Study shows that many Retirees fall Short for Financial Needs after they Retire

According to TransAmerica’s recently-released report, Current State of Retirement – A Compendium of Findings About American Retirees, most American retirees are overconfident about their ability to sustain their lifestyles over their life spans. 72 percent of retirees surveyed are “somewhat” or “very confident that they will be able to maintain a comfortable lifestyle throughout their lives but only 46 percent say that they have enough savings to do so.

The current (median) savings level that retirees have in their various retirement accounts is $119,000. Married retirees have a median of $224,000 in retirement savings, while unmarried retirees have an average of $40,000.

The study also found that relatively few of today’s retirees have any kind of written financial plan for their retirement years. Over half of them say they have a retirement strategy in place, but only 10 percent of them have a retirement strategy in writing.

Only 30 percent of today’s retirees have a plan that takes into account the long-term effects of inflation, which can severely erode the purchasing power of a pension or other source of retirement income unless some level of inflation protection is built in. Only about 26 percent have an estate plan in place.

Here are some of TransAmerica’s other findings:

1)  Social Security is still the foundation of retirement security for most people. Nearly nine out of ten retirees report Social Security benefits as a part of their overall retirement income plan.

2)  Private savings and investments is the second most commonly cited retirement income source with 48 percent of current retirees receiving income, thanks to private savings. However, it’s disappointing that fewer than half of those surveyed, having reached the age of retirement, were able to cite private savings as a significant source of retirement income.

3)  Only 42 percent of current retirees report taking income from employer-funded pension plans. This number will likely fall in future years since fewer and fewer employers have been offering them, preferring instead to offer lower-cost defined contribution plans to employees.

4)  Most retirees report they retired sooner than they had planned to. Fully two thirds of retirees in their 60s and 53 percent of retirees in their 70s report that they had to retire prematurely. The reasons cited for early retirement are as follows:

  • 66 percent cite employment-related reasons for early retirement, such as layoffs or job losses.
  • 52 percent of retirees in their 50s report that they retired because of poor health.
  • Only 12 percent of retirees who retired early report they had done so because they had earned enough money to provide a secure retirement lifestyle for themselves.

5)  The median age at which they began taking Social Security benefits was surprisingly young – 62 years of age. This results in a significantly lower monthly benefit than waiting until one reaches full retirement age, although those who begin taking Social Security benefits as soon as they are eligible are able to collect benefits for more years.

6)  Senior citizens have a significant exposure to the risk of long term care costs. According to the 2016 Genworth Cost of Care survey, a year in an assisted living facility costs an average of $43,539 per year, nationwide, while a semi-private room in a nursing home costs an average of $82,125.

While there are bright spots in the Transamerica report – today’s retirees are the healthiest with a longer life expectancy than any in history. Most retirees would be well served by getting a written plan in place that addresses a variety of risk, including living longer than expected, disability and the need for long-term care, inflation and market risk.

Tech Support Scams Are On The Rise

For the past several years, scammers have been selling fake security software. They go so far as to set up websites, which they use to market free computer scans. There is usually no scan performed at all but they issue a warning message at the end of the fake scan to convince visitors that their computer has a virus. They then introduce their own software as a solution. In most cases, the software has no security capabilities. Several scam artists who are even more malicious provide malware instead of worthless software. Malware is designed to give the software creator access to the computer, and this is how criminals steal information from unsuspecting consumers.

Phone Scams

A new version of security scam starts with an unsolicited phone call. Using public records, scammers find phone numbers, names and even addresses to make themselves sound legitimate. They may try to guess the type of security software or operating system used by their potential victims. These scammers gain the trust of people by claiming to be associated with major reputable companies such as Norton or AVG. They use technical jargon to confuse people, and that confusion mixed with high-pressure urgency to fix security risks causes panic. One of the most common ways to execute a security scam is to gain remote access to a computer. Scammers will walk their victims through the steps to receive an applet that lets the caller see all of the files. By remotely controlling the victim’s mouse, they change the settings to leave the computer vulnerable through remote access. Some scammers also require a monthly or one-time fee for their fake services.

