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BOSTON (MarketWatch) — President Barack Obama, in his State of the Union speech, didn’t really touch on the subject near and dear to the hearts of millions of Americans — the State of Retirement in the U.S.

No doubt he had other pressing matters to address. So allow us the pleasure of issuing — thanks in large part to many experts on the topic — our State of Retirement column.

Others are in the same camp. “There are many challenges,” said Anna Rappaport, the president of Anna Rappaport Consulting and chair of the Society of Actuary’s Committee on Post-Retirement Needs and Risks. But Rappaport also said there’s a lot of opportunity to fix those challenges.

Here’s a look at the challenges and some ways to respond.

Social Security

The combined Social Security trust funds will be exhausted in 2036 and at that point there will only be enough income coming in to pay for 77% of scheduled benefits.

Now 24 years might seem like plenty of time to fix that problem but there doesn’t seem to be the political will to do so. Elected officials are seemingly afraid to tackle the issue; they would rather a greater fool put their bid to be re-elected at risk than address an issue that will affect some 78.1 million Americans a generation from now, which we should note is twice the number of Americans age 65 and older today.

But the truth of the matter is that it’s time that President Obama (or someone) take a page from President Ronald Reagan’s book when, in 1981, he established a commission led by Alan Greenspan to reform Social Security.

Some two years later, as a result of that commission’s work, amendments to Social Security included a provision for raising the full retirement age from age 65 to 67, phased in over time. At the time, the Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age.

Given the current and predicted future state of Social Security, it’s time to once again raise the full retirement age, according to Bob Reynolds, the president and CEO of Putnam Investments. This time, Reynolds suggests, we might peg the full retirement age to life expectancy so as to adjust for improvements in the health of older people and increases in average life expectancy.

In 1940, for instance, the average 65-year-old male in the U.S. had a life expectancy of 77.7. In 1990, it was 80.3. And by 2006, it was 81.6. “You have to adjust for that,” Reynolds said. “It’s just too costly.”

FYI: Using 1940 as the benchmark ratio, the full retirement age could be raised, by my calculations, to 70¾.

Of course, you would phase the increase in over a period of time so that people have time to prepare for it, Reynolds said. And you might leave the full retirement age for people over age 55 as is, while adjusting it upward for those under age 55.

Reynolds also favors increasing the amount of earnings subject to taxation for a given year. For 2012, the annual limit, the contribution and benefit base for Social Security, is $110,100. He suggests that the contribution and benefit base be increased to “somewhere around” $150,000. “That would provide the base for a stable system long term,” Reynolds said. He noted, for instance, that there’s no limit on the amount one’s taxed to pay for Medicare.

What’s more, Reynolds is in favor of examining a needs-based system that would reduce one’s Social Security benefit based on one’s income or assets. “It’s something that should be looked at,” he said.

Others also see the need to shore up Social Security. For instance, Cynthia Egan, president of T. Rowe Price Retirement Plan Services, said: “Lower income earners, those who are not covered by a defined contribution plan, as well as ‘weak savers’ are going to be highly reliant on Social Security. It is what it is. So we must ensure the stability and reliability of the Social Security program for the future.”

Contribution rates

On average, workers — at least those who have such a plan — contribute about 7% of their compensation into their 401(k) plan and that, many experts say, is too low. According to Reynolds, one would need to save at least 10% to replace, when combined with Social Security benefits, 80% of one’s final pay in retirement. Others say contribution rates have to be even higher the longer one waits to save and the less one has socked away.

Maybe the time has come to put in place plans that would automatically escalate the amount one contributes to a 401(k) to a minimum of 10%, not just the 3% which is the norm. Others agreed. “People need to save more — and we need to figure out how to make that happen,” Rappaport said.

To be fair, not all experts are worried about contribution rates or the shortcomings of 401(k) plans.

