The Philosophy of Liberty...

5 Longevity Trends Affecting The Need for Long-Term Care Insurance

by Danielle Andrus @ Senior Market Advisor

Americans are living longer, but how will that extended lifespan affect our plans for retirement? 

By 2050, about 20% of Americans will be 65 or older, U.S. News and World Report writes - that’s about 90 million people. Of those, 11% will be 75 or older, and 9% will be between 65 and 74. The magazine highlights some trends that will shape seniors' retirements.

1. Financial protection (or the lack thereof).

The poverty rate among seniors is about 10% – not bad compared to the national poverty rate of 13.2% – but an additional 25% of seniors are near the poverty line, according to U.S. News.

“When the recession's financial impact is clearer in a year or two, the picture may get worse, because of rising healthcare costs and the absence of cost-of-living adjustments (COLA) in Social Security benefits,” the magazine writes.

2. A decrease in depression. 

Seniors are less likely to be depressed but the 40-59-year-old group is especially at risk. Over 7% of people in this age group report being depressed.

3. An increase in chronic health problems. 

Not much of a surprise here, but the magazine points to data from 2007 which shows that the percentage of people over 65 who said a chronic condition limited their activities was more than double the percentage of the 18-64 set. And, as chronic conditions increase, so too will the cost of health care. U.S. News cites one survey that shows people over 65 paid an average 15% of their health care expenses out-of-pocket in 2006. Those with private health insurance paid even more; 21%of health care expenses were paid out-of-pocket, according to the magazine.

4. Alzheimer’s will become the main cause of death. 

Alzheimer’s was responsible for only 4% of deaths in 2006, but it’s expected to take over as the leading cause of death, the magazine writes. A study by the Alzheimer’s Association found the number of deaths attributed to the disease increased over 46% between 2000 and 2006. In contrast, heart disease deaths decreased over 11% in the same time period. According to the Association, people 60 or over with Alzheimer’s live an average of 4 to 6 years after their diagnosis.


5. Fitness will fall as stress and weight increase.  

Women suffer higher rates of hypertension and high cholesterol, according to data cited by U.S. News. About 65% of senior men suffer hypertension, compared with between 70 percent and 80% of women. Nearly twice as many women suffer high cholesterol than men – 19-24% compared with 10% – and about 33% of seniors are clinically obese, the magazine writes.

4 Ways to Avoid IRA Early Withdrawal Penalties

In a perfect world, pre-retirees would never have a need to dip into their IRA savings.

However, if special and unforeseen circumstances arise and one needs to dig into an IRA nest egg, U.S. News and World Report offers some ways to avoid the penalty for making an early withdrawal.

Medical Expenses. If you spend more than 7.5% of their income on unreimbursed medical expenses, you can use an IRA withdrawal to pay for health care above that amount.

Health Insurance. Workers who receive unemployment benefits for 12 consecutive weeks can use their IRA to pay for health insurance. Only distributions received during the year unemployment benefits were received or the year following are exempt from the penalty.

Annuity Payments. If early distributions are part of a series of payouts, and the distribution method is approved by the IRS, they can be taken without penalty. At least one withdrawal must be taken annually, and you must take distributions for five years or until you turn 59 ½. Payment amounts can be calculated based on a portion of the account balance, however.

Disability. If you become disabled before you turn 59 ½ and cannot work, you can take distributions without paying the penalty.

Global Growth Paradigm Shift Forthcoming

Mohamed El-Erian, Co-CEO of PIMCO, was on CNBC’s Squawk Box in March 2010 and talked about his view of what PIMCO has dubbed “The New Normal” in the investing world. 

In sum, El-Erian’s view is that we are seeing a “Paradigm Shift” in growth from the advanced economies of the world such as the U.S. and the U.K. to the emerging countries such as China, India, Brazil, and the like.

“We will see a continuous migration of wealth and growth dynamics from advanced economies to the rest of the world,” El-Erian told the CNBC audience.

The  said he expects to see "a multi-speed world" where "part of the world is going to grow and grow robustly. There's going to be another part, the U.S. and U.K., that is going to have difficulty once all the stimulus and inventory cycle goes through." 

