Why Life Insurance Matters for New Homeowners

 

It addresses a significant financial risk.

 

Provided by Michael R Snow

 

If you buy a home and you have no life insurance, there is a financial risk. It may not be immediately evident, but it must be acknowledged – and it should be addressed.

 

What if you die, and your spouse or partner is left to pay off the mortgage alone? This possibility may seem remote, and it may be hard for you to contemplate. It deserves consideration regardless.

 

Imagine your loved one having to handle that 15-year or 30-year debt by themselves. (Or the debt on an adjustable-rate loan or jumbo mortgage.) Additionally, how would that heavy financial burden come to impact your children’s lives? These tragedies do occur and do bring these kinds of emotional and financial challenges. A life insurance payout may provide some help for a homeowner in the event of such a crisis.

 

When you buy life insurance, the coverage amount should reflect your mortgage debt. You will need enough coverage to help your spouse, partner, or heirs deal with the outstanding home loan balance, should you pass away prematurely.1,2

 

Term life insurance may meet the need. If you are the typical homeowner, you will stay in your current home for about ten years. (Back in 2006, the average homeowner tenure was just six years.) As you may move up, move to another region with different home values, or even rent in the future, a term policy that lets you renew or modify coverage could suffice.1

 

On the other hand, permanent life insurance may be more suitable. The reality is that inflation decreases the value of term life coverage over time. Suppose you buy a 20-year term policy offering $250,000 of coverage today. At just 4% annual inflation, that coverage will be worth 56% less in 2038 – and your home may be worth much more in 2038 than it is now.2

 

Moreover, the cost of term life insurance rises as you age. A term life policy is cheap when you are young, but if you want a new one after your initial term policy sunsets, you may find the premiums dramatically more expensive. In contrast, premiums on a permanent (whole) life policy are locked in, effectively becoming more manageable as time goes by. You may want permanent life for other financial reasons as well, reasons that have nothing to do with your home. A permanent life policy has the potential to accumulate cash value in the future; a term life policy does not.2

 

A homeowner should carefully consider life insurance coverage options. If you lack coverage today, talk to a qualified insurance professional about your options, so that you can insure yourself for tomorrow.

 

Michael R Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal or accounting services. If legal or accounting services are needed, the reader is advised to engage the services of a competent professional. This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp. (TFSC), a Registered Investment Adviser. TFSC is also a licensed insurance agency (not licensed in all states).

 

Citations.

1 – themortgagereports.com/26307/homebuyer-tenure-how-long-are-people-staying-in-their-houses [3/17/17]

2 – entrepreneur.com/article/310731 [3/22/18]

 

Life Insurance Explained

A quick look at the different types of policies.

 

Provided by Michael R. Snow

  

When it comes to life insurance, there are many choices. Whole life. Variable universal life. Term. What do these descriptions really mean?

 

All life insurance policies have two things in common. They guarantee to pay a death benefit to a designated beneficiary after a policyholder dies (although, the guarantee may be waived if the death is a suicide occurring within two years of the policy purchase). All require recurring payments (premiums) to keep the policy in force. Beyond those basics, the differences begin.1

 

Some life insurance coverage is permanent, some not. Permanent life insurance is designed to cover you for your entire life (not just a portion or “term” of it), and it can become an important element in your retirement planning. Whole life insurance is its most common form.2

    

Whole life policies accumulate cash value. How does that happen? An insurer directs some of your premium payments into a reserve account and puts those dollars into investments (typically conservative ones). The return on the investments influences the growth of the cash value, which builds up according to a formula the insurer sets.3

  

A whole life policy’s cash value grows with taxes deferred. After a while, you gain the ability to borrow against that cash value. You can even cancel the policy and receive a surrender value. Premiums on whole life policies, though, are usually higher than premiums on term life policies, and they may rise with time. Also, beneficiaries only receive a death benefit (not the policy’s cash value) when a whole life policyholder dies.2,4

    

Universal life insurance is whole life insurance with a key difference. Universal life policies also build cash value with taxes deferred, but there is the chance to eventually pay the monthly premiums out of the policy’s investment portion.5

