Beneficiary Designation Exasperation

The husband and wife were reviewing her annuity with their financial advisor. “You need to designate a beneficiary,” says the advisor. “I thought she did,” the husband responds. “I’ll send you a beneficiary designation form and help you submit,” the advisor concludes, and moves on to the next topic.

Later, the husband pulls the annuity contract. It includes the wife’s application, complete with her beneficiary designation. The employee who processed the original application is still on the job, years later. She reviewed the file, and explains that she messed up and had looked at the wrong paperwork when logging the contract. The company had the right paperwork, but didn’t look for it until challenged.

Beneficiary designations matter, and everyone should keep a copy with their Will. Better yet, insist on a written confirmation, to prove your designation was accepted and recorded and matches the instructions you provided. Data entry and record retention are the weak links in beneficiary designation, and they fail too often.

Does anyone remember Washington Mutual? The FDIC bought all of their assets, then sold them to Chase. Did Chase get any account agreements? No, all the assets and records were reduced to electronic notation and more than one family found itself in probate litigation because the records were lost.

Electronic notations are not written instruments. If you expect your beneficiary designation to be honored, leave a written copy.

Double check the designation that’s actually recorded. If you designate a trustee, but confirmation says “my estate,” the asset is going through probate. Don’t assume the professionals know what they’re doing. IRAs are long-term investments, yet some custodians destroy the paperwork after three years. If you don’t leave a written copy, your family’s not getting one from the custodian.

It’s all so haphazard. Why not just let everything run through probate? Think again. If you don’t designate a beneficiary, the account may designate one for you. Especially for employment benefits, where efficient administration is the highest priority, it’s common that the plan defines default beneficiaries. Thought that account was going to probate? Your family may discover it’s going to the kids in equal shares, including the one you disinherited.

Disability Payments For Those That Are Not Disabled

The present administration continue to advocate taking from the “haves” and giving to the “have-nots”. Over the past 6 years the labor participation rate (the number of people working full time divided by the number of people available to work) dropped from 95% in the 1970’s to around 88% today. This is the lowest in U.S. history.

At the same time unemployment benefits were extended six years ago from 26 weeks up to 99 weeks now. Basically, there are not any incentives to go to work if one is being paid for 2 years to do nothing. As these 99 weeks of benefits ended the present administration lowered the requirements to receive lifetime “disability” payments.

Presently, the average monthly disability payment to an individual seems to be about the same as the monthly full-time minimum wage. Hence, the 40 hour work week is competing against the zero (0) hour work week for the same pay.

In addition, a person deemed “disabled” can qualify for FREE health insurance, food stamps, public housing, transportation services, free education and student loan forgiveness. It should not take anyone too long to figure out why so many people are applying for and receiving disability benefits.

True, there are people in our society that are truly disabled and need and deserve our help. But, these “freeloaders” are going to ruin it for those that really need the help.

Contact your representatives and let them know how you feel.

How long must my money last?

During our working years, most people have a financial goal of accumulating enough money to retire. Usually our time horizon is known; that is, we know how long we want to or have to work to accumulate enough money to retire. Another goal during our working years is often to obtain as high a rate of return as possible without taking more risk than necessary.

During our retirement years, the financial goal is typically to try to make sure that our money will last for the remainder of our lives. Since none of us know how long we will live, our time horizon is unknown. This uncertainty oftentimes makes retirement income planning very challenging. The investment objective in retirement often becomes obtaining as much income as possible without outliving our money – that is, having too much life left at the end of the money. This raises some interesting financial planning and tax questions, such as how to invest retirement funds and how to systematically withdraw funds from tax-exempt, tax-deductible and taxable accounts.

When I work with clients, I prefer to assume that they will live longer than the average because I want to try to protect them from running out of money. I’d rather they have some money going to heirs than for them to find themselves broke during their lifetimes. I encourage my clients to plan on living at least into their mid-90’s, or longer.

As a result, some people may choose to work longer than they initially planned. Moreover, retirement-income planning options need to be carefully planned and monitored.

Here Comes the Health Police!

The World Health organization estimates that 1.4 billion adults are overweight and 500 million are obese. So 1/3 of the world’s population is fat. We all know that excess weight leads to excess medical costs. Since the Obama administration has made a plan to take over the U.S. healthcare system (modeling a lot of European countries who coincidently, now want to jettison their failed system) they are dramatically trying to keep costs down. Unfortunately as the population worldwide ages, then, naturally costs go up. To keep future health costs down, look at the subtle work that has been done over time by the Health Police!

