BEHIND THE MIKE

In last week’s column we asked “Are You Prepared?” for what will happen in your retirement. I was with three friends who addressed the convention of over 1,000 Knights of Columbus agents in Omaha this summer.

Tom Hegna had this to say. He touched on a ton of things, the most important of which was long-term care.

Long-term care is the greatest unfunded need in our society today. People want to stay in their homes, not a nursing homes. Tom asks: “Do you have a plan?”

You should maximize your Social Security. You might even consider a “hybrid” retirement where you continue to earn some income to allow you to protect your savings.

“The absolute key to it all,” says Hegna “is a guaranteed income for as long as you live.” The crucial thing is to have a plan for long-term care because there is a 70%+ chance that you’ll need it when you are over 65.

Hegna advises, “Use your home equity wisely.” It could be the largest untapped asset you have. Long term care insurance is nothing more than asset protection insurance. Without a plan, Medicaid will burn down your assets and put you into the closest nursing home they can find. Is that how you want it to end?

Hegna points out there are three phases in the 4th quarter of our lives. The first are the “go-go years” where we earned, we retired and played golf all week. The second is the “slow-go years” (60-80) when we become passive. The final segment is the “no-go years” of failing health and nursing care.

Responsible people take the “longevity” issues off the table. There is only one way to do that… with guaranteed income from a cash cow that throws off enough milk to live as long as you do without having to sell the cow (i.e. never eating into the principle). Is your cow big enough?

The biggest challenges of retirees, says Hegna, are how long will you live, the rate of your return on your money and the risk of your investment.”

You need to have a plan for your retirement. You do not do your own dental work; why would you do your own planning? Get advice from a professional. Even pros have coaches. Amateurs don’t.

Many people are sitting on large assets that are, in their minds, “leave-on monies” and not “live-on money.” To protect those funds you need insurance. Otherwise your favorite uncle or the nursing home will become your biggest beneficiary.

“You must control your risks,” says Hegna. “The risk of loss, theft, law suits, divorce, inflation and the biggest of all – a crash in the stock market. It’s only a matter of time.

“If you had $10,000 per month of guaranteed income 20 years ago,” says Hegna, “It could have the buying power of only $4,564 today.” That is a big hit to take under any circumstance.

You see and hear people always badmouthing annuities. Do you like the guarantee you have from your Social Security? Guess what? That’s an annuity. Do you like the guaranteed income your pension provides? Duh… that’s an annuity as well.

Only an annuity can guarantee a lifetime income. It is the only vehicle that provides those guarantees, which are the singular biggest challenge that seniors face today-running out of money.

So the next time you hear someone say annuities suck, the question to ask is “Compared to what?” Show me another vehicle that can provide those lifetime guarantees to you, your spouse and even to your heirs. It doesn’t exist.

“The problem is that people have been psycho-nomically (a coined word) led to believe they should not spend their investments,” says Hegna. “The secret to a happier retirement are friends, neighbors and a fixed annuity,” according to the Wall Street Journal from June 27, 2005.

In my years in the insurance business, a widow only asks “How much will I get, how long will I receive it, can I stay in my home and will it ever run out?”

Do you have a plan for living too long?