Accounting & Finance

fall-2019-senior

What about Mom?

Ever worry like crazy about something, but don’t want to talk about it?  The topic of aging and long-term care seems to fall into this category. We’re all suffering from a terminal disease, and that disease is called time. Rarely does a week go by that someone doesn’t mention to me about how worried they […]

Ever worry like crazy about something, but don’t want to talk about it?  The topic of aging and long-term care seems to fall into this category. We’re all suffering from a terminal disease, and that disease is called time. Rarely does a week go by that someone doesn’t mention to me about how worried they are about their parents, grandparents or themselves. What’s going to happen when they are no longer able to care for themselves? Who will care for them? Where will they be cared for? How will they be able to pay for care?

These are important and difficult questions.  I realized that my clients had nowhere to go to get these answers, so I decided to better educate myself on the topic. I wasn’t looking forward to it, because I thought it was going depress me. I have good news!!  I feel much better now.

This is not your parents’ long-term care.  Options in this area have made significant progress since my parents were in this situation. Ten thousand Baby Boomers turn 65 each day.  Baby Boomers have changed the world as they’ve gone through each phase of their lives. Now they’re working on improving what retirement and aging look like. As with everything else – they want options!  So now, we’re beginning to have great options for aging and long-term care. “Nursing homes” are moving to the back, while an array of better options are moving forward.

What are the options?

  • Aging in place – there’s no place like home. This is a good option for people who are generally in good health. A major consideration is the current floor plan, and if it needs to be changed. Check out universal design for suggestions on preparing the home. There has also been a large increase in the types of services available to come to your home, including meals, transportation, and nursing care.
  • 55+ independent living communities – best suited for active, healthy, 55+ adults looking for a hassle-free lifestyle. There are options for every budget. They usually provide limited health services.
  • Continuing Care Retirement Communities (CCRCs) – this is a combination of living accommodations and a continuum of health care services for life. Independent living, Assisted living, and Skilled nursing is usually in one location. There are a wide variety of price ranges. Most provide a wide range of activities for active, healthy adults. They will help you when/if you become ill, but that is not the vast majority of residents.
  • Assisted living facilities – this is for individuals who need help with some activities of daily living, such as bathing or dressing. Many have individual apartments and activities, including things like a movie theatre.
  • Skilled nursing facilities – this is the closest to what we think of as a nursing home. They provide 24-hour skilled nursing services for the seriously ill or advanced dementia.

 

What do they cost?

The costs are vastly different based on the option, and even within each category. The good news is that there are options for most budgets. You will want to take your time and get a clear understanding of what services are included and what are extra.  A few questions to ask:

  • Is there a down payment? Is it refundable?
  • What does the monthly fee include? Food? Utilities? Transportation? Activities? Health care services?
  • Do the monthly fees increase each year? Do they increase with additional care?
  • What if I run out of money? Is there a benevolence fund? Do they take Medicaid?
  • Private pay – maybe use the value of your home?

 

How do you pay for them?

I suggest you talk to your financial advisor/planner. You can use your home, your investment assets and your retirement assets. You can also use a long-term care policy as additional care is needed. There are many more long-term care insurance options today. Your advisor should be able to educate you on all of these options.  Many policies now allow for a death benefit, or for you to change your mind and get all or most of your money back.

The bottom line: Options, options and options – from the type of places, to the services offered, to the cost and the availability of insurance.  At some point, we will all have to face this for ourselves or a loved one.  Start educating yourself today!

Any opinions are those of Mary Evans and not necessarily those of Raymond James.  Expressions of opinion are as of September 6, 2019, and are subject to change without notice.  There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.  Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

Mary Evans, CERTIFIED FINANCIAL PLANNERTM, 1134 Pennsylvania Avenue, Emmaus, PA 18049.  610-421-8664

Securities offered through Raymond James Financial Services, Inc.  Member FINRA/SIPC.  Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.  Evans Wealth Strategies is not a registered broker-dealer and is independent of Raymond James Financial Services.

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Important Real Estate Investing Considerations and the Need to Plan

Many people have decided that real estate is a powerful tool to accumulate wealth.  Some believe it’s the only tool.  Many of those investors have been successful at it.  Like all markets, the Real Estate market goes up and down.  So, what is so special about owning real estate? When talking with investors and professionals […]

Many people have decided that real estate is a powerful tool to accumulate wealth.  Some believe it’s the only tool.  Many of those investors have been successful at it.  Like all markets, the Real Estate market goes up and down.  So, what is so special about owning real estate?

