What I thought was, “It depends. How lucky do you feel?”

What I said was, “I recommend you plan like a pessimist so you can live like an optimist.” 

Here’s why I answered that way: When we expect life to always go according to our plans, we invariably end up frustrated and wishing we’d planned differently.

However, when we’re a bit “pessimistic in our planning, we’re less surprised and better prepared for bumps in the road. By planning for potential negative scenarios, we increase our chances for a better outcome. 

So, back to our question: Should older folks considered long-term care insurance?

That prompts another question, “If you had to go into a nursing home, how would you pay the bill?” 

If your only financial resources are a monthly check from Social Security, the tab would likely be paid by Medicaid. (Medicare only pays after you’ve spent a certain amount of time in the hospital.) 

But what if you’re in that group of folks who have worked and accumulated a nest egg? Unless you want to see those assets quickly depleted, you should think hard about long-term care insurance.

According to the current Cost of Care Survey by Genworth Financial, the cost of a semi-private nursing home room in north Louisiana is $64,605. For a private room, the cost is $75,190. (NOTE: By 2031, those figures are expected to rise to $86,824 and $101,049, respectively.)

At that rate, how long would it take to exhaust your savings? Perhaps not long.

“But,” you say, “Isn’t long-term care insurance prohibitively expensive?” 

Recently I saw a long-term care policy for a 65-year-old quoted at around $6,000 a year. 

That’s a lot of money. Is it even doable for most people?

Well, suppose you had a $500,000 nest egg. Simple math tells you that, at current prices, seven years in a nursing home would burn through every penny of that. 

But think again about the long-term care insurance option. At $12,000 a year (a policy for two), that’s only 2.5% of your nest egg.

And since interest rates have risen above that, it’s possible you could pay your long-term care premiums out of your nest egg and never touch the principle. 

That’s not the only interesting option for funding long-term care insurance. 

If, for example, you’re willing to let an insurance company hold some of your money in a single premium whole life policy, you might not have to pay any premiums at all. (They use the float on your money to finance the long-term care insurance and even give you a little return on your money.) 

And if you never had to spend that money on long-term care, your heirs could receive it tax-free as a life insurance death benefit. For those who have the means, this is an intriguing option.

Obviously, when it comes to paying for long-term care insurance, no single answer is best for everyone. So, you’ll definitely want to discuss all your options with a knowledgeable, licensed agent. 

In the meantime, just remember…a little pessimism during your retirement planning can lead to a much more optimistic outcome in your retirement living.

And—last thing–if all this talk of nest eggs, long-term care insurance, and having enough income in retirement has you tossing and turning, email me at bmoore@argentadvisors.com. 

I’ll send you a link to take the RISA^® Profile. (RISA^® stands for Retirement Income Style Awareness^®.) This quick and ingenious quiz is FREE, and it can help you create a retirement income plan that makes fiscal sense for you.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

Get rid of banks and you’d definitely eliminate banking problems. (About like you could avoid stumping your toes by cutting off your feet!)

It’s understandable that we get upset when we hear about wasted tax dollars—or crooked cops, predatory preachers, and corrupt politicians. But we have to avoid over-reacting.

A society without rule of law, spiritual leadership, a financial system or representative democracy is…well, unthinkable. 

But back to financial institutions…why do we have them, anyway? Is it just so a few rich, fat cats can get even richer?

No. Financial institutions exist to bring borrowers and lenders together efficiently.

Producing anything people want (e.g., a next-generation smartphone, deluxe accommodations in an island paradise, designer clothes, a blockbuster movie, etc.), takes capital. Where do companies and creatives and entrepreneurs get that money? From you. And from me. 

We think of ourselves as “savers” when we deposit our money in the bank. What we actually are is “lenders.” We’re lending our money, through that bank, to various borrowers: the chef who wants to open a restaurant and the plumber who wants to buy a new service vehicle.

That’s the simplest way I know to explain what financial institutions do. They bring together a large number of lenders (savers) and a large number of borrowers. That way the costs are reduced for both parties. 

In short, financial institutions (like banks) are aggregators. They do in large numbers what we cannot or will not do on our own.