CBO Report: National Debt Will rise to 90% of GDP in 10 Years

Is a new era of fiscal irresponsibility inevitable?

President Obama's fiscal 2011 budget will generate nearly +$10 trillion in cumulative budget deficits over the next 10 years, +$1.2 trillion more than the administration projected, and raise the federal debt to 90% of the nation's economic output by 2020, the Congressional Budget Office (CBO) reported on Thursday March 25th.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday March 26th the S&P 500 closed @ 1167, and that was...
  
 +9.4% ABOVE its 12-Month moving average which stood @ 1066.
+10.0% ABOVE its 40-Week moving average which stood @ 1061.
 +4.7% ABOVE its 10-Week moving average which stood @ 1114.


Therefore, the INTERMEDIATE-Term trend IS Moderately BULLISH and the LONG-Term trend is BULLISH.

Economics Class Experiment - How Socialism Destroys Human Progress

A common-sense, real-life example of why Socialism is morally bankrupt, conceptually bankrupt and inherently flawed...

Economics Class Experiment - How Socialism Destroys Human Progress

An economics professor at Texas Tech said he had never failed a single student before but had, once, failed an entire class.

The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we'll have an experiment in this class on socialism."

All grades would be averaged and, therefore, everyone would receive the same grade.

That way no one would FAIL, and no one would receive an A.

After the 1st test the grades were averaged and everyone got a B. The students who studied hard were upset, and the students who studied little were happy.

But, as the 2nd test rolled around, the students who studied little had studied even less and the ones who studied hard decided that since they could not make an A, they studied less, too.

The second test average was a D!
No one was happy.
When the 3rd test rolled around and the average was an F.

The scores never increased. Bickering, blame, name calling all resulted in hard feelings.

No one would study solely for the sake of anyone else.

To their great surprise, everyone failed.

The professor told them that socialism would ultimately fail, too, because it's not conducive to human nature or the natural order of the human condition.

He pointed out that we're not born with equal talents, abilities or deficiencies and that socialism cannot succeed because it fails to acknowledge that human beings possess different strengths, weaknesses, talents, needs, wants, desires, etc.

People will aspire to succeed if they are rewarded for their efforts. But when government punishes achievement (and rewards lack of achievement) by confiscating from the achievers and redistributing the rewards to those who haven't earned it, no one in their right mind will make the sacrifices necessary to succeed.

That's how Socialism - which sounds so benevolent and harmless in theory - in reality discourages excellence, sabotages achievement and retards human progress.

3 Reasons Healthcare Reform Won't Cut The Deficit

from: Reason.tv

Why A Democracy Cannot Exist As A Permanent Form of Government.

"A democracy cannot exist as a permanent form of government.

It can only exist until the voters discover that they can vote themselves largesse from the public treasury.

From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

The average age of the world’s greatest civilizations has been about 200 years.

These nations have progressed through this sequence:

    from bondage to spiritual faith;

    from spiritual faith to great courage;

    from courage to liberty;

    from liberty to abundance;

    from abundance to selfishness;

    from selfishness to apathy;

    from apathy to dependence;

    from dependence back into bondage.”

from "The Decline and Fall of the Athenian Republic" (1776) by Alexander Fraser Tytler, Scottish Professor of History at Edinburgh

(...aka "The Grecian Formula for America's Demise")

Long-Term Care Policy Stats

73.5% - Percentage of long term care insurance buyers who were 55 or older when they applied for coverage.

$1,900 – Average annual premium for buyers between 45 and 54.

92.2% - Percentage of buyers who chose a 90-day or longer elimination period on their long-term care coverage.

29.5% - Percentage of buyers who chose a policy that would pay benefits for 3 years or more.

24% - Percentage of couples who bought a policy that covered only one individual.

Source: AALTCI

Socialism: Ayn Rand's Definition...

"Socialism is the doctrine that man has no right to exist for his own sake, that his life and his work do not belong to him, but belong to society, that the only justification of his existence is his service to society, and that society may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good."

- Ayn Rand

Socialism vs. Capitalism: The Critical Distinction ...In A Nutshell

by John G. Harris

"Because Socialism Redistributes The Wealth That Capitalism Creates..."
 

...Socialism is NOT an Economic System.  