When talking with investors and professionals who work with them, a few consistent themes emerge as to why they’ve decided on real estate investing:

  1. Substantial tax benefits. There are many sections of the tax code of which real estate investors regularly take advantage.  They can defer (and sometimes avoid) capital gains tax on appreciated property.  Any losses incurred can offset future capital gains, and those who are designated Qualified Real Estate Professionals can avoid the loss carryforward rules that often limit or delay the benefits of a substantial tax loss.  They can use depreciation and other expensing techniques such as cost segregation to limit their exposure to income tax.  As with most sophisticated tax planning techniques, this should be completed with the guidance of a skilled tax professional in order to properly execute without running afoul of the IRS.
  1. The power of leverage. Investors who use debt to finance their deals, utilize someone else’s money to acquire their properties.  Once acquired and occupied, the rents received provide the money to service and retire the debt.  Properly structured, real estate investors can acquire large assets using a relatively small amount of their own capital.
  1. Potential for long term appreciation. While rents are covering debt services and providing income, the long-term growth in the value of real estate assets can add substantial value to an investor’s balance sheet.
  1. Passive cash flow. Properly structured real estate investments can generate income streams independent of an investor’s daily effort.  With enough properly designed assets in place, consistent cash flow can be generated by the investor.
  1. Inflation protection. Every financial plan must address inflation.  Real estate values tend to rise with inflation.  Investors can include rent elevators in their contracts to ensure their income streams keep pace with inflation.   This can offset the impact of inflation.  Successful investors must understand if a particular market has inflated over time, and whether it is likely to do so over time.

 

  1. It’s Tangible. After living through decades of boom and bust stock and bond market cycles, many concluded that they wanted tangible investments.  Real Estate investors can touch their investments – be it a house, apartment complex, warehouse, or office building.

 

 

This list is not comprehensive, but the themes are quite common.  It should be noted, that real estate is not a silver bullet that helps achieve all financial planning objectives.

In fact, for many of the concepts above, there are risks against which these strategies must be measured.  For example, using leverage as described adds potential risk to an investment.  Without the means to handle higher than anticipate vacancy rates or carrying costs, new investors might suffer financial harm.  While real estate tends to appreciate over time, market bubbles do occur.  Real estate tends to be illiquid, so investors may not have access to their capital for some time.  It is important to understand how these risks may impact an investor’s long-term plan.

Like all people, real estate investors arrive at financial crossroads in their life.  At points such as those, they would benefit from a comprehensive understanding of their finances.  Investors may come to a point where they are financially independent and want to plan for their family’s legacy.  They face issues of protecting their assets from avoidable taxation, while also protecting their family from the pit-falls of inherited wealth.

Others may be less interested in leaving a legacy but want to unburden themselves from the management of their portfolio.  While the IRS has provided a great advantage in accumulating these assets, the bill comes due when it’s time to sell.

Many mid-career professionals embark upon real estate investing to free themselves from their 9 to 5 job.  It’s important to have clarity about the cash flow and return expectations they need to meet to replace their paycheck, which assets to deploy, and what risks they deem prudent in this endeavor.

When determining the best direction at these stages in life, investors are well served by seeking competent counsel from Financial Planning Professionals, as well as Attorneys, and Accountants who understand the unique opportunities and challenges real estate investors face.

 

David Ellowitch, CFP ® is the Managing Member of Ellowitch 3, LLC, a Financial Services Firm with offices in Allentown, PA and Paramus, NJ.  He is a registered representative of Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Ellowitch 3, LLC is not an affiliate of Lincoln Financial Advisors Corp.  CRN-2699557-082319

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fall-2019-two-faced

How Well Do You Know Your Financial Advisor?