It’s the same with a mutual fund. An investment company brings together large numbers of investors to achieve greater diversification than we could typically obtain on our own. And from our purchase of the stocks in that fund, assorted companies get the capital they need to grow.

This system is a microcosm of society at large. Civilizations are built when people figure out ways to work together so that they create a kind of “symbiotic synergy.” More is possible together than when we try to function as solitary individuals.

This is why I believe financial institutions, by and large, make us better. 

But notice I said “by and large.” Just like individuals, financial institutions have the capacity to become self-serving. Fact is, these entities are usually run by good guys, but not always. Because of this, they need monitoring and accountability. We shouldn’t trust them blindly. 

Which brings us to your relationship with financial institutions. How can you ensure that the ones you’ve chosen are good for you? One way is by having a clear financial plan. 

You are not a saver only, or an investor only, or anything else only. You are a complex human being with diverse financial needs. 

That’s why you need a carefully crafted financial plan that spells out what you want to accomplish. When you know that, it’s easier to determine which financial institutions can best help you reach your goals, including your retirement goals.

If that’s a topic you haven’t thought much about, email me at bmoore@argentadvisors.com. I’ll send you a link to take the RISA^® Profile. (RISA^® stands for Retirement Income Style Awareness^®.) This quick and ingenious quiz is FREE, and it can help you take steps to create a retirement income plan that makes fiscal sense for you.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

“I’m constantly stressed about money!”

Maybe you can relate? (Especially in the current economic climate.)

If so, let me give you two reminders and five suggestions.

First, two reminders:

• Money doesn’t “contain stress.” It’s not inherently stressful. The stress comes from how we view and use money.

• Simply getting and having more isn’t the answer. Some of the most stressed individuals on earth are billionaires and Powerball winners.

Next, the five suggestions (see if these don’t reduce your financial stress!):

• Discover where your money is going. 

When money is flowing in and out of your bank account, but you don’t know where it’s all going—that’s stressful! 

Income is fairly easy to determine—we see the figures on our paycheck every week or month. But what about outgo? Do you know how much you’re spending monthly…and on what?

By tracking your spending, you can begin to get a handle on your financial stress.

• Decide where your money will go. 

Once you know where your money is going, you can begin to take control. 

The key is deciding your expenditures in advance—rather than on the fly. 

We’ve all made bad spending decisions—and had regrets later. Imagine how many impulsive and unwise spending decisions you could avoid by being intentional. 

What if you stopped deciding how much to spend on clothes while you’re trying them on in the dressing room? (That’s reactive spending, made in the emotion of the moment.) 

What if you were proactive instead? What if you reviewed your finances first and gave yourself a limit BEFORE you shopped? 

Such an approach means fewer purchases that you’ll later evaluate as “foolish.” And that means less stress.

• Develop a financial gratitude list. 

Hate to break it to you, but even with planning, your wants will still exceed your means. And if you focus on what you don’t have, you’ll always feel stressed. 

Let me suggest a practice that has application far beyond the financial realm (though it certainly applies here):

Each day list ten things for which you are grateful. 

Gratitude reminds you of what you already possess. It’s a great stress-reliever, because of the power it has to alter our perspective.

• Discontinue comparison.

Comparison, as the old saying goes, is the thief of joy. 

It either makes you prideful or pitiful, both of which produce stress. 

When you feel tempted to compare your financial situation to someone else’s, go back to #3.

• Develop connections. 

An old proverb says shared joys are multiplied and shared sorrows are halved. 

That’s one of the main benefits people get from classes, cohorts, and small groups.

Those personal connections can help us stay motivated for the long haul. They provide a sounding board when things get hard. A personal connection for you may be a book club (that discusses financial books), a financial class, a trusted friend who’s good with money, or even a financial professional with whom you have a good relationship. 

These 5 suggestions have proven to reduce the stress that arises around money. 

Now it’s your turn. 

Give them a try, and let me know which ones work best for you.

One last thing…is the question of retirement income one of the things that’s got you stressed? The question: “How do I turn my retirement nest egg into money I can live on for the rest of my life?!”