Socialism CANNOT create jobs, opportunity or wealth on its own. Instead Socialism confiscates the wealth that Capitalism creates in order to redistribute it. 

Capitalism, on the other hand, creates wealth and is therefore a viable Economic System which has, over time, increased living standards and the quality of life. 

Socialism, instead, is a POLITICAL System, NOT an Economic System because Socialism DOES NOT create an economic benefit in, of, or by itself. 

Instead Socialism serves as a parasite - by virtue of  Socialism's confiscation and redistribution of the wealth that Capitalism creates. 

Capitalism, which is rooted in liberty and freedom of choice, is Economically Motivated. 

Socialism, which can only succeed by engaging in the imposition of coercion, is Politically Motivated, serving as political tool to restrict freedom and concentrate power by force.

In sum, because it's a parasite, Socialism CANNOT subsist on its own - NOT without its host - Capitalism - which provides its sustenance.

"Parasitism is a type of symbiotic relationship between two different organisms. The parasite benefits from a prolonged, close association with the host, which is harmed."

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday March 19th the S&P 500 closed @ 1160, and that was...
  
+8.9% ABOVE its 12-Month moving average which stood @ 1065.
+9.9% ABOVE its 40-Week moving average which stood @ 1055.
+4.4% ABOVE its 10-Week moving average which stood @ 1111.


Therefore, the INTERMEDIATE-Term trend IS Moderately BULLISH and the LONG-Term trend is BULLISH.

Bullish Omen: Over The Past 30 Days the S&P 500 Lags the SmallCaps, MidCaps & Nasdaq

The most profitable and least risky stock market climates occur when the smallcaps, midcaps and Nasdaq indices lead the largecap S&P 500 by a healthy margin.

That's the case at present.

Chart courtesy of www.StockCharts.com

Small Caps Likely To Maintain Leadership During This Stage of the Cycle

You have to go all the way back to 1947 to find a bull market rally that made it through one year but did not last a second. And historically, the average stock market gain in the 2nd year has been +12.2%, a bullish omen for 2010.

So the prospects for stocks in 2010 are favorable because it's still early in the recovery phase. Moreover, either the small-cap growth or small-cap value sectors have shown the best 1-year performance in all but 1 of the past 10 stock and economic recoveries dating back to September 1953.

Of the 2 small capitalization categories, small growth led in 7 of these 10 recoveries and small value in 2. Only once, during the 1953–54 recovery, did a large capitalization category lead.

Consistent with this record, small value has led in the present recovery so far, and by a wide margin, too.

Now that the economic recovery has gained some momentum, investors, quite naturally, have begun to ask whether recent leadership by small capitalization value stocks will persist.

If history is any guide, the answer is "Yes."

The averages show clearly that small growth leads out of recessions, with a 1-year average return of +48.2% for all 10 cycles, excluding the present, incomplete one. Small value comes in second, with an average 1-year return of +43.3%.

Chart Courtesy of www.StockCharts.com

High-Yield Bonds Average +14.7% Per Annum For 3 Years After A Recession's Conclusion

The primary reason why the outlook for the high-yield bond market is favorable for 2010 is because the credit cycle upswing is still in its early stages.

Credit cycles can be traced to Roman times. Credit bubbles can be traced to everything from tulip bulbs, to railroads, to technology stocks, and most recently, to mortgage debt.

The average credit cycle from peak to peak has lasted more than 6 years—averaging 2 years on the downside and 4 years on the upside.

The violent cycle we encountered recently was short-lived by historical standards, with the downswing lasting only 1.5 years. We remain less than 1 year into the upswing. While we musn't assume smooth sailing for the foreseeable future, history is on our side.

Historically, high yield performance has been extremely resilient following recessions, averaging +14.7% per annum over 3 years subsequent to the recession’s conclusion.

Under that historical scenario, $100,000 grows to $150,900 in only 3 years!

