The Health Care Crisis Explained (maybe…)

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Sometime in the next few weeks, the Supreme Court is supposed to render its verdict on the legislation passed in 2010, affectionately known as Obamacare. How it will come down from on high, I have no idea, but the blogs and messages I receive as a financial advisor are all over the map.

While I’m interested in this personally and to some degree professionally, I realize that readers of my blog probably don’t give a damn, unless they are somehow directly impacted by the few provisions of the law that catch the most attention.

But if you are a member of the voting public, and you have an interest in how all this evolves, both politically and from the perspective of your wallet, here is something I found that helps.

It was written by a Joe Miller and appeared on a daily newsletter called BenefitsPro. They publish with a target audience of insurance agents, and individuals in corporate America whose job is to manage benefit programs for employees.

Over the last 10 plus years, the United States Economy has seen 27 percent inflation. This means that if you had $1.00 in the year 2002, you would need $1.27 to purchase the same thing in 2012. Over the same period of time, according to the Kaiser Family Foundation, insurance premiums have increased by 114 percent. 27 percent vs. 114 percent.

This difference has been referred to as the health care affordability gap. This gap has caused businesses to examine different ways to offset some of the pain of the ever-increasing insurance burden. Organizations have increased employee contributions, raised deductibles, increased co-pays and chosen lower quality plans. Still, no matter what measures they take to lessen the impact, insurance premiums have increased 87 percent when adjusted for inflation (114 to 27 percent).

While the affordability gap has been drastic for businesses, the employee has actually taken a heavier burden of the health care cost increases. Over the same 10 year period, according to the Kaiser Family Foundation, the average worker contribution has increased by 147 percent; an inflation adjusted increase of 120 percent.

What you should take away from this is that this isn’t just a problem for business. Employees, meaning “us”, need to know that we should care about this issue because like the inflated cost of gas for our cars, insurance costs are eating into our budget and our retirement money more than ever.

There are many factors contributing to increased health care costs. Some, such as an aging population are inevitable and irreversible. Other factors are controllable decisions that people make every day. These include choices such as maintaining a healthy weight, not smoking and making conscious decisions of how to “spend your health care dollar.”

Each of us need to realize there is a direct correlation between our health risks, the insurance claims they incur and the insurance premiums that are then offered by the health insurers. The problem with this is that many of us don’t have the information we need or the education to make the best decisions and impact these numbers. And we’re generally pretty lazy.

We should be encouraging our employers to provide education as to how to make smart choices with our health plans. Some are providing this education in conjunction with consumer-driven health options. Most employers though, are either not doing enough to educate their employees, or are providing information that is confusing or hard to use.

The second level of help that we as employees need are programs designed to maintain or improve our health. Everyone knows smoking and obesity are bad for you. If the information alone changed behavior, we’d have a perfectly healthy population.

FYI

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An Englishman, a Scotsman, an Irishman, a Welshman, a Latvian, a Turk, a German, an Indian, several Americans (including a Hawaiian and an Alaskan), an Argentinean, a Dane, an Australian, a Slovak, an Egyptian, a Japanese, a Moroccan, a Frenchman, a New Zealander, a Spaniard, a Russian, a Guatemalan, a Colombian, a Pakistani, a Malaysian, a Croatian, an Uzbek, a Cypriot, a Pole, a Lithuanian, a Chinese, a Sri Lankan, a Lebanese, a Cayman Islander, a Ugandan, a Vietnamese, a Korean, a Uruguayan, a Czech, an Icelander, a Mexican, a Finn, a Honduran, a Panamanian, an Andorran, an Israeli, a Venezuelan, an Iranian, a Fijian, a Peruvian, an Estonian, a Syrian, a Brazilian, a Portuguese, a Liechtensteiner, a Mongolian, a Hungarian, a Canadian, a Moldovan, a Haitian, a Norfolk Islander, a Macedonian, a Bolivian, a Cook Islander, a Tajikistani, a Samoan, an Armenian, an Aruban, an Albanian, a Greenlander, a Micronesian, a Virgin Islander, a Georgian, a Bahaman, a Belarusian, a Cuban, a Tongan, a Cambodian, a Canadian, a Qatari, an Azerbaijani, a Romanian, a Chilean, a Jamaican, a Filipino, a Ukrainian, a Dutchman, a Ecuadorian, a Costa Rican, a Swede, a Bulgarian, a Serb, a Swiss, a Greek, a Belgian, a Singaporean, an Italian, a Norwegian and 2 Africans,

…Walk into a fine restaurant.