Email me at bmoore@argentadvisors.com. I’ll send you a free link to take the RISA^® Profile. This simple, ingenious quiz takes mere minutes, and it can save you a LOT of stress in retirement.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

They have multiple dining options, but they can’t agree on where to eat.

Margie Miller is feeling adventurous—she’d really like a cauliflower taco and a fish taco from a food truck with stellar Google Reviews. 

Her best friend Amanda thinks the truck looks sketchy. “I want something healthy,” she says, “Where could I get a fruit smoothie around here?” 

Bob, meanwhile is eyeballing a local BBQ dive across the way. And Jim is pointing out, “We could just go through the drive-thru of that burger joint. It’s fast. Cheap. Nothing special. Just a chain. But least you know what you’re getting.”

This little travel snapshot is a great reminder.

We have diverse personalities along with unique concerns and desires. These differences are what makes life frustra—er, “interesting.” 

In my last couple of columns, I’ve mentioned the Retirement Income Style Awareness Profile® (i.e., the RISA®).

This ingenious test measures two factors that affect someone’s preferences when it comes to retirement income. 

The first has to do with RISK. Are you “probability-based”? In other words, do you want your assets in the market where they’re exposed to potential loss—but also to the historical probability that they will likely grow over time)? 

Or are you “safety first”? That is, do you want your assets secured in products that don’t fluctuate with or depend on the market?

The second scale measured by the RISA® is more about FLEXIBILITY. Do you want to commit to a long-term income solution (like an annuity). That kind of solution will tie up some or all of your assets, but it will also give you a steady, predictable amount of income.

Or do you prefer to keep your options open so you can respond to potential personal changes or economic opportunities?

The beauty of the RISA® is that it can measure your unique preferences and map them onto a matrix to show which of four distinct retirement income personas you are most like: 

• Someone in the “Total Return” quadrant is someone who is probability based (“If history is any indicator, the market will probably grow over time”) with an optionality orientation. (“I like keeping my options open. I don’t want my money locked into some long-term investment vehicle.”) 
• A “Risk Wrap” quadrant individual is one who is probability based, but with a commitment orientation (“I’m willing to commit some portion of my assets to more secure and steady income source.”)
• “Income Protection” describes the more conservative man or woman who is safety-first with a commitment orientation (“I don’t want market exposure—it’s nerve-wracking to see my assets fluctuate. A guaranteed monthly check for life is what I want.”)
• And the “Time Segmentation” quadrant is where you find folks who are safety-first with an optionality orientation. (“I’ll put my money in ‘buckets’—so that it’s as secure as can be, but also available to me at different times.”)

Why do these designations matter so much? 

Because if you’re an adventurous food truck person, you’ll never be happy eating at a chain burger joint. And if you like healthy fare, a hole-in-the-wall BBQ joint is going to leave you scowling.

Trust me. An “Income Protection” type person with a “Total Return” type retirement plan…that’s the recipe for a sleepless retirement.

Do you know your Retirement Income style? If not, email me at bmoore@argentadvisors.com. I’ll send you a free link to take the RISA® Profile. It only takes a few minutes, and it can save you a LOT of angst and frustration down the road.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

It depends on a number of factors:

• How deep are the pockets of the other investors? (Or are they perhaps inviting you to the party because of your deep pockets?)
• Could you afford to risk losing your entire investment?
• How much sleep do you lose when you engage in such deals? 
• If the deal goes south, do you know how much you’d be on the hook for? 
• If all the other investors come up short on cash at the same time…will you be asked to guarantee only a portion of the loan or the whole thing?  

Remember, when farmer Brown comes into the barnyard with a hatchet in his hand, not all the chickens are at risk…just the fat ones.

Consider the case of Mark Brunell. He was a three-time Pro Bowl quarterback in the NFL. He actually won a Super Bowl ring with the New Orleans Saints in 2009 while playing backup to Drew Brees. 

Brunell threw 30 passes that season—for which he was paid a cool $1.6 million. (Nice work if you get it, right?)

But that pay is nothing compared to his earlier contracts. According to overthecap.com, Brunell earned more than $70 million playing in the NFL.

