Sunday, January 26, 2020

Things I Just Don't Understand

     We live in confusing times. And I for one am not afraid to admit it.

     It wasn't long ago when we knew how the economy worked. Prosperity was good. Jobs were good. Ambition was good. We saved for the future and aspired to live more affluent lives than our parents did. We agreed on a set of moral and social principles. Politeness was good. Consideration was good. Narcissism was bad. Insults were bad. Crime was bad.

     But everything has become much more muddied in our modern times. For example:

     The Federal Reserve worries about deflation, and for years has been trying to get the inflation rate up to 2%. According to the Bureau of Labor Statistics the 2018 inflation rate was only 1.9%, and for 2019 it barely rose to 2%. So if this is the case, how can there be, according to many sources including the Atlantic, a "cost-of-living crisis" because of "ballooning rents, sky-high child care prices, spiraling out-of-pocket health-care fees and heavy educational debt loads." How can there be a "cost of living crisis" when there is no inflation?

     And how it is that people are up in arms about global warming, yet Americans are now buying more gas-guzzling SUVs than ever before? For the first time, in 2019, more trucks than cars were sold in America, while electrics and hybrids together make up just 8% of the market. Meanwhile, we plug more computers and more air conditioners into the electric grid, which leads power companies to burn more coal, oil and gas, sending yet more hydrocarbons into the atmosphere.

     Then all the experts worry over how the planet is going to accommodate our ballooning population, now at 7.8 billion people and climbing to 10 billion in the next 30 years. I recently read The Sixth Extinction by Elizabeth Kolbert which suggests that global warming is the least of our problems. We will starve to death or catch a fatal communicable disease even before we drown in the rising waters.

     Yet at the same time experts wring their hands over our low birthrate. The United States is not producing enough children even to replace our population. Neither are Europe, China or Japan. So our economy won't grow. Our standard of living will decline. And there will be nobody to support us in our old age.

     I read a piece from NPR the other day. Here we are in the age of instant communication, with phones and texting and Facebook, Instagram, Twitter and a myriad of ways to connect with other people. And yet, according to NPR, we as Americans suffer a loneliness crisis. Older adults are especially vulnerable since many live in isolation at the very same time they are dealing with the loss of a spouse or close friend or relative. Loneliness, in turn, has led to higher suicide rates, especially among the elderly, and mostly especially among elderly men.

     But loneliness is not restricted to the elderly. One study by the insurance company Cigna found that about half of Americans view themselves as lonely. And somewhere between 20% and 40% are beyond lonely, classified as "socially isolated."

     Another report from San Diego State University said that increased use of social media is actually correlated with increased feelings of loneliness. Is it possible that sometimes the answers to our problems are actually causing the problems?

     Maybe it's time to get back to some basics. Maybe we don't need a big, hulking SUV just to get around town. Maybe we can put the credit card away for a while -- both personally and nationally -- and realize what our parents told us, that money doesn't grow on trees. Maybe we should unplug our computers, at least for a while, and go for a walk with some friends, read a book, and be polite during conversations with our neighbors and fellow countrymen.

Sunday, January 19, 2020

Best States to Retire In -- 2020

     Okay, we all know that these lists are flawed. First of all, for most people, the best place to retire is right where they are already living, where they have family and long-time friends. If retirees do move it's often to follow children or grandchildren who have moved away, usually for a job.

     Then there is the category of "state," which can be quite uninformative. Living in New York City is an entirely different experience from living in the Finger Lakes region of upstate New York. Coastal California is a whole other world compared to the Central Valley.

     Nevertheless, a state ranking does provide some useful information. For example, when we retired we wanted to stay in the Northeast, near friends and at least some of our family - but not someplace super-cold like Maine or Vermont. We looked at several towns in New Jersey, including a couple on the Jersey Shore. We took a few trips to Maryland and the Washington, DC area. But we discovered that housing and taxes are just as high, if not higher, in New Jersey and Maryland as they are in New York and Connecticut. So we eventually focused on Pennsylvania, where taxes and the cost of living are lower, there are plenty of cultural opportunities, and we're still within shouting distance of our old haunts.