 

Month by month, some of your premium on a universal life policy gets credited to the cash reserve of the policy. Sooner or later, you may elect to pay premiums out of the cash reserve – so, the policy essentially begins to “pay for itself.” If all goes well, a universal life policy may have a lower net cost than a whole life policy. If the investments chosen by the insurer severely underperform, that can mean a dilemma: the cash reserve of your policy may dwindle and be insufficient to keep paying the premiums. That could mean cancellation of the policy.5

      

What about variable life (and variable universal life) policies? Variable life policies are basically whole life or universal life policies with a riskier investment component. In VL and VUL policies, you may direct percentages of the cash reserve into investment sub-accounts managed by the insurer. Assets allocated to the sub-accounts may be put into equity investments of your choice as well as fixed-income investments. If you choose equity investments, you (and the insurer) assume greater risk in exchange for the possibility of greater reward. The performance of the subaccounts cannot be guaranteed. As an effect of this risk exposure, a VUL policy usually has a higher annual cost than a comparable UL policy.6

 

The performance of the stock market may heavily affect the performance of the subaccounts and the policy premiums. A bull market may mean better growth for the policy’s cash value and lower premiums. A bear market may mean reduced cash value and higher monthly payments to keep the policy going. In the worst-case scenario, the cash value plummets, the insurer hikes the premiums in order to provide the guaranteed death benefit, the premiums become too expensive to pay, and the policy lapses.6

 

Term life insurance is life insurance that you “rent” rather than own. It provides coverage for a set period (usually 10-30 years). Should you die within that period, your beneficiary will get a death benefit. Typically, the premium payments and death benefit on a term policy are fixed from the start, and the premiums are much lower than those of permanent life policies. When the term of coverage ends, you may be offered the option to renew the coverage for another term or to convert the policy to a form of permanent life insurance.2,7

  

Term life is cheap, but the tradeoff comes when the term is up. Just as you cannot build up home equity by renting, you cannot build up cash value by “renting” life insurance. When the term of coverage is over, you usually walk away with nothing for the premiums you have paid.7

   

Which coverage is right for you? Many factors may come into play when deciding which type of life insurance will suit your needs. The best thing to do is to speak with a qualified insurance professional who can help you examine these factors, so you can determine which type of coverage may be appropriate.

 

Michael Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are un-managed and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

sunset person love people
Photo by Josh Willink on Pexels.com

 

Citations.

1 – thebalance.com/does-a-life-insurance-policy-cover-suicide-2645609 [6/5/18]

2 – fool.com/retirement/2017/07/20/term-vs-whole-life-insurance-which-is-best-for-y-2.aspx [7/20/17]

3 – investopedia.com/articles/personal-finance/082114/how-cash-value-builds-life-insurance-policy.asp [4/30/18]

4 – insure.com/life-insurance/cash-value.html [12/12/17]

5 – thebalance.com/what-you-need-to-know-about-universal-life-insurance-2645831 [5/8/18]

6 – insuranceandestates.com/top-10-pros-cons-variable-universal-life-insurance/ [9/1/17]

7 – consumerreports.org/life-insurance/how-to-choose-the-right-amount-of-life-insurance/ [3/30/18]

 

Why the U.S. Might Be Less Affected by a Trade War

 

The nature of our economy could help it withstand the disruption.

 

Provided by Michael R Snow

 

A trade war does seem to be getting underway. Investors around the world see headwinds arising from newly enacted and planned tariffs, headwinds that could potentially exert a drag on global growth (and stock markets). How badly could these trade disputes hurt the American economy? Perhaps not as dramatically as some journalists and analysts warn.1,2

 

Our business sector may be impacted most. Undeniably, tariffs on imported goods raise costs for manufacturers. Costlier imports may reduce business confidence, and less confidence implies less capital investment. The Federal Reserve Bank of Philadelphia, which regularly surveys firms to learn their plans for the next six months, learned in July that businesses anticipate investing less and hiring fewer employees during the second half of the year. The survey’s index for future activity fell in July for the fourth month in a row. (Perhaps the outlook is not quite as negative as the Philadelphia Fed reports: a recent National Federation of Independent Business survey indicates that most companies have relatively stable spending plans for the near term.)1,2  

