Financial Planning

According to authors Diamandis and Kotler (Abundance), if every word written from the earliest days of civilization to the year 2003 would represent five exabytes of information.  A single Exabyte is one billion gigabytes (a one followed by 18 zeros). From 2003 through 2010, the world created five exabytes of information every two days. By the year 2013, we will produce five exabytes of digital information every 10 minutes.

A survey by LMSR and Invesco Van Kampen Consulting shows what words are preferred by investors when describing their current situation and advisors.

Even though national divorce rates have declined since peaking in the 1980s, divorce rates for those ages 40-69 have dramatically increased. In 1990, only 1-in-10 of those who went through divorce was age 50 or older; by 2009, the number was 1-in-4. More than 600,000 age 50+ got divorced in 2009.

Since the end of 2008, a point in time when the financial crisis was near its worst, investors took out more than $105 billion in stock ETFs and mutual funds than they put in. During 2011, withdrew a net $34 billion in large cap stock funds. Yet, since the end of 2008, investors have added more than $55 billion to sector funds (including $12 billion in real estate funds). The question is, “Has derisking turned into rerisking?”

According to Reverse Mortgage Insight, the top three reverse mortgage lenders for 2011 were MetLife Bank, One Reverse Mortgage and Urban Financial Group. Origination fees with lenders can be as high as 2% of the home’s value, capped at $6,000. Closing costs are frequently an additional 2% and there are mortgage insurance fees charged by HUD. The interest rate charged on these loans is generally higher than the rate someone would pay with a traditional fixed-rate mortgage.

Ron Carson is one of the most successful wealth managers in the country and offers different “boot camps” for advisors. Ron has been a CFS for close to 20 years. One of our directors has known Mr. Carson for close to 25 years—he is a class act, and so is his business practice. This is one of our favorite books because Ron has taken the practice of wealth management to a whole new level. Below are excerpts from his highly-recommended book.

In 2010, health care costs accounted for 17% of the GDP; it is projected to reach ~20% by 2017. The typical person covered by Medicare will have out-of-pocket medical expenses of more than $4,300 per year ($8,600 for a couple). These figures include health care premiums, copays, and expenditures not covered by Medicare. It is estimated a healthy 65-year-old couple will need $260,000 to pay for health care and LTC costs for the remainder of their lives.

Life expectancy has increased dramatically; a person born in 2010 can expect to live to age 79, 32 years longer than a person born in 1900. More importantly, there has been an increase in the life expectancy of a 65-year-old. In 1980, the average life expectancy for a 65-year-old male was 79.1 years. In 2010, this number increased to age 82.7. These extra three years has a great impact on retirement security. Say a person has annual expenses of $50,000 in retirement; expenses for 14 years total $700,000.