5 Reasons to Roll a 401(k) into an IRA

Why would a 401(k) participant want to move his money out of a 401(k) and roll it into an IRA? Here are reasons why:

1. Most 401(k) s and other company plans have limited investment options. They may offer 50 different mutual funds and other investments options, but most of the options are subject to market fluctuations. If we learned anything in 2008 and early 2009, it’s that what the market gives can be taken away with little to no warning. Many of these accounts lost as much as -40% in 2008 alone. Those who chose to play it safe and moved their 401(k) money into bond funds or funds invested in CDs and other short-term investments were rewarded with little or no growth while inflation and management fees ate away at their principal. IRAs have almost unlimited investment options including annuities that guarantee the principal and offer a competitive rate of return.


2. Plan guidelines can restrict the owner’s access to his money. The plan document is essentially the 401(k) rulebook. If it’s not in the book, you can’t do it! With savings down and unemployment up, you never know when you may need access to your retirement accounts. IRAs offer greater flexibility, allowing the owners to make their own rules if they are willing to pay the tax on the distributions.


3. Direct rollovers avoid the 20 percent mandatory withholding. It’s critical that the funds are moved as a trustee-to-trustee transfer. If a check is written to the 401(k) owner, you can count on the custodian withholding 20% for the IRS. I have worked with several advisors who have encountered this problem, and they are still battling with the IRS to get the 20% withholding back where it belongs.


4. 401(k) s have limited distribution flexibility for the children and grandchildren who are likely to inherit when both the owner and spouse are gone. In 2002 when the multi-generational/“stretch” IRA was born, the children and grandchildren were given new valuable distribution options. They now have the right to spread the inherited IRA distributions over their individual life expectancies, according to Appendix C, Table 1 of IRS Publication 590. This means they are no longer forced into rapid distribution, causing rapid taxation. The 401(k) plan administrators didn’t get on board with this valuable income planning tool and are, in many cases, forcing these non-spousal beneficiaries to take full taxable distribution in just five years. Under the “Worker, Retiree and Employer Recovery Act” of 2008 (HR 7327), all employer plans will be required to allow non-spousal beneficiaries to do direct rollovers to properly titled inherited IRAs beginning January 1, 2010. IRAs allow these beneficiaries to take control and choose between cashing out and receiving a lifetime of income.


5. Most 401(k) plans do not allow the Roth IRA conversion. Beginning this year IRA owners with adjusted gross incomes over $100,000 can for the first time convert their traditional IRAs to Roth IRAs. After the conversion tax is paid, the new Roth will grow tax-free and distributions after the 5-year holding will also be income tax free. The Pension Protection Act simplified Roth conversions from 401(k) s and other company sponsored plans. Beginning in 2008, owners can convert company sponsored plan funds directly to a Roth IRA. They no longer need to convert to a traditional IRA first then convert the traditional IRA to a Roth IRA.

What's Next for the High Yield Market...

What's Next for the High Yield Market - Pioneer Investments

Excerpt:

An investor who assumes no further improvement in price or spreads would earn the yield to maturity of 9.04% at month-end in January. 

Given that many asset allocation models assume a 9-10% annual return over the long term, this almost equity-like figure is relatively high compared to an investment universe where government bonds, stocks and money markets have offered paltry yields (e.g. the 3-month T-bill was yielding just 0.079% at the end of January).

Conclusion...

We believe a strategy that contains a balance of high yield, equity, convertible and bank loan securities is prudent, given the anticipated investment environment. Allocations within Pioneer’s own fixed income strategies – in particular our high yield and global high yield strategies – reflect this view. Investors should speak with their financial advisors about a portfolio allocation appropriate to their needs.

 

What's Next for the High Yield Market - Pioneer Investments

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday March 12th the S&P 500 closed @ 1150, and that was...
  
+8.2% ABOVE its 12-Month moving average which stood @ 1063.
+9.5% ABOVE its 40-Week moving average which stood @ 1050.
+3.7% ABOVE its 10-Week moving average which stood @ 1109.


Therefore, the INTERMEDIATE-Term trend IS Moderately BULLISH and the LONG-Term trend is BULLISH.

Why The Health Care Bill Makes NO Sense - IBD Editorial

Why The Health Care Bill Makes NO Sense - IBD Editorial

EXCERPTs:


1. The people don't want it!  More than 4 in 10 "strongly" opposed; just 2 in 10 "strongly" favored. 

2. Doctors don't want it! A survey we took last summer of 1,376 practicing physicians found that 45% would consider leaving their practices or taking early retirements if the Democrats' reform became law. Even if the bill doesn't have a "public option," nearly 30% said they'd quit the profession under the plans being considered.

