Tag Archives: financial plan

How to Protect Inherited IRAs After the Clark v. Rameker Decision

will with clockMy Comments: If you have an IRA today, there is a chance there will still be money in it when the inevitable happens and you permanently leave the building. What then with this money?

If you have a spouse, and they are the named beneficiary, that money now belongs to them and it becomes their IRA. If your spouse has predeceased you, it becomes an Inherited IRA, benefiting someone else, perhaps one or more of your children.

Recently the Supreme Court declared that while YOUR IRA is protected against the claims of creditors, an Inherited IRA is not. Because it represents money earned by someone other that YOU. Before this decision, it was assumed from IRS regs that it would be protected.

If none of this applies to you, then read no further. I’d like to attribute this to the correct author but somehow that name went missing.

In a landmark, unanimous 9-0 decision handed down on June 12, 2014, the United States Supreme Court held that inherited IRAs are not “retirement funds” within the meaning of federal bankruptcy law. This means they are therefore available to satisfy creditors’ claims. (See Clark, et ux v. Rameker, 573 U.S. ______ (2014))

The Court reached its conclusion based on three factors that differentiate an inherited IRA from a participant-owned IRA:

1. The beneficiary of an inherited IRA cannot make additional contributions to the account, while an IRA owner can.

2. The beneficiary of an inherited IRA must take required minimum distributions from the account regardless of how far away the beneficiary is from actually retiring, while an IRA owner can defer distributions at least until age 70 1/2.

3. The beneficiary of an inherited IRA can withdraw all of the funds at any time and for any purpose without a penalty, while an IRA owner must generally wait until age 59 1/2 to take penalty-free distributions.

These factors characterize an inherited IRA as money that was set aside for the original owner’s retirement and not for the designated beneficiary’s retirement. This simple analysis has sent shock waves through the estate planning and financial advisory worlds, because its logic is also applicable to all inherited defined contribution retirement plan accounts, so inherited 401(k) and 403(b) accounts are also affected. What can be done to protect inherited IRAs from creditors? Could the Clark decision put IRAs inherited by spouses at risk? Could state law still protect inherited IRAs? In this issue we will answer these questions and provide guidelines for you and your team to follow when advising clients who or what to name as the beneficiaries of their IRAs.

What Can Be Done to Protect Inherited IRAs From Creditors?
In view of the Clark decision, clients must thoughtfully reconsider any outright beneficiary designations for their retirement accounts if they want to insure that the funds will remain protected for their beneficiaries after death. By far the best option for protecting an inherited IRA is to create a Standalone Retirement Trust for the benefit of all of the intended IRA beneficiaries. If properly drafted, this type of trust offers the following advantages:

• Protects the inherited IRA from each beneficiary’s creditors as well as predators and lawsuits
• Insures that the inherited IRA remains in the family bloodlines and out of the hands of a beneficiary’s spouse, or soon-to-be ex-spouse
• Allows for experienced investment management and oversight of the IRA assets by a professional trustee
• Prevents the beneficiary from gambling away the inherited IRA or blowing it all on exotic vacations, expensive jewelry, designer shoes and fast cars
• Enables proper planning for a special needs beneficiary
• Permits minor beneficiaries, such as grandchildren, to be immediate beneficiaries of the inherited IRA without the need for a court-supervised guardianship
• Facilitates generation-skipping transfer tax planning to insure that estate taxes are minimized or even eliminated at each generation
Downsides to tying up an IRA inside of a trust include compressed tax brackets which max out at $12,150 of income (in 2014), ongoing accounting and trustee fees, and the sheer complexity of administering the trust year after year. In addition, a well-drafted trust can be completely derailed by an uncoordinated IRA beneficiary designation. Therefore, all of the pros and cons of a Standalone Retirement Trust must be carefully considered before committing to this strategy.

Planning Tip: In most cases a standard revocable living trust agreement will not be well-suited to be named as the beneficiary of an IRA. This is because in order to provide all of the benefits listed above and avoid mandatory liquidation of the inherited IRA over a period as short as five years, the trust agreement must be carefully crafted as a “See Through Trust.” A See Through Trust insures that the required minimum distributions can either remain inside the trust (an “accumulation trust”), or be paid out over the oldest trust beneficiary’s life expectancy (a “conduit trust”).