For instance, Kevin Crain, head of Institutional Retirement & Benefit Services for Bank of America Merrill Lynch, offered the following: “We believe that privately sponsored corporate retirement systems are structured to be successful, and can be even more successful with employer’s continued focus on enhancements to their financial benefit plans and services. More specifically, within 401(k)s, we continue to see significant increases in employee engagement and utilization of these plans through such tools as auto enrollment and advice services.”

And Linda Wolohan, a spokeswoman for the Vanguard Group, said: “The U.S. retirement system, while rocked like any investment-based program during the severe market downturn of a few years ago, has shown great resilience.”

For instance, she noted that retirement wealth for the typical 401(k) plan participant grew over the past five years even in the face of the substantial market and economic shocks. What’s more, she said, while account balances have sometimes been cited as too low to be helpful in retirement, it’s important to note that the typical participant is a 46-year-old male who is saving 8.8%, with 20 to 25 more years to work and grow his account. “His retirement plan assets will be complemented by Social Security benefits and other savings, perhaps assets in other employer plans or a spouse’s plan, or personal savings,” she said. “Even though we always encourage people to save more — ideally at least 12% to 15% of their income — the reality is that more participants than you think may be on target for retirement.”

Coverage

Another issue plaguing the U.S. today is this: Just half of the 150 million or so working Americans have an employer-sponsored retirement plan at work. And the 75 million workers who don’t have a retirement plan at work aren’t saving anything at all for their golden years. But studies suggest that those workers might save if they did have a plan at work. So, Reynolds is in favor of creating what’s been called a universal, or automatic, IRA.

According to the Heritage Foundation, universal or automatic IRAs would provide a relatively simple, cost-effective way to increase retirement security for the millions of workers without plan coverage. The universal or automatic IRA, said the Heritage Foundation, is a way that employees of smaller businesses can choose to save for retirement by allowing their employers regularly transfer an amount from their paycheck to an IRA.

For her part, Egan said there’s no need for another retirement plan, just incentives. “Small employers should be offered incentives to provide coverage,” she said. “We don’t need another vehicle. There are many, many providers who support small- and micro-plan services. We simply need to incent the smaller employer to make it happen and keep it simple for them.”

By the way, one big risk looming is the possibility that those folks who did the right thing and saved for retirement might end up paying in one way or another for those who didn’t.

Literacy and confidence

Sometime in March, the Employee Benefit Research Institute will release the 22nd annual Retirement Confidence Survey and it likely will show that only a few Americans are very confident about having enough money for retirement. In 2011, just 13% were very confident.

Reynolds suggests that there’s a correlation between financial literacy and confidence. To solve the confidence problem, we must solve the literacy problem. According to Reynolds, it’s time to provide the education and tools required to help people understand how much to save and how to invest, how much they will need to accumulate for retirement, and how to make their money last a lifetime once in retirement. Knowledge will lead to action, and action will lead to confidence.

Others agree. “Financial literacy and awareness are key components in helping Americans prepare for retirement,” said Suzanna de Baca, the vice president of wealth strategies at Ameriprise Financial. “Any American looking ahead to retirement can benefit from a written financial plan that will help them define their retirement goals and objectives, and guide them in creating a realistic plan to create a more confident financial future.”

Rachel McTague, a spokeswoman for the Investment Company Institute (ICI), also said education is needed. “ICI research finds that the system of saving for retirement in 401(k) plans and IRAs is a success, based on such survey data and modeling of potential savings over a full career with 401(k) plans,” she said. “Nonetheless, we believe there is room for improvement. Among other priorities, we support efforts to provide retirement savers with information and tools to help them use the system to accumulate assets and understand and navigate the distribution phase as well.”

In the absence of such education and planning, however, there are those who say policies that force people to save on their own for retirement hurt more than help. “Too much responsibility has been shifted to individuals, and they are not well prepared to handle them,” said Rappaport. “Financial literacy creates major challenges and we need systems that work without people having initiative.”

Outliving one’s assets

Right now, there’s much ado about outliving one’s assets. Experts are worried that average Americans don’t understand longevity risk and might draw down their assets too quickly during retirement. According to experts, many Americans should consider adding investments that insure against the risk of outliving one’s assets.

