Blog Archives - PFwise.com

Metlife Will Sunset Many Life Insurance Products

1/31/2017

Q. I heard that Metlife will exit the life insurance market?

A. Effective February 3, 2017, MetLife will sunset the following products:
Promise Whole Life
Promise Whole Life 120
Promise Whole Life Select 10
Promise Whole Life Select 20
Promise Whole Life Select 65
Guaranteed Level Term (face amounts less than $1M only)
Secure Flex Universal Life
Provider Universal Life
Legacy Advantage Survivorship Universal Life
Equity Advantage Variable Universal Life

For more details, please find attached PDF file.

Shareholder Benefits Programs

1/30/2017

Q. I heard some public company offer perks to shareholders, is it true?

A. Yes, it's true, and here are some good shareholder benefits programs:

Berkshire Hathaway (BRK-A) (BRK-B)
Owners who can afford at least a single share of Berkshire Hathaway also are entitled to discounts on Geico insurance. The rate varies by state, but it can be as much as 8 percent.

However, the biggest perk of Berkshire Hathaway ownership is access to the annual shareholder meeting. Beyond getting to be in attendance while Buffett and his partner Charlie Munger offer investing insight for hours, shareholders also get to shop at the exclusive store during the meeting that offers markdowns from Berkshire Hathaway subsidiaries.

Carnival Cruises (CCL), Royal Caribbean (RCL)
Shareholders who own at least 100 shares of CCL or RCL can apply for a stateroom credit on sailings. How much investors get in onboard spending money depends on the length of the cruise. RCL is more generous than CCL in terms of credits given out.

Ford
Investors who own at least 100 Ford shares for at least six months can get a few percentage points off on some new car models.

Free Reliable Tech Support Resources

1/29/2017

Techguy.org
This is a FREE site that has existed for over 20 years by now! You can get free advice on any tech issues - laptop, mobile, hardware, software, virus ...

iFixit.com
This is a site with FREE repair guide for everything, written by everyone.

CClearner
If you want to speed up your PC, this is a site with a FREE program you can download to get it done!

Could Your Insurance Claim Be Processed by a Robot In the Future?

1/28/2017

Japanese insurance company Fukoku Mutual Life is reportedly replacing 34 human insurance claim workers with IBM Watson Explorer starting this month. It’ll cost $1.7 million to install the system and $128,000/year for maintenance, saving the company an estimated $1.1 million on salaries (that’s roughly $32,300 per employee). IBM Watson will perform the bulk of the data gathering tasks performed by humans today and feed summaries to the remaining employees who process final payouts.

Most of the replaced job functions are probably data gathering and data collection which could be automated with algorithms, which provides data to human employees responsible for the final judgment call and payout decisions.

Do you have a mundane job that could be at risk someday in the future? How could you develop new skills and work on higher-level activity?

Why Investors Buy 50-Year Bonds With Very Low Rates?

1/27/2017

Q. Why investors in some foreign countries purchase long term bonds such as 50-year bonds with very low interest rates?

A. It's true that some countries have issued extremely long term bonds with extremely low rates, for example, France and Spain each sold 50-year bonds in 2016 so these governments could lock in the low rates through 2066. The French government pays just 1.75 percent.

Why would investors find such long-term bonds attractive? A lack of options. Many nations have issued debt with negative yields. According to JP Morgan Chase, about $9 trillion of government debt, or about a third of the global total, has negative yield!

Underwriting Guidelines for Blood Pressure

1/26/2017

Q. I know my blood pressure is a bit high, is it possible to have a reasonable estimate what underwriting class I might get before my term life application?

A. Yes, if you are very healthy other than the high blood pressure, you can refer to the Underwriting Guideline for Blood Pressure below to have a reasonable estimate of what underwriting class you might get if you apply for life insurance.

Note, each life insurance company's specific underwriting guideline could change at any time, it's best for you to Contact Us so we can discuss with you to make more accurate assessment and determine the best carrier for you to apply.

