Long Term Care Insurance is in Trouble

Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice

Battered by losses, long-term-care insurers hit policyholders with steep rate increases that many never saw coming

David and Sally Wylie walk their dog, Finn, in Owls Head, Maine. The annual cost of their long-term-care insurance has jumped more than 90% in the past two years. Photo: Sarah Rice for The Wall Street Journal


Leslie Scism

Updated Jan. 17, 2018 10:50 p.m. ET

Long-term-care insurance was supposed to help pay for nursing homes, assisted living and personal aides for tens of millions of Americans when they became unable to take care of themselves.

Now, though, the industry is in financial turmoil, causing misery for many of the 7.3 million people who own a long-term-care policy, equal to about a fifth of the U.S. population at least 65 years old. Steep rate increases that many policyholders never saw coming are confronting them with an awful choice: Come up with the money to pay more—or walk away from their coverage.

“Never in our wildest imagination did we consider that the company would double the premium,” says Sally Wylie, 67, a retired learning specialist who lives on Vinalhaven Island, Maine.

In the past two years, CNA Financial Corp. has increased the annual long-term-care insurance bill for Ms. Wylie and her husband by more than 90% to $4,831. They bought the policies in 2008, which promise future benefits of as much as $268,275 per person. The Wylies are bracing for more increases.

To make their budget work, she has taken on a part-time landscaping job. The couple has delayed home maintenance, travels less and sometimes rents out their house. “We feel like we are out on a limb here, and these policies are supposed to be our safety net,” she says.

A CNA spokesman says the Chicago insurer understands rate increases “can be challenging,” but “it is important for us to take appropriate actions to ensure we can fulfill our obligations to our policyholders.”

Behind the Rising Costs of Long-Term-Care Insurance

The long-term-care ​insurance industry is imploding. What’s ​at stake for 7.3 million Americans who own ​the policies? Illustration: Laura Kammermann/The Wall Street Journal

Only a dozen or so insurers still sell the coverage, down from more than 100. General Electric Co. said Tuesday it would take a pretax charge of $9.5 billion, mostly because of long-term-care policies sold in the 1980s and 1990s. Since 2007, other companies have taken $10.5 billion in pretax earnings charges to boost reserves for future claims, according to analysts at investment bank Evercore ISI.

When sales of long-term-care insurance were ramping up in the 1980s and 1990s, companies thought they had found the perfect product for middle-class families—and that’s how they pitched it.

The annual premium was designed to hold steady until a claim was filed and premiums then halted, though the rates weren’t guaranteed. Many policies paid out benefits for life.

Families flocked to what seemed like affordable peace of mind that would save them from draining their lifetime savings, leaning on children or enrolling in the federal-state Medicaid program for the poor.

Long-term care often costs more than $100,000 a year a person, financial advisers say. The nationwide total exceeds $200 billion, according to analysts at LTCG, a third-party administrator of long-term-care policies.

Almost every insurer in the business badly underestimated how many claims would be filed and how long people would draw payments before dying. People are living and keeping their policies much longer than expected.

After the financial crisis hit, nine years of ultralow interest rates also left insurers with far lower investment returns than they needed to pay those claims.

Long-term-care insurers barreled into the business even though their actuaries didn’t have a long record of data to draw on when setting prices. Looking back now, some executives say marketing policies on a “level premium” basis also left insurers with a disastrously slim margin of error.

“We never should have done it, and the regulators never should have allowed it,” Thomas McInerney, president and chief executive of Genworth Financial Inc. since 2013, says of the pricing strategy. “That’s crazy.”

Mr. McInerney says future policies should be sold based on the assumption that buyers could face modest rate increases as often as every year.

Long-term-care coverage often feels like a godsend to people already drawing benefits. “I would be destitute. I don’t even know if I would be alive,” says Ailene Adkins, 69. She has an autoimmune disorder and resides in an assisted-living facility in northern Virginia at the expense of Manulife Financial Corp.’s John Hancock unit.

She bought the policy in 1993 and paid slightly more than $12,000 in premiums before filing her claim. John Hancock has paid $1.2 million for her care since 2001. In 2017, long-term care insurers spent $9.2 billion on 295,000 policyholders, according to the American Association for Long-Term Care Insurance, a trade group for insurance agents.

Fewer than 100,000 long-term-care insurance policies were sold in the U.S. in 2016, and sales fell to about 34,000 in the first half of 2017, the industry-funded research firm Limra says. Both those totals are the lowest in more than 25 years. The business peaked in 2002 with about 750,000 sales.

A sales document the Wylies received said their premiums were ‘expected to remain level over your lifetime.’ Photo: Sarah Rice for The Wall Street Journal

The latest policies typically cover less and cost more. According to the insurance agents’ trade group, a 60-year-old couple can expect to spend about $3,490 in combined annual premium for a typical policy that starts out with a maximum payout of $164,050 per person and then grows 3% a year to $333,000 when the couple is 85.

Buyers of so-called hybrid life insurance or annuities can use proceeds for long-term care instead of a death benefit. But such products are often even costlier than traditional long-term-care policies.

Few Americans are wealthy enough to foot their own nursing-home bills. The Medicare health-insurance program for older people pays for nursing-home stays only for a limited period after hospitalization.

Long-term-care insurance benefits generally start flowing when one of two conditions is met: The policyholder must be unable to perform two out of six basic “activities of daily living,” such as bathing and dressing, or have a cognitive impairment requiring “substantial supervision.” Dementia and Alzheimer’s diseases are especially common causes of policy claims.

Advisers who answer phones at A Place for Mom, a business based in Seattle that provides referrals and is paid by senior-living communities, hear the despair of many families who lack insurance coverage.