“Striking the right balance between growth and income to keep from outliving one’s retirement savings is an even more daunting task than it was before the current period of market volatility and low interest rates,” said Chris Winans, a spokesman for AXA Equitable. “The problem is that 401(k)s and plain-vanilla savings accounts without downside protection are exposed to the vagaries of the market. You wouldn’t think of not spending whatever it costs to insure from losing your house in a fire. Why wouldn’t you want protection on a portion of your retirement nest egg, too? Our challenge is to help people understand this value for themselves and their families. You hope your savings appreciate and nothing bad happens, but a lifetime income guarantee reduces some of the risk. That’s worth something.”

Tax breaks and retirement

Efforts to eliminate the so-called tax breaks Americans get for saving money in a 401(k) or other plan where they can save on a pre-tax basis could affect adversely the state of retirement in the U.S.

According to Reynolds, 401(k) plans and the like are not tax breaks. Rather they are tax-deferred plans. At some point in the future, Americans will pay ordinary income taxes on the money distributed from those plans. Efforts to eliminate or reduce incentives to save might backfire and reduce further the poor state of retirement in the U.S., not improve it.

Egan is of the same opinion. “Tax incentives must be preserved for retirement savings,” she said. “Our defined contribution system reflects ‘the American way.’ There’s a balance among government endorsement and oversight, corporate and plan sponsor fiduciary responsibility, individual responsibility, and free market competition among service providers.”

The good news — sort of

“As more and more baby boomers retire, the discussion on retirement, on retirement income, will become a national topic,” said Reynolds. “And I think it will spark the interest of retirement to all age groups.”

Let’s hope that’s the case because the problem is real. “America is facing an unprecedented retirement challenge as the U.S. population undergoes a radical demographic shift,” said Michael Falcon, head of retirement at J.P. Morgan Asset Management. “Twenty percent of the population will be over 65 years old by 2020 and, despite impressive aggregate asset growth, many Americans are still significantly short of the savings they will need for a dignified retirement and are unprepared for the complex financial choices they will need to make.”

Please, provide any comments to this article and contact me if you have any questions.  I'm always happy to help.

BOSTON (MarketWatch) — Fewer stocks, more annuities. That, in essence, is the advice gleaned from two just-published reports for the benefit of those living in or approaching retirement.

Retirees should invest just 5% to 25% of their portfolios in stocks, or at least that’s the case for those whose primary goal is to minimize the risk of running out of money and sustaining their withdrawals, said one report published by Putnam Investments new think tank.

For his part, W. Van Harlow, Ph.D., CFA charterholder and director of research at the Putnam Institute, is suggesting a conservative asset mix largely because of what he views as the greatest risk to a retiree’s portfolio: the unfavorable “sequence of returns” in the securities’ markets.

That’s a fancy way of saying retirees who have too much money in equities face the very risk that the stock market will keep falling at the very same time they are withdrawing money for their accounts. And that doing so increases the odds that they will outlive their money or, more likely, reduce their withdrawals and presumably their standard of living. (By the way, many retirees experienced this risk firsthand from 2000-2009. So it’s not one of those risks that people talk about, but never have to face in reality.)

In an interview, Harlow noted that once a retiree starts taking money from their retirement accounts, the withdrawals become “path dependent.” And if the success of a retirement income plan rests on whether the markets go up or down, one has to figure out how to protect oneself against that volatility, and especially against the risk of unfavorable “sequence of returns.” And the best way to do that is by reducing one’s overall exposure to equity to no more than 25%, he said.

Harlow also took issue with many life-cycle, or so-called target-date, mutual funds in the marketplace today, suggesting that many have far too much invested in equities. “The higher equity allocations used in many popular retirement investment products today significantly underestimate the risks that these higher-volatility portfolios pose to the sustainability of retirees’ savings and to the incomes they depend on,” he said in a release. His advice to retirees who own or plan to buy a target-date fund is to check the asset allocation of those funds.