3. Congress doesn't even want it!  Members of Congress...{have} already exempted themselves from whatever they inflict on us.

4. People are happy with the health care they've got! Polls show that 84% of Americans have health insurance and that few are displeased with what they've got.

5. It doesn't even cover the people they set out to cover! Supporters of government-run health care say there are as many as 47 million Americans — 9 million to 10 million of them illegal aliens — without medical insurance. The Democrats' plans, however, will put only 31 million of the uninsured under coverage. 

6. Costs will go up, not down! A new estimate by the Congressional Budget Office puts the cost of the Senate bill at $875 billion over 10 years, $4 billion more than its original projection. 

7. Real cost controls are nowhere to be found! The Democrats are offering no meaningful tort reform that will help push down the high malpractice insurance premiums that are a burden to doctors and their patients. 

8. Insurance premiums will rise, not fall! As Democratic Sen. Dick Durbin acknowledged,..."Anyone who would stand before you and say, 'Well, if you pass health care reform, next year's health care premiums are going down,' I don't think is telling the truth," he said from the Senate floor. "I think it is likely they would go up."

9. Medicare is already bankrupting us! The Medicare trust fund, which has unfunded obligations of $37.8 trillion, will be insolvent in 2017. How can lawmakers justify another entitlement that will cost trillions when they can't pay for existing liabilities?

 10. There aren't enough doctors now! Last month, 26% of physicians responding to a Web poll on Sermo.com, which calls itself "the largest online physician community," said they had been forced to close, or were considering closing, their solo practices. Providing coverage for an additional 31 million Americans when the number of doctors is shrinking won't improve our health care.

 

11. The doctor-patient relationship will be wrecked! The latest IBD/TIPP Poll, taken just last week, found that Americans, by a wide 48%-26% margin, believe the doctor-patient relationship will decline if the Democrats' plan is passed.

12. Medical care will also deteriorate! IBD/TIPP has also found that 51% of Americans believe care would get worse under government control. Only 10.5% said they felt it would improve. In our doctor poll, 72% disagreed with administration claims that the government could cover 47 million more people with better-quality care at lower cost.

13. Rationing of care is inevitable! In Britain and Canada, where the government does the rationing, medical treatment waiting lists are sometimes deadly and quite often excessively long. The reasons cited for the late diagnoses include doctor delay, delay in primary care, system delay and delay in secondary care.

14. Private health insurers will be destroyed! Added mandates and price controls will force many insurers to simply get out of the health plan business because it will no longer be profitable.

15. It's probably unconstitutional! One way to help bring down the number of uninsured is to demand that those without coverage buy health plans. But the government has never passed a law requiring Americans to buy any good or service. Constitutional scholars say any such mandate would likely draw a legal challenge.

Health care is not a right, because a NEED is not a RIGHT. Getting sick does not give you the power to force others to pay for your medicine, even if you need it.

Why The Health Care Bill Makes NO Sense - IBD Editorial

Delinquencies On Jumbo Loans Continue To Escalate

Jumbo mortgages are those with an initial principal amount of over $417,000 (in most areas of the U.S. or over $729,750 in certain specified areas), a limit set by Fannie Mae and Freddie Mac.

Fitch Ratings, a credit rating agency, says the performance of prime jumbo loan performance in the residential mortgage-backed securities (RMBS) category dropped again in January as serious delinquencies (60+ days past due) rose for the 32nd consecutive month and edged closer to 10%.

Prime jumbo loan delinquencies have been rising since the second quarter of 2007. In 2009, the delinquency rate nearly tripled during the year. The serious delinquencies rose to 9.6% in January from 9.2% in December.

“The new year has brought no relief from declining jumbo loan performance,” said Fitch managing director Vincent Barberio. “The trend line for delinquencies indicates the 10% level could be reached as early as next month.”

California, which has a 44% share of the total jumbo market, saw the delinquency rate rising to 11.3% in January from 10.8% in December.

Delinquency rates rose in 4 other states – New York, Florida, Virginia, and New Jersey -- which along with California constitute the top 5 states in market share.