“I would listen to families in chaos, families trying to find the money…and all the money is gone or not enough,” says Carole Starr, who worked there from 2013 to 2015. She put down her headset and sobbed after some calls.

Debra Wilber applied for a long-term care policy in November. Her parents didn’t have one because it was too expensive. She helps her father, a retired funeral-home director in New Jersey, care for her mother, a former executive assistant who has Parkinson’s disease and dementia.

Her parents, both 79 years old, “worked hard and live in a nice house in a nice town, and now we are facing the application for Medicaid,” says Ms. Wilber, 55. “I’ll be damned if I will go through what they are having to go through.”

When the business was being launched, actuaries mined data that included the federal government’s National Nursing Home Survey. The information was used to create tables with projections of the rates at which people would become infirm and how long they would require care, says Vincent Bodnar, an actuary in the 1990s at a consulting firm.

The Society of Actuaries, a professional group, ran education sessions about the intricacies of pricing long-term-care policies. Insurance executives recall being prodded by their own sales forces to keep rates low. State regulators have said they didn’t inspect assumptions behind the prices rigorously enough.

It turned out that nearly everyone underestimated how long policyholders would live and claims would last. For example, actuaries, insurers and regulators didn’t anticipate a proliferation of assisted-living facilities. And they assumed families would do whatever they could to avoid moving loved ones into nursing homes, holding down policy claims.

By the late 1990s, assisted-living facilities were widely popular. Especially at well-run ones, staff members looked after policyholders so well that they lived years longer than actuaries had projected.

Residents “are taking their medications; they are not falling,” says Mr. Bodnar, now a senior executive at Genworth .

Genworth’s headquarters in Richmond, Va. The insurer has suffered losses of about $2 billion on long-term-care policies. Photo: Kris Tripplaar/Sipa/Associated Press

Another flawed assumption was that about 5% of policies on average would lapse annually. Actual results have been very different. Just 1% or so of policies lapsed in the average year, actuaries and executives say.

Actuaries now say they realize they didn’t bake into their original estimates the possibility that many people buying the policies were unusually meticulous planners who intended to always pay their premiums. Those buyers might also have carefully looked after their health and diet, enhancing the chances they would live long.

The business’s dire condition also is a consequence of lower interest rates, especially since 2008. Many insurers assumed annual earnings of about 7% on customer premiums, which are invested until needed to pay claims. The net yield for U.S. life insurers’ overall portfolios is down more than 20% since 2007 and was an estimated 4.6% last year, according to ratings firm A.M. Best Co.

To overcome such miscalculations, Genworth ‘s Mr. McInerney says he spends half his time talking to state regulators in efforts to win approval for rate increases on about 800,000 older policies. Genworth has 1.2 million long-term-care insurance policies outstanding.

“The state capital buildings are all beautiful in their own way,” he says about his visits. In the majority of states so far, cumulative premium increases have ranged from 50% to 150%, and more are needed, according to Genworth .

Credit Suisse analysts tallied more than 4,500 rate-increase requests nationwide from 2009 to early 2017 by 16 once-big sellers of long-term-care insurance. The proposed increases affected hundreds of thousands of policyholders. Many of the approved requests topped 50%.

Harriet Fisher, a former teacher and real-estate agent in Maryland, decided to reduce the maximum payout from her John Hancock policy. After the insurer said it would increase her premium by a double-digit percentage, she “stewed over” what to do but decided she didn’t want to pay more, she says.

She says she doesn’t recall the agent warning her when she was buying the policy about a decade ago that a large increase could occur. John Hancock declined to comment.

Most states reluctantly allow at least some portion of the rate increases sought by insurers to go through. Former Pennsylvania insurance commissioner Teresa Miller says regulators try to balance the financial health of insurers against struggling policyholders who often are “just trying to figure out how to pay their bills every month.”

Last year, a state-court judge in Pennsylvania approved the liquidation of two long-term-care insurance units of Penn Treaty American Corp., based in Allentown, Pa., and known for its relatively low rates.

The judge blasted regulators for not granting rate increases sought by Penn Treaty years before its collapse. The two long-term-care insurance units had a projected gap of $3.4 billion between their assets and claims liabilities.

Penn Treaty has about 67,000 long-term-care policies across the U.S. Statutes in most states limit payments to policyholders of failed long-term-care insurers to $300,000.

Leaton Williams III and his wife, Jane, have paid $90,000 in premiums on the Penn Treaty policies they bought about 20 years ago while in their 50s. The coverage included lifetime benefits.

Now they will get no more than $300,000 a person, the cap by North Carolina’s guaranty association. Mr. Williams, a retired federal employee, says his wife was recently diagnosed with dementia.

Fear of such an illness was “the absolute reason that we went with long-term care, and now we’re kind of stuck,” he says.

Few companies were hit as hard as Genworth . Long a top seller of long-term-care policies, the company’s life-insurance units were downgraded below investment grade in 2016. Its losses on long-term-care policies total about $2 billion and are a reason why Genworth , of Richmond, Va., agreed in late 2016 to sell itself to a Chinese conglomerate.

Terms of the $2.7 billion acquisition include an additional cash infusion of $1.1 billion by China Oceanwide Holdings Group Co. The Chinese company wants to use Genworth ‘s expertise to bring long-term-care insurance to China. The deal is under review by an American national-security panel, state regulators and other officials.

As the industry reels from its mistakes, some policyholders complain that it has nothing to lose by denying legitimate long-term-care claims. Last year, Mary “Mollie” White’s family filed a breach-of-contract lawsuit against Senior Health Insurance Co. of Pennsylvania in an Ohio state court.