By way of background, we should note that very few retirees and would-be retirees own just one mutual fund which also happens to be a life-cycle or target-date fund. In fact, investors saving for retirement in a 401(k) often own many funds, one of which might be a life-cycle fund. The research does suggest, however, that would-be retirees do face the risk of unfavorable sequence of returns given their mix of assets in their retirement accounts.

On average, according to a recent Investment Company Institute report, 401(k) plan participants in their 60s have about 50% of their money in equities, spread among a mix of stock, life-cycle and balanced mutual funds, as well as company stock. What isn’t so well known, though, is the percent that represents of a retiree’s or would-be retiree’s total portfolio, or what it might represent if you factored in the net present value of, say, a defined benefit plan, or Social Security, or the net present value of any earnings a retiree might generate. In other words, that 50% might be just 5% of a total portfolio or it might be 75%.

So, using Putnam’s research as your guide, any overall portfolio where the percent allocated to stocks greater than 25% would be subject to the risk of unfavorable sequence of returns.

Meanwhile, the 79-page GAO report, which was undertaken by at the request of Sen. Herb Kohl, D-Wisc., the chairman of the Special Senate Committee on Aging, details how Americans can avoid the risk of outliving their savings.

In the study, the GAO found that while most retirees rely primarily on Social Security, most Americans fail to maximize their benefits. An estimated 72.8% took benefits before age 65, and only 14.1% took benefits the month they reached full retirement age. By taking the benefits on or before their 63rd birthday, nearly half — 49.5% — passed up at least 25% to 33% in additional monthly inflation-adjusted benefits that would have been available had they waited until full retirement age, the GAO said.

Overall, the GAO found that experts recommended that retirees systematically draw down their savings and covert a portion of their savings into an income annuity to cover necessary expense or opt for the annuity provided by an employer-sponsored defined benefit pension instead of a lump-sum withdrawal.

The GAO also found that given the difficult economy and life expectancy increases, experts recommend that most workers, if possible, continue to work and save well beyond age 62.

And the GAO said that an immediate annuity can protect retirees from the risk of outliving one’s savings, but that only about 6% of those with a 401(k)-type plan purchased one at retirement.

According to experts consulted by GAO for its report, retirees ought to do consider the following:

• Many retirees should delay taking Social Security to increase payments for life.

• Depending on net worth, households also should consider buying a life annuity, particularly if they don’t have a traditional pension that guarantees sufficient income.

• High-net-wealth households generally don’t need life annuities.

• Middle-income households, such as those with $191,000 in financial assets and without a traditional pension, should consider using a portion their savings to purchase an inflation-adjusted annuity.

• Delaying Social Security is more cost effective than purchasing an annuity to enhance retirement income because the money that a retiree would forego by waiting until age 66 is less than the amount needed to purchase the contract.

• Retirees should make withdrawals from their investment portfolio at a rate of no more than 3% to 6% annually at retirement, with adjustments for inflation, to help ensure they won’t run out of money.

Sri Reddy, a senior vice president and head of institutional income at Prudential Retirement, commended the GAO for addressing what Americans can do to ensure income throughout retirement, saying that the recommendations are logical and rational. “It speaks volumes that this is a pending issue,” he said.

But the GAO’s recommendations don’t necessarily take into account the human element, he said. According to Reddy, more time and energy must be spent educating workers about how much they need to save for retirement and how much longer they might have to work to achieve their retirement goals, before one can talk about whether an income annuity is the right product or not.

“We need to help people arrive at a destination with some level of comfort,” Reddy said. “Before product, you need tools, education and support.”

In essence, Reddy said people need a baseline understanding of what they need for retirement and some forms of protection in place while saving for retirement. And all the rest is moot if we haven’t provided the education need to help people get there. “We also need to focus on outcomes,” said Reddy. “Not account values, but how much we need in terms of retirement income.”

