VOLUME 6, ISSUE 3 NOVEMBER 2017
SAFETY PINS ACTUARIAL ASSUMPTIONS, LONGEVITY RISK, AND YOUR RETIREMENT INCOME In most cases, the numbers don’t lie - that’s why we need the actuaries. So, why is it that we as human beings tend to ignore the actuarial tables when we look at our life expectancy and calculate how long our By Raymond J. Ohlson CLU, CRC, LACP
PLAYING IT SAFE SAFE CREDIT IN THE HOLIDAY SEASON
We’ll have to make do with the cards currently in our wallets. They’re getting safer year by year, but trouble seems to lurk around every corner where billions of financial transactions are concerned. By Steve Dinnen
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SAFE RETIREMENT LIQUIDITY AND THE ILLUSION OF CONTROL
ACTUARIAL ASSUMP TIONS, LONGE VIT Y RISK, AND YOUR RE TIREMENT INCOME By Raymond J. Ohlson, CLU, CRC, LACP Let’s start with the definition of actuarial assumptions from Investopedia, “An actuarial assumption is an estimate of an uncertain variable input into a financial model, normally for the purposes of calculating premiums or benefits. For example, a common actuarial assumption relates to a person’s lifespan, given their age, gender, health condition and other factors.” I have worked with actuaries for many years in my career. First, as president of life insurance companies when we deliberated over benefits, premium, payouts etc. The actuary was the sound voice of reason that kept us in a profitable mode. I also worked with actuaries when contracted to develop products for
The concept of liquidity is not as clear cut as it first appears. Having liquidity gives you the feeling of control, but liquidity provides both real control and the illusion of control. By Dr. Jack Marrion
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PERSONAL FINANCE RECENT BREACH HIGHLIGHTS THE VULNERABILITY OF YOUR PERSONAL DATA Equifax, one of the nation’s three major credit reporting agencies, recently reported a massive data breach. Are you among the 143 million U.S. consumers whose personal information was hacked? Here’s how to find out and help protect yourself... By TMA, PC
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SAFE FOR LIFE GREATEST GENERATION KEPT AMERICA Millions of American men and women served during World War II. They are called the “Greatest Generation” because of their willingness to make the supreme sacrifice for their country and fellow men and women. It is to their honor we dedicate this story. By Norm Wilkens
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SAFETY PINS ... “Actuarial assumptions, longevity risk, and your retirement income” - Continued insurance carriers. Again, in most cases, the numbers don’t lie - that’s why we need the actuaries. So, why is it that we as human beings tend to ignore the actuarial tables when we look at our life expectancy and calculate how long our retirement funds will last? Maybe it’s because we have anecdotal evidence of premature deaths of people we have known. I have also witnessed the early deaths, but the actuarial tables show the big picture. And, chances are you are going to live longer than you might think. So, I ask you... how lucky do you feel? Let’s go to Wikipedia and look at the definition of longevity risk, “A longevity risk is any potential risk attached to the increasing life expectancy of pensioners and policyholders, which can eventually result in higher pay-out ratios than expected for many pension funds and insurance companies.” They
go on, “One important risk to individuals who are spending down their savings is that they will live longer than expected and thus exhaust their savings dying in poverty or burdening relatives. This is also referred to as “outliving one’s savings” or “outliving one’s assets.” So, what does this mean? Let’s explore… First off, we all feel good about Social Security being there (at least for baby boomers) and can count on that as one source of income. Some of us are also lucky enough to have a pension. And, in most cases, that payout won’t be in danger (unless the institution is in serious financial distress). But what about the rest of your money? What about the essential income needs: housing, medical, taxes, insurance, food, etc? Is there enough cash flow? We then look at discretionary needs... vacations, gifts, new cars or whatever. How about that
source of funds? Is it in good shape? Let’s look at few factors and a solution to help you sleep better at night. Okay, pull out your driver’s license and look at your date of birth. Are you at the age where you should be shouldering high levels of risk in your portfolio? Only you can answer that… but the answer is probably no. If you are withdrawing funds in this low interest environment, this could affect how long the funds will last unless you reduce withdrawal amounts. What about your money in equities? If you are like me, you’ve been enjoying the ride. But, will there be a day when the markets will decline? I don’t think I even have to wait for your answer. If that becomes the case, then your portfolio could become very damaged and the amount of your income would have to be reduced or curtailed for a while. Is there an answer? Yes…
SAFETY PINS ... “Actuarial assumptions, longevity risk, and your retirement income” - Continued There are annuities available which will provide you with an income for life... regardless of interest rates or market turmoil. These annuities allow you to participate in the potential of growth while taking distributions. Many also provide access to funds, on top of your distributions, to be used in the case of emergencies or opportunities. And finally, you are guaranteed to never lose a penny of principal or previous
gains even in the case of a market turndown. So, there you have it. The actuaries say that the risk is there. The result can be painful, but there’s an answer to this risk, and it will allow you to sleep like a baby. All you have to do is inquire and check it out. Want to know how this can be personalized to your portfolio? Contact me and I’ll give you some safe money solutions.