The insurer, which isn’t selling new policies, had rejected a claim to pay in-home aides for Ms. White, 89, who has memory loss. The company questioned if she was incapacitated enough to draw on the benefits and followed procedures correctly when applying.

In an August settlement, Ms. White received $77,600, or about $10,000 less than she sought but more than four times as large as the company’s offer, court filings show. A lawyer for the company declined to comment.

“It was very stressful,” says Ms. White’s daughter, Ruth White. “I wouldn’t encourage others to buy.”


What Could Go Wrong? (For Public Pensions, More Than You Know)

Authored by Patrick Watson via MauldinEconomics.com,
September 26, 2017

Here’s a loaded question for you: “What could go wrong?”  

In some contexts, it can express mistaken confidence, as in, “Sure I’ll put my hand between that crocodile’s jaws. What could go wrong?”

Investors should ask the same question before entering a position. “What risks am I taking with this trade? What could go wrong if it doesn’t go as planned?”

But here’s the problem: What if you never think to ask the question because you have no idea you’re in that trade?

And guess what—this is your problem if you are a taxpayer anywhere in the US.

Photo: DWS via Flickr

Pension Pain

Part of my job is helping John Mauldin with the research for his Thoughts from the Frontline letters. Regular readers know John isn’t a doom-and-gloom guru. He’s optimistic on most of our big challenges.

Except for a few things—like the brewing state and local pension crisis.

The more John and I dig into it, the worse it looks. We have both spent many hours trying to find any good news or a silver lining, without success.

All over the US, states, cities, school districts, and other governmental entities have promised their workers generous retirement benefits, but haven’t set aside enough cash to pay what they will owe. At some point, perhaps soon, either they will have to cut benefits to retirees or stick taxpayers with a huge bill, or both.

You can read John’s September 16 letter, Pension Storm Warning, to learn more. Then you’ll see why he says to Build Your Economic Storm Shelter Now.

What else could go wrong? Plenty.

Photo via Flickr

Healthcare Goes on the Books

Local governments often give retired police officers, firefighters, teachers, and other workers a pension plus healthcare benefits.

Healthcare is expensive even in the best circumstances. Imagine your health insurer had promised to cover your medical expenses but hadn’t set aside any cash to pay for it.

Remarkably, that’s exactly what has happened. Governments currently disclose their retiree healthcare liabilities only in footnotes to their financial statements. Many have saved little to no money to cover those future expenses.

That’s about to change.

Starting in 2018, the Governmental Accounting Standards Board—the source of generally accepted accounting principles (GAAP) for state and local governments—will force officials to record healthcare liabilities on their balance sheets. Pew Charitable Trusts estimates the national shortfall will add up to $645 billion.

That’s on top of the estimated $1.1 trillion in unfunded pension liabilities they already had. In other words, this giant problem that no one knows how to solve is about to get 59% worse!

Or, more accurately, it’s going to look 59% worse. The healthcare shortfall isn’t new. What’s new is that local governments have to stop obscuring it.

What else could go wrong? Plenty.

Photo: AP

Unbudgeted Crisis

Now, let’s add another crisis on top of the already-terrible one that just got 59% worse.

You’ve probably heard about the opioid drug abuse that is killing thousands of Americans. Putting numbers on it is tricky—often, multiple factors contribute to the same death. The Centers for Disease Control estimates opioids played a role in more than 33,000 deaths in 2015. No one thinks the numbers have improved since then.

The deaths aren’t evenly distributed. This Reuters graphic shows the heaviest concentrations in the Midwest, New England, and New Mexico.

It’s probably no coincidence that some of these states also suffered above-average economic pain in the last decade or two.

The deaths from overdose and the even larger number of near-deaths are putting a huge strain on local government finances in those regions.

A recent Reuters investigation found costs soaring for everything from ambulances to autopsies. Cities and counties are racking up huge bills for courts, prosecutors and public defenders, jails, and treatment programs.

The small towns and counties dealing with this opioid plague are often the same ones whose pension plans and healthcare expenses are already underfunded.

That’s bad news for current retirees, workers who hope to retire, and taxpayers who will ultimately foot the bill. In a word, everyone.

But that’s not all.

Costly Storms

Last weekend at the Texas Tribune Festival here in Austin, I heard Houston Police Chief Art Acevedo discuss his Hurricane Harvey experience. As more areas flooded, he kept the entire department on duty for six straight days, 24 hours a day.

Acevedo said he knew this wasn’t in the budget, but the alternatives were worse. Lives were at stake, and the city needed its protectors more than ever.

The hurricane is over, but the Harvey expenses are just starting. Houston may have to spend $250 million on the disposal of flood debris… and the city is only part of the affected area.

Houston’s pension plans were already on shaky ground, so this won’t help. Many local governments in Florida, Puerto Rico, and the US Virgin Islands may see the same, thanks to Irma and Maria.

So what does it mean to you?

For one, we should plan for substantially higher state and local taxes in the future.

And if you’re a public worker or retiree, you better think about how you will make ends meet if your benefits get slashed.

This is, as John Mauldin says, a problem we can’t just muddle through. All we can do is prepare for it—and now is the time to start.

See you at the top,

Older Americans Are More Afraid of Running Out of Money Than Death

This is getting serious.

Maurie Backman


Sep 25, 2016 at 9:41AM

Running out of money in retirement is a major concern for older Americans, especially since so many are considerably behind on savings. But apparently the aptly named retirement crisis is more serious than we thought. According to a recent Transamerica study, 43% of workers 50 and older claim that their greatest retirement-related fear is outliving their savings. A survey released last year by the American Institute of CPAs had similar findings, with 57% of financial planners listing running out of money as their clients’ primary retirement concern. This sentiment is further driven home by an Allianz study of over 3,000 baby boomers in which 60% were more afraid of outliving their savings than actually dying. But if running out of money in retirement really is a fear worse than death, why aren’t more Americans doing something about it?