He noted, for instance, that annuity with a guaranteed minimum withdrawal benefit can provide those saving for retirement with some degree of protection and an idea of how much income they will receive in retirement. That type of annuity protects savers against investment losses and guarantees the percent and total amount a person can withdraw from the annuity.

Is your most valuable asset your house?  Your car?  Your investments? 

Well, for most of us that are still working, it is our income.  And our income depends upon our ability to work and earn a living.  How will you replace lost income if disability strikes?  A 35 year old worker making $4,000 per month has an earning potential to age 65 of $1,440,000.  Most of us insure our house, our cars, our lives, but often we overlook the asset that makes all of these things possible...........our income.

Only 36% of full-time employees have access to long-term disability income (DI) insurance through their employers.  Now is prime time to educate yourself about the value of Disability Insurance.

The LIFE Foundation has designated May as Disability Income Awareness Month (DIAM). Access printable consumer guides, DI needs calculator, realLIFE stories, and more at this link:

http://www.lifehappens.org/diam/ 

As always, I'm here to help you in any way possible to make sure you and your family are protected.  We have the most complete and valuable Disability Insurance products in the market today!  Give me a call to discuss how you can protect the most important asset you have....your income.  (Please, feel free to add a comment to our blog.  Thanks.)

Most middle-income baby boomers are delaying their retirement by an average of five years, according to a new study.

The study, released by the Bankers Life and Casualty Company Center for a Secure Retirement, found that 73 percent of middle-income boomers are rethinking retirement and of those, 79 percent are delaying their retirement by an average of five years.

The study, Middle-Income Boomers, Financial Security and the New Retirement, which focused on 500 middle-income Americans between ages 47 and 65 with income between $25,000 and $75,000, found that one in seven (14 percent) believe that they will never be able to retire due to the turbulent economy.

According to the study, 71 percent worry about outliving their money once they retire, 68 percent have experienced a decline in the value of their retirement accounts within the past three years and more than half (55 percent) have saved less than $100,000. One-fifth (19 percent) have saved less than $10,000.

The CSR’s study found that three out of four (75 percent) expect that their retirement will involve work in some form and more than half (57 percent) say that they will have to work for financial reasons.

Other interesting findings of the study include:

• Uncovered health-care expenses (80 percent), inflation (79 percent) and living longer than their money lasts (71 percent) are the top three financial concerns that middle-income Boomers have about retirement.

• Pensions and guaranteed income are what sixty percent (60 percent) of middle-income Boomers envy most about the retirement of previous generations.

• Three out of four (73 percent) middle-income Americans age 47 to 65 say that their financial situation, not age, is now the key indicator for when to retire.

• Three out of four (75 percent) middle-income Boomers expect to work in retirement; more than half (57 percent) of those expect they will have to work for financial reasons.

• Two out of three (68 percent) middle-income Americans age 47 to 65 have experienced a decline in the value of their retirement accounts since 2008; one-third (30 percent) of those have not seen any rebound in value as of March 2011.

The study was conducted in March 2011 by the independent research firm The Blackstone Group. A nationwide sample of 500 American baby boomers (ages 47 and 65) who are not yet retired and have an annual household income of between $25,000 and $75,000 participated in the Internet-based survey. Significant sub-sample differences were tested at the 95 percent confidence level.

I can provide a complimentary Retirement Analysis that will allow you to plan for a better retirement.  Also, let me know how you feel about your retirement...........Luis (813) 265-9699

Whatever your politics are, it seems clear that the president has no short-term energy policy when it comes to dealing with the prices of oil.

I decided to write this short and simple article when I heard part of a speech by President Obama recently about gas prices. Amazingly, the president was making light of higher gas prices. His speech was fairly typical. He looked down his nose at Americans who like gas-guzzling cars; and, as usual, he had little sympathy for those who drive them.

His idea for those who drive SUVs was simple - get rid of them and buy fuel-efficient cars like the Chevy Volt. This shows how truly out of touch the president is and that he lives in some sort of green energy fantasy land.