Examples of Impaired Risk Underwriting Improvements

1/25/2017

Q. With medical advancements, do consumers with some sorts of health conditions receive better underwriting class offers from life insurance companies?

A. Yes, that is certainly happening right now! Here are some examples where consumers are getting better offers from life insurance companies today than before:

Alcohol abuse: a mild or moderate abuser coudl secure a mile or moderate rating.
Asthma: can secure Preferred rates now.
Cancer: certain cancers can receive Preferred nonsmoke rates now.
Diabetes: Preferred rates are now possible for an increasingly number of well controlled diabetics.
Heart disease: single vessel coronary artery disease can get Preferred nonsmoker rates now.
Hepatitis C: using new drugs, previously a declination or high table rated can receive Standard or even Preferred rates.
HIV: previously viewed as uninsurable, now could get offers from a number of insurance companies.
Marijuana and cigar users: some could get Preferred nonsmoker offers now.
Prostate cancer: using watchful waiting over age 65, previously declination could get Standard ratings now.
Seniors: over age 70 now available with multiple credits, better with acute coronary syndrome.
Sleep apneas: some are now available with Preferred rates.

Three Types of Retirement - Implication B

1/24/2017

In our last blog post, we discussed the implication on saving for retirement. Now we will discuss disability insurance and risk to human capital.

Disability Insurance and Life Insurance
We have discussed before that in the non-traditional retirement types, the retirement saving is not needed to be as high as traditionally needed to be, this means we will be more reliant on our ability to earn income, or "human capital".

However, what if you had any unfortunate event in the alternative retirement phase, for example, either lose the ability to generate earnings temporarily or permanently?

This means it's very important for people pursuing the alternative retirement to have the protection of disability insurance (for temporary events) and life insurance (for permanent event)?

Are you fully protected when you purse your dream retirement?

Three Types of Retirement - Implication A

1/23/2017

We have discussed three types of retirement, now let's discuss what are the implications to your personal finance actions!

Savings for Retirement
The traditional saving for retirement is only effective for the traditional type, and not the best fit for the other two types, for two reasons:

a. Smaller saving needs
In semi-retirement and temporary retirement, your actual working time is a lot longer than traditional retirement, so your need for saving is a lot less too.

b. Later peak demand
In semi-retirement and temporary retirement, your peak demand for your nest egg happens a lot later in your life - probably only the last decade or so of your life when it's no longer feasible for you to engage any types of work.

c. Smaller peak demand
Because your need for the nest egg happens a lot later in your life for a shorter period of time, the amount needed to support that shorter period of time is less than the amount needed to support the traditional retirement.

In Traditional Retirement, if one has saved $1M nest egg, the traditional rule of thumb 4% withdrawal rate could sustain the non-working time for several decades.

However, if in any of the two non-traditional retirement types, if one could just earn $20,000 per year to supplement that $40,000 per year withdrawal, the required nest egg amount could be cut in half to half a million dollars!

In our next blog post, we will discuss another important implication.

Three Types of Retirement - Non-Traditional Retirements

1/22/2017

We discussed the traditional retirement last time. There are two types of non-traditional retirement -

Semi-Retirement
Semi-retirement means a retirement from your current full time job, but necessarily from any work.

You could be pursuing a new career of your true passion, starting a business you already loved, or engaging in consulting or part-time work in your previous field. There are plenty of resources helping people in this life style.

Such scaled back work brings both personal fulfillment and ongoing financial assistance, which means you could actually retire from your current job earlier than the traditional retirement time!

Temporary Retirement
Temporary retirement means you take breaks from your current full time job/work, for a limited time, after which you go back to the working field, and you do this several times in your life.

In this types of retirement, retirement is not the end goal anymore. Instead, retirement becomes a transition between extended careers, and your end retirement will be shortened compared with the traditional retirement, as you have taken it a lot younger and several times before!