Yet in 2010, he filed for Chapter 11 bankruptcy protection. 

The Wall Street Journal reported that “personal guarantees of numerous business loans contributed to…Brunell’s Chapter 11 filing…In court papers, he listed $5.5 million in assets and debts of $24.7 million.” 

Bankruptcy laws play an important role in our society, encouraging capitalists to put their capital at risk. These laws don’t eliminate risk (ask anyone who’s been through the process), but they can soften the blow and, in some circumstances, provide room to breathe and, ultimately, recover.

Brunell joined a long list of famous individuals who have declared bankruptcy at some point in their lives: Mark Twain, Henry Ford, Henry John Heinz (the ketchup king), Milton Hershey (the chocolate titan), Walt Disney, and former President Donald Trump—to name just a few. 

I personally have known multiple individuals who have gone through the bankruptcy process. Each one would tell you it was one of the most difficult events of their lives.

In every case I’ve seen—where loan guarantees were more or less blindly-signed—the basis of the deal was a personal relationship. It was some version of “My buddies were all getting into this deal together, and I wanted to go along for the ride.”

Here are some questions to ask yourself before you guarantee a business loan:

• Do I really understand this deal?
• Why am I being asked to participate?
• Have I sought counsel from my attorney and financial advisor?
• Do I understand the worst-case scenario here and am I willing to take that big of a risk?
• Are the others in this deal really wise…or simply persuasive?

Americans are natural risk takers. That’s a good thing.

But taking a risk without understanding that risk is a dumb thing.

You need to ask a lot of questions.

Speaking of questions, I meet people all the time (especially those in their late 50s, early 60s), who have questions about retirement finances.

You’re smart to ask those questions. But make sure you’re asking ALL the right ones. Email me at bmoore@argentadvisors.com, and I’ll send you my free list of “30-Something Questions for People Who Are 60-Something.” 

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

Small, family-owned businesses are the engine of growth and job creation in this country. Therefore, it’s in everyone’s best interest to see them thrive.

Unfortunately, about 70% not only don’t thrive—they don’t survive past the first generation! Fully 95% fail to make it beyond the second generation.

This failure of family-owned businesses to succeed beyond the first generation is often a money thing. It involves a shortage of dollars.

Consultant Russ Allen Prince conducted a study of 749 heirs of failed family businesses. He found that family business failure is more often associated with inadequate estate planning than poor succession planning.

In other words, he argues that it’s often more of a money problem than a management issue.

He’s got a point. Every savvy business person knows that a thriving business can go under when there’s a lack of cash. In the same way that if you cut off the oxygen flow of a healthy person, you suddenly have a dead person…if you cut off the cash flow of a vibrant family-owned business, you’ll soon have a family business failure.

The usual tools to overcome the dollar crunch that occurs at succession time are:

• Properly drafted legal documents
• Trusts 
• Life insurance (Since death usually comes at the most inconvenient time, life insurance is often key to making small business transitions secure.)

But even when the “dollar” hurdle is successfully crossed, there’s often a second problem—direction. 

Linda Davis Taylor, an advisor to family businesses, makes this point by asking this question, “On a voyage over turbulent waters, should you build a better boat or train a better captain?”

Davis encourages family business owners to see their wealth in four different forms: human capital, intellectual capital, social capital, and financial capital. 

If you’re serious about seeing your family business prosper under the leadership of the next generation, you’ve got to focus on the human capital.

Ask yourself one question: If I devoted the same amount of time, energy and attention to my business operations as I’m spending in developing the next owner(s) of my business (i.e., your children or heirs), how successful would my business be?

Yes, yes, I know that being a business owner requires you to wear a number of hats. You have a lot of demands on your energy and attention—and not a lot of time. 

But can you imagine having a machine that’s central to your business’s success, and totally ignoring the maintenance of that machine? 

Don’t ignore the development and training of the next generation of your business’s owners. When you fail to plan, you plan for failure.

Speaking of planning, I bet you’ve got a retirement portfolio. What’s your plan for turning those “nest egg” assets into monthly living expenses once you stop drawing a paycheck? Do you have one?