First, let’s define the title of Financial Advisor. The title itself is often lumped into the Advisor category, which could be someone who specializes in taxes, mortgages, finances, real estate, law, etc. What makes a Financial Advisor different is that they have passed certain licensing examinations which allow them to provide financial advice as well […]

First, let’s define the title of Financial Advisor. The title itself is often lumped into the Advisor category, which could be someone who specializes in taxes, mortgages, finances, real estate, law, etc. What makes a Financial Advisor different is that they have passed certain licensing examinations which allow them to provide financial advice as well as manage investments and portfolios. On the one hand, you may work with someone who strictly does investment management and another who offers insurance products. Some Financial Advisors do a combination of both, amongst other services. Do you know what your Financial Advisor specializes in? Do you know what professional licenses and designations they hold? Most importantly, are you aware of a history of client complaints, lawsuits, or criminal charges? If you are unsure of any of these questions, now would be a great time to look at your Financial Advisor’s FINRA BrokerCheck. https://brokercheck.finra.org/

BrokerCheck is a web-based tool created by the Financial Industry Regulatory Authority (FINRA) to provide full transparency to clients on all Registered Representatives. To clarify, Registered Representatives are different from Financial Advisors in that they mainly are limited to buying and selling securities, not providing financial advice nor managing investments. Financial Advisors are often Registered Representatives; too, however many Registered Representatives are not Financial Advisors. In just a few clicks, you’ll have a full detailed report of any Financial Advisor or Registered Representative. This report will help you make informed decisions about working with that financial professional. BrokerCheck tells you instantly whether a person is registered, as required by law, to sell investments or offer investment advice. The report will also give detailed employment history, regulatory actions, licensing information, lawsuits & client complaints. These are vital pieces of information when deciding who you are going to trust with your family’s, your business’s and/or your own personal assets. You want to ensure they are fully licensed to offer unbiased advice and have a limited number of client complaints.

Some red flags to watch out for:

  • Frequent Changes in Firms
  • History of Fines
  • Criminal Charges (DUI’s, Traffic Violations, Theft, Etc.)
  • Unable to Locate Your Advisor on the Site

Choosing the right financial professional is a huge decision. The intention is to work with a Financial Advisor up to and through retirement. A Financial Advisor who looks at your overall financial situation, provides an objective analysis, and works with you over time to create a concrete yet flexible plan will help put you on a path to success. Always make sure to do your due diligence to ensure they have your best interested in mind as well as sufficient knowledge and experience. If you are not comfortable with something you see on BrokerCheck, you are certainly entitled to ask your Financial Advisor for more information. So, let’s revisit the questions again: How well do you know your Financial Advisor?


 

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 1767 Sentry Parkway West Suite 200, Blue Bell, PA 19422 (267-468-0822). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian.  Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian.

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Today vs. Tomorrow How Lifestyle Creep Could be Jeopardizing Your Financial Future

As I think about the 155th meeting of Lafayette and Lehigh’s football teams on November 23rd, I find it difficult not to reminisce about the good ole’ days at Lafayette. During my college years, the hit HBO series The Sopranos was in its prime, guiding much of my Sunday night social calendar. Each week, my […]

As I think about the 155th meeting of Lafayette and Lehigh’s football teams on November 23rd, I find it difficult not to reminisce about the good ole’ days at Lafayette.

During my college years, the hit HBO series The Sopranos was in its prime, guiding much of my Sunday night social calendar. Each week, my friends and I would pool together funds for a pre-Soprano’s meal consisting of pasta, butter, and some frozen garlic bread. Looking back, that meal was far from luxurious and not something I’ve since served dinner guests. After all, being in a better financial position should mean better meals, right?

The habit of upgrading spending habits alongside increasing income has a name: lifestyle creep. While it’s natural to enhance your lifestyle as earnings grow, folks would be well-served to focus on the pace of both. Young professionals right up to retirees often fall victim to inflating their lifestyle at a faster rate than their earnings. When this happens, the sacrificial lamb is almost always long-term savings.

It’s easy to see why this happens. Present bias is a technical term for a sentiment many of us understand and experience — it’s far more enjoyable to use the money now than it is to save it for the future. This is especially the case when the notional future is retirement, which could still be decades away. This bias compounds lifestyle creep, and it seems to transcend age, influencing those in their early professional years right up until the golden years.

Young professionals seem to be the poster child for lifestyle creep. Many professionals in their 20s and early 30s are shackled with student loans and maintain little in the way of emergency reserves. Yet at the same time, many sport luxury apparel, buy new technologies and maintain a buzzing social life.

The next phase for many is the life building stage: marriage, mortgage, and maybe children. Between kids’ activities, making your house a home, and the occasional date night, lifestyle creep is never-ending for this category. While some life builders may have started saving into their retirement plan years ago, many failed to escalate those savings rates, spending more on happiness today.

