058 Furloughed Life Insurance

(Complete Show Notes Below)

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In the 58th episode of the Financial Procast:

TIAA-CREF Says People Don’t Trust Financial Advice

According to a research report commissioned by TIAA-CREF that surveyed 1000 Americans, nearly 50% say that they aren’t really sure who to trust with regards to receiving financial advice.

Now that probably means the other half of people aren’t working with a credible resource either…they just don’t know it.

Hmm…

What’s even more disturbing?  It seems that 37% of those people surveyed say, “they don’t like talking to anyone about their finances.”

Uh oh…that’ not good.

In our experience, that means these people are likely too embarrassed  with their lack of planning to admit their failure to anyone.  So, basically we now know the percentage of Americans who aren’t totally delusional about the fact that they’re not saving enough money.

That 37% isn’t doing a good job of planning and they don’t wanna talk about it.

Additionally, 1/3 of those surveyed said they don’t have time to deal with it.  What?

It really doesn’t take that much time, so…maybe people should start telling the truth. What’s the truth?  The truth is most people are clueless and talking about it with someone just reinforces that fact.

This reminds us of the world’s most famous excuses for not exercising…”I don’t have time”, “I’m too busy for that” etc.  Really? How about that four hours of television you watch every night, you got time for that…right?

The esteemed senior managing director of advisory services at TIAA-CREF, Eric Jones, says “When it comes to financial advice, trust and personal touch are key if we expect individuals to take action.”

Ummm…nope, that’s not the key.

We can tell you what the two most crucial factors are:

1.  Having the right knowledge and/or a competent resource

2.  You have to do something—just talking about it won’t help, people have to set the wheels in motion

It’s time for a little personal responsibility to take root with regards to planning your finances.  A trusted advisor can certainly help but their advice will be much more valuable if you have a destination in mind.

furlough

Life Insurance Carriers Say “Meh” (18:25)

In the last couple of weeks, we’ve had a couple of people ask us specifically about how life insurers will deal with a Treasury default.  And does the whole government shutdown really matter?  Don’t life insurers invest heavily in treasuries?

After all, just last Thursday, the Treasury said

“In the event of a default, the U.S. economy could be plunged into a recession worse than any seen since the Great Depression.  The U.S. dollar and Treasury securities are at the center of the international finance system.  In the catastrophic event that a debt limit impasse were to lead to a default on Treasury securities, financial markets could be shaken to their core as was seen in late 2008, which resulted in a recession worse than any seen since the Great Depression.”

Guess what life insurers had to say about all this?

Not much.

Why is that?

Well, life insurance companies are pretty savvy when it comes to invest their general account money.  According to industry surveys, the life insurance industry’s general account assets show us that the most of their portfolios are invested in corporate bonds and mortgage loans.  Not treasuries.

Jack Dolan, the spokesman for the American Council of Life Insurers, “Only 8 percent of our general account assets are held in long-term government bonds.  In comparison, about half of our general account assets are in corporate debt.”

That’s a pretty small percentage of general account assets invested in government bonds.

Also, let’s not forget that just being in the life insurance business is profitable even if your investment return isn’t so great.  The life insurance business is inherently profitable—claims are very predictable which makes underwriting profits almost a certainty.

Turns out the investment folks at the life insurers have seen the less than favorable trends in the Federal government, spending etc. coming for quite some time and have taking steps to largely move away from treasury bonds.

Meanwhile we think that all of the rhetoric in Washington is just that—a bunch of political posturing and bloviating that will likely not result in much of anything.  All of the political zealots understand the ramifications of a treasury default and will do whatever last minute maneuvering it takes to avoid it.

Stop Whining Already (29:37)

Are we tired of listening to the Gen-Y and the Millennials whine about how things aren’t working out for them exactly as they had envisioned?

Yep we are a little bit.

Wait…I don’t just get a job when I graduate from college?  But they told me if I went to college, got good grades, I’d get a good job with my diploma.  It’s a combo plan right?

You mean if I borrow $100,000 for an Art History degree, I may not find a decent job that will help me get out of that debt?

That’s precisely what we’re saying.

First, you need to be pragmatic and not borrow a lot of money to get a degree where you’re going to make $30,000/year.

Secondly, you can’t just expect for someone to serve up a job to you when you’ve graduated.  That’s a lie that’s been perpetuated for far too long.  No one owes you anything, you have to earn the privilege of receiving a salary.

Millienials and everyone else need always remember that a job is merely a tool that is used by an employer to leverage your time to create more revenue for their business.

If you don’t have the potential to generate a net profit for them at some point in the future, the employer has no reason to hire you.  They may really think you’re swell but businesses exist to generate profits for their shareholders.

So perhaps you should spend more time thinking of creative ways you can display to a potential employer your value as their potential employee?  Even if they don’t use your idea, they’ll likely be impressed that you put forth the effort.

No doubt the economy and job market are not so great.  However, complaining about it won’t but any money in your pocket. And if you’re waiting for someone else i.e. the bozos in Washington, D.C. to fix it—good luck.

And here’s the story Brandon referred to in the podcast with The 30 Mindblowing Statistics About Americans Under The Age of 30.  We’re not sure how mind-blowing they are but it’s worth taking a look and listening to our commentary in the podcast.

 


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