  

Fortunately, the U.S. economy is domestically driven. Consumer spending is its anchor: household purchases make up about two-thirds of it. Our economy is fairly “closed” compared to the economies of some of our key trading partners and rivals. Last year, trade accounted for just 27% of our gross domestic product. In contrast, it represented 37% of gross domestic product for China, 64% of growth for Canada, 78% of GDP for Mexico, and 87% of GDP for Germany.3,4

     

Our stock markets have held up well so far. The trade spat between the U.S. and China cast some gloom over Wall Street during the second-quarter earnings season, yet the S&P 500 neared an all-time peak in early August.5

 

All this tariff talk has helped the dollar. Between February 7 and August 7, the U.S. Dollar Index rose 5.4%. A stronger greenback does potentially hurt U.S. exports and corporate earnings, and in the past, the impact has been felt notably in the energy, materials, and tech sectors.6,7

       

As always, the future comes with question marks. No one can predict just how severe the impact from tariffs on our economy and other economies will be or how the narrative will play out. That said, it appears the U.S. may have a bit more economic insulation in the face of a trade war than other nations might have.

 

Michael R Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

 

Citations.

1 – reuters.com/article/us-usa-economy/us-weekly-jobless-claims-hit-more-than-48-and-a-half-year-low-idUSKBN1K91R5 [7/19/18]

2 – nytimes.com/2018/07/24/upshot/trade-war-damage-to-us-economy-how-to-tell.html [7/24/18]

3 – money.cnn.com/2018/07/25/news/economy/state-of-the-economy-gdp/index.html [7/25/18]

4 – alliancebernstein.com/library/can-the-us-economy-weather-the-trade-wars.htm [7/17/18]

5 – cnbc.com/2018/08/06/the-sp-500-and-other-indexes-are-again-on-the-verge-of-historic-highs.html [8/6/18]

6 – barchart.com/stocks/quotes/$DXY/performance [8/7/18]

7 – investopedia.com/ask/answers/06/strongweakdollar.asp [3/16/18]

 

Retirement Income and The Sequence of Returns

 

A look at how variable rates of return do (and do not) impact investors over time.

 

Provided by Michael R Snow

 

What exactly is the “sequence of returns”? The phrase simply describes the yearly variation in an investment portfolio’s rate of return. Across 20 or 30 years of saving and investing for the future, what kind of impact do these deviations from the average return have on a portfolio’s final value?

 

The answer: no impact at all.

 

Once an investor retires, however, these ups and downs can have a major effect on portfolio value – and retirement income.

 

During the accumulation phase, the sequence of returns is ultimately inconsequential. Yearly returns may vary greatly or minimally; in the end, the variance from the mean hardly matters. (Think of “the end” as the moment the investor retires: the time when the emphasis on accumulating assets gives way to the need to withdraw assets.)

 

An analysis from BlackRock bears this out. The asset manager compares three model investing scenarios: three investors start portfolios with lump sums of $1 million, and each of the three portfolios averages a 7% annual return across 25 years. In two of these scenarios, annual returns vary from -7% to +22%. In the third scenario, the return is simply 7% every year. In all three scenarios, each investor accumulates $5,434,372 after 25 years – because the average annual return is 7% in each case.1

 

Here is another way to look at it. The average annual return of your portfolio is dynamic; it changes, year-to-year. You have no idea what the average annual return of your portfolio will be when “it is all said and done,” just like a baseball player has no idea what his lifetime batting average will be four seasons into a 13-year playing career. As you save and invest, the sequence of annual portfolio returns influences your average yearly return, but the deviations from the mean will not impact the portfolio’s final value. It will be what it will be.1

 

When you shift from asset accumulation to asset distribution, the story changes. You must try to protect your invested assets against sequence of returns risk.

