The article has some great advice about raising your deductibles to save money, avoiding small claims which could raise your rates or get your dropped, and checking rates every few years.

You can read the article at www.consumerreports.org/ (online subscription required)

I’d like to publicly thank these clients and the many others who have been willing to open up their financial lives so that others can learn from their experiences.

To Read about John and Mike:

To Read about Jody and Rob:

Many of the annuities have a guaranteed value, or a guaranteed withdrawal amount. Most of my boomer clients with variable annuities are way over invested in stock funds within the annuity for people their ages so the cash out value would be substantially less than the initial investment or the guaranteed value with the market declines of 2008.

So were stuck with them for now. Now I’m wondering will the insurance companies be able to make good on all those guarantees my clients have been paying for. The Wall Street Journal just ran a great story on variable annuities.

Here is a quick quote from the article about the financial strength of some of the major annuity companies:

“Moody’s has “negative outlooks” on units of top-10 U.S. annuity sellers Lincoln, Hartford Financial Services Group Inc., Prudential Financial Inc., and Canadian giant Manulife Financial Corp., while ratings of units of American International Group Inc. are under review for possible downgrade. Last week, Moody’s downgraded units of Europe-based ING Groep NV to A1 from Aa3, giving them stable outlooks.”

Read the whole article

The states that regulate insurance companies do provide some protection for annuity owners. You can find out about your state’s insurance at www.nolhga.com

Here are some links to ratings agencies that rate insurance company financial strength

A.M. Best

Fitch, IBCA, Duff & Phelps

Moody’s

Standard & Poor’s

Weiss Ratings

Obama will inherit twin economic crises. The immediate financial crisis and recession and a longer-term crisis (Medicare, Social Security, Infrastructure)

What should you expect?

In the next year:

• Obama’s tax plan will likely be passed by congress meaning a tax cut for most Americans earning less than $200,000/year and a tax increase for those earning more than $250,000. There will possibly be a capital gains tax rate increase for these taxpayers as well.

• Some sort of fiscal stimulus plan although more focused on infrastructure rebuilding vs. checking sent directly to taxpayers.

• A re-evaluation of the current economic rescue plan and an expansion of the plan to other industries and to some homeowners facing foreclosure.

Over the next few years:

• Some type of health care plan that would be similar to the one in Massachusetts which requires everyone to buy health insurance if their employer doesn’t provide it. It will likely offer a Medicare-type like option for people who could not afford to purchase private insurance.

• Possible changes in Medicare and Social Security, more likely Medicare which is in more trouble. Expect Medicare to be allowed to negotiate prices for prescription drugs (which it cannot do by law now) and higher premiums. The very complicated Medicare+Choice options are likely to stay.

• A tougher economic climate (not due to Obama) but due to our country’s desire to live on borrowed money. Eventually living off newly borrowed money becomes unsustainable, especially if we use that money for current consumption (flat screen TVs, cars, etc.) vs. investments that increase our long-term wealth (education, bridges, etc.)

What should you do?

• Save more. Long-term returns on stocks will average in the single digits as they did from 1966-1982. Although you cannot control what returns you get in the market you can control how much money you save. Plus if I am wrong, you can retire that much earlier.

• If you earn more than $250,000 and can shift your income into 2008 from 2009, or possibly 2010 into 2009, then doing so will reduce your tax bill.

• If you earn more than $250,000 and have capital gains that you are thinking about realizing, do it now. Capital gains tax rates will be higher for you in the future.

Major economic transformations are always difficult, and usually lead to major political transformations (as happened yesterday). If Obama can navigate the political and economic waters he could set the nation on the course to a much better future.

]]> http://longfinancialplanning.com/blog/2008/11/05/what-could-an-obama-presidency-mean-for-your-finances/feed/ 0 http://longfinancialplanning.com/blog/2008/11/04/bulk-up-your-emergency-reserves/ http://longfinancialplanning.com/blog/2008/11/04/bulk-up-your-emergency-reserves/#comments Tue, 04 Nov 2008 14:22:33 +0000 Chris Long http://longfinancialplanning.com/blog/?p=128 In the past I have recommended that you keep three months of living expenses in cash on hand in case of an emergency. Now I am increasing that to six months.

We may be on the cusp on the most severe recession since 1980-1982 when unemployment hit 10%. Although most of you will keep your jobs during a recession it is important to be prepared for the worst. If you do lose your job finding a new one will take longer, and other sources of credit (Home Equity, Credit Cards) are reduced due to the financial crisis.

How do you get there? If you already have three months stashed away then start cutting back on some of your extras (entertainment, vacations, dining out) with the goal of saving an additional one week’s worth of living expenses each month. Over the course of a year you will have six months of living expenses saved. If your living expenses are $6,000 per month then you would need to save an additional $1,400 per month.

If this seems to daunting to you, you could save ½ that amount each month and then add any “extra” money you receive to your cash stash. (e.g. tax refunds, bonuses, etc.)

This exercise will also prepare you for living on less should you lose your job. (See “Could you live on less”).

We are facing some difficult economic times. I’m challenging you to figure out how to live on 30% less income than you have if you had to.

What are your top priorities and what would you cut? What is really necessary? Should you have a decline in your income due to a job loss, reduced business income, or for a medical reason it’s much easier to cope with the change if you have already figured out how you would adjust your spending.

Check out the November, 2008 issue of Kiplinger’s to see how people have dealt with a reduction in income.