I imagine some financial planners have been asked and surely will be asked the magic question: Does it make financial sense to get rid of a less efficient SUV and buy a new, more gas-efficient car?

Let’s look at the math using a $42,000 Chevy Volt. I’ll assume no financing costs and that the car payments are amortized over five years. The annual payment would be $8,400.

The average driver puts 15,000 miles on a car. For this article, I’ll give numbers assuming gas is $4, $5 and $6 a gallon.

The Volt averages 35 miles per gallon in the city and 40 mpg on the highway (from Kelly Blue Book), and so I’ll assume it will average 37.5 mpg for this artcile.

I’ll compare the Volt to the most popular SUV, which is the Ford Explorer. I’ll assume the example driver has a 2005 vehicle (with no payments) that averages 15 mpg.

The following are the average cost of gas each year and the annual savings using the Volt.

Hmmm. That doesn’t sound like a lot of savings, does it? Not to mention that the SUV is a much larger and more useful car (and safer).

The KBB trade-in value for a 2005 Explorer in “good” condition with average miles is $6,500. Therefore, after the trade-in amount of $6,500 is applied, the out-of-pocket cost to pay for the Volt is $7,100 each year for five years.

The math

Let’s consider the math following the five years after buying the Volt. Because the comparison is to keeping the used Explorer, I’ll assume an additional $1,500 a year in fix-it-up costs to keep it in good working condition.

Without factoring in savings on fuel, if it takes five years to pay off the debt on the Volt, the additional costs this buyer would have to pay each year because of the decision to buy the Volt would be $7,100-$1,500 = $5,600 a year.

If we now factor in the fuel savings by buying a more fuel-efficient car, the net loss when buying the Volt is:

at $4 a gallon = $3,200 a year or $16,000 total over five years.
at $5 a gallon = $2,600 a year or $13,000 total over five years.
at $6 a gallon = $2,000 a year or $10,000 total over five years.

There is a one-time tax credit of $7,500 which needs to be factored into the savings. There is also a need to factor in the cost to install a charging station at home ($2,000, with cords), and the annual electric bill to recharge the car ($450). When you factor in the credit and the additional expenses, you need to subtract $3,250 from the above totals.

If you have clients who are interested in the here and now and having the maximum amount of money in their pockets over the next five years, it certainly won’t be as the president advocates, which is by buying a new gas-efficient car.

Also, to be fair, in five years the 2005 Explorer is probably going to need to be replaced (even though I’ve budgeted enough money to keep it in good working condition). The fuel-efficient car will also be older, but assume you could keep the gas-efficient car for another five years and that you’d have to buy another SUV to replace the 2005.

Even if gas goes to $6 a gallon, you’d have saved enough from 2011–2016 to buy a 2011 used Explorer with the savings (meaning you can keep your big gas hog, drive a safer car, and still save money).

Conclusion

Our job as advisers is not to look out for the good of the country or for the good of the world. We do that when we vote and elect officials. Our job as advisers is to give the best advice possible to our clients.

When your clients ask you if they should get rid of the SUV they love so much (spacious, luxurious and safe) to buy a president-recommended Volt or other fuel-efficient vehicle, give them my article and tell them what they want to hear, e.g., that they should keep the gas hog, enjoy life, and still save more money than if they had bought the car the president and other green crusaders are trying to guilt them into buying.

Note from Luis:  (I didn't write the article.  The article came from one of my many financial subscriptions.) Send me a short reply to let me know what you think and if the article makes sense to you or not, and why.  My two cents:  There are many vehicle options out there to choose from, it doesn't have to be a $40,000 electric vehicle.  There are many cars that give you 28 to 30 miles per gallon and don't cost $40,000.  For many of us, the next time we purchase a car, gas mileage will be one of the top priorities...........do you agree or disagree? 