Letting retirement savings fall by the wayside

You may have heard that a large number of Americans are unprepared for retirement, but here are some sobering statistics:

  • A good 33% of Americans have zero retirement savings. 
  • Roughly 30% of Americans 55 and older have no retirement savings. 
  • 56% of Americans have less than $10,000 in retirement savings. 
  • Only 31% of seniors 65 and over have $200,000 in a retirement account. 
  • About 25% of Americans 65 and over rely on Social Security as their only source of retirement income. 

So why aren’t we saving more? For many, it’s a combination of factors. Hefty mortgages, college tuition payments, and other short-term needs have a way of trumping retirement savings.

But it’s not just a matter of misplaced priorities. Many Americans have, in recent years, fallen victim to stagnant wages and fewer options for saving. Pension plans have all but gone away. Employers are stingy with 401(k) matching dollars. Worse yet, far too many low- and middle-income earners work for companies that don’t offer a 401(k) to being with. In fact, in the past few years, 401(k) coverage has been on the decline. According to a 2015 Transamerica survey, only 66% of U.S. workers were offered an employer-sponsored retirement plan in 2015, compared to 76% in 2012.

It’s for these and other reasons that outliving retirement savings is a huge concern for so many seniors. The question is: What can we do about it?

Your finances aren’t set in stone

If you’re an older American who’s worried about late-in-life finances, you basically have two choices: You can throw your hands up in the air and admit defeat, or you can take steps to change your long-term financial picture. Even if you no longer have the luxury of being decades away from retirement with a world of saving and investment options, you can still find ways to eke out extra savings as your career draws to a close.

First, you can start by taking advantage of catch-up contributions and socking away as much money as you can in an IRA or 401(k) plan. Currently, anyone 50 and older is allowed to contribute up to $24,000 to a 401(k) and $6,500 to an IRA each year. If you max out on either option for as little as three years, it’ll make a huge difference in the grand scheme of retirement.

Imagine, for instance, that you’re able to amass an extra $72,000 by maxing out your 401(k) contributions during your last three working years. Over the course of a 20-year retirement, that’s an additional $3,600 a year, or $300 a month, to work with, and those figures don’t even account for the fact that you might further grow that sum with smart investments. Even maxing out an IRA for three years would give you another $19,500 for retirement, which translates into almost $1,000 extra each year for a 20-year retirement. Furthermore, if your employer offers a 401(k) match, you can get your hands on even more last-minute retirement cash.

Finally, if all else fails, you do have the option to extend your career a few extra years, or take on some type of part-time work in retirement. If you find something you enjoy, it’s a win-win — you’ll get to earn money while occupying some of your newfound free time.

While running out of money in retirement is a legitimate concern, it’s not too late to change your fate. The sooner you take action, the better your chances of amassing enough savings to last for the remainder of your life.


I’m Winning My Battle With Smartphone Addiction

by Leonid Bershidsky 
August 29, 2017, 1:42 PM EDT

Mobile devices are easily adjustable. Brains are not.

Most of the research on phone addiction and deprivation is done on students. 1 It’s not just the “kids these days,” though. At 45, I’m a recovering addict. It’s been four months since I uninstalled social networking apps, three months since I last posted on Facebook, and two months since I turned off all notifications on my smartphone. Before I started the detox program, I checked my phone about five times an hour. That’s about half as often as the average millennial but about three times as often as most people of my generation in the U.S. Now, I’m down to once an hour.

I think I got hooked because of my job. When I started out as a reporter in the late 1980s, you used your legs to get a story and teletype or dictation to file it from a remote location. It got progressively easier with email, the internet, search engines, social networks, and mobile communication. I could follow developments in several countries through a network of Facebook friends; in Ukraine, politicians became so addicted to Facebook that it became almost pointless to talk to them. In the U.S., much of the high-level political debate occurs on Twitter thanks in no small part to its tweeter in chief. I told myself that maintaining accounts on every social network was necessary for work, but that was absurd: most of these posts and videos were useless to me as a journalist.

I was submerged in the cozy haze of smartphone addiction, and it’s hard to say how it differed from substance abuse. “Comfort kills, discomfort creates,” wrote Jean Cocteau in his personal account of opium detoxication.

So, like someone trying to wean himself off a substance, I started experimenting with discomfort. That’s when I lost the Facebook and Twitter apps, which were eating up most of my screen time. I figured that out from battery use statistics. At first, I felt such acute deprivation that I had to open Facebook and Twitter in a browser. That was less convenient, and my phone use dropped a little, but I wasn’t able to completely swear off Facebook for a few more weeks. FOMO — the fear of missing out — ruined several mornings; I reverted to peeking for a couple of days, then forced myself to stop.

As Cocteau wrote, “I am not a detoxicated person proud of his effort. I am ashamed of having been chased out of this supernatural world after which health resembled a bad movie in which ministers inaugurate a statue.” After having kicked opium, Cocteau still had alcohol and cocaine. I kept updating and reading Twitter, although I gradually cut down on arguing with people on it — that had been time-consuming and sometimes emotionally draining. Now, I’m down to 30 minutes of Twitter a day: That’s enough for work.

We touch our smartphones — tap, click, swipe — more than 2,500 times a day. That’s probably 100 times more often than we touch our partner. The reason we do it is that the phone constantly demands attention by sending us notifications. It does so every time someone wants to connect with us, every time something changes in an app, every time an artificially intelligent entity decides we need information. Notifications have a barely veiled commercial purpose: Once we start playing with the phone, we’re likely to open more apps, see more ads, buy more stuff.