About the Author: Raymond J. Ohlson CLU, CRC, CEO & President of The Ohlson Group, Inc. and SMP International, LLC Mr. Ohlson entered the insurance business while completing his Bachelor of Science Degree at Ball State University. He quickly qualified for the Million Dollar Round Table (MDRT) of which he is a Life Member. He also received his Chartered Life Underwriter (CLU) designation from the American College in Bryn Mawr, Pennsylvania. Mr. Ohlson, a former life insurance company president, currently sits on college and hospital boards and is a published author. Raymond J. Ohlson can be reached at: Email: rohlson@ohlsongroup.com.
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Visit www.SafeMoneyPlaces.com for more information about The Safe Money Choices available to you in today’s marketplace ( Page 17 ) ( Page 7 )
PLAYING IT SAFE
SAFE CREDIT IN THE HOLIDAY SEASON By Steve Dinnen On a recent trip motoring through Greece, we pulled into a service station and gassed up. I handed the clerk my credit card.
understood the situation enough and was able process the payment using just the chip embedded in my US-issued credit card.
“PIN?” he asked.
To combat fraud, European credit card issuers have opted for a two-stage security process. In addition to sticking a microchip in the card that is read when it is scanned, the cardholder also needs to have a PIN. He or she enters it when
“No.” “No PIN?” “No, no PIN.” This conversation wasn’t moving much. But he
the transaction takes place. If that card is lost or stolen, the new possessor is likely out of luck without that PIN. It’s anyone’s guess as to why the Americans haven’t adopted this measure, since they just spent billions of dollars to issue new cards nationwide that carried the chip. Couldn’t they have added the PIN feature at the same time? Debit cards use them, so why not credit cards? ( Page 4)
PLAYING IT SAFE... “Safe credit in the Holiday Season” - Continued Unless we all move to Europe, though, we’ll have to make do with the cards currently in our wallets. They’re getting safer year by year, but trouble seems to lurk around every corner where billions of financial transactions are concerned.
the merchant is transmitting your data to the card issuer and instantaneously halts the purchase should those numbers not match.
Of course, anyone who holds your card and isn’t blind also knows that CSC (thus, the If you’re buying online with a PIN is to my way of thinking a credit card, look for an “S” to be better idea). tacked onto the “HTTP” in the Now, if you’re at a restaurant web address line. This stands for “secure,” and indicates that or department store and use your card, you’re going to the merchant is scrambling get a receipt to sign. Bank of communications between its website and your browser. That America advises that if you see any blank lines on that receipt, should keep the bad guys at bay. (HTTP, btw, means Hyper draw a line through it to make Text Transfer Protocol, which is sure no one can come in after the protocol over which data is you and pencil in some fresh numbers. sent). If you have a choice between Most merchants these days a credit and debit transaction also will ask for your CSC – with the same bank card, card security code. This is experts say you should choose a three-digit numbers group credit. There are stringer fraud that is separate from your protections with credit cards. account number. Thanks to And if something bad does these transactions taking happen, a credit card liability place at the speed of light,
is capped at $50. With a debit card it’s $500, or in some cases more. Plus, bear in mind that your debit card is linked to your bank account. Not so with a credit card. Have a merry, safe shopping, holiday season.