So, which types of retirement do you prefer? Traditional, semi-retirement, or temporary retirement?

In our next blog post, we will discuss the implications of the different retirements.

Three Types of Retirement - Traditional Retirement

1/21/2017

What are three types of retirement?

Traditional Retirement
We are all familiar with the "traditional" retirement concept -

Save early and often, invest prudently for growth, and retire as soon as you’re financially able. For example, if you could save $500 a month from a very young age, such as 20, by early 60's you will have nearly $2M sitting in your retirement account and you could retire comfortably.

Of course, if you can grow your retirement portfolio fast enough, you can retire early. If not, you could at least retire in your 60s when Social Security becomes available. The time in retirement is filled with leisure, or perhaps engagement through volunteer “work” (but you no longer work for the money).

Hedonic Treadmill
Have you heard of "hedonic treadmill"? It is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes.

The hedonic treadmill effect means that, while we are working, we find a life of leisure sounds great ... only when we reach that stage - once we retire into that life of leisure, we find it becomes boring and no longer enjoyable. Don't believe it? Just ask people around who are already retired.

This bring us the concept non-traditional retirement, there are two types of them.

Some Creative Use of FSA Money

1/20/2017

Q. My employer's FSA plan allows me to spend the money till March 15. I am having trouble figuring out how to use the money. Any suggestions?

A. Here are some ideas to use your FSA money -

You can use FSA money to pay for acupuncture
Pay for massage to treat a medical condition (need a letter from your Doctor)
Use FSA to pay health club dues (with a letter from doc)
Use FSA to pay for a swim or dance class to treat a medical condition
Purchase a nightguard (for teech grinding)
Purchase sunscreen (SPF15 or greater)

15 Great Finance Websites

1/19/2017

Here is a list of 15 great websites for finance professionals -

Institute For Truth in Accounting: www.truthinaccounting.org
Americans For a Secure Retirement: www.paycheckforlife.org
U.S. Census Bureau: www.census.gov
Peter G. Peterson Foundation: www.pgpf.org
Employee Benefit Research Institute: www.ebri.org
Inflation Data: www.inflationdata.com
Social Security Administration: www.ssa.gov
Congressional Budget Office: www.cbo.gov
Shadow Government Statistics: www.shadowstats.com
Life Happens: www.lifehappens.org
Professor Laurence Kotlikoff on Social Security: www.maximizemysocialsecurity.com
IRA guru Ed Slott: www.irahelp.com
Tom Hegna on guaranteed income: www.tomhegna.com
John Mauldin on economic issues: www.mauldineconomics.com
Martin Weiss: www.weissinc.com

How to Avoid Bank Fees?

1/18/2017

Q. How to avoid the various small bank fees?

A. Here are some tips to avoid the various small bank fees:

Overdraft Fees
A bank cannot charge you the overdraft fee unless you opt in for the service. You might have signed up this service many years ago and have forgotten about it, if this is the case, call the bank to cancel overdraft protection program enrollment.

Monthly Fees
Many banks have various requirements, such as setting up direct deposit, complete a minimum number of transactions, etc. if you want to avoid the monthly fees. The trick is if you have any change, such as change a job, move to another location, etc. and it's hard to meet those requirements. It's key to shop around and find the bank that best meets your needs.

Low Balance Fees
If you have a savings account that requires a minimum balance otherwise there will be a fee, it's wise to evaluate if it's worthwhile to let a large amount of money sits on the savings account and eanring near 0% interest rate, or simply change a bank that charges no low balance fees.

What Is the Base for 4% Retirement Income Withdrawal?

1/17/2017

Q. Should I include my house value when calculating the 4% withdrawal?

A. No, the traditional rule of thumb for retirement income is to withdraw 4% from your liquid assets, which exclude your house because you need a place to live.

However, if you later on sold your house and moved into a smaller one, and put the proceeds of house sale into the investment account, your 4% will be based on the larger base.