 

This is the risk of your retirement coinciding with a bear market (or something close). Even if your portfolio performs well across the duration of your retirement, a bad year or two at the beginning could heighten concerns about outliving your money.

 

For a classic illustration of the damage done by sequence of returns risk, consider the awful 2007-2009 bear market. Picture a couple at the start of 2008 with a $1 million portfolio, held 60% in equities and 40% in fixed-income investments. They arrange to retire at the end of the year. This will prove a costly decision. The bond market (in shorthand, the S&P U.S. Aggregate Bond Index) gains 5.7% in 2008, but the stock market (in shorthand, the S&P 500) dives 37.0%. As a result, their $1 million portfolio declines to $800,800 in just one year.2

 

If you are about to retire, do not dismiss this risk. If you are far from retirement, keep saving and investing knowing that the sequence of returns will have its greatest implications as you make your retirement transition.

 

Michael R Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

 

Citations.

1 – blackrock.com/pt/literature/investor-education/sequence-of-returns-one-pager-va-us.pdf [6/18]

2 – kiplinger.com/article/retirement/T047-C032-S014-is-your-retirement-income-in-peril-of-this-risk.html [7/3/18]

The Details More People Should Know About Medicare

 

Before you enroll, take note of what the insurance does not cover and the changes ahead.

 

Provided by Michael R. Snow

 

Misconceptions about Medicare coverage abound. Our national health insurance program provides seniors with some great benefits. Even so, traditional Medicare does not pay for dental care, vision care, or any real degree of long-term care. How about medicines? Again, it falls short.1

 

Original Medicare (Parts A & B) offers no prescription drug coverage. You may not currently take prescription medicines, but you may later, and can you imagine paying out of pocket for them? Since 2013, the prices of the 20 most-prescribed drugs for seniors have risen an average of 12% annually. Will Social Security give you a 12% cost-of-living adjustment next year?1

  

To address this issue, many seniors sign up for Part D (prescription drug) plans, which may reduce the co-pays for certain generic medicines down to $1 or $0. As private insurers provide Part D plans, the list of medicines each plan covers varies – so, carefully check the list, also called the formulary, before you enroll in one. Keep checking it, as insurers are permitted to change it from one year to the next.1,2 

  

You may want a Medigap policy, considering your Part B co-payments. If you stick with original Medicare, you will routinely pay 20% of the cost of medical services and procedures covered by Part B. If you need a hip replacement or a triple bypass, you could face a five-figure co-pay. Medigap insurance (also called Medicare Supplement insurance) addresses this problem with supplemental Part B coverage. Premiums and services can vary greatly on these plans, which are sold by insurers.1

     

If you want dental and vision coverage (and much more), you may want a Part C plan. Around a third of Medicare beneficiaries enroll in these plans, also called Medicare Advantage programs. The typical Part C plan includes all the coverage of Medicare Parts A, B, and D, plus the dental and vision insurance that original Medicare cannot provide. Medicare Advantage plans also limit beneficiary out-of-pocket costs for the services they cover.1

 

Part C plans may soon offer even more benefits. They will be allowed to include services beyond normal medical insurance beginning in 2019. Starting in October, they can reveal what new perks, if any, they have chosen to offer. Some of the new benefits you might see: coverage for the cost of home health aides, adult day care, palliative care, the installation of grab bars and mobility ramps in the home, and trips to and from medical appointments. The list of potential benefits could expand further in 2020.3

        

Few seniors who enroll in Part C plans switch out of them. If you enroll in one, you should realize that these plans are regional rather than national – so, if you move, you may have to find another Part C plan or return to traditional Medicare, with or without Medigap coverage.1,3

 

The Medicare Advantage Disenrollment Period is disappearing. A recently passed federal law, the 21st Century Cures Act, does away with this annual January 1-February 14 window. Beginning in 2019, there will simply be an annual Medicare Advantage Open Enrollment Period from January 1-March 31. During these three months, Medicare recipients will have the chance to either switch Part C plans or disenroll from a Part C plan and go back to original Medicare.4

 

