Many people may pay little attention to how they might handle their family’s living expenses should their income suddenly cease because of an unexpected illness or injury. Perhaps this is because most people believe an injury or illness will never happen to them. However, the statistics are unsettling.

According to the Insurance Information Institute (III, 2007), an individual between the ages of 40 and 65 has a greater chance of missing at least three months of work due to an accident or illness than of suffering an untimely death. Indeed, the average recovery period runs a lengthy two and a half years. This is why disability income insurance should be an important part of your overall financial picture.

Protect Your Most Valuable Asset

Disability income insurance protects your most valuable asset—your ability to earn an income. You pay a periodic premium, and in exchange, if you are disabled and cannot work, the insurance company agrees to pay you a predetermined benefit amount.

In order to understand the right type and amount of disability income insurance for your needs, you’ll first need to consider whether you already have some coverage in place. For instance, you may have some form of disability income insurance through your employer. If you do, it may be a good idea to find out if you have short-term and/or long-term coverage, and exactly how long the benefits last. Knowing what coverage you already have will help you determine if you need additional coverage to help pay for your home or apartment, automobile(s), utilities, food, clothing, education, etc., in the unfortunate event you ever become disabled.

Likewise, if you’re self-employed, you need to examine how a disabling injury or illness could affect you, your family, and your business. Because workers compensation insurance is often confused with disability income insurance, you need to know that workers compensation (required of employers in most states) only covers disabilities that occur while you’re on the job. Hence, in order to qualify for benefits, the illness or injury must be work-related.

Better Safe than Sorry

Since disability income insurance helps protect a portion of your earnings, you should consider it an important part of your insurance program. Remember that individual contracts can be specifically tailored to help meet your personal and/or business needs. Because features and benefits vary widely from policy to policy, you may wish to discuss your needs with a qualified insurance professional—one who can answer your questions and concerns, assess your needs, and help you make an informed decision. $

America’s senior generation grew up in a different world. Earlier decades of the twentieth century were governed by courtesy, good manners, loving one’s neighbor as oneself, and trust in one’s fellow man. Today, these exemplary standards of conduct are getting seniors into trouble. Con artists, offering a wide variety of too-good-to-be-true investment “deals,” are banking on the willingness of older Americans to seal their shady scams with the proverbial handshake. Unfortunately, many seniors today are finding themselves in financial tight spots, making them more inclined to jump at the chance to “double” their money.

With today’s multitude of contact options, ranging from the phone to the Internet,
scammers have virtually an unlimited number of “ins” when targeting victims. Common scams include e-mailed chain letters that are not only illegal, but also promise a pyramid of payoffs that always fall apart once the victim has bought into the system. Another common scam is one in which a Nigerian prince, doctor, or chief e-mails the victim and claims to need assistance transferring his riches to an American bank account. The victim is promised as much as 30% of the transferred millions and is asked to pay the perpetrator a fee to prove his or her honesty.

Fake charities are another common scam method. Kind-hearted donors are swindled into becoming victims by paying ridiculous sums to a cause that only benefits a con. Phone calls and paper mail are often used to offer individuals the chance to “win” the lottery or claim a sweepstakes prize. In the end, these supposed winnings only end up causing financial loss and heartache. Topping off all of these scams are fraudulent investment opportunities wherein the victim is promised fantastic returns on capital from “lucrative” oil and gas leases, penny stocks, rare coins and metals, etc. The list is endless.

Too often, these scams go unreported because of the shame victims experience once they realize they have been had. And that’s just what scammers are banking on. FINRA (formerly known as NASD) awarded a grant to WISE Senior Services to research this growing crime. In a report entitled, “Off the Hook Again: Understanding Why the Elderly Are Victimized by Economic Fraud Crimes,” several discoveries were made, including the typical psychological tactics cons use. These tactics increase cons’ success rates and decrease the chances of them being reported. Victims may be led to believe that their only option is the one being presented in the scam, or the scammer may befriend the victim knowing full well that people are less inclined to ask friends hard-hitting questions. Another ploy is a request for help from the scammer tapping into the victim’s pity. Or the scammer may claim famous investors, like Donald Trump, are also buying into the property, or the product is in such high demand and so rare that the victim is lucky to have even heard about it in the first place.

Con artists may also use their assumed authority roles to coerce victims into letting the con make the decision for them; offer no-risk, guaranteed results; intimidate the victim by playing on his or her fears; or procure more and more payments by telling victims they are committed to the investment and must continue to invest in order to not lose the sums they have already paid.

On paper, these tactics might sound entirely see-through. But in person, they are too often extremely effective. The WISE study also revealed that fraud techniques are often tailored to the psychology of the individual. Financial education, alone, will not be enough to put an end to senior fraud, since one of the study’s major findings indicated that senior fraud victims are more financially educated than non-victims and more willing to listen to sales pitches. In addition, victims are more likely to have experienced negative life events, such as job loss, divorce, or the death of a spouse.