Thus, a Standalone Retirement Trust that has specific provisions for administering retirement accounts, and that is separate and distinct from a client’s revocable living trust that has been drafted to address the entire gamut of the client’s non-retirement assets, is the preferable type of IRA trust beneficiary. If your clients have not considered a Standalone Retirement Trust before the Clark decision, then the time is now to educate them about its far-reaching consequences and how a Standalone Retirement Trust can benefit their IRA beneficiaries.

Could the Clark Decision Put IRAs Inherited by Spouses at Risk?
The Clark decision dealt with an IRA inherited by the daughter of the owner. What if the IRA was instead inherited by the spouse of the owner, would the decision have been different?

When a spouse inherits an IRA, he or she has three options for what to do with it:

1. The spouse can cash out the inherited IRA and pay the associated income tax.

2. The spouse can maintain the IRA as an inherited IRA.

3. The spouse can roll over the inherited IRA into his or her own IRA, after which it will be treated as the spouse’s own IRA.

In scenario 1 the cashed-out IRA will not have any creditor protection since the proceeds will become comingled with the spouse’s own assets. Extending the Supreme Court’s rationale to scenario 2, the inherited IRA will not be protected from the spouse’s creditors since the spouse is prohibited from making additional contributions to the account, may be required to take distributions prior to reaching age 70 1/2, and can withdraw all of it at any time without a penalty. In scenario 3, a rollover is not automatic, and even after a rollover is completed, the inherited funds were certainly not set aside by the spouse for his or her own retirement before the rollover was initiated.

As a result of the Clark decision, will an IRA inherited by a spouse lose its qualification as a “retirement fund” under federal bankruptcy law once it is actually inherited by the spouse? Could the rollover of an inherited IRA into the spouse’s own IRA now be considered a fraudulent transfer under applicable state law? Unfortunately the answers to these questions are not clear at this time.

Planning Tip: Provisions can be made in a Standalone Retirement Trust for the benefit of a spouse. This may be important for many reasons aside from creditor protection, including a second marriage with a blended family or, when coupled with disclaimer planning, for a spouse who eventually needs nursing home care and seeks to qualify for Medicaid. A layered IRA beneficiary designation which includes a Standalone Retirement Trust and disclaimer planning can offer a great deal of flexibility for clients who want to insure that their hard-saved retirement funds stay in their family’s hands and out of the hands of creditors and predators.

Could State Exemptions Still Protect Inherited IRAs?
In the wake of the Clark decision, a handful of states – including Alaska, Arizona, Florida, Idaho, Missouri, North Carolina, Ohio and Texas – have either passed laws or had favorable court decisions that specifically protect inherited IRAs under state bankruptcy exemptions for federal bankruptcy purposes. If the IRA beneficiary is lucky enough to live in one of these states, then the beneficiary may very well be able to protect their inherited retirement funds by claiming the state exemption instead of the federal exemption.

Planning Tip: Caution should be used in relying on state exemptions to protect a beneficiary’s inherited IRA. People are more mobile than ever and may need to move from state to state to find work, pursue educational goals, or be closer to elderly family members in need of assistance. Aside from this, federal bankruptcy laws now require a debtor to reside in a state for at least 730 days prior to filing a petition for bankruptcy in order to take advantage of the state’s bankruptcy exemptions. Therefore, long-term planning should not rely on a specific state’s laws but instead should take a broad approach.

The Bottom Line
Given the amount of wealth held inside retirement accounts, planners have got to become adept at helping their clients figure out who or what to name as the beneficiary of these special assets. The Clark decision has amplified the need to become knowledgeable about the pros and cons of all of the different beneficiary choices for retirement assets.

This is certainly not one-size-fits-all planning and can only be done on an individual, case by case basis. We are here to answer all of your questions about protecting beneficiaries of retirement accounts through Standalone Retirement Trusts, disclaimer planning, and layered beneficiary designations.

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Every Day Should Be a Good Day to Die

My Comments: If this headline caught your attention like it did mine, then what is the message?

As a life insurance salesman for lo these past 40 years, talking about death is not something new to me, though always somewhat uncomfortable. You and I both know it’s inevitable, but not something to dwell on.