The jumbo market in the country is valued at $376 billion and dropping.

Grant Bailey, a senior director for the RMBS Group at Fitch, said: “In the 2005, 2006, 2007 vintages, close to 50% of borrowers are underwater. That keeps a negative pressure on borrowers and, therefore, we keep a negative outlook on delinquencies.”

Boomers In No Rush for Social Security Benefits

• 20% - Percentage of boomers who say they plan to apply for benefits as early as age 62.

• 25% - Approximate percentage of boomers who say they won’t apply for benefits until later than they initially thought they would.

• 69% - Percentage of boomers who have not changed their retirement plans.

• 6% - Percentage of boomers who say they’re applying for Social Security earlier than they thought.

Source: MetLife Mature Market Institute

Consensus Bond Allocation @ 31%

Below we highlight the consensus strategist recommended bond allocation since 1997. At the moment, Wall Street strategists are collectively recommending a 30.5% weighting in bonds.

Prior to the run-up in Treasuries during the financial crisis, the recommended bond weighting fluctuated from 15%-20%. As bond prices rallied, strategists followed them higher by increasing their recommended weighting.

As shown in the chart, the recommended bond weighting peaked well after the long bond peaked in December 2008, and the weighting has been drifting lower throughout the current bull market in stocks.

Over the last few weeks, the recommended bond weighting has remained right around 30%. The long bond itself is currently trading in a range that it typically traded in during the '03-'07 stock market rally, but at 30%, the recommended weighting is about 10 percentage points higher than it was during that time.

Have analysts become more conservative in general, or will the recommended weighting continue to fall as long as the market goes up?

Chart and analysis courtesy of Bespoke Investment Group

Small-Cap Momentum Bullish for Stock Market

On February 25th, a streak of 9 straight up days in the small-cap Russell 2000 index had just been broken by a relatively large decline.

Far from signaling an end to the momentum, in similar historical circumstances, we nearly always saw that index recover the loss, usually very quickly, and it continued to do well over the next month or so.

It has certainly continued that winning pattern lately, and has now been positive 16 out of the past 18 trading days.

In both the short- and long-term, the small-cap index has, in the past, tended to exhibit a continuation of the momentum, and with strong average returns.


This is often a by-product of a market that is emerging from oversold conditions, and buying interest is so eager that we see extreme momentum. And that is one of the strongest buy signals we can encounter.

Whether our current situation qualifies as having emerged from oversold conditions is debatable - we got quite a few of those indications in February, but the index is already trading at a new high.

Similar historical action suggests perhaps a short-term pause, and questionable prospects over the next several months, but at the very least we'll likely see at least one more new high after whatever short-term correction may come.

On average, under similar historical conditions, , the Russell 2000 has gained +2.9% in three months, +6.1% in six months and +20.0% one year later.

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday March 5th the S&P 500 closed @ 1139, and that was...
  
+7.3% ABOVE its 12-Month moving average which stood @ 1061.
+9.0% ABOVE its 40-Week moving average which stood @ 1045.
+3.0% ABOVE its 10-Week moving average which stood @ 1106.


Therefore, the INTERMEDIATE-Term trend IS Moderately BULLISH and the LONG-Term trend is BULLISH.

Chart of the Day - Why Education Matters - The Unemployment Rate by Educational Attainment

Chart and Analysis Courtesy of ChartOfTheDay.com

Today, the Labor Department reported that the unemployment rate held steady at 9.7% during the month of February.

For some perspective on the current state of the labor market, today's chart illustrates the unemployment rate by educational attainment.

As today's chart illustrates, a higher educational attainment has correlated with a lower unemployment rate.

For example, the unemployment rate for those that have not completed high school (red line) has increased from 5.8% to 15.6% over the past 40 months -- nearly a 10 percentage point increase. Compare that to the unemployment rate for those that have obtained a bachelor's degree or greater (blue line).

The unemployment rate for those with a minimum of a bachelor's degree is currently 3 percentage points above where it was 40 months ago.

In any event, the upward trend in the unemployment rate (for all education levels) has slowed in recent months.

Vital Statistics on Aging That May Surprise You...