If you do, does that plan really align with your “financial personality”? If not, I’ve got a free gift for you. Email me at bmoore@argentadvisors.com and I’ll send you a link to take the RISA® (Retirement Income Style Awareness®) Profile. There’s no charge. It only takes a few minutes, and it can save you LOTS of worry. 

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

One of my clients lives abroad. I only see him about once a year. At our last visit, I was shocked at how much he’d trimmed down. “You’re not half the man you used to be!” I quipped.

I suspect that’s where we’re headed with Social Security and Medicare—a sizable reduction in benefits. If so, very few will be pleased.

Back in their 2009 annual report, the Social Security and Medicare Trustees warned us, Medicare would run out of “trust fund assets” in 2017. Clearly, that didn’t happen. 

Now they tell us that Social Security can pay in full retirement income benefits until 2034. Medicare should be okay until 2028 (remember, it was going to run out in 2017…). 

Years ago, Nobel Prize-winning economist Milton Friedman diagnosed the problem with these programs when he listed the four ways we spend money. (Friedman wasn’t referring to these two programs, but I think you’ll see the connection.) 

1. Spend your own money on yourself. 

When you do this, you are both thrifty (it’s your money, remember?) and value-conscious (you want your money’s worth). When spending your own money on yourself, you are motivated to be very careful about how and how much you spend. 

2. Spend your own money on someone else. 

This is gift-giving or charity. When using your own money on behalf of others, you are incentivized to be thrifty. Even if you give extravagantly, you want good value from that large expenditure. Who wants to spend their hard-earned money on a sub-standard gift?

3. Spend someone else’s money on yourself. 

Think about business trips vs. vacations. Most business travelers tend to splurge on meals and rooms when spending company money. (That’s why the travel industry loves business travelers.) Yet even though you’re spending someone else’s money, you insist on quality. You spend more, but you also demand more. Your focus is not on what you spend, but on what you are getting.

4. Spend someone else’s money on someone else. 

Here the incentives for wise economic behavior have all but been removed. You are spending someone else’s money, so where’s the incentive to be thrifty? And you are spending it on someone else, therefore your concern for quality is reduced, if not gone. 

This fourth option is the inevitable result of most government spending. That’s not to say some government spending isn’t needed…or carried out wisely. I’m simply speaking to natural human tendencies, which affect any such program. 

Back to Social Security and Medicare—and the question of what their futures look like…I don’t expect massive government SOPMOOP (“spend-other-peoples’-money-on-other-people”) programs to voluntarily get their fiscal act together. 

It will likely take an external crisis. Maybe the rest of the free world will decide the U.S. is no longer the safest place for their savings dollars, due to our out-of-control unfunded promises.  

Should that happen, interest rates would rise to attract the money back. That means our cost of borrowing would rise, and our SOPMOOP problem would get even worse.

So, do I think Social Security and Medicare will be there for you? I do. These programs are deeply entrenched in our culture and politics. Eliminating them would be nearly impossible.

But look for them to be smaller…maybe half the SOPMOOP they are today.

You probably have other financial questions you wonder about. Make sure you’re asking all the important ones. Email me at bmoore@argentadvisors.com and I’ll send you my free list of “30-Something Questions for People Who are 60-Something.”

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

I told him, “I understand that feeling. But the truth is you could create a smart financial plan. It really is possible.”

(That’s a book I want to write one day: “How to Do Seemingly Impossible Things.”)

Have you ever listed the interesting things you COULD do, but for whatever reason, you’ve never tried to accomplish? My list looks like this: become fluent in French, skydive, play the piano, cycle coast to coast, travel to Africa, write a book (hmmm…).

I’m guessing your list, like mine, is both inspiring and intimidating. Some of your items might seem impossible. They’re not. You could do them.

Just like the man above could create a wise financial plan.

How? By taking these six steps:

1. Make a choice. The first step is to make a choice that, yes, I want to do this thing. Until you decide to pursue a thing, it’s not a serious goal, only a vague wish. And you need to state your decision in specific terms. “Lose weight” is weak. “Stop eating sweets and lose 10 pounds by June so I can get back into my swim suit for our family vacation” is much better.