It’s relatively easy to retake control; I went into my phone’s settings and banned every one of the 112 apps from sending notifications. Now, I only check my personal and corporate email accounts, as well as two messenger apps, when I want to, not when my device wants me to. That means my friends must wait longer than they used to for a response. They haven’t noticed — or at least they haven’t commented on it. We overestimate the need for immediacy in communication; perhaps our kids don’t because they live their addiction to a greater extent than we do, but an adult finds it easy to wait for a response.

Recovering addicts know it’s impossible to be perfectly clean: Even if you don’t use your favorite substance, you miss it. At the end of his opium essay, Cocteau wrote wistfully that perhaps “the young” might someday discover “a regime that would allow one to keep the benefits of the poppy” without getting addicted. That remains impossible for drugs but maybe not for smartphones.

After reasserting control over my digital life, I’m nearly ready to take further steps. My next goal is to be able to use it as an electronic book reader without ever switching from the Kindle app to the browser or the email and messenger apps. I expect a boost in reading speed, another way to battle my FOMO. A forced experiment during a two-week holiday in the south of France without high-speed internet produced hopeful results.

As I stood in a chapel Cocteau designed in the hills above Frejus, I felt healthier, able to breathe easier, almost capable of relearning how to lose myself in the company of my beloved wife and children, who are, of course, fighting their own battles with gadget addiction. Perhaps our lives can be a little more like their pre-iPhone versions. If Cocteau could kick his habit, so can we.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. Most notably the recently viral work of Jean Twenge, a psychology professor at San Diego University who studies generational differences. She believes that today’s teens are addicts, hooked on their smartphones and therefore reluctant to work, drive, go out, have sex.

Original Article: https://www.bloomberg.com/view/articles/2017-08-29/i-m-winning-my-battle-with-smartphone-addiction

Harry Dent: Stocks Will Fall 70-90% Within 3 Years

February 1, 2017

All four of the cycles I track point down now. One after the next has peaked in the last several years. All four point down into early 2020 or so. That’s only happened in the early to mid-’70s when we had the worst stock crashes back then, the OPEC embargo, etc — the worst set of crises since the 1930s.

 Of course, in the early ’30s we had this same configuration of all four of these fundamental cycles, cycles that have taken me 30 years to hone and say “these are the four that matter”.

 The next three years are likely to be the worst we see in our lifetimes. It will be more like the early 1930s when stocks hit a debt bubble and financial asset bubbles crashed, which they only do once in a lifetime such as the early 1930s. Stocks will be down 70, 80, 90% — that’s to be as expected in this stage of the cycle after such a bubble.

 I went from being the most bullish economist in the ’80s and ’90s to now being of the most bearish because what goes up goes down. That’s what cycles do. At heart, I’m a cycle guy. Demographics just happens to be the most important cycle in this modern era since the middle class only formed recently — its only been since World War 2 that the everyday person mattered so much; because now they have $50,000-$60,000 in income and can buy homes over 30 years and borrow a lot of money. This was not the case before the Great Depression and World War 2.

 And based on demographics, we predicted that the U.S. Baby Boom wouldn’t peak until 2007, and then our economy will weaken — as both did in 2008. We’ve lived off of QE every since…

 That’s a brief summary of my fundamentals and of why I tell people this is not the time to believe in the Trump rally. I’ll go into that. I’ll show you why that cannot last and he cannot create 4% in growth.

 Then we also go into which areas will have been favored by demographics and by our cycles. You’ll never see prices this low if you protect your capital now and convert it to cash or to safe, long-term high quality bonds, then you can take advantage of the sale of a lifetime. If you don’t, you’ll have seen your financial assets wiped out a good bit more than they were in 2008 and ’09, and the markets won’t come roaring back to new highs next time

If you are concerned, you might want to consider our Half Right/Half Wrong Approach

Millennials and the Future of Jobs, Part 3

Because of the factors we have been discussing over the last two weeks, Millennials don’t have the money to build the foundations for our futures that our parents had.  We largely lack the applicable advice that past generations got from those who came before them.  Despite this, I think that we are the most ambitious generation.  Even with the odds stack against us, a shocking amount of us has achieved and still will achieve stellar feats that would have been thought impossible when our parents were born.

We see record-shattering Olympians like Simone Biles and Michael Phelps.  We see superstar programmers like Cody James who are changing the future of aviation.  We see teens founding dynamic companies like Mare, Biofire Technologies, Makotronic Enterprises, Mesa Foundry, Beam, and Averia Health Solutions (and that’s just from Forbe’s most recent 30 under 30).

Despite my numerous and well-founded complaints about the changes to higher education, my generation is easily the most well-educated generation ever to walk the Earth, to the point where we have made college degrees a standard to which higher skill workers are held.

In the face of every challenge we have created powerful and dynamic solutions; after all, necessity is the mother of invention, and because of this we have become the most inventive generation.  Perhaps because of this trial by fire that we are all simultaneously experiencing, we have also grown much closer, and more compassionate towards one another than the generations prior.  Could an idea like Kickstarter or Patreon have blossomed into the world-shaking successes they are today without the support of a generation that knows what it means to constantly struggle in the face of adversity?  Every day we prove ourselves uniquely willing to help each other out if we think that it might foster a world-changing success.  We donate or fund more people and organizations in the way than anyone before, despite having almost no disposable income to speak of, because we value compassion and the economy of great ideas over things.

With all of that being said, the next time you feel like telling a Millennial to get a job, how about instead telling them to make a job?  Or, even better yet, tell them to make the world that they dream of, and when they tell you to visit their Kickstarter page the next time you see them, give them a much-needed handout.  Because they may make the next job you really want to have.

