know) he's the only chiropractor in the state who uses this business model, he definitely goes against the norm.


If you're not familiar with the membership practice model, as Chad explains it on his website, he "provide[s] unlimited care for a low flat rate monthly fee".  Unlike most chiropractors, he doesn't take insurance.  The fee I pay him comes 100% out of my pocket (not literally--actually it's deducted automatically from our family bank account).


So why does an Insurance Nerd recommend someone who doesn't accept insurance?  Three main reasons are that (1) what he does is in line with why I entered the health insurance business to begin with,  (2) it fits what insurance is supposed to be, and (3) it works.


One of the biggest reasons I got into health insurance was that I saw what my mom went through battling cancer, and wanted to do what I could to make it so that people facing health issues could concentrate on their treatment instead of having to weigh treatment options against the monetary cost.  The membership practice removes that stress.  Because I pay the same no matter how much or how little I see the doctor, I simply have to consider whether or not I want to go, not how much it's going to cost.  I love that.  There have been a lot of times that I dropped in on him simply because I was driving by, thought, "Well, it won't hurt and it won't cost me anything".   And I walked out knowing it that I needed to stop.


The membership practice fits the insurance concept that insurance is supposed to be to prevent a catastrophic event from becoming a financial catastrophe.  It's not intended to cover small expenses like basic maintenance, which is exactly what I view regular chiropractic adjustments to be.


Getting regular adjustments from Dr. Chad works.  When I first started going to him, I was using a lift in one of my cycling shoes because I had been told that one leg was longer than the other.  However, his initial assessment was that it wasn't a leg length discrepancy, but rather my lower back and hips were out of alignment, I'm guessing from an old hip injury from getting hit by a drunk driver.  Now I no longer have to use the shoe insert.  I have also found that I recover much more quickly from hard workouts and races, and I'm rarely sick.  That's worth a lot more than I pay for my membership.


Bonus benefit of membership:  with no paperwork to fill out, I am in and out of the office in less than five minutes, even if I spend time talking about business,  horses, Freemasonry, or health.

"Where All The Children Are Above Average" (Day 4)

From the first time I heard Garrison Keillor say, "Where all the women are strong, all the men are good-looking, and all the children are above average", I've always smiled when I think about or hear, "all the children are above average".  How does that relate to retirement?  Generally.  But for you specifically, how much does average matter?  A lot less than most people think it does.  However, many people base their decisions on averages when it comes to retirement.  None of us want to be "average", so why make decisions on what happens with the "average" person?  You shouldn't.  It's a mistake.


The mistake with basing decisions on averages is that AVERAGES DON'T AFFECT WHAT HAPPENS TO YOU!


The best example I can think of is in regards to long term care insurance.  I can't tell you the number of times I've seen LTC (AKA, "nursing home") insurance that was bought and sold based on "the AVERAGE stay in the nursing home is 4 years".  That's an interesting statistic.  But it's a statistic.  The average doesn't matter if you are the one who needs help with bathing, toileting, eating, etc.  You might need help for 30 days or for 30 years.  The average is irrelevant.  The right way to plan is to be prepared both for never needing that help and for needing that help for 20 years or more.  If you plan only for a 4 year stay in a nursing home,  anything over that will blow your plan up and you are likely to be no better off than anyone who didn't plan at all.  Think about the large number of people who go into the nursing home for only a couple of days and how they affect the average.  If you plan only thinking about the average and then need care for 10 years, which is very common, you're screwed because the average is skewed.


Planning retirement income based on averages is another huge mistake.  Time and time again I see people basing all their planning on what an investment averaged over the last 10, 20, or 100 years.  It's smart to know those numbers, but a smart person also considers that "past performance is not a guarantee of future results".  It doesn't matter what happened on average for the last 100 years.  What matters is what happens to you in your time.  You need to have a plan for the best and worst possibilities.


The same principle applies to things like longevity, cost of living changes, tax rates, etc.  It's good to know the average, but to be successful you also need to be prepared for when "all the ___________ are above (or below) average.