     So with that in mind, I ran across several new state rankings for retirement in 2020. As you might expect, they do not always agree with one another, mostly because they use different criteria. Some focus on affordability; others use weather or quality of life as the most important factors.

     Even using the same factors, they don't always make sense. For example, listed as the "most expensive" states to retire in are: New York, Vermont, New Jersey, Rhode Island and Minnesota. Where are California and Hawaii, two states with the highest cost of living?

     So with all those caveats, here is a summary on the Ten Best states, and the Ten Worst, based on an "observational study" averaging several other studies to come up with a general, overall list. If your state is not among the Ten Best or Ten Worst, you can assume it's about average in terms of weather, affordability, quality of life and access to health care.

     The Number 1 state for retirement is no surprise: Florida. Almost everyone ranks it number one, including the almost 100,000 retirees who move there every year for the low taxes, the low cost of living, the warm weather and generally good health care (although not everyone likes Florida, see Why I'll Never Move to Florida.)

     Two states tie for the Number 2 position: Iowa and Idaho. They're not for people who like warm weather, but they offer other benefits such as low cost of living, low crime rates and good access to health care. But these two states might be considered undiscovered gems. On average, only about 6,000 retirees move to Idaho in a year, and fewer still to Iowa.

     Two other surprises on the Top Ten list are North Dakota and New Hampshire, both of which suffer bitter winters, but enjoy low cost of living, low crime rates and ready access to health care.

     Rounding out the Top Ten best states for retirement are: Vermont, Nebraska, Pennsylvania, North Carolina and Texas.

     As if to confirm these rankings, a separate list rates the best "places" to retire. Florida scores four cities among the top ten (Ft. Myers, Sarasota, Port St. Lucie and Jacksonville). North Carolina has two: Ashville and Winston-Salem. Texas (Dallas), Michigan (Grand Rapids) and Pennsylvania (Lancaster) each have one on the list.

     A surprise (to me at least) is that, of the five or six Top Ten lists I consulted, only one mentioned Arizona as a great state to retire in. But retirees themselves seem to disagree. Arizona ranks second behind Florida as the state where most retirees actually move.

     And the Ten Worst?

     New Mexico, Maryland and Connecticut rank among the ten states that are tough on retirees.

     Ranked even worse are New York, Rhode Island, New Jersey, California, West Virginia, Illinois.

     And, by general consensus, the absolute worst state to retire in is . . . Louisiana.

     But before you start to argue with me, consider this. There are three states that rank as one of the Top Ten places to retire on one list, and then as one of the Ten Worst on another. They are Hawaii, Alabama and Tennessee. That's, no doubt, because different lists emphasize different criteria. If you have a lot of money and don't mind living on an island, then Hawaii might top your list. If you're a country music fan, maybe Tennessee.

     If you don't find any of this satisfying, then maybe you'd consider one of the top countries to retire to, at least according to one list: Spain, Portugal, Switzerland or New Zealand. In the end, it's all up to you.

Thursday, January 16, 2020

Do We Need Life Insurance?

     Last week I went to the dentist, which in a perverse sort of way got me thinking about insurance -- maybe because getting insurance is about as much fun as going to the dentist. But like going to the dentist, it’s something we need to do.

     So of course we all have health insurance (or we'd better!). If we own a car we have car insurance. If we own a home we have home insurance, and if we rent we might have renter's insurance, at least if we own clothing, jewelry or electronics that are worth anything.

     What about long-term care insurance, or life insurance? Personally, I have long-term care insurance; I do not have life insurance. I gave up life insurance when I retired, about the same time my dependents went off to college and started work.