    • Elimination of cigarette ads on TV.
    • Elimination of smoking in public places
    • Huge increase in taxes on tobacco products
    • In New York recently, you have seen salt remove from restaurant tables
    • In New York, no more big sodas
    • Arnold Schwarzenegger removes soda machines in California
    • Michelle Obama pushing kids to eat vegetables and telling Barrack to stop smoking and not to eat fries.
    • To help curb obesity health care costs- legislation has been passed to ban or tax junk food in developed or developing countries
    • The toughest law, in Japan, sets a maximum waistline limit for adults age 40 and older- 33.5 inches for men and 35.4 inches for women (how many do you think would make this rule in the U.S. ?)
    • More regulation around the globe are being proposed
    Yes, it may sound good to you to curb the use on things that are distasteful to you, but, watch out;
    • The truth about coffee (caffeine) is coming out and the harmful effects.
    • Study after study (not by the alcohol commission) show that the severe harmful effects of alcohol on your liver, other internal organs and leading cause of obesity.

My point is that so many people want the government to make laws to stop each and every aspect of our lives. What happened to self reliance and personal accountability? When you invite the government in to protect you (so you think) they will just control you.

One of my favorite expression is really a wise crack at those that want the government to run everything “Beware of those who seek to take care of you, lest your caretakers become your jailer!”

History on Social Security

From 1800 to 1929 Americans lived through 23 recessions and 4 depressions, or one every 4.8 years. After the depressions in 1929 more people began to look to the government for assistance.

In 1930 Senator Huey Long of Louisiana proposed a program called “Share the Wealth”. Here the Federal Government would “confiscate” the wealth of the nation’s rich to “guarantee” an annual income of $5,000 to every family ($5,000 in 1930 equates to $69,000 today)… Sad part of this sick idea is that once you take all the wealth from the top earners… where will the government get the money for this program in ensuing years? Duh! The whole thing sounds very Marxist!

In 1932, FDR imposed a massive government expansion focused on the “Three R’s” … relief for the poor, recovery for the economy and reform of the financial system (sounds a lot like Obama’s proposals). There were cries from Congress of socialism as it was pushed and rushed through Congress with debates over the constitutionality of the program (sounds just like the show during Obama Care). Ah, the more things change… the more they stay the same!

FDR responded to these delays by grabbing new presidential authority out of the hands of Congress, including appointing new judges he wanted in districts where the judges refused to retire. He appointed 44 lower court judges and six new justices to the Supreme Court which tipped the political scales in his favor.

FDR then resent the “Social Security” and New Deal program to the Supreme Court where it was approved. Congress is allowed to collect taxes for the “general welfare of the United State”. Hence the contributions by employees and employers were considered a tax, thus, making it constitutional. A crafty piece of illusion and similar to the court ruling on Obama Care.

Withholding History

    In the first twelve years of the program a 1% tax was withheld from employers and employees. In 1950 the rate began to rise until it peaked at 6.2% in 1990. In 1965 Medicare was added in to the program with 0.35% tax for both sides. Presently, each side contributes 7.65% for a total of 15.3% of wages.

Mortality History

    A major threat to the viability of Social Security in the increase in American’s longevity. Back in 1940 a 65 year old male had a life expectancy of 12.7 years (to age 77.7). A female could live to 79.7 years. A study in 2009 showed a 65 male can expect to live to 82.5 years and a female to 85.2 years. So the payout period is lasting longer. The improvement in mortality comes about by socioeconomic status. Thus upper income earners enjoy a longer life expectancy as well as improvement in longevity. The affluent have better access to health care, do not participate in excess use of illegal drugs, alcohol and nicotine products. Also, they tend to be more forward looking and goal oriented resulting in a healthier life style.
    Taxation of Social Security

    Prior to 1984 Social Security benefits were exempt from federal income taxes. In 1984 as much as 50% of one’s benefits became subject to tax. In 1993 a new 85% level was added.

    The amount that is taxed is based on the person’s filing status and modified adjusted gross income (MAGI) also known as provisional income. The thresholds are: (1) No amount of Social Security being taxed, (2) 50% being taxed or (3) 85% being taxed. These thresholds were established years ago and are NOT indexed for inflation. This simply means more people each day are being trapped at 85% subject to tax.

If you would like to learn more about how to double your Social Security benefits while reducing your retirement taxes by more than 80% … watch my YouTube video and then request your free report.