The focus here is on the words “good day” as opposed to “die”. Simply said, if there are reasons for you to delay your death as long as possible, yet recognize it’s uncertainty, then having in place the necessary arrangements allows you to spend your time enjoying life more. So if every day is a good day to die, then it follows that every day is a better day to be alive.

by Bill Coffin on May 12, 2014

Several weeks ago, as I retired to bed, I thought upon the day’s achievements and decided that it would be alright if I died in my sleep. Not that I wanted to die in my sleep, of course. But that if I did, my final day would have been a good one on which to end things. I had had a happy and productive day at the office. I had a vigorous and enjoyable workout at my dojo. I had conversed with many friends. I enjoyed time with my family. Not a single word of tension or reprimand had been aired — which, as anybody who has raised kids knows, can be a rarity. I gave my kids extended tuck-ins (yes, I still tuck my kids in, even though the oldest is 13. I’ll do it until they tell me to stop) and told them how much I loved them. My wife and I watched some TV together, joked, and when she fell asleep (as she always does — before I do), I told her I loved her, and she told me back. And then, in the quiet dark hours of the late evening, I had done some writing I was proud of, and called it a night.

I lay in bed and thought of our bank balance, of our college savings, of our insurance and decided that things were in as good an order as they ever would be. If I died tonight, my family would miss me. But I had left nothing undone insofar as taking care of them. I had done what I could, and in my heart, I was content, even if only for those few minutes it took between my head hitting the pillow and the rest of me entering the Land of Nod.

When I’m not writing about insurance (or the science fiction and fantasy novels I produce in my spare time), I am a martial artist, and in a recent discussion with a friend, he noted to me a quote from an old samurai text that exhorts the reader to imagine one’s own death daily; whether it comes suddenly and traumatically on the field of battle, or silently and slowly on one’s deathbed. How we go does not matter; that we go is what we must never, ever forget, for when we disentangle our minds from the notion of death, we can then live much more meaningful lives.

Those words were shared with me as I fretted over the fact that I had recently lost two matches in a Brazilian jiu-jitsu tournament. And as I took those words to heart while I prepared for my next tournament, I also took them on a larger context and, inevitably, turned it toward the business, and calling, of the insurance of life itself.

You buy life insurance because you love somebody. But you also buy it because, no matter how much you don’t want to admit it, you are going to die. Your loved ones are going to die. Your friends are going to die. Your co-workers, casual acquaintances, even bitter enemies. We are all dying. And the truth is, few are the days when we can content ourselves with thinking that right now, at this moment, our affairs are well in order. They almost never are. But there are dedicated corps of professionals who can help people get there and be more prepared than they would be otherwise.

And that, my friends, is where you come in. When I speak of the nobility of life insurance, I speak of this. Now, go out there and do what you do best. And do it knowing that you’re earning a commission, yes, but more importantly, you are doing your part to make sure that for anybody, anywhere, every day could be a good day to die.

Source: http://www.lifehealthpro.com/2014/05/09/every-day-should-be-a-good-day-to-die

Three Key Strategies for Helping Clients Navigate Aging Plans

retirement_roadMy Comments: OK, we’re all getting on in years, some of us more so than others. Baby boomers are starting to ask compelling questions about Social Security, about health care issues, and dozens of other topics that a 30 year old cannot yet start to think about. That’s OK; I couldn’t either when I was 31 and our son was first on the scene.

This came to me from an attorney friend who from time to time forwards interesting comments about the law and the issues faced by those of us who can and should now think about this stuff.

It’s a good start for someone as they start coming to terms with their mortality.

Acknowledgement goes to Louis Pierro, Esq., founder and principal of Pierro Law Group, LLC, for the content of this newsletter.

Many of your clients are baby boomers (now ages 50-68) moving into retirement and dealing with all the issues related to aging: elderly parents, kids in college, saving enough to last a lifetime and protecting what they have. With a dizzying array of financial instruments to choose from, complex federal and state laws governing estates, and the crisis in health and long-term care, your clients need your help more than ever to develop an effective plan for their senior years.

By 2050, the U.S. Census Bureau predicts there will be 86.7 million citizens age 65 and older living in the U.S., and they will comprise 21% of the total population. It predicts the number of people in the 65 and older age group will grow by 147% between 2000 and 2050, compared to 49% growth in the population as whole.