     But there are other reasons to have life insurance, so I arranged to consult with Brett Wilson, vice president of Ethos, a new company that avoids traditional insurance agents to provide "easy access to modern, simple and ethical life insurance." Wilson himself, with an MS in management from Stanford University, has a decade-plus experience in the insurance industry.

     I started off by admitting that I have no life insurance and asking why I would need it.

     If you don’t have any financial dependents, and don’t have any debts that loved ones would have to assume -- and you also have funds set aside for funeral expenses -- then it isn’t necessary to purchase a life insurance policy. But if you do have dependents – for example, a spouse who is not eligible to continue receiving your pension, or a child who depends on you for college tuition – then you should strongly consider life insurance.

     Okay, so what kinds of life insurance are there? I’ve heard of term insurance, but I know there are others.

     There are two broad categories of life insurance: term life insurance and permanent life insurance. The main objective of term insurance is to provide protection for a specific period of time – presumably the time when you are financially responsible for anyone else such as a spouse or children. The main objective of permanent life insurance is the accumulation of capital, and it generally requires higher premiums than term life insurance. Examples of permanent insurance are whole life and universal life insurance.

      Most of us who are retired no longer have dependents. But I’ve heard that some life insurance can provide long-term care payments. Is that true?

     First of all, to explain, typical stand-alone long-term care insurance policies provide benefits only when the insured needs long-term care. Benefits are provided for services assisting them with activities of daily living like bathing, dressing and eating. To qualify, policyholders have to meet certain criteria such as the inability to perform two or more daily activities, or be diagnosed with cognitive impairment. These services can generally be used at home or in an assisted living environment. The downside to long-term care policies is that they are only accessible when the insured suffers from a qualifying condition. If long-term care services are not needed, benefits are not payable.

     Some life insurance policies combine the death benefit of a life insurance policy with “living benefits” to provide the insured with care while still living. They are sometimes referred to as “combo policies.” These policies (or attached riders) allow for the acceleration of the death benefit related to specific qualifying conditions such as long-term care or terminal illness. The insured can request that a portion of the death benefit be made available for medical bills or long-term care. Accelerating the death benefit will of course reduce the amount payable at the time of death.

      Is there any role for life insurance in estate planning?

     Yes, there can be. Death benefits paid from life insurance policies are generally not subject to federal income tax and, in many cases, state inheritance taxes. There may also be tax benefits associated with the investment component of permanent life insurance policies, although they can be complex. It's a good idea to seek the advice of a tax expert when thinking about this.

     So if I need, or want, life insurance, how much should I get?

     It depends on your financial circumstances. You can compare your current debts and financial obligations against your assets and aim for life insurance to cover the difference. So ask yourself if your spouse or partner could assume any debt payments (like a mortgage) and living expenses in your absence. If they have their own income, how long would that sustain them in the event of your death? Have you already put away money for your own funeral costs? Again, you want to cover with life insurance what you can’t cover with the assets you leave behind.

     One last question. If we buy life insurance now, how can we be assured that 10 or 20 years from now, when we die, that the company will still be around and able and willing to pay benefits?

     Ethos partners with industry giants including Legal & General America as carriers, as well as reinsurance companies like RGA, to make sure the financial assets are sufficient to pay benefits for many years into the future.

     So, I'm convinced that life insurance can be complicated, but it can also be important. Right now, Wilson told me, some 70% of families in the U. S. would go bankrupt within three months if their primary breadwinner died. As a result, more and more people end up relying on crowdsourcing tools like GoFundMe, just to raise money for funeral costs. I, for one, would not want to leave my partner or loved ones with that burden.

     I'm not promoting Ethos. I have not dealt with them. And I probably will not get life insurance, mostly because I already have long-term-care insurance. But this is all something to think about, to discuss with your loved ones and perhaps your financial adviser. And I have to say, if I had it to do over, I might just go another way.