About the Author: Steve Dinnen Steve is a freelance writer specializing in financial and travel news. He received his Bachelors Degree from Drake University and his Master of Journalism from Oklahoma University. Mr. Dinnen served as Sr. Business Reporter for the Des Moines Register, Business News Editor for the Indianapolis Star and served as Editor (freelance) for the Christian Science Monitor of its weekly personal finance column.
SAFE RETIREMENT
LIQUIDITY AND THE ILLUSION OF CONTROL by Dr. Jack Marrion Liquidity means the ability to turn an asset into cash. Having liquidity gives you the feeling of control, but liquidity provides both real control and the illusion of control. The financial reason for wanting liquidity from what are intended to be dollars left untouched until some future date, is the ability to cope with
or avoid potential risk. If you have an unexpected financial emergency, being able to sell or transform an asset quickly to get dollars in your hands is real control. This is generally what is thought of when one thinks about their asset being liquid, but liquidity isn’t that simple. Does liquidity also mean
getting the money without a cost? If so, then certificates of deposit within their penalty period could be viewed as illiquid. Indeed, even money market accounts could be viewed as illiquid since federal law limits free withdrawals to not more than six per month. Typically there is a commission or fee if ( Page 6)
SAFE RETIREMENT -
Liquidity and the Illusion of Control” - Continued
an extreme case, there was zero investment liquidity in the days following 9 -11. Although that was extreme, What is the time limit on governmental authorities liquidity? We use words in some countries believe like immediate or instant that some exchange liquidity, but unless the traded funds (ETFs) could money is in our mattress or become illiquid during a wall safe we can’t get it this market panic. The financial very second. You typically markets, banks, and even can’t get the money for two governments all operate days or more when you sell on the illusion of liquidity securities; is this liquid? A believing there will always check is called a demand be buyers, enough people deposit, but the bank paying their debts and a can stop access to those government that will be funds for a week by saying able to ultimately bailout they have concerns over any crisis, but this is only “doubtful collectability”. And true if people still believe if a week delay is viewed the illusion. as liquid, why wouldn’t the two to four weeks it usually The illusion of control takes to get the check from imagines that you will exercise that liquidity well. cashing in an annuity also In the stock market the be liquid? mirage is that the investor And then there is the will sell out of the market illusion of liquidity. Typically just as it begins its fall – or a bank will let you cash will use the liquidity to keep in that CD or make that moving from liquid choice seventh withdrawal from to liquid choice to maximize the money market account returns. The reality is that this month, but they don’t doesn’t happen. Indeed, have to. A bond sale settles as Investment Company in two days, unless you Institute data shows time were trying to sell many after time, the liquidity is of the mortgage-backed used to sell at the bottom of bonds in 2008 for which markets and often to leap there were no buyers. And, out of rising markets. you sell a stock or bond – does this mean stocks and bonds are illiquid?
The concept of liquidity is not as clear cut as it first appears. If liquidity is defined as not having a cost then many annuities would be excluded, but so would any ETF, stock or bond where a commission or transaction fee is involved in the sale. If liquidity is defined as having instant access to the funds then every investment is ruled out as well as many bank products. What this all means is you need to ask yourself how you define liquidity and what it means to you. About the Author: Dr. Jack Marrion Dr. Marrion’s research on senior decision making and the financial world have been featured in hundreds of publications including: Business Week, Kiplinger, Smart Money, and The Wall Street Journal. He is the author of six books and a frequent media guest.
PERSONAL FINANCE
Recent Breach Highlights the Vulnerability of Your Personal Data By TMA, PC Equifax, one of the nation’s three major credit reporting agencies, recently reported a massive data breach. Are you among the 143 million U.S. consumers whose personal information was hacked? Here’s how to find out — and how to help
protect yourself against future breaches. What Went Wrong? On July 29, Equifax discovered that, starting in mid-May, criminals had exploited a vulnerability in a website application.