Roughly 30% of aging is genetically based. We control the other 70% of variables.

It is predicted that babies born in this country in 2050 will have 89 year life expectancies. Currently our life expectancy is 78.1 years; Hawaii has the longest at 79.8 years and Washington DC has the shortest at 72.6 years.

The number one cause of death in the USA is heart disease, 2nd is cancer, then stroke and respiratory disease, respectively. These are the most common causes of death for people over 65.

In 1950 there were 14.5 million people over age 80 on the planet. By 2050 it is predicted there will be 394.7 million over age 80 and most will live in industrialized nations. More money than ever will be required to care for them.

If smoking were eliminated, it would increase Medicare costs by $293 billion because people would live longer. Longer life expectancies mean Social Security, Medicare and Medicaid will have even larger financial requirements than currently predicted.

Children who move back with their parents because of financial considerations are known as the “boomerang” children. One of the consequences rising life expectancies is “boomerang” seniors, aging parents who move in with their children. The number of “boomerang” seniors has risen +50%. 

Family models are changing, and we must recognize, understand and adapt to these changes.  

How to Avoid Fights Over Drafting a Will

by Wynne A. Whitman, Esq.

Schenck, Price, Smith & King LLP

Preparing a will turns into a battle of wills for too many couples and families. Creating or updating a will forces you to think about money, mortality and extended family -- topics that can cause conflict in even the closest of families.  

To avoid fighting with your partner over drafting a will...

 

1. Don’t be critical of family members. Fights over wills often have more to do with perceived affronts to relatives than with who gets what. If you do not believe that a particular descendant deserves a share of your estate or you disagree with your partner’s choice of executor, search for a way to present your position without speaking poorly about the person in question.

Examples: Explain that you wish to give a particular descendant less than an equal share of your estate not because this person does not deserve the money (even if he/she doesn’t), but because other descendants need the money more or will put it to better use... explain that you are not disagreeing with your partner’s choice of executor or trustee because there is something wrong with this person (even if there is), but because you think that there is someone else even better equipped to handle the task.

2. Propose compromises. Fights are particularly likely when one partner feels his voice is not being heard.

Solution: Listen to your partner’s positions, and look for middle ground even if you disagree. 

a) Potential compromises if you cannot agree on how to divide up the estate: Leave a ne’er-do-well descendant a family heirloom of sentimental value, but little financial value... establish a charitable trust that provides for the family as one partner wishes, but later donates whatever remains to charity as the other wishes... agree to give a small percentage of the estate to a partner’s children from a former marriage rather than shut these descendants out entirely... include a statement in the will explaining that the descendants who received less are no less loved.

b) Potential compromises if you and your partner cannot agree on an executor for your will: Name the two candidates for executor as co-executors rather than selecting one over the other... name a mutual friend or a bank as executor rather than argue over which family member to select.

c) Discuss potentially difficult issues with your partner before meeting with your lawyer. Paying an attorney a steep hourly fee to listen to you argue with your partner will only increase everyone’s tension level.

Solution: Sit down with your partner before the meeting to hash out who should be executor... who should be responsible for any minor children... and who should receive what from your estate. Even if you cannot bring every issue to a mutually satisfactory conclusion, this premeeting discussion will allow you to clearly and calmly explain any disagreements to your attorney. Perhaps he can then offer acceptable solutions.

3. Agree on a primary goal. What do you most want your will to accomplish? If you and your partner can agree on this, you are less likely to bicker over details.

Example: If you have minor children, you and your partner likely can agree that the main goal of your will is to ensure that they are raised properly. If your partner protests that giving someone on your side of the family custody of the children will anger members of his family, remind your partner of the primary goal and explain why living with your family would be best for the children -- perhaps your family lives nearby, so your kids would not be uprooted... or perhaps your sister is your kids’ favorite aunt. 

4. Say the words “for now.” Your will can be amended in the future. Reminding your partner that the decisions made today are not necessarily permanent can remove some of the emotion. 

Example: Your partner believes that a family member with a substance abuse problem will eventually recover and should receive a portion of your estate. To your partner, leaving this family member out of the will is like giving up on him forever.

Solution: Agree that this person will be added to the will as soon as he overcomes the problem.