As people move beyond this stage of life and become more well-established, bigger ticket items tend to sneak into the picture. Many find themselves sandwiched between aging parents and adulthood-seeking children.  Both may require significant financial support.

While lifestyle creep can come in many different forms and cross many different life stages, the point is that it distracts and derails people from reaching longer-term financial goals. Over the last ten years, an extended bull market has masked many savings shortfalls. However, forward-looking capital market assumptions suggest a reversion to historical averages. Equity returns over the next ten years may not be as high as they have been in the past, and the impact of poor savings habits may become more pronounced, especially for those who assume market returns can make up for an underfunded retirement.

While returns may be outside the control of market participants, there are factors well within their control. Chief among them, and perhaps the largest driver of future wealth, is one’s savings rate. Using technology to automate savings, regularly monitoring your financial goals, and evaluating the lifestyle creep you may be experiencing is a combination that will pay long term dividends. Finding the balance of happiness now versus happiness later is an imperfect pursuit, but one worth considering no matter where you are in life.

Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Cornerstone Advisors Asset Management, LLC, which is independently owned and operated. #2715889.1

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Long term care – What is it? Who needs it? Should you have it?

Long term care is a range of support and services affecting your personal care needs. When you can’t do activities of daily living that includes bathing, dressing, toileting, incontinence care, transferring from a bed or chair, eating or you have severe cognitive impairment that requires substantial care then you need long-term care. Many of these […]

Long term care is a range of support and services affecting your personal care needs. When you can’t do activities of daily living that includes bathing, dressing, toileting, incontinence care, transferring from a bed or chair, eating or you have severe cognitive impairment that requires substantial care then you need long-term care. Many of these things we can take for granted, but as we age, or health becomes a challenge, it becomes more challenging to do these seemingly simple tasks. Long term care insurance is one way to help cover some of the costs that you would have to pay out of pocket for or have a family member assist you in your day to day routine.   

Medicare doesn’t cover long term care – the fact is it only covers a short term stay in a nursing facility but under strict guidelines that you are in a hospital for 3-days and then transfer directly to a facility because you are unable to return home but have expectations to return home and live independently.  It is important to get insurance while you are young and healthy as you must qualify in good health to get coverage. Many people say that it is an expensive insurance, but if you think about the costs associated with long term care, the insurance can be a bargain. Personal care with a home health aide can cost upwards of $22/hour, assisted living costs start at $3,500/month, and skilled care can be double assisted living costs. Paying for long term care insurance in advance of needing care instead of expending your life’s savings for care can be a huge value.

There are various levels of care, and they are adjusted as care needs change. Personal care can be given at home or in a facility which includes some basic daily needs. The next level is assisted living and then finally, skilled nursing care. The only covered services via Health and Human Services through Medicaid is skilled nursing care. You may have reduced quality of life if you don’t need that high level of care but don’t have insurance or assets to pay for the first steps of needing basic assistance.

Long term care insurance is a big part of your financial well being offering you peace of mind to know that if the unexpected happens, you won’t need to depend on your family or go through all of your assets to get the care you need. Once you reach the age of 65, you have a 70% chance of needing some form of long-term care during your lifetime. (Medicare and You, 2015) The unexpected need for care can arise at any age.  Over 50% of people on a claim are between the ages of 40-64. (Unum Ins Co)

If you are a business owner depending on how your business is structured, you can get a tax deduction based on your age and other factors when you buy long term care insurance through your business. This offering can be extended to your employees at no cost to you and can be part of your health insurance benefit package. They too can qualify for a tax deduction on their individual taxes. If you have a health savings account (HAS) premiums can be paid pre-tax.

Traditional long-term care insurance is still available but new products have given rise to alternative ways to protect assets, provide care and offer a different option versus a use it or lose it benefit. Hybrid whole life insurance policies have a rider add on that will allow you to pull forward the death benefit to use towards long term care while still leaving some death benefit coverage. There are one-time lump sum policies that allow you to carve out a piece of your savings and secure it for long term care needs instead of having a monthly payment moving into retirement years. If it turns out, you don’t need long-term care in each of these scenarios at some point your family will get the benefit of the insurance upon your death. Protecting yourself and your loved ones, taking the burden off your family to care for you is one of the best gifts you can give to you and them.