What To Do When Scammers Call

If someone calls and claims to be from a reputable company, hang up and call the company directly. Callers who use high-pressure tactics or create a sense of urgency are likely scammers. Here are some additional tips to follow:

  • Do not give a caller remote access to a computer.
  • Since criminals can spoof numbers, do not rely on caller ID to verify a number.
  • Beware of online ads for tech support companies that are similar to major reputable names.
  • Do not provide financial information to any unexpected caller who claims to be from tech support.
  • Do not purchase security software over the phone if the caller requires a subscription fee.
  • Register any home or cell phone number on the national “Do Not Call” list.
  • Do not give out passwords or a personal email address over the phone.

 

After Responding To A Scam

After responding to a scam and downloading malware, follow these steps:

  • Download legitimate malware removal software to run on the computer.
  • Change passwords for all online accounts.
  • Notify the credit card company if a card was used to pay for bogus services.
  • Contact the FTC about identity theft prevention if financial and personal information may have been compromised.

 

Refund Scam Identification

After paying for tech support services with a new computer purchase, some buyers receive a call several months later about a refund. Scammers either guess or are able to find information about people who buy warranties with computers, and they use the tactic of offering free money to get financial data. For example, the caller may say that a refund is available but a bank account number is needed to deposit the money. Callers may cite one of several reasons for issuing a refund. Keep in mind that warranty registration means submitting a mailing address. Ask the caller to use the mailing address provided to mail a check. Never provide financial information, a home address or any other personal details. When receiving these types of calls, report the scammers to the FTC at FTC.gov. For answers to any other questions, discuss your concerns with an agent.

5 Ways You Can Maximize Your Social Security Benefits

More than nine out of ten current retirees rely at least in part on Social Security benefits to fund their retirement income.

As of 2016, the maximum monthly Social Security benefit for an individual retiring at full retirement age is $2,639 per month. But the average retired worker receives just $1,341 per month, according to information from the Social Security Administration. An aged couple, with both receiving benefits, receives an average amount of $2,212 per month ($2,680 for widowed mothers with two children). And elderly widow(er)s receive an average monthly benefit of $1,285 per month.

Clearly, Social Security is not sufficient income for most of us by itself to fund an acceptable retirement lifestyle. But there are some things you can do to boost your monthly payout. 

1.)  Increase your earnings. Social Security benefits are based, in large part, on your contributions over your working years. The more you and your employer contribute in payroll taxes, the greater your benefit is likely to be, up to the statutory benefit cap. So the more money you earn now, if taxable as ordinary income, the greater the benefit you may eventually qualify for.

2.)  Stay married. In the event of divorce, an ex-spouse may claim spousal and survivor’s benefits on an ex-spouse’s earnings provided the filer was married to the earner for at least 10 years, and is not currently married. However, there is an exception for widows and widowers over the age of 60. 

3.)  Be patient. The longer you wait to claim your Social Security benefits, the higher your monthly benefit will be. For those born between 1943 and 1954, your normal retirement age is 66. For those born in1960 or later, normal retirement age is 67. But you can get a bigger monthly benefit if you wait a few years longer: Social Security will add 8 percent per year plus inflation to your eventual monthly check when you delay taking benefits past full retirement age up to age 70.

If you can stay in the work force longer, you will have a bigger monthly cushion to retire on. However, if you are in poor health, or you have reason to believe your life expectancy will be shorter than average, you may want to go ahead and take Social Security benefits at an earlier age. 

4.)  Step up to the larger benefit in the event of the death of a spouse. If your spouse passes away, you are entitled to the deceased’s benefit if his or her benefit is larger than yours. To maximize the monthly benefit, you may consider putting off the claim until you reach normal retirement age, if you are not there already. 

Alternatively, you could take the survivor’s benefit early, while working or living off of other sources of income, and then switch over to your own benefit based on your earnings once you reach full retirement age. 