Millennials and the Future of Jobs, Part 2

Hello; I am a Millennial with an unpopular opinion.

I think everyone is wrong about my generation.  I really believe that we are uniquely situated in history to create the new economy from nothing. First, we have to understand and overcome our challenges, so let’s cover those first.

We are quite possibly the first generation to grow up in a vastly different world than our parents.  Everything about our daily lives has changed in the time it took us to grow into adults.  Everything about the way that we see the possibilities that await in our future has changed; if it hasn’t, it’s time to update our perspectives because the future that waits for us in the next 20 years will be so far removed from the history of the world thus far that it would have been nearly impossible to have imagined it 20 years ago, when many of us were born or were small children.

All of this makes us the first generation that was unable to get adequate information from our parents about how to go about our lives.  Our parents could tell us about love, but couldn’t anticipate “ghosting”; Our parents could tell us about finances, but they didn’t know that overdraft fees would become a multi-billion dollar a year market in the US alone; Our parents could tell us about investing, but couldn’t anticipate that the stock market would plummet and completely reimagine itself several times since we became old enough to invest in it; Our parents could tell us how to write a resume, but couldn’t really explain how to use the internet to market ourselves professionally or teach us the basic computer skills that have become perhaps the most widely relevant job skill.

It’s not that our parents were worse than any other Generation’s parents were; we were simply both lost in the New World together, at the same time.  Or, simply, you can’t teach a skill you still haven’t learned.

So, here we are out in the new world, almost completely alone, and I feel that a great deal of us are spinning our tires — the one thing I have to give our critics credit for being completely right about.  They’re right.  We are having a lot of trouble gaining traction in this new and shifting economy. We are by far a more depressed and anxious generation than the ones that have come before us.  We are a more unemployed generation than many generations that have come before us in the same period of our lives.  We have more debt by far than generations previous to us.  This last point isn’t because we, on the whole, spend more frivolously than those who have come before us; in fact, the contrary is true.  We have become a far more frugal and financially conservative generation as a whole than the ones that preceded us.

Much of this comes largely because our student debt has skyrocketed over the last 20 years.

Here’s a quick breakdown of how schools in each category performed, looking at data reported by ranked schools that were included in editions of the U.S. News Best Colleges rankings from 1995 to 2015:

  • The average tuition and fees at private National Universities jumped 179 percent.
  • Out-of-state tuition and fees at public universities rose 226 percent since 1995.
  • In-state tuition and fees at public National Universities grew the most, increasing a staggering 296 percent.”

Despite all of that, we’ve acheived some amazing milestones, and even more so when we work together, but more on that next week in the conclusion to this three part series.


Millennials and the Future of Jobs

Stop me if you’ve heard this one: You Millennials and the rest of your generation are just so darn entitled.  You think everything should just be handed to you.  You have no ambition.  Go get a job.

Yeah, I’ve heard that quite a bit myself.  It seems to come as a hazard of being born in the last three decades, being alive to breathe air, and having the audacity to leave my apartment; this sentiment only grows stronger and more culturally pervasive every day.  

At the same time, the people I hear saying this to us are facing heightened unemployment themselves.  They say it’s easy to start a meaningful career as they rapidly begin losing their own.  I hear them complain about “going back to school” to learn job skills; sometimes even in the same breath as they assure me that getting a college degree is my only meaningful way to get a good job.  At the same time, they hit the polls and vote to put bank directors on local Boards of Governors, who then raise state tuition regularly as if they had some interest in the size of the average student loan skyrocketing.  Oh, wait!  They do.

I’ve heard those same people saying that the Government should make more jobs because they had a hard time finding one in the post-recession world; at the same time, they remind me that it should be simple for me to just go find one.  At the same time employers make it harder for someone just getting out of college to get a good job, and the ones that do hire us, hire us to do the job at a 40 or 50-something who they’re going to let go mainly because somehow they can get away with paying us half as much money to do as much work or more.

Not only do I disagree with shaming large groups of people and oversimplifying their struggles, but I also think they’re just wrong about us.  I think that we’re all saying the wrong thing on a fundamental level as well.

Instead of telling Millennials to go “get a job”, instead we should be telling them to “Go make a Job”; which will undoubtedly be followed up with “and make me one too while you’re in there.”

It’s not the government’s place to do this.  Only in Socialism does the government bear that responsibility.  Otherwise, the burden of creating jobs falls on the private sector.  The difference between “Private sector” and “Public sector” is that while Public sector jobs are created by the government and paid via taxes and fees on the public, Private sector job growth is encouraged by the individual (or corporations).  

Now that I mention Corporations I should tell you why we shouldn’t expect a benevolent Billionaire to make us jobs either.  For the purposes of this explanation, I’ll be talking about “C Corps” or what we generally think of as a Corporation.  

Corporations are owned by their shareholders; above all else their primary motivation is to increase the profits of their shareholders (which often includes their higher-level employees) and while this can mean hiring more people and expanding, it often encourages them to downsize, or to have workers do more work for less money in order to make a higher profit margin for themselves and their shareholders.


That brings us to the people.  Why do I think the people have the greatest power to solve the unemployment crisis?  Because we are the only ones who ever have.

Join me next week as we cover the problems that this generation faces in more depth, and then, in the following week, the solutions and a nice, happy ending.

Stay tuned!

Money Skills 204: Building a Legacy

Welcome Honors Students, to our final Money Skills class (for now!)

Over at Wallet Hacks Jim Wang has identified 70 life skills to help you handle money that you shouldn’t be without.

This is the final course in our 200 level Money Skills Curriculum.