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What the future holds for Social Security and should you expect to receive benefits when you retire?

Most Americans will eventually receive Social Security benefits. Each year, the Trustees of the Social Security Trust Fund release a lengthy report to Congress that assesses the health of this important program. The newest report, released back in April of this year, discusses the current financial condition and ongoing financial challenges that the program faces. […]

Most Americans will eventually receive Social Security benefits. Each year, the Trustees of the Social Security Trust Fund release a lengthy report to Congress that assesses the health of this important program. The newest report, released back in April of this year, discusses the current financial condition and ongoing financial challenges that the program faces.

Highlights of Social Security
Trustees Report

Social Security’s total cost is projected to exceed its total income (including interest) in 2020 and remain higher for the next 75 years. The U.S. Treasury will need to withdraw from trust fund reserves to help pay benefits. The Trustees project that the Old-Age and Survivors Insurance/Disability Insurance trust fund reserves or (OASDI) will be depleted in 2035, one year later than projected in last year’s report, unless Congress acts.

Once the trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 80% of scheduled benefits for 2035, with the percentage falling gradually to 75% by 2093.

The OASI Trust Fund, when considered separately, is projected to be depleted in 2034. Payroll tax revenue alone would then be sufficient to pay 77% of scheduled benefits. These figures are unchanged from last year’s report.

The DI Trust Fund is expected to be depleted in 2052, 20 years later than projected in last year’s report. The significant depletion date change reflects the fact that both benefit applications and the total number of disabled workers currently receiving benefits have been declining over the past few years. Once the DI Trust Fund is depleted, payroll tax revenue alone would be sufficient to pay 91% of scheduled benefits.

Why is Social Security facing
financial challenges?

Social Security is funded primarily through the collection of payroll taxes. Because of demographic and economic factors, including higher retirement rates and lower birth rates, there will be fewer workers per beneficiary over the long term, worsening the strain on the trust funds.

What is being done to address these challenges?

Currently, not much, but the reports urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. Combining some of these solutions may also lessen the impact of any one solution.

Some Social Security reform proposals on the table are:

Raising the current Social Security payroll tax rate. According to this year’s report, an immediate and permanent payroll tax increase of 2.7 percentage points to 15.1% would be necessary to address the long-range revenue shortfall (3.65 percentage points to 16.05% if the increase started in 2035).

Raising or eliminating the ceiling on wages currently subject to Social Security payroll taxes ($132,900 in 2019).

Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later).

Reducing future benefits. According to this year’s report, to address the long-term revenue shortfall, scheduled benefits would have to be immediately and permanently reduced by about 17% for all current and future beneficiaries, or by about 20% if reductions were applied only to those who initially become eligible for benefits in 2019 or later.

Some financial advisors believe that although Social Security is not expected to be depleted until 2035, which means today’s retirees should not worry too much, those about 15 to 20 years out from retirement should start acting now to bolster their retirement savings should Congress fail to act.  Social Security was initially envisioned as one leg of a three-legged stool, the other legs being pensions and personal saving.  Other advisors increasingly see annuities as a solution to the challenges facing Social Security by serving as an income replacement to the looming cut in monthly social security benefits.  However, at the present time, annuities have been a misunderstood, complex and frustrating option for individuals and many advisors recommend that annuities should not represent more than half of an individual’s retirement assets.

Lastly, whether you have been saving for your retirement for decades or whether you’ve had to deal with health issues or layoffs, it is important to periodically review your personal social security statement on the Social Security Administration website at www.ssa.gov.

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Trust but Verify

Few people would argue if I said that your health is your greatest asset. Given the importance of physical health, it is wise to work with a caregiver that you trust implicitly. Doctors proudly frame their educational accolades on the wall, are backed by large health networks, and possess specialized skills and experience a layperson […]

Few people would argue if I said that your health is your greatest asset. Given the importance of physical health, it is wise to work with a caregiver that you trust implicitly. Doctors proudly frame their educational accolades on the wall, are backed by large health networks, and possess specialized skills and experience a layperson does not have. The general public expects a vetting process allowing only the best and brightest to practice medicine.