Some Medicare Cost plans are being phased out. These plans, which offer some features of Medigap policies and some features of Medicare Advantage programs, are ending in certain counties within 15 states and in the District of Columbia. Enrollees are being left to search for new coverage.4

  

If you are financially challenged, you may have options. State subsidies and Medicare savings programs are available to help households handle co-payments and deductibles under original Medicare. Some non-profit groups offer pharmaceutical assistance programs (PAPs) to help Medicare beneficiaries pay less for medicines.4

 

Lastly, diabetics who use insulin pumps sometimes find they are better off with original Medicare as well as a Medigap policy, rather than a Part C plan. Some Medigap plans cover the entire cost of insulin. Many infusion treatments (such as chemotherapy) are also 100% covered by Medigap policies.4

 

Michael R. Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. Tower Financial Strategies is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

 

Citations.

1 – forbes.com/sites/nextavenue/2018/07/10/avoid-these-big-medicare-mistakes-people-make [7/10/18]

2 – money.usnews.com/money/retirement/medicare/articles/2018-06-25/prescription-drug-costs-retirees-should-expect-to-pay [6/25/18]

3 – nytimes.com/2018/07/20/health/medicare-advantage-benefits.html [7/20/18]

4 – rd.com/health/healthcare/things-medicare-wont-tell-you/ [7/6/18]

Before You Claim Social Security

 

A few things you may want to think about before filing for benefits.

 

Provided by Michael R. Snow

 

Whether you want to leave work at 62, 67, or 70, claiming the retirement benefits you are entitled to by federal law is no casual decision. You will want to consider a few key factors first.

   

How long do you think you will live? If you have a feeling you will live into your nineties, for example, it may be better to claim later. If you start receiving Social Security benefits at or after Full Retirement Age (which varies from age 66-67 for those born in 1943 or later), your monthly benefit will be larger than if you had claimed at 62. If you file for benefits at FRA or later, chances are you probably a) worked into your mid-sixties, b) are in fairly good health, c) have sizable retirement savings.1

 

If you sense you might not live into your eighties or you really need retirement income, then claiming at or close to 62 might make more sense. If you have an average lifespan, you will, theoretically, receive the average amount of lifetime benefits regardless of when you claim them; the choice comes down to more lifetime payments that are smaller or fewer lifetime payments that are larger. For the record, Social Security’s actuaries project the average 65-year-old man living 84.3 years and the average 65-year-old woman living 86.7 years.2

  

Will you keep working? You might not want to work too much, for earning too much income can result in your Social Security being withheld or taxed.

 

Prior to Full Retirement Age, your benefits may be lessened if your income tops certain limits. In 2018, if you are 62-65 and receive Social Security, $1 of your benefits will be withheld for every $2 that you earn above $17,040. If you receive Social Security and turn 66 later this year, then $1 of your benefits will be withheld for every $3 that you earn above $45,360.3

 

Social Security income may also be taxed above the program’s “combined income” threshold. (“Combined income” = adjusted gross income + non-taxable interest + 50% of Social Security benefits.) Single filers who have combined incomes from $25,000-34,000 may have to pay federal income tax on up to 50% of their Social Security benefits, and that also applies to joint filers with combined incomes of $32,000-44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes surpass $44,000 may have to pay federal income tax on up to 85% of their Social Security benefits.3

  

When does your spouse want to file? Timing does matter, especially for two-income couples. If the lower-earning spouse collects Social Security benefits first, and then the higher-earning spouse collects them later, that may result in greater lifetime benefits for the household.4  

 

Finally, how much in benefits might be coming your way? Visit ssa.gov to find out, and keep in mind that Social Security calculates your monthly benefit using a formula based on your 35 highest-earning years. If you have worked for less than 35 years, Social Security fills in the “blank years” with zeros. If you have, say, just 33 years of work experience, working another couple of years might translate to slightly higher Social Security income.1

  

Your claiming decision may be one of the major financial decisions of your life. Your choices should be evaluated years in advance, with insight from the financial professional who has helped you plan for retirement.

