Posted on Mon, Dec 29, 2008
It might not take a Kreskin to predict financial gloom in the year ahead, but that hasn’t stopped the actual Kreskin from making just such a proclamation.
As reported in the Tonawanda News, the famed hypnotist The Amazing Kreskin, born George Kresge Jr., went out on a limb with the latest presidential election, predicting in December 2007 — when no less than 10 candidates were alive in the race — that Barack Obama would win.
In addition to his Obama prediction, Kreskin correctly said the New York Giants would win last year’s Super Bowl by three points, and that a cloud of social controversy would hang over the Summer Olympics in Beijing.
Many of Kreskin’s predictions come from studying the past, which he said can teach society a lot about itself. Among the blasts from the past he predicts to make a comeback in 2009 are trains and mom-and-pop stores
Kreskin predicts good things for bartenders and clowns in 2009, both of which will reappear en masse due to people’s desire to escape reality and have a shoulder upon which to cry.
In a year when all TV broadcasts will go digital, Kreskin foresees families turning off their sets with greater frequency to take part on older forms of entertainment.
Back to his discussion of finances, Kreskin said that a lack of money will lead to at least two direct consequences — the spread in popularity of shepherd’s pie, which can be made cheaply with leftovers, and a decline in the divorce rate.
What do you predict will be the cultural, social or lifestyle changes that will affect your life in 2009?
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Posted on Mon, Dec 22, 2008
Despite the dark clouds that have cast a shadowy pall across America’s countryside, there are fleeting signs in the sky that something may be twinkling on high and the economy is not quite as dismal as we all may dread, or, at least, that the storm front shows imminent signs of clearing.
As the year rolls to an end, the dollar has actually increased in value compared to foreign currencies like the Euro and the Yen. This is rather remarkable considering how much money the Fed is printing and the bundle of billions sliding down the chimneys of our temporarily credit-frozen banks. One of the biggest concerns of the bailout thus far has been inflation (the lessened ability to purchase goods at the same price) but if the dollar continues to increase in value, American’s will be able to buy more with every dollar which will help the economy even more.
Any more silver in the lining? The number of people filing for first time unemployment benefits fell this past week. This could mean that less people are being laid off than expected and that businesses are finding ways to cut costs without cutting personnel. Early fears that the unemployment rate would skyrocket may be hyperbolic as a result.
Finally, oil prices are down to under $37 a barrel, the lowest they have been since early 2004. At the very least, it’s more likely that people will be able to travel where they need to be able to get to work, and heat their homes this coming winter. If oil prices continue to drop, companies will be able to realize lower operating costs in their offices and factories, which can only help us.
Yes, Virginia, we are technically in a recession which began a year ago, but there are positive aspects that people can point to. In the American tradition, we can hope to pull ourselves up and out very soon, and make fundamental contributions to our nation’s infrastructure in the process. Do you think the economy is improving? What can we do to weather the storm?
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Posted on Thu, Dec 18, 2008
The Ascent of Money: A Financial History of the World is a sweeping history of finance written by scholar
Niall Fergusonthat affords readers a rare, historical glimpse of how money has evolved since biblical times.
One historical recounting looks at the subject of debt forgiveness. As Niall writes, “In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years.
The biblical conception of a jubilee was a general cancellation of debts. “Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.”
In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders.
The economist John Maynard Keynes had repeatedly called for a general cancellation of the war debts and reparations arising from the first world war. Though no such intergovernmental jubilee was ever proclaimed, debt cancellation was effectively what happened after 1931, beginning with President Herbert Hoover’s one-year moratorium on both war debts and reparations
As 2008 draws to a close, there are many people on both sides of the Atlantic who yearn for such a simple solution to the problem of excessive indebtedness.
It is all but inevitable that we shall see serious political and geopolitical upheavals in 2009, as the recession takes its toll on weak governments (Thailand and Greece are already reeling) and raises the stakes in inter-state rivalries (India-Pakistan). In the words of Hank Paulson, the US Treasury secretary: “We are dealing with a historic situation that happens once or twice in 100 years.” The stakes are high indeed. Has the time arrived for a once-in-50-years biblical jubilee?
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Posted on Mon, Dec 15, 2008
Throughout history, nations have relied upon and gone to war over, the resources they need to run their economies. These resources have evolved from water, to farmable land, to the ever more volatile resource of oil. Energy is the life force of a modern economy. In the current equation, oil adds up to both convertible heat in a building furnace or combustion in an automotive engine to drive transportation.
Like all finite resources, our oil supply is subject to the market forces of supply and demand. The commodity is on a trajectory to skyrocket in price, be it in the short term or long, and must be weighed against more economical alternatives.
Just as important as the economic impacts are the environmental benefits. The right energy policy can spark the dynamism of our economy through long-term investment in renewable energy. We can create potentially millions of jobs, starting with a 21st- century economic recovery plan that puts Americans to work building wind farms, solar panels, and fuel-efficient cars. At the same time, we can reduce the carbon emissions that threaten to warm the planet through the creation of greenhouse gases in the ozone layer.