A close second to physical health, in terms of importance, should be financial wellness. Doctors go through stringent training and accreditation procedures, but can the same be said for professionals in financial services? The industry has tests ensuring a basic level of competence, but the hurdles to begin practicing are not nearly as rigorous as those in the medical field.

Investment services, unlike medicine, also have varying levels of responsibility that firms owe to their clients. In some cases, the duty owed is merely to ensure that an investment is suitable at the time of purchase, whereas, in other instances, an ongoing duty of undivided loyalty exists. The distinction may seem subtle, but in plain English, would you rather have a service provider who merely chooses what is suitable for you or one that must act in your best interest? There is also a myriad of legal means by which the provider of services can be compensated, not all of which are fully disclosed. Given the potential for misaligned interests between investors and their financial advisors, an implicit trust may not suffice. How, then, can investors structure their relationships with advisors to more closely align with those found in the medical field?

By asking a simple question: “Are you a fiduciary?” Investment fiduciaries provide advice and direction for their clients. Fiduciaries work with individuals, institutions such as corporations and not-for-profits, and retirement plans. Today, advisors are even applying a fiduciary process in the wealth preservation and insurance markets. The same principles can be applied to all aspects of a client’s financial plan.

So, what is a fiduciary? A fiduciary is a party that owes a legal responsibility to another. A fiduciary is required to make decisions that are in the best interests of the people and assets in their care without regard to their own wellbeing — it is a relationship of undivided loyalty and trust. A fiduciary should always be willing to commemorate this great responsibility in writing; otherwise, the promise of loyalty is not worth the paper it is written on.

There are critical factors in the due diligence process before engaging a financial professional. Client goals and needs, professional experience, asset management philosophy, tenure, and advanced designations are all important considerations, but a base level of peace of mind can be achieved knowing that you are interviewing a fiduciary.

The role of a fiduciary is so important that the SEC has recently approved its new Best Interest Regulation that provides a framework for regulation of investment professionals. It is no coincidence that the SEC Chairman Rob Jackson said in his prepared remarks that “investors should seek out true fiduciary advice from financial professionals who have chosen to hold themselves to a higher standard.”

I was raised to believe that trust is earned, never given. I teach my children this lesson. I believe you can and should trust. Trust should be nurtured and deepened over time, and even after it is earned, I still believe we should all follow the wisdom of President Ronald Regan to always, “Trust but verify.” The fiduciary standard should act as that explicit verification.

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Think you have all your “Risk” Covered? Time for a Review?

While driving home from the Network Magazine event at Boos Rock last week, I was sharing my thoughts with Kelly on what I wanted to write this article about.  As an insurance professional in my 4th decade of practice, I am increasingly alarmed at the “commoditization” of auto insurance.  Very few companies advertise protection; it […]

While driving home from the Network Magazine event at Boos Rock last week, I was sharing my thoughts with Kelly on what I wanted to write this article about.  As an insurance professional in my 4th decade of practice, I am increasingly alarmed at the “commoditization” of auto insurance.  Very few companies advertise protection; it is all about low price. Now don’t get me wrong, everyone wants the best quality at the lowest price, but I suspect the majority of drivers have no idea what stacked underinsured coverage really protects or the difference between limited tort and full tort and the hundreds of thousands of dollars of protection that are in play for pennies of premium per day.

As Kelly and I continued this conversation, we heard sirens coming from all directions.  Next, the Upper Macungie Police cruiser flew by.  Then the Fogelsville Fire police and first responders flew by.  I always get nervous when I hear sirens, hoping and praying it’s not someone I know or insure.  As it turns out, I did get THAT call the very next morning.  It was a near-fatal auto accident, involving one of my clients, actually the son who is in his 20’s. He was completely innocent in this accident, just a simple case of being at the wrong place at the wrong time. We proceeded to set up the claim, and I invited the family to come to the office to review their auto policy in person. They were distraught with many questions.  Hopefully, I was able to offer some semblance of assurance that they will be well protected if litigation is brought.  As it turns out they have high levels of liability protection, plus a personal liability umbrella in place.  We discussed how the repairs would be handled once the car is released from impound and set them up in a rental car.  Finally, we explained how the medical transport and other medical bills would be handled.