5.)  Double up on spousal benefits. If you have been married at least ten years and then divorce, both of you may benefit from refraining from collecting your own Social Security benefits right away. Instead, you each may be able to claim spousal benefits based on the others’ earnings, and waiting until full retirement age or age 70 before filing for your own Social Security benefits. To make this work, you and your ex must be divorced for at least two years, and either age 62 or older or receiving disability benefits. 

There is no one-size-fits-all technique that maximizes lifetime Social Security benefits in every case. You may want to work with a retirement income expert to explore different scenarios to see what course of action works for you.

High Deductible Health Plans and HSAs Gain Popularity As Customers and Employers Look to Trim Costs

As medical insurance costs continue to grow for both employers and employees, high-deductible health plans (HDHPs) and other forms of consumer-driven health plans (CDHPs) are getting more and more popular.  Consumer-driven health plans require individuals to take a greater role in making their health care decisions, and to bear more of the cost of relatively minor medical issues. The expectation is that they will make better health care decisions with more sensitivity to cost. 

HDHPs are special health insurance plans that require their insureds to meet relatively high expense thresholds before the insurance company will begin paying benefits for covered health care. In exchange, HDHP insureds and beneficiaries who qualify are allowed to contribute to special tax-advantaged accounts, called health savings accounts (HSAs), to help them accumulate cash to pay the deductibles themselves, in the event of a health care event. 

These plans have proven to reduce eventual claims, resulting in premium savings for employers and employees alike. According to data from Mercer LLC and the National Business Group on Health – an association of large employers – the average medical costs per employee enrolled in a CDHP linked to a health savings account averages $9,228 compared with $11,212 for PPOs and $11,248 for HMOs. 

These plans are also gaining traction in the individual market as well: The National Business Group on Health estimates that more than eight out of ten large employers plan to offer an HDHP or other variant of consumer-driven health plan in 2016. Of these, more than a third plan to offer HDHPs together with an HSA as the only option. 

Why? In a word: Savings. 

The average annual premium for individual health insurance plans last year was $6,435. But for those enrolled in HDHPs with health savings accounts, the average premium was $5,762 per year in 2015, according to the Kaiser Family Foundation.

For plans that cover the whole family, the premium savings that HDHPs offer were even greater: The average head of household was paying $19,003 for family insurance coverage. But HDHP premiums were just $16,737 per year, for savings of $2,266 per year. 

Popularity 

Thanks to the premium savings, these plans have proven to be a hit with the American public, and more and more people are flocking to such consumer-driven health insurance plans. The percentage of American workers enrolled in an HDHP with a savings option has increased from zero in 2015 to 29 percent in as of last year. 

Employers have been leading the charge, migrating workers from more expensive PPO plans to HDHP plans with either a Health Savings Plan or Health Reimbursement Arrangement attached to the plan. The result is a lower out of pocket premium for similar coverage for the employer – and often for the employee as well. However, deductibles are higher, so in the end the worker winds up shouldering more of the burden. Average deductibles for individual plans range from $917 for HMO plans to $1,028 for PPOs to $2,199 for HDHPs with savings options. 

In compensation, though, some employers are taking some of the money they save in the form of lower health care premiums, and using them to beef up employee health savings accounts. 14 percent of covered workers in an HDHP with a health reimbursement arrangement and 7 percent of covered workers enrolled in an HDHP with a health savings account receive employer contributions to their plans at least equal to their deductible. Further, about 47 percent of workers with HRAs and 28 percent of covered workers with an HSA receive enough contributions to their accounts from their employer that it reduces their annual deductible out of pocket costs to $1,000 or less – putting them in the neighborhood of HMOs when it comes to out of pocket costs.

 

Top Water Loss Claims and Damages for Homeowners

Frozen Pipes And Material Failure The two main types of plumbing system failures involve frozen pipes and supply system material failures. In a study, frozen pipes that eventually broke made up nearly 20 percent of plumbing system insurance claims. The study also showed that failure of the pipe system materials was a factor in two out of every three plumbing system claims.