Waiting to plan for the “golden years” is no longer a viable option. Your clients need to look far into the future and develop an estate plan that will help them maintain their desired lifestyle and protect assets from a variety of risks, including the rising costs of care. We have identified three key strategies that can help your clients navigate the minefield of aging, and focus on a successful retirement.

Establishing Future Cash Flow and Determining Adequate Resources

The number one long-term concern of most clients is running out of cash as they age. No one wants to outlive their assets, but without pre-planning that could easily happen, especially if there is a medical crisis or chronic illness. Clients need to take care of themselves first, ensuring their income throughout retirement before worrying about the distribution of their estate. On an airliner, passengers are instructed that if the yellow oxygen masks drop, they must first put their own mask on and only then assist others. Only when your client is breathing comfortably about the future can plans be made to transition wealth to beneficiaries.

Having a list of questions to ask your clients at the beginning of a discussion about their estate plan will help establish the outline and direction of the plan. Some of the basic questions to ask are:
· What are your sources of income in retirement, and if married, do they continue for your spouse?
· Do you plan to stay in your current home?
· If so, do you have enough funds to do that?
· If not, where do you plan/want to live?
· Will you have any dependents living with you (parents, special needs children)?
· What would put your plan at risk?
· What about a medical crisis?
· Who will take care of you?
· How will you pay for it?

Answering these questions gives both you and your client a starting place to discuss creating the right estate plan. It is also an excellent place for financial advisors and estate planning attorneys to work together to ensure that income and assets are properly structured and protected.

Regular Planning for Tax Liabilities and Protecting Assets
With the increased focus on income tax issues, CPAs are integral in capturing business opportunities to help clients protect their assets, smoothly transition estates and reduce tax liabilities. It used to be that tax laws didn’t change very often, and established estate plans didn’t need to change year over year. However, since 2000 the federal estate and gift tax exemptions have changed almost yearly. Other federal and state laws governing income, estate and gift taxes have changed as well, with increased income and capital gains tax rates imposed on January 1, 2013.

While on the surface it appears that we have entered a period of stability, at least for federal estate and gift taxes, given their history and the federal deficit, it seems likely that the tax laws are only going to get more complicated, burdensome and complex. Diligent advisors offer guidance and educate clients regularly about any changes to the laws that could impact their estate plans and tax liabilities, and “best practices” include a team approach.

What a client might need in an estate plan when they are in their 50s and 60s can be very different from what they need in their 80s and 90s. Although accountants and financial advisors meet regularly with clients, most attorneys do not. As laws governing Revocable and Irrevocable Trusts, taxes, Medicaid, VA benefits and health care change over time, and your client has personal changes that could seriously jeopardize his or her estate plan, ongoing counseling is required. For estate planners, setting up an annual maintenance program with your clients, and working with an interdisciplinary team that includes a financial planner, CPA and attorney, keeps you up to date on best practices and ensures that your clients’ estate plans are current.

Planning for Medical Crises and Long-Term Care

No one plans to have a medical crisis, but without a solid estate plan in place before a crisis happens, a medical issue can destroy financial security in short order. The need for long-term care is a looming prospect that gets ever harder to deal with as clients age, with uncovered long-term care exposure creating an insolvency risk for most seniors. With Medicare all but out of the long-term care (LTC) space, and LTC costs escalating, for 95% of the retiring population the greatest risk to financial security is uncovered medical expenses. People are living longer, and often those added years are unhealthy. Consequently, the “elephant in the living room” for retirees is paying for medical care without exhausting assets.

A Long-Term Care insurance policy is still the best weapon against a financial disaster caused by a chronic illness or aging. Such policies are not accessible to everyone, however, due to cost, pre-existing conditions and other circumstances. LTC coverage is not guaranteed available by the Affordable Care Act or any other legislation. Moreover, although premiums are “level” they are not fixed, and careful planning is required to tailor coverage and premium to fit the client’s plan. Those able to afford the premiums are well advised to purchase a policy for needed coverage. The cost of assisted living and nursing home care is skyrocketing, and without an LTC plan, a client can be faced with losing all assets acquired through his or her lifetime. Often, for those uninsured, the burden of care falls on a loved one, and because of the complexities and pitfalls of Medicaid, such as the 5 year look-back and penalty provisions, paying privately can result in complete impoverishment.