Shifting from an oil based economy would also cut our dependence upon foreign entities for our economic survival. Imagine all the money Americans would have saved this summer if gas was less than $4 a gallon. If we do not need as much gas, the money saved could be funneled into our national economy, increasing our economic strength. Energy = economy if you do the math.
How do you think America’s energy policy has affected our economy? How could new energy sources transform the economic landscape? Energize us with your ideas!
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Posted on Fri, Dec 12, 2008
When completing a life insurance application people often list out all the people they love most in the world, sometimes without thought to the meaning of primary or contingent beneficiaries. When minors are involved, the primary beneficiary is most often the person who will be caring for the children and taking care of them financially. In a family situation the wife should be the beneficiary of the husband’s policy and the husband the beneficiary of the wife’s. The children should be listed as contingent beneficiaries.
What should you do if you are divorced, or your spouse has died? You want to take care of your children in the event of your death, but children cannot cash checks, and you certainly wouldn’t want them to handle large sums of money. How do you specify the beneficiary so they will be taken care of? Fortunately, a statute has been adopted in all states to take care of this situation. It is called the Uniform Transfers to Minors Act or “UTMA”.
Think of UTMA as a mini-trust with standardized language that does not need an attorney to set up. An UTMA account can be set up at a bank or brokerage company. Under UTMA an account can be set up for a minor using the minor’s social security number. The UTMA account will require a custodian be named to manage the account.
When specifying a life insurance beneficiary to benefit a child you should write “(Name of Custodian), as Custodian for (Name of Minor) under the (Name of State) UTMA.
It is important to understand the difference between a custodian and a guardian. The custodian of a child manages the child’s money and potentially other assets such as real estate, stocks, bonds, art and other collectibles, automobiles, patents, royalties, and other assets of value. The guardian is responsible for the child’s health, support, and maintenance, just like a parent.
You can see how a person could specify one person to handle their children’s finances should something happen to them, possibly through a beneficiary designation on a life policy, and another person to care for and nurture the child until they are an adult. It is important to have a will to specify who the preferred guardian is, otherwise a court will appoint someone. The court’s choice may not be who you would have chosen! The same goes for the custodian. Though a life insurance beneficiary is a matter of contract and is clear on who the check will be written to, a custodian should be specified in the will to take care of other assets.
Money in a custodial account irrevocably belongs to the minor, but is controlled by the custodian until the minor reaches the age of trust termination. The age of trust termination is 18 or 21, depending on the state. The custodian has the fiduciary responsibility to manage the money in a prudent fashion for the benefit of the minor. UTMA accounts are required to remain open until the child reaches the age of majority in their state. An UTMA account will stay open, even with a zero balance, until the minor reaches the age of majority and has the irrevocable right to receive the funds. If the account has been spent down the UTMA beneficiary could sue the custodian if the funds were not used for the minor’s support.
If a beneficiary designation for a minor is not properly specified, costs will be incurred. A court is appointed to manage the child’s funds until a custodian is determined. I have heard of several cases where a child’s guardian had to go to a court with a list of expenses and ask to make a withdrawal from the child’s insurance proceeds. The court also charges a fee for every appearance. Not only is it inconvenient, it can be expensive.
Choosing your beneficiary is the most important choice you make when setting up your life insurance. Getting it right is the job of your licensed representative. Take advantage of their knowledge and training and get it right for your sake, and your beneficiaries.
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Posted on Sun, Dec 07, 2008
With only about 4 years’ worth of coverage in the event of a breadwinner’s death, family goals like college funding and retirement planning are put immediately at risk –95% of Americans make it a priority to protect their kids by using seatbelts, but only 20% have enough life insurance for family protection.
American families, already confronting a difficult economic environment, face the danger of missing widely-held goals such as paying off a mortgage, funding a four-year college education or financing a secure retirement because they lack adequate life insurance protection, according to a major new “Life Insurance Gap” study released today.
A detailed analysis of self-reported financial objectives revealed that Americans typically have just 49 percent of the financial protection they need to achieve their own stated financial goals for their families.
This Life Insurance Gap exists despite the fact that over 80 percent of American breadwinners surveyed feel they have enough life insurance coverage. The Life Insurance Gap translates into a median shortfall of almost $300,000 in coverage for the typical American family.
“Instead of asking the insurance industry to provide a statistic on how much life insurance coverage it recommends people should have, this study took a novel approach by asking respondents to decide this amount for themselves, based on what they wanted for their families,” said Brian Perlman, Ph.D., a partner at Greenwald & Associates, which conducted the study. “The results are clear: most Americans’ coverage comes up way short.”