Sunday, January 12, 2020

Baby Boomer State of Mind

     Remember the old Billy Joel song, New York State of Mind, which he wrote while riding on a Greyhound bus, about returning to his hometown after having been away for a few years? "I know what I'm needing," he croons, "and I don't wanna waste more time ..."

     This week Baby Boomer bloggers also seem to know what they need -- to return to the basics and focus on the fundamental aspects of their lives. They "they don't wanna waste more time" on political or personal arguments, shallow everyday distractions, or the superficiality and wastefulness of crass consumerism.

     Carol Cassara of A Healing Spirit, for example, realizes that the world has turned into a snappy and sometimes ugly place to have a conversation, and sometimes we find ourselves behaving in ways that don't line up with our values. When this happened to her, as she tells us in Why Don't You Try Being Human? she turned to words from the sage Ram Dass to help her be patient with herself and understand that she is "still on her path."

     Rebecca Olkowski with delves into the idea that Baby Boomers who face challenges will do better and be happier if they learn how Being Adaptable Will Get You Through Life's Biggest Challenges. It's easy to become stuck in our ways, she says, especially when we're older. So she offers a number of practical tips on how navigate our way through the changes in our lives.

     Jennifer of Untold and Begin has similar concerns, and in How Do I Know My Vision Board Works she introduces us to the concept of the Vision Board which can help us set and meet our goals. And not coincidentally, she came out with a book on January 1 called Goal Planning and Vision Boards that might help us keep to our New Year's resolutions.

     Meryl Baer of Six Decades and Counting knows that most of us are concerned about staying mentally sharp as we age. We want to continue to be able reason, comprehend and remember even as the years tick by. So in Is Adult Conversation Possible? she recounts her experience, as she puts it, "in an interesting program that engages folks of all ages in spirited, educational conversation."

     (Spoiler alert: The program is Socrates Cafe, and I can second Meryl's recommendation since it's a course that B and I got involved with last year. We're hosting a new Socrates Cafe this spring at our local Center for Learning in Retirement.)

     Meanwhile, on The Survive and Thrive Boomer Guide, Rita R. Robison turns to another kind of waste. The consumer and finance journalist reminds us of the importance of reducing our use of plastic containers. In Single-Use Food Packaging she points out that much of our packaging contains dangerous materials, and the way food packaging is made and how much we use and throw away produce massive environmental problems.

     Finally, Laurie Stone of Musings, Rants & Scribbles used to wonder if the old saying was true that we discover who we really are as we age. But as the years have crept by, she's discovered that some of her personality traits seem not only hardwired, but more pronounced. In As You Grow Older, Do You Become "More"? she analyzes seven ways that she has gotten worse (or better) in her 60s. We do change as we get older, she concludes. But do we also become more of what we were to begin with?

     So like Billy Joel, perhaps we've been out of touch, behaving in ways that don't line up with our values, so we're rediscovering who we really are. "It comes down to reality . . . a little give and take . . . " Cause we're in a Baby Boomer state of mind.

Thursday, January 9, 2020

Two Useful Guides

     You may have heard that the federal government has made a few tax and Social Security changes for 2020.

     If you're like me, you haven't paid much attention. But I saw a clear and useful summary on my friend Jeremy Kisner's website, and so I thought I'd pass on the links -- for those who want an easy guide to the new rules.

     The first reference guide is called 2020 Important Numbers. It provides all sorts of information, including the revised tax brackets, standard deductions for both single and married taxpayers, Social Security annual limits, retirement plan annual limits, estate and gift tax limits . . . and a raft of other numbers, all in a quick easy-to-read format.

     The second guide, called 2020 Social Security Cheat Sheet focuses on everything you need to know about Social Security, including maximum benefits, how much benefits are reduced for retiring early, earning limits for people collecting Social Security.

     Anyway, don't rely on me. Check out the two guides. You might need to zoom in on the computer to see them better. You might also want to print them out for future reference -- for this is an information world we live in, and so it's information that gives us both prosperity and empowerment.