Today, we will be looking into his suggestions for “Legacy skills”; a collection of habits designed to ensure that all of your hard work can easily be protected and passed on to the next generation.


  1. How life insurance works – There are a lot of terms, like whole, term, universal,… learn about the different life insurance policies and which one is best for you.
  2. How to prepare your estate – this includes writing your last will & testament, a medical directive, etc.
  3. How to be an executor of an estate and finalize an estate – You can put this on the list of optional skills to learn after you’ve been named by the maker or nominated by the testator but it’s a challenging task. If you are asked by someone to be an executor, read up and make sure you’re up to it before you say yes.
  4. Assume power of attorney – This is less stressful than being named or nominated executor but is still a big responsibility – learn what’s involved before agreeing to do it.

yellow-starHere’s a bonus skill – smile more. It’ll make you feel like a million bucks. Costs nothing. Can’t beat that ROI. Have a great day. 🙂


This is a part of a continuing series of practical financial skills for life.  Read the original article here.

Also, Follow on Twitter  and like us on Facebook for more practical life tips and financial advice.

Student Loans – A Multi-Generational Curse

February 23, 2017
Dennis Miller

For many, student loan debt is a giant step backward. Is it possible to get a good college education without a multi-decade debt burden? Yes, but it requires some hard work and discipline.

It seems like yesterday when I held my newborn grandson Jacob. Today he is taller than I am, graduating from high school heading off to college. The extraordinary cost of college education is looming, with his sister following close behind. There is money saved, including some of his own, but not nearly enough.

I cringed when student loans were mentioned. Student loans are a curse that keeps on haunting and should be avoided. Jacob can learn from his cousins before him. His older cousin married right before graduation. Their combined student loan debt would buy a nice home. Paying off their loans may take decades.

They were good students, received scholarships, grants, parents and grandparents chipped in; yet that was not enough to cover the cost of their diploma. They’re now in their 30’s and, like most of their peers, they both work, pay rent, pay down debt, have two small children and hope to save enough for a down payment on a home – “someday”.

Is a college degree worth it?

About News tells us, “…over an adult’s working life, high school graduates can expect, on average, to earn $1.2 million, while those with a bachelor’s degree will earn, $2.1 million; and people with a master’s degree will earn $2.5 million.

On average, a $100,000 bachelor’s degree would provide $800,000 more net income over a lifetime. Taking more than four years to graduate changes the math considerably. Complete College America publication Four-Year Myth reports, “… It has become the accepted standard to measure graduation rates at four-year colleges on a six-year time frame.” The top state schools (called Flagship Universities) report “36% graduate on time”.

Is a degree worth the money? It depends on many variables – the cost of the degree, the type of degree, the job market and the skills of the student. Student loans (for the lucky ones) may have been a blessing, however for many it’s become a curse.

Since the 2008 recession began student loans have skyrocketed to over $1.4 trillion.

The Wall Street Journal recently reported, “Revised Education Department numbers shows at more than 1,000 schools, at least half of students defaulted or failed to pay down debt within 7 years.” Many young people (not all graduated) owe several hundred billion dollars they have been unable or unwilling to repay.

The curse that keeps on giving

While there are some limited exceptions, you cannot discharge student loans in bankruptcy court. In 2012 Marketwatch reported:

“According to government data … the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds.”

Billions of dollars in student loan debt is on the books. Learn from the experience of others and don’t get caught in the trap.

The challenge for all families with school age children

Screw the statistics! We are concerned about our offspring. How do we get him/her through school, into a good career, without the burden of overwhelming debt, so they can enjoy the rest of their life?

Properly addressing issues in advance can go a long way toward achieving that goal.

  • Is college the right choice? Not everyone is college material, or scholastically motivated. Forcing a square peg into a round hole can be very expensive and setting them up for failure. Family elders must talk and LISTEN to their children. The goal is to help them become financially and emotionally independent adults. If college is not for them, the goal should not be negotiable, but rather how to get there.
  • What would be a good major? Because dad is a CPA and wants junior to buy out his practice is not why he should become an accountant. What skills and interests does junior have? What does he see himself doing in ten years? I had a friend who was terrified of flying tell me his son worked at a small airport and wanted to be a pilot. His son prevailed.
  • Be financially responsible. Once you have an idea of a major, finding an affordable school to fit is the next step. My friend was surprised to find a local college that had exactly what his son needed and he could continue to work his part time airport job.
  • All schools are not created equal. CNN Money provides a great tool for estimating college costs.I started with Northwestern University. The annual cost of tuition, room and board is $70,177. They also provide estimates after grants and scholarships (none guaranteed), which vary by family income. By contrast, the annual cost for our local Arizona State University is $26,191 before grants and scholarship. Is the big name school worth almost three times the price?
  • Expectations should be clearly understood. A four-year degree is expected, be one of the 36%. Using the above numbers, two additional years at Northwestern would cost $140,000 more. Time is money! Put a master’s degree on top of it and the educational cost could be well over $500,000.

How do the 36% make it through in four years?

For some, college was considered a right of passage. It made little difference what kind of degree you earned; you could find a job. Times and costs have changed. A party school today can become a very expensive six-year party. Young people at the most uptight school in the country will still have time to make friends and have fun. It’s a given!