There are many LTC products and options to choose from, like traditional LTC insurance, LTC/life insurance hybrids or life insurance with an LTC rider. You can help your clients find one that fits their needs and enhance your position as one of their trusted advisors – one who helps plan effectively without a focus on selling products, but rather implementing a plan. With increased volatility in the LTCI markets, carrier issues and rising premiums, it is imperative that LTC policies be reviewed regularly and that the policy fine print is understood. When your client is most vulnerable or unable to manage his or her affairs is not the time to find out that a LTC policy has a problem!

What if your client can’t afford the LTC premiums or has been denied coverage? Without an LTC insurance plan, it is even more important to consult with an attorney on other ways to protect assets from the poverty requirements of Medicaid and the Veterans Administration. An attorney can construct a plan to create a Medicaid Asset Protection Trust or Veterans Asset Protection Trust, as well as make plans to protect the estate, even if home care, assisted living or nursing home care becomes necessary. The collaboration between LTC insurance agents and attorneys is key, and the opportunities for mutual referral and joint marketing are abundant.

Summary: Identifying the Need to Plan Now Rather than Later
As our clients grow older, their medical, financial and legal needs change. For many, instead of worrying about growing their net worth, the new worry is not running out of money before they die. Working in tandem with an interdisciplinary team of professionals — financial planner, accountant and attorney — provides the expertise needed to create strategic estate plans for your clients.

In spite of deep experience in their field, no member of the advisor team, whether CPA or financial advisor or attorney, can know all the nuances of estate planning. Each brings specialized expertise to the table.

By working together on behalf of the client, the combined knowledge of this interdisciplinary team provides the best possible planning options to protect the client’s estate into the future. And, each team member has the added benefit of gaining referral opportunities to continue to build their own businesses.

This Is Exactly How Fast the Windows Monopoly Is Being Destroyed

MicrosoftMy Comments: At some point last year I ran across this and found it interesting. So I saved it for when I needed something to talk about. And today is one of those days! Dull, rainy and cold!

It’s another example of what at one point appears to be something locked in stone but over time becomes unlocked.

There are forces at work over which we have no control. Survival is a function of the ability to adapt in a timely manner, always assuming you correctly anticipate the coming storm. Sometimes that works and sometimes it doesn’t.

This post previously appeared on Business Insider. By Henry Blodget

In the late 1990s, a single technology company became so unfathomably rich and powerful—and so hellbent on dominating not just its own industry but a massive and rapidly growing new one—that the U.S. government dragged the company into court and threatened to break it up over anti-trust violations.

The case was settled, and the company, Microsoft, agreed to play nicer. But it turned out that the world had nothing to worry about. As often happens in the technology industry, what has really destroyed Microsoft’s choke hold on the global personal computing market over the past 15 years hasn’t been a legal threat but a market shift.

Just when it looked like Microsoft’s vision of the PC as the center of the tech world would lead to the creation of the world’s first trillion-dollar company, the Internet came along. And it washed over the PC industry like a tidal wave swallowing a pond.

In terms of market value, Microsoft’s loss of power has long been visible: The stock is still trading at about half the level it hit at the peak of the tech boom 13 years ago. The effects on the actual PC industry fundamentals have taken longer to develop, but they are also now crystal clear. Microsoft’s “Windows monopoly” hasn’t been so much destroyed as rendered irrelevant.

That’s because, thanks to the explosion of Internet-based cloud computing and smartphones, tablets, and other mobile gadgets, the once all-powerful platform of the desktop operating system has now been reduced to little more than a device driver. As long as your gadget can connect to the Internet and run some apps, it doesn’t matter what operating system you use.