“I’m sorry,” says the maître d’, after scrutinizing the group.

“You can’t come in here without a Thai. “

Richard Kendzior – 100 Years Ago Today!

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In most of the civilized world, we celebrate the passage of time with birthdays, anniversaries, centennials, etc. I remember being very involved in our nations’ bicentennial some 35 years ago.

Today I honor my father, Richard Kendzior, on what would have been his 100th birthday. I discovered there is a story to tell and many pictures to help tell it. This image, showing him along with his wife and young son Anthony, is an active link to a web video I created to share with you. (Slide your cursor over the image and click it.) It’s not too long, so if you have a few minutes, please join me in saying “Happy Birthday, Dad!”

Some Boomers May Choose Door No. 3

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Instead of working longer or retiring on time with less money than anticipated, there may be a third alternative that financial advisors can show their clients that may give them the best of both worlds.

An alternative may be to continue working full or part time and use money that had been going into savings to begin enjoying “retirement activities” before actually retiring.

“It is a case of balancing time and money,” says Christine Fahlund, senior financial planner at T. Rowe Price, which recently studied the alternatives available to those nearing retirement who do not like the two standard options.

“We advocate a new transitional strategy,” Fahlund explains. “While this approach involves working longer, it can provide more discretionary income during these transition years to start seriously pursuing your retirement aspirations well before you thought you could.”

In order to steer clients in the right direction, financial advisors need to be well versed on the possibilities and on the advantages of delaying taking Social Security benefits, she says.

A number of variations of the T. Rowe Price plan can be initiated, but a standard example might be a 62-year-old couple making $100,000 who wants to retire. Receiving Social Security benefits of $30,800, plus withdrawing $21,100 from retirement savings gives them only 52% of their preretirement income, less than the 75% recommended by T. Rowe Price. In addition, their $500,000 in savings would only grow to $526,000 by age 70. (All figures are expressed in today’s dollars, using a 3% discount rate.)

They decide to keep working, but discontinue making contributions to their retirement plan, which gives them an additional $15,000 to pay for some enjoyable activities. Each year they wait to start taking Social Security benefits, their initial benefits increase approximately 8%, based on Social Security formulas—regardless of what the market does.

In addition, if they do not tap into their retirement savings prior to their fully retiring, their investment portfolio will have increased as well. If they retire at 70, withdrawing $34,900 from savings and collecting combined Social Security benefits of $54,100, they have a total retirement income of $89,000 and their retirement nest egg would have grown to $775,000 by age 70, according to the T. Rowe Price calculations. That’s almost a 90% replacement rate, rather than the 52% replacement income percentage the couple that retires at age 62 realizes.

Being able to use some of their time and money earlier to live out their retirement dreams might make working longer less onerous. Basically, their salaries would be funding their fun. T. Rowe Price recommends they should also use this transition phase to pay off debts, including mortgages.

“People have to make a decision whether they want to continue working, at least part time, or if having more free time trumps the extra money they would have in salary as well as later in retirement,” Fahlund says.

“Unfortunately, given today’s economy, not everyone is in a position to consider these options,” she adds. “However, T. Rowe Price believes that even if you both work part-time in your 60s while you begin playing, the financial benefits may be significant, or, in some cases a couple may choose to have one spouse retire while the other continues working.

“Whatever you do during the transition phase, if you are married, try to delay having the higher wage earner take his or her own Social Security benefits until age 70. That way, the benefit received will be as large as possible, and will be available for the rest of the surviving spouse’s life, regardless of which one survives. If you are single, the same rationale applies.

Fahlund notes that this approach to retirement may be appealing to some financial advisor’s clients––especially those who have not yet saved enough and those who may have saved but are not emotionally prepared to leave the work force.

— Karen DeMasters ( See SOURCE here… )

Only Half of Americans Financially Prepared to Live Longer

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My Comments: I know, I know, I promised to add stuff that was more positive going forward. Only it’s hard to find. And as I age, along with you, I’m reminded that given medical advances, both of us might be dead by now had we lived a 100 years ago. But we’re not, and that’s a good thing. So there!

By Paula Aven Gladych

Americans are completely unprepared to live into their 70s, 80s or 90s, according to a new study by Northwestern Mutual. The “Longevity & Preparedness Study” asked people, based on their current financial plan, how prepared they feel to live to age 75, 85 and 95.