  • Make the counselor work for you.
    Complete College America tells us, “On average, there is one advisor available for every 400 students.” They don’t always work in our best interest.In two cases, a college counselor told our incoming freshman to take 12 hours; it is less stressful. Don’t fall for it! If you need 120 hours to graduate, you just added an additional year to your cost – assuming you have a perfect schedule, don’t change majors or have a bout with mono.
  • Build a complete academic plan. Expect 15 credit hours per semester. Require the counselor to map out the required courses for the major, or a plan to get the student to a point in year one or two where they can declare their major without having to take additional classes. Take summer classes if you need to.On average, students with a bachelor’s degree end up with 134 credits when 120 are sufficient. That’s expensive and unnecessary.
  • If you consider a junior college, do your homework. College costs escalate rapidly when students transfer to another school. If your goal is to get a bachelor’s degree from your state school, will they give credit for all the classes from a state junior college? Avoid remedial classes if at all possible.Start with the goal and build a plan working back through the freshman year. You need to insure all credits are acceptable and build a road map. Yes it takes time, but you could be saving thousands of dollars.
  • Go to class every day. School is a full time job. Only going to class a couple days a week, and the holy grail of no Friday classes will not get you a degree in four years. The student must schedule classes when they are available – even if it means getting up early in the morning.
  • Dropping classes is unacceptable. If a class is hard and might affect your grade point average, “blowing it off” is unacceptable. Those with technical degrees can name the “weed out” classes. They are hard, require a lot of study time and many have drop out rates of 50% or more. Stressfully working hard to pass tough classes is part of the deal. That’s real life! Get a tutor if you need help, it is much cheaper than dropping out and changing majors.
  • Inquire about grants and scholarships every semester. Ask your professors and department heads for help. Many times there is money available just for the asking.
  • Parents, do your job! Parenting does not stop when your offspring leave for college; they still need your guidance.Have a realistic, jointly agreed upon budget from the minute they enter college. Keep them on track and you will avoid a lot of problems down the road.I’ve heard cases of students underperforming and totally exasperated parents exclaiming, “You are on your own!” By spending their own money parents hope their offspring will suddenly become more responsible.

One of the curses of student loans is the money is too easily available. Students do not learn financial responsibility until much later. Reality sinks in when they have to pay back the debt.

  • Do you really want an irresponsible child running up thousands of dollars in student loan debt? I am NOT suggesting you continue to bail them out financially. Refocus and recommit to the budget. It’s time they learned to focus on priorities, and distinguish needs from wants. If student loans become necessary, they should be as little as possible providing the shortest path to graduation.

Student loans have allowed the cost of education to escalate to ridiculous levels.

As family elders our goal is to get our offspring educated, without the horrible burden of student loan debt affecting the rest of their lives. Be among the 36% who get it done right!

Entrepreneurship Endeavor

Evann Hopkins

Devise and Design Event Planning


Entrepreneurship has become all the rage.  The business world is sliding away from the traditional 9-5 work life, and more towards the small business work from home kind of environment.  Being an entrepreneur can be freeing, but can also be very overwhelming.  Let’s take a look at the pros and cons of entrepreneurship and the financial side of it.

According to Shobhit Seth, from Investopedia, entrepreneurs are important for the economy because they create new business, add to national income, create social change, and farther community development. From their earned wealth, many of them create jobs and better conditions that lead to a more prosperous society.

Of course, with every situation there are ups and downs.  Let’s look at the reasons to love being an entrepreneur. First and foremost, you have lots of freedom.  You are not under someone else’s’ jurisdiction, and you are your own boss.  You create your own schedule and everything from when you work, how you work, and where you work.  You are in control.  This also means you have the freedom and time to attend conferences, seminars, networking events, and anything else you fancy.

All of these things will create opportunities for you and allow you outlets to sell your products and services. You will also meet other successful and motivated entrepreneurs as well.  These relationships will be important and essential. One of the biggest draws to entrepreneurship is the possibility of unlimited income.  The possibility of this is always there, unlike with your traditional job.

As well as there being many up sides, there are many downsides as well.  Most of the time, being an entrepreneur means you will be putting in more hours than a person working in a traditional company.  Your work-life balance will probably suffer.  There will be extra stress you may not be use to having, and you may get overwhelmed.

There are also a couple risks you will have to take as well.  You will need to be ready for the fact that you will no longer have a steady paycheck.  You will possibly need to sacrifice personal capital.  This is the case, at least at first, for most entrepreneurs.  Get use to the idea of not being able to rely on cash flow, and be prepared to deal with this monthly.  Also, remember that you will never be able to accurately estimate popular interest.  You have to make sure that anyone else working with you on your venture is trustworthy and won’t abandon you in your time of most need.

Another important side of entrepreneurship to look at is the financial side.  There are many ups and downs financial when it comes to entrepreneurship, and there are many things to keep in mind.  One very important action to take financially is planning. Plan, plan, and plan.  The more knowledge you have on your situation, and more backup plans you have, the better. This includes planning for the current situation, the future (retirement, children, etc), and planning for rainy days or months.

You should also diversify your income and assets as much as you can.  This way if your business venture doesn’t happen to work out, you have a better chance of having some financial security.  It is also a good idea to have separate personal and business accounts.  This is helpful for keeping some distance between what is yours personally and what is for the business, and it also helps keep you more organized.  It is also very important to keep your expenses below your income.  Live within your means and sacrifice in areas you can.

Make things easier on yourself by automating your bill payments.  This will keep you from forgetting about them and they will always be paid on time.  Also remember that you get what you pay for.  This reigns true for everything from products and supplies to business partners and employees.  The finances of it all can get confusing.  Seek out tax advice from a professional so you can make sure things are being kept straight.  The professionals at Homeland estate and Financial Services are here to help when it comes to any financial questions or concerns.  Book a free consultation with them and let them get your finances straight.

There is a lot that goes into being an entrepreneur.  There are ups and downs and many financial things to keep in mind.  The key is doing something you love, are passionate about, and that you want to share with people.  There are so many amazing opportunities you will stumble upon, so many talented and special people you will meet, and you will make your own special impact on the world.