Anyone approached with a “must-act-now” deal should take the time to walk away and do some research. Be skeptical, question why the offer is being made to you at that time, and contact the Better Business Bureau to learn more. Don’t waste time listening to cold-call sales pitches, and make sure to get second opinions from friends and family before taking action on any hot deal. In the end, follow the golden rule of thumb. If it sounds too good to be true, it probably is. $

Today’s workers will experience a retirement different in many ways from the post-work years of past generations. While most Americans realize this, many are not adjusting their financial strategies, according to the 2007 Retirement Confidence Survey (RCS),¹ sponsored by the nonpartisan Employee Benefits Research Institute (EBRI) and survey research firm Matthew Greenwald & Associates.

Jack VanDerhei, a Temple University professor, EBRI fellow, and coauthor of the RCS, said, “This year, we found that a substantial number of workers realize that the shift from traditional pensions to 401(k) plans affects them personally. Unfortunately, only 24% of those affected indicate that they will save more on their own, and only 8% indicate that they will save more in the employer’s plan as a result of these changes. EBRI research suggests that the vast majority of employees are likely to need some type of additional savings if they hope to end up with the same amount of retirement savings they would have expected prior to the change.”

Nearly half of the workers surveyed (45%) are less confident about the money they can expect from a traditional pension—18% are much less confident, and 27% are a little less confident. While 16% reported their confidence has increased, 28% said their confidence remains unchanged. Of those workers who have experienced a reduction in employer benefits in the past two years (17%), only 32% reported they are saving more to account for the loss.

Furthermore, some workers appear overly optimistic about their future benefits. Only 41% of workers reported that they have a defined benefit plan (through their own employer or through a spouse), but 62% expect to receive income from this type of traditional pension. Fewer companies offer defined benefit plans today than in the past, and this declining trend is expected to continue.

A majority of workers are currently saving for retirement (60%), but less than half (43%) have tried to calculate their accumulation needs for retirement. While 66% of workers reported having saved money at some point for retirement, this percentage is down from 70% in 2006.

Younger workers tend to have less saved than older workers: 68% of respondents under the age of 35 have less than $25,000 saved or invested; 48% of those age 55 or older have more than $100,000 saved. According to the survey, the total value of savings and investments was higher for those who had estimated their financial needs for retirement and for those who had higher incomes and more education.

How much do Americans think they need to save for retirement? The RCS reported the following: 25% of workers estimate they’ll need less than $250,000; 18%, more than $250,000 but less than $500,000; 20%, more than $500,000 but less than $1 million; 11%, more than $1 million but less than $2 million; and 8%, $2 million or more. Younger workers tend to have higher estimates than older workers, and women are more likely to have lower estimates than men.

At least half of Americans plan to rely on their own savings and investments as their primary source of retirement income. According to the RCS, 50% of workers expect their own personal savings will be their largest funding resource; 40%, Social Security; and 21%, a traditional pension plan. An employer-sponsored plan, such as a 401(k), will provide most of the retirement income for 28% of respondents.

According to the RCS, many Americans are confused about their Social Security benefits. For older generations, the age for receiving full Social Security benefits is 65. However, due to longer life expectancies, full retirement age will increase in gradual steps until it reaches age 67, which affects people born in 1938 and later. Only 18% of those surveyed knew when they would be eligible for full benefits from Social Security.

An additional source of income for a majority of retirees will be work for pay. While 37% of current retirees have worked at some point during their retirement, 66% of today’s workers expect to work in retirement. The 2007 survey did not inquire about retirees’ reasons for working, but the 2006 RCS reported the following: 96% of working retirees wanted to stay active; 79% enjoyed working; and 63% had at least one financial reason.

The RCS also looked at Americans’ expectations of health care costs in retirement. Provided Medicare benefits remain at current levels, EBRI estimates that couples who live to the average life expectancy will need approximately $300,000 to cover health costs in retirement; couples living to age 95 may need as much as $550,000. Workers tend to underestimate the amount they and their spouse will need: 32% estimate less than $100,000 will be enough, and 52% estimate less than $250,000 will be enough.

Matthew Greenwald, president of Matthew Greenwald & Associates, cautioned that rising health care costs will be a significant financial burden for future retirees. He said, “It seems clear that workers do not understand how much Medicare, Medigap policies, and prescription drugs will cost them in retirement. Most are not accumulating enough money to even cover the insurance and health care costs they are likely to face in retirement.”

Even so, Americans remain relatively confident about their financial futures. According to the RCS, 27% of workers are very confident they will have the financial resources to enjoy a comfortable retirement, 43% are somewhat confident, 30% are less confident, 19% are not too confident, and 10% are not at all confident. $