Although management took immediate action to stop the attack, hackers had already gained unauthorized access to millions of consumers’ names, Social Security numbers, birth dates and addresses, along with thousands of credit card numbers and credit dispute documents that contained sensitive personal information. The attack affected individuals in the ( Page 8)
PERSONAL FINANCE... Recent Breach Highlights the Vulnerability of Your Personal Data” - Cont. United States, Canada and the United Kingdom. Equifax immediately launched a forensic investigation and began working with law enforcement officials to discover the source and scope of the breach. Equifax has also responded by offering a free year of identity theft protection and credit file monitoring to all U.S. consumers. Has Your Personal Data Been Breached? Go to Equifax’s website and click on the “Potential Impact” tab to find out if your personal information has been compromised. The website also allows you to sign up for free data protection and credit
monitoring services — regardless of whether you were affected by this particular incident. Important note: The link requires you to enter personal information. So, access it using only a secure computer and an encrypted network connection. After you request to enroll in the free service, the website will provide you with an enrollment date. Write down the date and come back to the site and click “Enroll” on that date. You have until November 21, 2017, to enroll for the free services. In addition to the website, Equifax plans to send direct mail notices to consumers whose credit
card numbers or dispute documents were breached. “This is clearly a disappointing event for our company, and one that strikes at the heart of who we are and what we do. I apologize to consumers and our business customers for the concern and frustration this causes,” said Chairman and Chief Executive Officer, Richard F. Smith, in a recent statement. He added, “I’ve told our entire team that our goal can’t be simply to fix the problem and move on. Confronting cybersecurity risks is a daily fight. While we’ve made significant investments in data security, we recognize we must do more. And we will.”
PERSONAL FINANCE... Recent Breach Highlights the Vulnerability of Your Personal Data” - Cont. ”What Should You Do If a Breach Occurs? If you suspect a data breach, help protect your identity from thieves and minimize losses by taking these steps:
reporting agencies and last for 90 days. After the 90day window, you can renew a fraud alert, if necessary.
Obtain free annual credit reports from Equifax, Experian and TransUnion. Identity theft usually results Call the relevant companies in accounts or activity that if you suspect that a breach you won’t recognize. has occurred. Ask for the fraud department and Ongoing Protection explain the incident. Then change log-ins, passwords ID theft often happens and PINs to minimize your long after your personal information has been losses. stolen, so don’t allow Consider freezing your yourself to be lulled into credit. A credit freeze a false sense of security makes it harder for after your initial response. someone to open a new Ongoing credit monitoring account in your name. is essential. Proactive Keep in mind that a credit consumers continue to freeze won’t prevent a watch credit card and thief from making charges bank accounts closely for to your existing accounts, unusual activity. They also however. Alternatively, file their taxes as early consider placing a fraud as possible — before a alert to warn creditors that scammer can. you may be a victim of ID If your personal data was theft. Fraud alerts are free exposed in the Equifax from all three major credit
attack or it’s affected by another breach, contact your financial and legal advisors to guide you through the recovery process.
About TMA Small Business Accounting, P.C. The TMA Small Business Accounting, P.C. staff have been delivering professional services to small businesses in Central Indiana for over 20 years. Having worked with hundreds of small business clients, we have significant expertise with a wide variety of service businesses in Indiana. We have especially strong experience and expertise in working with businesses in the healthcare (medical, dental, etc.) and foodservice (restaurants, caterers, etc.) industries. Contact Info: (317) 571-8080 info@tmasba.com: tmasmallbusinessaccounting.com
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SAFE FOR LIFE
Greatest Generation Kept America Safe By Norm Wilkens Over twelve million American men and women experienced service during World War II. Of that total, only several hundred thousand are still living today. They have been called the “Greatest Generation” because of their willingness to make the supreme sacrifice for their
country and fellow men and women. It is to their honor we dedicate this story. Reford Young was just twentyone when he was drafted into the U.S. Army in 1942. A native of Pike County, Kentucky, he began his service at a basic