Three charts really bring home the challenges that Microsoft and other PC-powered giants like Intel, Dell, and Hewlett-Packard face in adapting to this new Internet-driven world. First, look at global device shipments. For the two decades through 2005, the personal computer was the only game in town, selling about 200 million units a year. But then smartphones and tablets came along. And now they dwarf the PC market. CHART ONE

This shift in personal computing device adoption, meanwhile, has radically diminished the power of the Windows operating system platform. As recently as three years ago, Microsoft’s Windows was still totally dominant—the platform ran 70% of personal computing devices. Now, thanks to the rise of Google’s Android and Apple’s iOS, Windows’ global share has been cut in half, to about 30 percent. More remarkably, Android is now a bigger platform than Windows. CHART TWO

Lastly, and most recently, this chart from analyst Horace Dediu of Asymco illustrates that the PC business is no longer just getting dwarfed by the explosion of smartphone and tablet sales … it has now actually begun to shrink. Now that people have a choice of devices, it turns out that a full-blown personal computer is often not the most cost-effective, convenient, or simplest way to do what a user wants to do. Instead of being the center of the personal computing world, in other words, the PC is becoming a specialized office-productivity device. CHART THREE

The news for Microsoft is not all bad. The company has been quite successful at moving from a “unit-driven” sales model to a licensing model, in which companies pay a fee per user per year rather than buying a perpetual license with each new computer. And Microsoft’s Office franchise is still extraordinarily profitable and dominant, in part because Google, Apple, and other more Internet-centric companies have made so little investment in their competitive products.

But only 15 years after the government went after Microsoft for anti-trust violations, the idea that the company ever had a “monopoly” on anything is hard to even understand. And the outlook for Windows, and the traditional PC business in general, seems sure to get even worse going forward.

Find source article HERE

9 Tax Breaks Expiring at Year’s End

IRS-formsI’m sure you agree that we live in a world of political correctness. Sometimes that’s a good thing and many times it just gets in the way of common sense. Right now, I have to tell you I am NOT licensed or qualified to dispense tax advice. But as a financial planner, for which I am licensed and qualified, I can tell you there are tax issues you should perhaps be aware of. Some of them qualify as simple common sense.

Another year has nearly passed, and it’s time to make sure your have your tax ducks in a row.
It’s important to make sure you know about the key changes made to the tax code before you make your end-of-year moves.

The slogan for this month might just be “use it or lose it.” That’s because there are several tax breaks that are set to expire as 2014 dawns. Whoever your clients are — teachers, students, small-business owners and big spenders to name a few — make sure they take advantage before it’s too late.

“The days of relying on Congress to automatically renew expiring tax provisions … might finally be coming to a close as the strain on the federal budget becomes more evident with each new round of budget negotiations,” wrote William H. Byrnes and Robert Bloink on ThinkAdvisor.

(Not all tax news is bad. The IRS recently gave high-income taxpayers a break with the release of the final regulations governing the new 3.8% tax on net investment income.)

Read about all NINE of them HERE:

Long Term Care Insurance Rates for Women Will Go up in 2014

My Comments: This has always proved to be a difficult conversation with clients. When they are relatively young, the topic is far away unless they have a parent with issues. And then the money has to be reserved for their care.

And when you reach my age, there is still a strong denial that you will become so debilitated that you cannot live at home and carry on. Modern medicine is working to keep us alive longer and longer, but we are often feeble and unable to properly care for ourselves. So we need help, and that often costs a ton of money, money that we may or may not have. Enter an insurance policy.

And there are kinds of coverage that effectively leverage what you already have and if you never need it, the money flows to your kids. But the cost is increasing as more and more of us reach a critical age, and there are fewer and few people ready and willing to look after us.

WINSTON-SALEM, N.C.–(BUSINESS WIRE)–If long term care insurance (LTC) is not on your holiday shopping list, you may want to add it before the end of 2013 — particularly if you are a woman. Rates for females are forecast to increase from 35 percent to 40 percent by second quarter of 2014, so adding LTC now to your plan for income and asset protection makes good financial sense, say industry experts.

“now would be that time. It’s going to cost a married couple significantly more money for the same contract and same benefits once those rates change to become gender specific.”

“Long term care continues to be a major risk for people, and yet many have put off purchasing LTC insurance to cover such things as nursing home care because of instability among carriers,” said Danny Mensh, president of Mensh Insurance, located in Winston-Salem, N.C. “Now, in order to stabilize the market, major carriers are increasing rates, and Genworth Life Insurance Co., one of the largest underwriters, has filed for a new pricing structure that includes substantial rate increases for women.