Findings revealed that only slightly more than half of Americans surveyed feel financially prepared to live to age 75. Less than half, 46 percent, feel financially prepared to live to age 85 and 36 percent feel prepared to live to age 95.

According to the Centers for Disease Control, average life expectancy in the U.S. has increased to 78.2 years (75.7 for men and 80.6 for women). For couples in their 60s, there is a 50 percent chance that one partner will live to the age of 94, and one out of 10 couples will have a partner that lives to be 100 or older, the report found.

“This research indicates that many Americans are financially unprepared to live long lives,” said Greg Oberland, Northwestern Mutual executive vice president. “With longevity comes an increased need to proactively manage your personal finances, which includes a solid risk management strategy. No matter what age you’ll live to, it’s important to protect the dollars you’ll eventually depend on to provide an income in your retirement years.”

The company’s research also found that men are more likely to feel financially prepared for living longer than women, and younger Americans, those under age 59, feel less prepared than older Americans to live beyond age 75.

Northwestern Mutual sponsored the Planning and Progress study to evaluate the state of financial planning in America, and where people stand in the way of progress toward reaching their long-term financial goals. Independent research firm Ipsos conducted the online survey of 1,015 Americans aged 25 or older between Feb. 2 and Feb. 13, 2012.

Source article here.

Our Relationship With Afghanistan and Raising Teenagers

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I hope the title got your attention. My plan is to draw a parallel between our military and diplomatic efforts in Afghanistan and helping our teen age children mature into young and self-sufficient adults.

This insight came to me as I read a book by Robert B. Parker. Among his leading characters has been a female private detective named Sunny Randall.

In the book I read, Sunny assumes responsibility for a 15 year old girl who has run away from what can only be described as a dysfunctional family. It seems the girl witnessed something bad at home which is why some bad people are after her to cause her harm.

There is dialog in the book that reveals the girl is oblivious to social etiquette, fundamentally resistant to outside pressure to behave, and the inherent value of being able to think for herself and make choices that lead to either freedom or servitude. Attempts are made to persuade her that knowledge is power, over yourself, and over others, and that leads to choices that offer pleasant relationships, happiness, and a sense of worth.

I don’t know if you have teenagers in your house, whether you expect to have them, or if yours are grown and gone. But I’ve had teenagers in my house and they require patience, understanding, coaching, discipline, rewards, and love. Mine had that from day one yet my wife and I were not prepared for the inevitable trauma that happens in the best of homes.

Now think how it might have been if there had been no coaching, no discipline, no encouragement, no rewards, little love and a future where the best hope is to die and find fulfillment on the other side. And, yes, he or she has an AK47.

There was an exchange between the main character and the teenage girl that was entirely plausible, given my frame of reference as a parent. And I suddenly drew a parallel between those characters in the book and the relationship between the government of the United States and the characters at play in Afghanistan.

How in the world can anyone expect a positive outcome unless there is someone to provide coaching, patience, understanding, discipline and rewards. For us to go in there, whether it be Iraq or Afghanistan, or Somalia, or Yemen, or Syria or any of those places, and expect them to embrace democracy, the rule of law, have an understanding of property ownership, civil rights, voting responsibility, and all that we in the west take for granted, is inherently stupid.

Should we make an effort? Most certainly, since the failure to do so will likely lead to a really bad outcome for the rest of us. But we have had a propensity to simply go in and kick ass and then expect those that are left, to suddenly be like us. Is that how you raised your teenage children? You may have wanted to kick some ass from time to time, but that’s usually the best way to get the very outcome you are trying to avoid.

We’re trying to impose the rules of democracy, commerce and justice, rules that we in the west have developed and come to terms with over the past 200 years. The folks on the receiving end are essentially tribesmen, who until a few short years ago, had no clue what existed beyond the next sand dune or ridge line. And the leadership wanted it to stay that way, because it allowed them to stay in charge. And, in some respects, want it to remain that way today. Witness the attitudes toward women being educated.

I don’t have a best answer. There may not be one. But as someone I like to read pointed out a few years ago, if those folks with AK47s find themselves at age 35, with a job, with a family, with children to support, and a future they can envision, they are not likely to go on jihad.

So our best chance is to somehow encourage more and more connectivity. Globalization works and is evidenced by the growing middle class in Brazil, in India, in China. It’s coming in Africa, and the rest of South America, and in Southeast Asia, and one day, hopefully, in the Middle East. We should be leading from behind so that those teenagers in Afghanistan and Iraq and Egypt and wherever grow into people like us. And it was all “their” idea.