training camp in Tennessee. Reford continued his orientation in desert training in Arizona and spent time at a base in Wichita, Kansas before disembarking for Europe from Fort Dix in New Jersey. He sailed aboard the Queen Mary to England. Upon landing, he spent a week adjusting to climate and being outfitted for combat. Reford was a part of General George Patton’s Third Army – specifically Company C 317th First Platoon. He was designated a rifleman and ( Page 11)
SAFE FOR LIFE ... “Greatest Generation Kept America Safe” - Continued photographer. Because of a special request by his mother, Reford’s twin brother, Raymond, was assigned to the same outfit as his brother. Raymond had been wounded early in the fighting, thus the brothers saw limited service time together although they did see action almost immediately upon arriving in France. The Company arrived at Omaha Beach in Normandy and were under fire within a few days at Argouten, France – a hilly part of the country still held by German forces. Being new to fighting, Reford would rise up to see what enemy was near only to be shouted out by his brother, “Keep your head down!” It was ironic that Raymond was the one who was wounded and Reford went unscathed through all the action. Reford reached the rank of Buck Sergeant during this time in the service, but refused on numerous occasions to take a leadership role in his company. It was his feeling the majority of
men in the command didn’t care to take orders, and he didn’t want to give them. He was content in remaining a member in the ranks – a foot soldier who wanted to complete the assignments given him, and do them as well as he could. Toward the end of 1944, the war had reached a stalemate. The Allied forces were perched on the border of Germany just waiting for the weather to break so that a successful attack could be mounted. There had been talk about the Christmas Holiday and maybe taking some time off from the front lines. That all changed on December 16th, 1944, because Hitler had other plans in mind. He would launch one more major offensive through the Ardennes Forest to divide the Allies and to secure a port cutting off their supplies. This battle was to be called the “The Bulge” and brought the siege of Bastogne to the headlines of newspapers throughout the free world. As history tells us, Hitler’s
December offensive was initially successful. If it weren’t for the fortitude of a meager defensive group of the 101st Airborne in Bastogne under General Anthony McAuliffe, who refused to give ground, and a tactical chance taken by Patton’s Third Army, the outcome might have been quite different. Reford Young remembers the bonechilling cold of foxholes and marching in mud and snow for miles to relieve the men fighting in the holding action in Bastogne. Even with their effort, the success of the operation depended upon the Army Air Corps to bomb an enemy that was dedicated to one last, desperate operation. Reford remembers an icy, snowy day in December when the skies cleared and for the first time in days, he could see the bombers and fighters overhead seeking targets that would clear the way for the Allies to break out of “the Bulge.” He was deep in his foxhole, but he couldn’t help feeling a joyful relief even
SAFE FOR LIFE ... “Greatest Generation Kept America Safe” - Continued though he was bitterly cold. It was the beginning of the end for the war in Europe. Hitler had spent his last effort. General Patton is quoted as saying, “The war is almost over. The God of battles always stands on the side of right when the judgment comes.” For Reford Young and his fellow soldiers, there was still plenty of war to be won. They fought their way through Germany and doubled back to end up in Austria where he ended his active war service. To his credit, Young ended up with four battle stars and numerous medals to exhibit. He was discharged from the
Army in October of 1945, having sailed back to the United States aboard a luxury German ship. Today, Reford divides his time between Florida and Franklin, Indiana, where he can still be found on a local golf course tying to shoot his age which is ninety-six. We wouldn’t bet that he doesn’t do it! The Battle for Bastogne was just one example of the fortitude and desires of the men and women who are a part of the “Greatest Generation.” And, even though their numbers are reduced, the American Spirit they represent lives on in their heritage. God bless them each and every one.
About the Author: Norm Wilkens A nationally recognized speaker and writer, Norman Wilkens has traveled to forty-seven of the fifty states speaking on topics of marketing, advertising and public relations. His most noteworthy subjects include: Healthcare Marketing; Multigenerational travel and Baby Boomers - their contribution to society and economics. He is presently serving as Midwestern Contributor to California’s AAA WESTWAYS Magazine. Among Wilkens’ current activities are the Butler University Alumni Board of Directors; Butler’s Central Indiana Alumni Chapter Board; Chairman of the Board of Visitors for the new Communication College of Butler; Board of Directors of Ruth Lilly Educational Foundation; Salvation Army of Indiana Advisory Board and as an Elder at Second Presbyterian Church of Indiana. Email: NormWilkens@aol.com