“If there ever was a time to go ahead and do something,” Mensh continued, “now would be that time. It’s going to cost a married couple significantly more money for the same contract and same benefits once those rates change to become gender specific.”

Why the female rate increases? Simply put, women live longer and will use more LTC insurance as their health deteriorates. “We know that when looking at males and females who reach age 65 and are healthy, statistics show females are living into the mid to late 80s vs. males, who are living a few years less,” Mensh said. According to the Social Security Administration, a man reaching age 65 today can expect to live, on average, until age 83, while a woman turning 65 today can expect to live to age 85.

“Genworth is the oldest writer of LTC insurance with the largest block of in-force business,” said David Hillelsohn, president of Haslett Management Group in Herndon, Va., an independent wholesaler of LTC insurance. “As a result, they have more claims experience than any other company in the market, and a more robust actuarial department committed to the LTC product line. As of June 30, 2012, Genworth had paid more than $8.3 billion in LTC insurance claims since 1974. This allows them to predict with greater certainty how LTC usage will trend in the future and adjust their pricing models to reflect the current market environment.” As a result, the company has asked state insurance departments to approve different LTC premium rates for men and women, reflecting the higher likelihood of women using the benefit. The expectation is that other carriers will soon follow.

When looking at LTC insurance, it’s wise to choose a company that is looking to stabilize pricing and stay in it for the future. “Many companies have chosen to stop selling new LTC insurance policies or have sold their LTC business because they had vastly under priced it to gain a competitive edge,” Mensh said. “The carriers committed to the market are increasing rates, becoming more stringent with in-home interviews and telephone interviews, and possibly requiring physical exams in the future. These are all pretty reasonable measures to take if you want your premiums to stay fairly consistent.”

A Thanksgiving Feast Of Rational Optimism

Breughel-The-KermessMy Thoughts: My favorite all time writer in the world of finance, Nick Murray, brings another fine thought to the table. Being optimistic seems so much more reasonable than getting bogged down, week after week, month after month, in woe and gloom. Being positive seems so much more productive. And it reinforces the notion I’ve always had that while good times come to an end, so do the bad.

November 6, 2013 • Nick Murray

Optimism is the only realism. It’s the only world-view that squares with the facts, and with the historical record. Pessimism on the other hand is deeply — almost weirdly — counterintuitive, and yet just as deeply human. “On what principle is it,” wondered Lord Macaulay in 1830, “that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?”

In his classic 2010 book The Rational Optimist: How Prosperity Evolves, Matt Ridley seeks to discover why “a rare predatory ape” — whose characteristics included tool making, big brains, culture, mastery of fire and even capacity for language, had been in place for some hundreds of thousands of years — suddenly burst out of Africa 45,000 years ago, to dominate the planet with rapidly evolving technologies.

Ridley’s answer is the twin engines of specialization and exchange — in his words, “ideas having sex.” It isn’t anything to do with how man is built; it’s how he interacts.

All innovation, in this view, is “a collective enterprise that requires exchange,” inasmuch as virtually all technologies are combinations of other technologies. Ridley quotes the molecular biologist Francois Jacob to the effect that “to create is to recombine,” and cites his favorite example, the camera pill, invented after a conversation between a gastroenterologist and a designer of guided missiles.

The breadth of Ridley’s learning is both great and lightly worn, and The Rational Optimist teems with wonderfully written historical and scientific vignettes. To choose just one of dozens (and one which encapsulates his whole anti-Malthusian stance), he talks about the ways in which the earth’s capacity to produce food has in fact run far ahead of population growth, largely because of advances in fossil fuel fertilizers:
“Since 1900 the world has increased its population 400 percent; its cropland area by 30 percent; its average yields by 400 percent and its total crop harvest by 600 percent. So per capita food production has risen 50 percent. Great news — thanks to fossil fuels.”

This is just the kind of gem with which The Rational Optimist sparkles. It’s a book to read, to savor and to love – a luxurious ocean-going yacht, cruising serenely upon a sea of catastrophism.

© 2013 Nick Murray. All rights reserved. Reproduced by permission. Nick highlights new books, articles, research findings and academic papers in the “Resources” section of his monthly newsletter, Nick Murray Interactive. To download a sample issue, visit www.nickmurray.com, and click on “Newsletter.”