Chris Blunt, senior vice president, New York Life Insurance Company, commented, “If we visualize the life insurance gap in the context of a cross-country trip, many Americans only have enough gas in the tank to get from New York to Omaha. As a result, millions of American families are in danger of being stuck by the side of the road, struggling to reach their financial goals, whether that means funding for a secure retirement, paying off a home mortgage or financing a college education. We’re hopeful these findings will help show American consumers that it’s not the life insurance industry telling them they need more coverage – it’s their peers, colleagues and neighbors across the country.”
“Today’s precarious economy has been a wake-up call for many Americans, demonstrating how rapidly one’s financial circumstances can change,” added Blunt. “Yet the current situation is also motivating a growing number of consumers to take renewed stock of their financial decisions, including their life insurance coverage. We may begin to see the Life Insurance Gap narrow as more Americans talk to financial advisors, reconsider their strategy and look toward adequate life insurance coverage as a step toward greater financial security.”
According to the survey, breadwinners reported a median of approximately $300,000 in life insurance coverage. Respondents were then asked about the ways they planned to use their families’ life insurance coverage if needed. Options ranged from simply replacing the breadwinner’s income to covering retirement and college expenses. Based on the responses to these questions, the median amount respondents reported they would need from the breadwinner’s life insurance proceeds was $589,378. When contrasted with the $300,000 median amount of actual life insurance coverage, the typical American family faces a 49 percent gap between their financial goals and the money they would have available from their life insurance policies, in the event of the breadwinner’s death.
The Life Insurance Gap survey examined the financial planning attitudes and behaviors of 1,003 Americans age 25 and over with dependents, with a particular focus on what they want their life insurance policies tocover in the event of the death of the breadwinner. It was commissioned by New York Life Insurance Company, the nation’s largest mutual life insurer.
A Disconnect Between Perception and Reality
Despite the existence of the Life Insurance Gap, Americans believe they have enough life insurance to protect their families. About 80 percent of respondents stated that they are at least somewhat confident that they have enough coverage. Even more revealing was the fact that 64 percent believe that their standard of living would not decline if the breadwinner in the household passed away.
However, according to the study, household breadwinners have enough life insurance, on average, to cover expenses for only four years after the loss of the breadwinner.
“What happens in the fifth year?” Mr. Blunt asked. “The survey makes it clear that while Americans feel they have enough life insurance coverage to cover their immediate needs in the event of the breadwinner’s sudden death, when asked more pointed questions about what their future financial needs would be, their life insurance coverage is clearly falling short. Americans are unaware that they are under-prepared, pointing to the need for education in this area.”
The study found that Americans are clearly concerned for their families’ well-being and safety. Over half of the respondents believe that it is very important to have life insurance to protect their family. However, even though most people understand the basic need for life insurance, buying it isn’t necessarily a direct result, because only 20% of respondents have enough life insurance to meet their self-reported needs. In fact, life insurance is seen as less important than many other ways people protect their families. Even though inadequate life insurance coverage can have a dramatic impact on a family’s standard of living, only about half of the survey respondents said they felt that purchasing life insurance is very important, in contrast with other critical areas for family protection such as driving safely (95%), wearing seatbelts (95%), and regularly testing smoke detectors (70%).
Inadequate Life Insurance Coverage Creates Other Risks
The survey also identified a number of other areas where American households are at risk from inadequate life insurance protection. These include:
– Covering the Whole Family: Despite the fact that it could be a financial burden to replace the work of a stay-at-home parent, 43% report having no individual life insurance coverage at all for the household’s non-breadwinner.
– The Fallacy of Conventional Wisdom: Although some commentators counsel Americans to “buy term and invest the rest”, the survey found that only 40 percent of those who planned to heed this advice actually did so – resulting in less secure life insurance coverage and less personal savings.
Retirement Risks: With onlyabout 20% of private sector workers covered by a defined benefit pension plan(1), life insurance can mean the difference between a fulfilling and secure retirement and one of constant struggle. The study reveals that many Americans are operatin under an assumption that group coverage with their employer is portable and/or that term insurance will remain affordable. These assumptions can leave the non-breadwinner uniquely exposed in retirement upon the breadwinner’s death.
– Additional details on these points are included in the “Other Key Findings” section that follows.
“What this study makes clear is that the cost of doing nothing can be enormous,” Mr. Blunt said. “The Life Insurance Gap leaves far too many families exposed to undue financial risk, whether they’re just starting out or looking forward to their retirement years. However, by beginning to look at life insurance as an asset to be maximized rather than an expense to be minimized, we can start to close the gap and increase financial security for millions of Americans.”
Survey Methodology
The telephone survey of 1,003 consumers was conducted by the research firm of Mathew Greenwald & Associates. Participants had to be at least 25 years of age, married and/or responsible for the support of their children, and had to have annual household incomes of $50,000 or more. The sample was evenly split between men and women. The margin of error at the 95% confidence level for the 1,003 consumers surveyed is plus or minus 3.1%. The survey was concluded in May 2008.
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