How Much Will A Speeding Ticket Increase My Auto Insurance Premium

1/16/2017

Q. How much a speeding ticket will increase my auto insurance's premium?

A. A speeding ticket will usually lead to an increase of your auto insurance's premium, although the increase will depend on several factors, such as your state, the insurer, and the actual speed.

Typically, if you are 1 to 15 miles per hour over the speed limit, your auto insurance rate may increase an average 21%, and if you are over the speed limit by 16 yo 30 miles per hour, your auto insurance rate might increase by 28% in average!

Worse, such increase may stay 3 to 6 years, as most insurers don't review a motorist's record every timethe policy is renewed!

If you want to minimize the increase of auto insurance premium, you can take a safe-driver course. You can also check your insurer if they have the rule to forgive the first ticket for longtime customers.

How to Dispute a Credit Card Billing Error?

1/15/2017

Q. I found a charge on my credit card bill for something I never received. How do I dispute it?

A. The easiest way maybe to contact the merchant directly and ask the merchant to correct the error. If that route doesn't work, you can contact the credit card issuer directly - per the Fair Credit Billing Act, you have 60 days from the time you received the credit card bill that contains the error to file a dispute, and the creditor has to settle your case within 2 billing cycles.

During the dispute period, you do not have to pay the amount in dispute.

If the result is to your favor, that's great. If not, you can still file a complaint with Consumer Financial Protection Bureau, it will forard your complaint to the issuer, who must respond within 15 days.

Does Risk Tolerance Vary With Market Situations?

1/14/2017

Q. Does an investor's risk tolerance vary with market situations?

A. No, an investor's perception of risk might vary with market situations, for example, in calmer markets, investors might view the risk lower, in market gyrations, investors might view risk higher.

However, an investor's risk tolerance level does not vary with market situations. To measure your risk tolerance level, you can try our online risk tolerance assessment tool.

What Happens When My Term Life Policy Expires?

1/13/2017

Q. What happens when term life expires?

A. You have quite a few options when your term life policy expires:

1) If your health condition got worse
In this case, it will be a good idea to convert your term life to a permanent life policy so you can take advantage of the same underwriting class you are getting for your term life policy, because otherwise you either can't get a life insurance due to your poor health or a very expensive one due to a lot worse underwriting class.

2) Keep the term life policy
You can keep the term life policy, but your premium will go up significantly. Or if you keep paying the same premium amount, but your coverage amount will be a lot lower.

3) Terminate the policy
If you stop paying your term life's premium, your policy will lapse.

Are We Really In a Very Long Bull Market at This Time?

1/12/2017

Q. I am concerned the stock market is overextended for too long, or is it really the case?

A. Many people think the current bull market is overextended because from the low of March 2009 to now, it's more than 7 years. Such a long bull market is highly unusual, therefore, the conclusion is that a correction may be inevitable.

However, the above view could be wrong - a bull market could be measured from the time the market broke above the prior bear market trading range and making new highs. If this is the case, the current bull market won't start from the March 2009 low but from the breakout to new highs in April 2013, this means the current market is not extended at all.

Is Budgeting Really a Good New Year's Resolution?

1/11/2017

Q. My New Year's resolution is to get more organized and start tracking budget. Is there an alternative to that?

A. Yes, budgeting is very hard to enforce, and it doesn't have to work that way. Below we will introduce an alternative to budgeting:

1. Figure out your future cash needs
Here you need to be as detailed as possible, and also don't forget inflation.

2. Figure out how much you will have
Find out how much income you will get from social security and pension, the gap between this and your cash needs is what you need to prepare on your own.

3. Figure out how much you need to save each month now
Given your investment target, assume a reasonable investment return, you can work backwards to figure out how much money you need to invest now each month. You can use our online calculator to do the calculation.

4. Figure out how much money you have left
After subtracting the savings you need each month, the rest is what you could spend each month. Go ahead spend all of it, there is no need to worry about budget!