This study showed that the leading cause of residential water loss was plumbing supply system failures. These failures averaged nearly $5,100 per incident in expenses after homeowners paid their deductibles. For the claims in the study, 65 percent were due to material failures. When frozen pipes were to blame instead, the failures were about two times more severe in damages than material failure incidents.

A home’s geographic location determines its risk for frozen pipes. For example, a home in Southern California is unlikely to have this problem. However, a home in the upper Midwest is more likely to experience a frozen pipe during the winter months. Homes with pipes that are located in exterior walls or in basements have greater risks of frozen pipes. Exterior hose bib supply lines are the most vulnerable part of a system for freezing.

Drain System Failure When sewer drains back up into homes, drain system failure is likely to occur. This is more likely to happen than drain corrosion. The study showed that more than 50 percent of drain system failures happened because of backed-up sewers. Only about 35 percent of failures were attributed to performance problems. Claims from failed drain systems showed that they were among the top five reasons for residential water loss.

Homeowners reported average costs of $4,400 per incident after paying their deductibles. Failures were more common in homes that were under 40 years of age. Almost 70 percent of sewer-related drain claims came from homes with basements. When the basement was finished, the damage was 65 percent worse than it was in homes with basements that were not finished.

Toilet Failure This ranks number two on the list of top causes of residential water loss. Clogged drains and faulty fill valves are usually to blame. Almost 80 percent of claims in this category were due to faulty supply lines, assemblies for fill valves, backed-up toilets and flanges. Incidents averaged about $6,000 per claim. New homes were more susceptible to severe damages from sudden failure, which resulted in significant water loss. About 15 percent of toilet failures happened in vacant homes.

Water Heater Failure When water heater tanks reach their maximum age expectancy, they start corroding and rusting. Most water heater failures happen because of corroded tanks that lead to bursts or leaks. If the tank is flushed and maintained properly, it can last longer. Almost 70 percent of water heater failures happened because of sudden bursts or slow leaks. Incidents averaged about $4,500 per claim in the study. Although supply line claims only accounted for 10 percent of all claims, they cost homeowners about 60 percent more than other types of water heater failure claims. In about 95 percent of claims, the hot water heater was 20 years old or less.

Washing Machine Failure This type of failure is usually caused by supply hose failure, drain line failure or overflow. The study showed that the average cost per incident was about $5,300. Hose failure was to blame in about 50 percent of claims. Of those claims, nearly 80 percent involved machines that were under 11 years of age. More than 5 percent of failures took place in unoccupied homes, and the failures in those vacant homes led to damages that cost more than two times as much as the failures that happened in occupied homes.

According to the study, damages in many categories were more costly in the southern regions than they were in northern regions of the United States. It is important for homeowners everywhere to know their risks and minimize them. To learn more about common types of claims and how to avoid them, discuss concerns with an agent.

Protect Your Business with Business Disability Coverage

When you start up a new business, purchase a practice, buy into a partnership or decide to expand your current business, there’s one thing you’ll need plenty of: money. More than likely, you’ll be paying a visit to the bank to secure a sizeable loan.

As you crank up your business and start bringing in some profits, you’ll be able to repay your loan bit by bit. If you were to die, your life insurance would repay the loan. But what happens if you become completely disabled and can no longer run your business? How will you repay that loan? Fortunately, there is one product that solves this complicated problem: Business Reducing Term DI.

What is Business Reducing Term DI?

Business Reducing Term DI pays a specified monthly benefit to the disabled business owner for a specified period of time, usually tied to the length of the loan. These products provide business owners with the ultimate security and peace of mind.

This coverage is somewhat similar to reducing life insurance policies that are often purchased to back mortgage loans. The beneficiaries of these products will receive fewer monthly benefits payments and a lower overall payout if the insured becomes disabled later during the policy term-which is why it’s called “reducing term.”