The competition for Auto insurance has never been fiercer.  Advertising is directed at a low price, minimum coverage.  The minimum liability limits in PA are 15,000 per person/ $30,000 per occurrence for bodily injury and $5,000 of property damage liability. The state legislature set these limits in 1974.  In 1974 the average price of a new car was $3,500.  In 2019, the average price of a new car is tenfold; $34,000.  Back in 1974, when you bought your first car, your father took you by the hand to his Insurance Agent.  That Agent gave you the protection you needed, and you forged a life-long relationship.  Today, the first time car buyer, typically Googles “cheap car insurance,” absent an insurance professional, finds a low-cost coverage minus consideration of inflicting serious bodily injury upon others, or giving up rights if injured by someone else. I get the feeling that there is a lot of underinsured drivers with misguided priorities based on irresponsible advertising.

Another major shift in transportation is the advent of rideshare, i.e. UBER and LYFT.  There are an estimated 1.5-2 million UBER drivers in the US and 41.8 million UBER users.  Total UBER usage is about 15 billion trips since its inception a decade ago.  Complicating matters, personal auto policies specifically exclude coverage when the vehicle is being used for livery (hired for pay).  UBER has contracted with a third party to pick up when the personal auto policy excludes coverage.  However, those limits are obscure at best and vary by state.  Typically, there is a low level of liability protection when the UBER driver is “App On” minus riders. Limits of $50,000 / $100,000 per person/per occurrence for bodily injury liability and $25,000 for property damage liability is common.    When transporting riders, the liability limits increase to $1,000,000.  So, at any given moment, various companies are insuring a vehicle at various levels of protection all in a matter of seconds. A claims and litigation nightmare. This topic alone should make everyone increase their Underinsured Motorist coverage and stack it!  And don’t be so quick to delete the collision coverage on your 10-year-old sedan.

In the past five years, the auto insurance landscape has changed dramatically based on new technology and a shift in advertising.  Now more than ever it’s important to take inventory of your insurance portfolio to assure you are protecting your assets if you just happen to be the one who is at the wrong place at the wrong time.  For a professional giving advice to clients, please ask your clients to sit down with their Insurance Agent to make sure adequate protection is in place.  What was adequate last decade may not adequately protect you today.

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CEO Challenges for 2019

As we enter into a new year, we face a new era of challenges with no clear resolutions.  2019 presents a combination of hurdles never before faced by businesses.  CEO’s are now faced with an unstable economy, global unrest, legalization of marijuana, and tax law changes; coupled together, these challenges leave us to merely shake […]

As we enter into a new year, we face a new era of challenges with no clear resolutions.  2019 presents a combination of hurdles never before faced by businesses.  CEO’s are now faced with an unstable economy, global unrest, legalization of marijuana, and tax law changes; coupled together, these challenges leave us to merely shake our heads and wonder how we got here.  The most significant hurdles which challenge CEOs on a daily basis are a tight workforce and advances in technology.

The United States is currently facing a tight labor market that unfortunately shows no signs of easing.  The latest data shows the December unemployment rate at 3.9%; a rate we have not seen since 2000.  The tight labor market has skyrocketed recruiting and retaining talent to the top of the hot button issues for 2019.  Every business leader knows that personnel is a company’s greatest asset and the biggest key to achieving corporate goals.  Finding workers that are highly skilled and experienced and then holding on to them is becoming increasingly problematic.

Employers in every industry are expressing the same concern – the inability to attract and retain qualified employees.  Losing qualified employees can have devastating effects on a corporation.  During a discussion with one business executive in the Lehigh Valley, he commented that his company has experienced a spike in turnover which has affected efficiency, and ultimately profits.    Another manufacturer indicated that they have not been able to replace experienced workers. Thus they have been forced to pay a large amount of overtime to existing employees, which again, impacts the bottom line.

With all of the advancements in technology, CEO’s are faced with either attracting new talent with the latest skills or reskilling their existing workforce.  Business leaders must make training a priority in order to prepare their workforce to compete in a highly competitive market. However, training requires planning and commitment.  With existing time constraints due to the tight market, there is little time available after a worker has performed his primary job responsibilities.  Business leaders need to remember that although training is not revenue generating in the short term and can be costly during implementation, it will positively affect the bottom line in the long term.

The key is to be proactive in training and advancement.  Training should be structured based on both the employer’s and employees’ needs.  Personalized training, while costly, is the most beneficial method in the long run.  When filling the gaps in your workforce, evaluate workers for advancement not only based upon leadership skills but also on their willingness to get involved in technological advancements.  The trend has been to advance employees who could not only take leadership roles but also had soft skills.  In the new era, executives also need to target employees willing and capable of developing technology skills.