What Are the Risks to Participate Equity Crowdfunding? Part II

1/10/2017

In our last blog post, we showed the SEC regulations on the amount you could invest in crowdfunding deals. They are for your protection only. Below are the major risks in crowdfunding investments -

Speculative investment. Start-ups and early-stage ventures often fail. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a start-up or early-stage venture often relies on the development of a new product or service that may or may not find a market. You should be able to afford the loss of your entire investment.
Illiquid investment. You will be limited in your ability to resell your investment for the first year and you may need to hold it indefinitely. Unlike investing in companies listed on a stock exchange, where you can quickly and easily trade securities on a market, you may have to locate an interested buyer when you seek to resell your crowdfunded investment.
Cancellation restrictions. Once you make a commitment to invest in a crowdfunding offering, you are committed unless you cancel within 48 hours of the offering’s deadline.
Overpay for your investment. Unlike companies that are listed on a major stock exchange, where prices are displayed throughout the trading day, the valuation of private companies is opaque. You may risk overpaying for the equity stake you receive. In addition, other investors might have ownership or investor rights that are superior to yours, giving them an economic advantage over you.
Limited disclosure. A company raising capital must disclose details about its business plan and what it will do with the money it’s trying to raise, among other things. A crowdfunded company might be able to provide only limited information. Also, the company is obligated only to file financial statements annually. Publicly listed companies, by contrast, are required to file annual and quarterly reports and promptly disclose certain events — continuing disclosure that can help you evaluate the status of your investment.
Misuse of your funds. When you invest in an early-stage company, you’re really making an investment in the entrepreneur or management of the upstart. Thus, a portion of your investment may be used to pay the compensation of the company’s employees, including its management.
Fraudulent investment. Crowdfunding makes it so easy for early-stage companies to raise money that certain opportunities could turn out to be money-losing fraudulent schemes. There is no guarantee that crowdfunding investments will be immune from fraud.
Lack of professional guidance. Many successful companies attribute their early success partly to the guidance of professional early-stage investors (such as angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role by sharing their resources, contacts and experience. An early-stage company financed primarily through crowdfunding may not have the benefit of such professional investors.

What Are the Risks to Participate Equity Crowdfunding? Part I

1/9/2017

Q. I am interested in investing some startups that are raising money through crowdfunding platforms. What are the risks?

A. The risks are so high that the SEC has imposed severe limits on the amount you can invest in equity crowdfunding deals during any 12-month period. Here are the parameters:

If your net worth and annual income are less than $100,000, you can invest up to the greater of $2,000 or 5 percent of the lesser of your annual income or net worth.
If both your annual income and your net worth equal or exceed $100,000, you can invest up to 10 percent of your net worth or annual income, whichever is less, up to a maximum of $100,000.

You can calculate your annual income or net worth by jointly including your spouse’s income or assets. Property does not have to be held jointly. But if you use this option, your total crowdfunding investments cannot exceed the limit that would apply to an individual at that level.

You can calculate your net worth by adding up all your assets and subtracting all liabilities; for crowdfunding purposes, your primary residence and mortgages are excluded. (Mortgage debt that exceeds your home’s fair market value counts as a liability.)

In next blog post, we will discuss in more details the various risks of investing in crowdfunding deals.

Is It Safe to Put All Investment Money in One Broker Account?

1/8/2017

Q. All my investments are done through one broker. I wonder if there is any risk in this approach?

A. If your brokerage account has a sizable amount, or if you are already in retirement and live on distributions, there could be risk if you put all your investment money in one brokerage account.

The reason is your investment money is insured up to $500,000, thanks to Securities Investor Protection Corporation (SIPC) insurance.

Can I Liquidate My Annuity Quickly?

1/7/2017

Q. If I need money urgently, can I liquidate my annuity quickly?

A. Yes, Annuity is a liquid asset, although if you want to liquidate a deferred annuity, there might be surrender charge. Other than this, most annuity firms can help you liquidate your asset quickly.