2. Engage a coach. Have you ever heard of a great athlete without a coach? Me neither. Coaches keep us focused and supply motivation when ours runs out. One reason we accomplish so few goals—despite all our good intentions—is that we run out run out of motivation. If you really want to do a thing, get some “coaching”—it may be a financial planner for financial fitness, a personal trainer for physical fitness, or a tutor for a foreign language. 

3. Draft a plan. No one ever drifted into greatness. You and your coach must draft an intentional plan of action in order for you to achieve you goal. It’s not enough to simply know your destination. You need the turn-by-turn directions that will get you there.

4. Embrace discipline. If your goal were easy, you would already have accomplished it. It takes discipline—i.e., the practice of saying no to one thing so you can say yes to something else. You need discipline to spend less and save more every month, to attend language classes weekly, or to practice the piano or run or walk two miles daily. That’s why celebrating small victories is important. Little successes keep us going, all the way to the finish line.

5. Accept accountability. Ever failed in pursuit of a goal? I have. When we stumble, we want sympathy, but pats on the back won’t get us to our goal. We need someone on our side—a coach or friend—who will lovingly kick us a little lower in the backside and get us moving again! 

6. Refuse to stop. Your progress won’t be even. You’ll have seasons of spectacular progress. You’ll have other times when you think the goal you set was a foolish mistake. When things get hard (and they will), it’s easy to lose perspective. It’s common to want to give up. 

But if you determined ahead of time this was a thing you can accomplish, here’s what you have to do: Forget your feelings of failure and forge ahead. Your coach is there is to provide perspective. It’s his/her job to know when to throw in the towel, not yours. Refuse to stop.

Accomplishing hard things isn’t easy, but it also isn’t complicated. These six steps are proven. They will work if you stick with them.

So…what do you want to do?

If creating a financial plan (like the man above) is one of those things you want to tackle, you could benefit from my free list of “30-Something Questions for People Who are 60-Something.” Email me at bmoore@argentadvisors.com and I’ll send it to you right away.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

I’m convinced this disconnect between “knowing what to do” and “doing what you know” is at the root of most financial problems. “Spend less; save more” may have a nice ring to it, but for most folks, it has never become a lifestyle.

I’m also convinced that management consultant Bobb Biehl was right when he said: “Nobody wants to fail. People most often fail because they just don’t know how to succeed.”

Consider these shocking financial facts about 65-year-old Americans:

• Only 2% are financially independent.  
• 23% are still working 
• 75% are dependent on relatives, friends and charity to make ends meet! (You think any of them said when they were 35, “My goal in 30 years is to be in financial trouble”?) 

Here’s the third thing I’m convinced of: Having a financial “coach” can put you in that 2% group. (And if you’re not wild about the term “coach,” substitute the term “personal trainer.”)

Such an individual provides instruction, motivation, and accountability.

Back before the earth’s crust hardened, I played football. I had plenty of coaches. And weren’t they a charming bunch!

First, they instructed me in the fine art of blocking and tackling.  

Next, they motivated me (or tried to): “Moore, if your brains were dynamite, you couldn’t make a hummingbird sneeze!” Not the most positive form of inspiration. But it had a certain effect.

Finally, they kept me accountable.  Rarely did I WANT to show up at practice twice a day in the August heat. But I knew that if I skipped practice, I’d get some “special” one-on-one time with my coaches.

Instruction, motivation and accountability…I’m finding that most people need these three same elements in their financial lives.

Hire a personal trainer, and he or she will instruct you in the proper methods of exercise, diet, and rest.

But instruction is only the beginning. That’s because “knowing” is only about 15% of the journey. It’s the other 85%—“doing”—that gets you to the goal.

In short, we need motivation and accountability. This is why we step on the scales. It’s why we meet regularly with our personal trainers at agreed-upon times…so we can engage in certain actions, with him or her standing by and offering encouragement to keep going.