The term of these products typically ranges anywhere between 5 and 30 years, depending on the length of the loan. In some cases, the benefit payments go directly to the lender as opposed to the insured.

Business Reducing Term DI is much more affordable than personal income protection coverage. Plus, it has longer terms than conventional Business Overhead Expense insurance, which typically covers only 2 years or less. To beef up their disability coverage, many business owners buy Business Overhead Expense insurance in addition to Business Reducing Term DI.

Who needs it?

Experts say that anyone who is taking out a loan to buy, start or expand a business or professional practice could benefit from Business Reducing Term DI to maximize their disability benefit payments. Dentists and other health care providers are particularly good candidates for this coverage.

Business Reducing Term DI would also be beneficial in the following scenarios:

  • When you’re buying a business
  • When you’re expanding your business
  • If you offer employee contract or contract performance guarantees
  • To protect medium term loans
  • To cover purchase agreements

As older baby boomers reach their retirement years, many of them are selling their stores, professional practices and other high-capital businesses to younger owners. As a result, Business Reducing Term DI is more valuable than ever. And it’s really no wonder why-these valuable products provide the ultimate disability protection for business owners.

If you are launching, purchasing or expanding a business, you should discuss Business Reducing Term DI with your financial advisor. This highly flexible disability product can be used in conjunction with any personal disability insurance you may already have. Plus, it gives you peace of mind knowing that your business will be protected no matter what happens.

Health Care Costs Consume Most Of Retirees’ Monthly Social Security Income

Many recent retirees are regretting not waiting to retire because of unexpected costs from health issues and life events. When people retire too soon and start collecting Social Security income, they give up extra money that could help them later on.

Harris Poll conducted its third Nationwide Retirement Institute survey of more than 900 adults who were over the age of 50 and were either retired or nearing retirement. Their research showed that about 25 percent of retired respondents would wait to start collecting Social Security if they could turn back the clock. Of those who did not regret waiting, almost 40 percent said that a life event compelled them to start collecting.

Almost 40 percent of retirees said that health problems prevented them from living up to their expectations in retirement. Another 80 percent of respondents reported experiencing major or multiple health problems sooner than expected. Health care costs alone kept about 25 percent of the participants from living how they hoped to live during retirement.

According to researchers, the average American who starts drawing Social Security income at age 62 will spend over 60 percent of that money on health care costs. By waiting longer, retirees are eligible for a larger monthly income. Nearly 25 percent of future retirees are unsure about the amount of their expected Social Security income. Of the participants who recently started collecting a benefit, about 30 percent reported receiving less than expected. Another troubling factor to researchers is that many soon-to-be retirees do not know what factors affect their benefit amount.

Researchers said that even those who could identify the factors affecting benefit amounts were unlikely to fully grasp the many applicable rules and what they mean for future income. Financial advisers, Social Security tools and other helpful additions can bridge the gap. Only about 10 percent of the surveyed retirees used online calculation tools to determine their benefit amount. However, the number of people who are aware of these tools and actually use them is slowly increasing. Researchers also hope to increase awareness about financial advisers. They reported that less than 15 percent of retired respondents talked to an adviser before retiring.

Financial advice is a more promising topic for future retirees. According to the survey, more than 30 percent of future retirees had talked to a financial adviser. Only about 50 percent of those respondents reported getting advice specifically about Social Security from their advisers. When asked if they would switch to an adviser who could show them how to maximize their benefits, more than 75 percent of future retirees said that they would gladly make the switch.

If retirees work with an adviser, they are less likely to report health problems and costs preventing them from living their dream retirement. As the landscape continues changing for retirees, Social Security is becoming more important. Researchers said that about 40 percent of the survey’s respondents did not have a pension plan and lacked adequate savings to retire. If future retirees work with advisers, they can reduce their risks of outliving savings and maximize their financial portfolio to allow for unexpected life events and health issues. To learn more, discuss concerns with an agent.