During these changing times, business leaders are forced to make long-term decisions based upon predictions and presumptions.  The combination of technology, automation, and a tight labor market will force business leaders to be creative with their workforce planning. In order to provide exceptional customer service in this fast-paced digital era, business leaders will need to offer more comprehensive employment packages in their recruitment of new talent or provide the necessary training to their current workforce in order to stay viable for the next 10 to 15 years.

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healthcare

Medicare as your employer plan?

Are your employer health insurance costs getting out of control?  Medicare may be an answer you’re not thinking about. Medicare is a federal health insurance program that is offered to American citizens turning 65 and other eligible individuals.  The two parts of original Medicare are parts A & B.  You can choose to add on […]

Are your employer health insurance costs getting out of control?  Medicare may be an answer you’re not thinking about.

Medicare is a federal health insurance program that is offered to American citizens turning 65 and other eligible individuals.  The two parts of original Medicare are parts A & B.  You can choose to add on a Supplement (options A – N; sometimes called Medigap) with a drug plan (Part D) or a Medicare Advantage (Part C) plan to cover additional costs not covered by original Medicare.

Medicare does work with employer coverages, and you should enroll in Part A when you turn 65 as it’s free for most people.  Part A helps cover the hospital portion of the benefit, and Part B is the medical portion.  Part B does have a cost and is determined by your income.  The option to waive Part B is available if you have employer coverage on your own or through a spouse.  If you don’t have other health coverage deciding to waive Part B will cause a penalty if you don’t sign up when you’re first eligible.  Part A is primary if you work for an employer with less than 20 employees participating in the health plan and you must enroll when you turn 65 to avoid a penalty and delays in acquiring Part A.  If your employer has more than 20 employees on their health plan than you could also decide to waive Part A.

Some employers may make you take full Medicare benefits when you turn 65.  Why do they do this?  The Affordable Care Act that was established in 2010 and took effect in 2014 with many changes happening before that.  It created a different group and individual health plan coverages costing the employer and employee more money to cover older employees.  Moving employees age 65 and older to Medicare helps to control the out of pocket costs the employers and employees pay including deductible costs and costs when visiting the doctors, hospitals, surgeries, treatment, etc.  Many times, the Medicare benefits offer better coverage with low or no deductibles and low or no out of pocket costs making this a great alternative to traditional employer plans.

A review of current employer plans versus Medicare Benefits is established before deciding to move off of your work benefits.  We look at health, how often you go to the doctors, and what medications do you take regularly.  Second, we take a look at your budget and determine what the costs would be for each choice.  Finally, we look at your health network preferences like doctors, hospitals and pharmacies.  How important is it to have coverage when you travel?  Medicare supplements and advantage plans do have domestic travel coverage options that vary based on plan choice.  Medicare plans can also offer ancillary benefits and can include things like dental, vision and even gym memberships to an approved facility.

Employers can typically save money on employee benefits by moving their 65 and older employees off the group coverages.  The costs associated with older employees tend to be more per month than for younger employees.  The savings can be hundreds to thousands of dollars per month if the employee workforce is older.  Employers can reimburse employees for their Part B, Part D, and Medicare Supplement policies but IRS rules apply.  The Medicare benefit plan arrangements must be integrated with other group benefit plans.

*Medicare reimbursement arrangements will be considered to be “integrated” with another group health plan if:

  • The employer offers a group health plan other than the employer payment plan that does not consist solely of excepted benefits and offers minimum value coverage;
  • The employee participating in the employer payment plan is actually enrolled in Medicare Parts A and B;
  • The employer payment plan is available only to employees who are enrolled in Medicare Part A and B, or Part D; and

The employer payment plan is limited to reimbursement of Medicare Part B or D premiums and excepted benefits, including Medigap premiums.*

When age 65 is looming, it’s best to meet with a Medicare Planning Specialist who can take the anxiety off employers as well as employees and help decide and determine the best course of action for their health insurance coverages.  Good health coverage and saving money can be accomplished.

*Excerpt taken from IRS Notice 2015-17—Employer Payment Plans and the ACA’s Market Reforms 03.30.15*

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