 

Michael R. Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are un-managed and are not illustrative of any particular investment.

 

Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser.

 

Citations.

1 – fool.com/investing/2018/07/07/4-frequently-asked-social-security-questions.aspx [7/7/18]

2 – ssa.gov/planners/lifeexpectancy.html [7/9/18]

3 – blackrock.com/investing/literature/investor-education/social-security-retirement-benefits-quick-reference-one-pager-va-us.pdf [7/9/18]

4 – thebalance.com/social-security-for-married-couples-2389042 [7/4/18]

Financial Elder Abuse: Perception vs. Reality

 

Someday, you or your parents could be at risk.

 

Provided by Michael R Snow

 

You may know victims of financial elder abuse. According to a new Wells Fargo Elder Needs Survey, almost half of Americans do.1

 

As you read or hear stories about seniors being financially exploited, you may think: not me, I would never fall prey to that in my old age. Your parents? Same thing. They are too smart and too vigilant to be taken for a ride by a con artist or an unprincipled relative or caretaker.

 

This perception is only natural. When we are young, we never picture ourselves, or our parents, in decline. We are told 60 is the new 40, and 80 is the new 50. Perhaps so, but as some of the Wells Fargo survey data bears out, we may be overconfident in our ability to evade financial scams as we age.

 

Nearly 800 Americans aged 60 and older were asked if they believed senior citizens were vulnerable to financial abuse. Ninety-eight percent of the respondents said yes, but 81% were confident that it would never happen to them. Just 10% thought they were susceptible to such exploitation, and only 24% even worried about the possibility.1

 

The surveyors also contacted nearly 800 Americans aged 45-59 with elderly parents, and 75% of these Gen Xers and baby boomers felt their moms and dads would never succumb to such fraud.1

 

In short: financial elder abuse might happen to other people someday, but not to us.

 

This assumption may be flawed – after all, half the people Wells Fargo contacted said that they knew elders who had been financially exploited. Any perception that strangers are committing most of these crimes may be equally unfounded. The Jewish Council for the Aging states that 66% of financial elder abuse is carried out by family members, friends, or trusted third parties.1

 

What actions can be taken to try and shield your parents from such abuse? As a first step, you and your parents can meet with an estate planning attorney to put a signed financial power of attorney in place (if one is absent). Should your mom or dad lose the capacity to make financial decisions on their own, this document can authorize you (or another family member) to make worthy decisions on their behalf.1

 

There are also software programs, such as EverSafe, that are designed to pinpoint odd financial transactions for a household or business. Such activity is flagged, and a financial advocate for the person or business is then signaled.1

 

 

You can also meet the bank or investment professional who works with your parent(s) and request that you become a trusted contact on their account. You can do this by filling out a form.2

 

You may already be named as a trusted contact. Since February, the Financial Industry Regulatory Authority (FINRA) has required investment firms to ask their clients to provide the name and information of such persons, though clients do not have to comply with the request.2

 

The financial services industry is taking further steps in this regard. In May, President Trump signed the Senior Safe Act into law. This legislation, introduced by Sen. Susan Collins of Maine, guides banks and investment firms to train their financial professionals to spot and report what appears to be shady financial activity. To encourage such reporting, it gives them a degree of immunity from liability and breaches of privacy laws.3

 

The bottom line: act now to guard against the risk of elder financial abuse. It happens too often, and though it may seem improbable today, that may not be the case tomorrow – for your parents or you.

 

*Michael R Snow may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results.  This information should not be construed as tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser. 125 N. Market ST., Suite #1603, Wichita, KS 67202

 

Citations.

1 – marketwatch.com/story/youre-in-denial-if-you-think-you-or-your-elderly-parents-wont-be-scammed-2018-06-25 [6/25/18]

2 – cnbc.com/2018/05/15/advisors-are-asking-their-clients-for-a-trusted-contact-choose-wisely.html [5/15/18]

3 – wealthmanagement.com/high-net-worth/new-senior-safe-act-encourages-reporting-financial-abuse [5/29/18]