Who should you choose as a financial “coach” or “personal trainer”? Here are two options:

• A successful friend. Maybe you know someone with a similar income and a track record of fiscal wisdom. They’re debt-free. Generous. They’re regular savers, and their portfolio is growing. Buy them lunch and pick their brains. 

• A trusted professional. This may be your CPA, a financial planner, a banker, someone else involved in the world of finances. Again, take caution. Make sure they are looking after your best interest, not just their own.

Remember, if you keep doing what you’re doing, you’ll keep getting what you’re getting.  My advice is to consider getting a coach!

What kind of questions should you be discussing with your coach? Email me at bmoore@argentadvisors.com and I’ll send you my free list of “30-Something Retirement Questions for People Who are 60-Something.”

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

I’ve got some money I’d like to leave to my grandkids. I want it to grow, but I’m not comfortable putting it at risk in the market. Meanwhile, safer investments like CDs seem like they’re barely keeping up with inflation. Do you have any suggestions?

It’s a classic case of competing demands. We want the growth that comes with risk, AND we want the safety that comes with conservative investing. Just the other day I had a guy tell me (smirking), “I just want steady ten percent returns, with no risk of loss.” 

(Right. And I want delicious ice cream that makes me lose weight.)

Investing doesn’t work that way. We can’t have massive gains and guaranteed safety too. But there may be a middle ground that’s attractive.

If you’re a CD person, you’ve probably been bombarded with sales pitches for tax-deferred annuities. These are accounts set up by insurance companies. You can set aside money for retirement, and one day it can be turned into a stream of lifetime income. 

The problem with most annuities? Most have large surrender fees. If you change your mind, or suddenly need your cash…or if interest rates jump and you want to move your money back into a CD with a better yield, you can’t do it the first few years without paying substantial penalties. It is common for annuity surrender penalties to last seven or more years. Some may be shorter, many are longer.

While most folks have heard of tax-deferred annuities, not many know about the lowly modified endowment contract (MEC). A MEC is also an insurance company instrument. It’s essentially a whole life policy stuffed with cash.

Because insurance companies don’t have the short-term liquidity requirements of a bank, they can often make longer-term investments, which in turn pay a slightly higher yield. This can translate into a higher return than one would get with a CD. (Obviously, the details on a MEC can vary, or change quickly, so you need to talk with an expert and get all the facts before doing anything.)

Like an annuity, MEC funds are tax deferred while left in the contract. And there is a federal government tax penalty for early withdrawal if you take money out before age 59 and a half. For that reason, a MEC is typically most appropriate for folks over that age.

Unlike an annuity, with a MEC the ability to get to all of your money comes much quicker, as in the second year. 

There is also a death benefit attached, so that proceeds pass income tax free to your heirs. Because of the death benefit, you have to go through a physical underwriting process to qualify for a MEC. My experience, however, is that most reasonably healthy older adults qualify. Again, talk to a trusted, licensed agent to learn all details.

Here’s an example of how a MEC can work. Suppose a reasonably healthy 65-year-old man puts $100,000 into a MEC. If the man died the day after the contract was in force, his beneficiaries would receive $175,000. 

Or, if he changed his mind, he could cancel the contract and get back his $100,000 plus some interest by the end of the second year. If he let the money grow and reinvested the dividends, his $100,000 would grow to about $150,000 ten years later, assuming current dividend rates. That’s about a 4% annual rate of return, with no taxation and no market risk. And the death benefit, according to current dividend yields, would have grown to $220,000 in the tenth year. Dividends, of course, are not guaranteed.

The same $100,000 placed in a 5-year CD might get close to 0%…or as high as 4.5%, depending on which bank you use. That is a huge spread, but that’s the rising interest rate environment we’re in right now. Penalties for early withdrawal vary from bank to bank.

MECs are more trouble to set up than CDs. They aren’t right for everyone. But for a long-term saver, looking to maximize returns for you and your loved ones, a MEC is certainly worth investigating.

If you’re like most people, when it comes to things like MECs, you’re not even sure what questions to ask! No worries. I’ve already done that for you. Email me at bmoore@argentadvisors.com and I’ll send you my free list of “30-Something Retirement Questions for People Who are 60-Something.”

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