Always remember that there are two sides to every story.  I have been in the financial services industry for over 20 years and I have seen many times what happens when clients stay in the market a little too long.  The market is not the problem.  The problem is that as individuals we ignore certain rules of planning when things are going well with the market.  We tend to think that nothing bad can happen (like a -30% return).  Most people would be devastated if something like that would happen, but have not taken any steps to protect themselves.  In most cases it is because they don't know how.  Take the time to read the following article (click on the link).  And let's get together so I can share some information and we can discuss how to protect yourself and your family.

http://www.safemoneymarketing.com/images/mediahonesty1a.pdf

I always welcome any opinions or comments you may have.  Please, take the time to share your thoughts. Thanks.

The LTC crisis affects five groups — government, insurers, employers, advisers and families. Let's look at the options they have for handling the LTC crisis.

An aging boomer population with expectations of generous health and retirement benefits has created challenges throughout the world. For years, an expanding economy and increasing population has meant that tough choices, such as whether to raise retirement ages or cut the growth in Medicare, could be put off.

However, as predicted for several years, the costs are rising rapidly beyond the promised benefits. Let’s look at five affected groups — government, insurers, employers, advisers and families — to see the options they have for handling the LTC crisis.

Government:

On March 17, the House Energy and Commerce Subcommttee met to discuss the Community Living Assistance Services and Supports Act, or CLASS Act. Much of the discussion focused on the sustainability of the program, but a lot of focus was also on how to take care of those who need care in general. Right now the plan offers “guaranteed issue” long term care coverage on a voluntary basis — something that group LTC actuaries find is hard to pull off and subject to adverse selection.

What will the designers of the CLASS plan do to avoid this problem?

Insurers:

During the last 12 months, insurers have had to make some difficult choices about long term care insurance. Because of worse than anticipated experiences around lapses, claims and investment returns, some companies have suspended new sales, increased in force premiums or excited the market altogether.

However, other carriers have seen opportunities in re-entering the LTC market, looking at linked benefit plans or adjusted policy features. Although there is risk involved in being in the LTC market as an insurer, the choice to not participate may mean being left out of a business line that experienced double-digit growth last year, despite the difficulties.

Employers:

Employers have had the opportunity to review and strategize over the PPACA health care bill for over a year now. They still have much to learn about the impact the health care bill has on their business and employees, but they are also turning their attention to the impact of an aging population as well as the prevalence the sandwich generation has on their workforce. The above mentioned CLASS Act will make a major effort to encourage employers to sign up for auto-enrollment of employees, similar to 401(k) plans.

Advisers:

Many advisers may feel they’ve had a bad experience offering long term care insurance to their clients. The list of problems cited is long: clients declined for health reasons, complex products, companies leaving the market, dealing with unforeseen rate increases and a difficult subject to discuss with their clients.

It is tempting to leave the issue up to the client, but the knowledge that a significant long term care plan could have a huge impact on the family keeps advisers interested in continuing the conversation. It’s been shown that the biggest reason consumers buy long term care insurance is their adviser recommended it to them.

Families:

Finally, we get to the group most impacted by the LTC crisis — families. We’re constantly seeing the need for long term care; take for example the 15 million people now caring for those with ALzheimer's.

People are often shocked when they realize Medicare or health insurance doesn’t pay LTC costs, and the calculation of the cost of care is eye-opening to the entire family. Not only that, but the experience of their parents shows boomers that the nursing home in its current, institutional form and financed by Medicaid is not where they want to be receiving their care.

The cost of not planning for LTC is clear. However, even those who embark on the planning path face some difficult choices. If they decide to self-insure, which assets do they liquidate first in order to pay for care? If they buy long term care insurance, how do they know how the plan will perform in 20 to 30 years? Who will help give them guidance on planning?

Everyone needs help and empathy

The long term care funding crisis is upon us, and every group above played a part in getting into the fine fix we are in. However, each group will also play a role in developing the long term care system of the future. That system will require planning for the financial and emotional cost — and no one is in a better position to help with that than advisers.

If you would like to discuss your options for LTC, I'm just a phone call away.  I'll be happy to explain how it will inpact you and your family's financial future.  One thing is for sure, LTC will impact your family's financial future!