Plus, J.D. Power’s Survey Reveals Low Satisfaction Among Annuity Holders
Free Webinar Tomorrow: Financial Planning in the Age of LongevityRic Edelman: Tomorrow at noon Eastern time, I'm presenting a 90-minute webinar for the Museum of American Finance and the New York Public Library. The webinar's on Financial Planning in the Age of Longevity. The webinar is open to the public and you can register for free at TheTruthAYF.com/MOAF. That's for the Museum of American Finance.
After a Downbeat 2022, is Recession Looming?(1 min)
Some 63% of Americans say that inflation pushed them off track financially. 59% are living paycheck to paycheck. 60% say they can't pay an unexpected expense of $500. 54% have reduced the amount that they're putting into their retirement accounts because of inflation. And 43% say they've withdrawn money from their retirement accounts to pay their bills. And you do have an explanation for this, don't you?
Well, we all know the tremendous pressure that the economic environment has placed us under in 2022 because inflation was near double digits - 8.7% Social Security increases based on the rate of inflation. And we know that the stock market had a terrible year, the bond market had a terrible year, crypto had a terrible year. So between the fact that your expenses were radically rising at the very moment that your assets were fundamentally falling, we're now discovering ourselves with layoff after layoff after layoff.
It's about over 200,000 people have been laid off from Silicon Valley alone. Wall Street investment banks and brokerage firms are announcing massive layoffs. It's really rather astonishing, leading to the fundamental question not whether we're going to have a recession, but when will it start? Has it already? And frankly, how long will it last? How bad will it be?
J.D. Power’s Survey Reveals Low Satisfaction Among Annuity Holders(1 min)
Because of everything going on in the economic environment all around us, retail investors have been piling into cash. In the last year, $155 billion was added into money market funds. Annuity sales are at their highest levels since the Great Depression. And since that's what you're doing, since so many folks are putting money into cash and into lousy investments like annuities, comes Morningstar's new study. The Center for Retirement and Policy Studies at Morningstar has just released a report saying that annuities deliver little benefit to wealthy investors. And I'll ask you, are you a wealthy investor? Do you have several million dollars? I mean, it's only wealthy people who have the money to invest. And what is it that these wealthy people are investing? Very often annuities- because you don't want the volatility of the stock market. You love the idea of a so-called guaranteed income and annuity sales are off the charts. But Morningstar says that if your wealth is 36 times more than your retirement income need, say no to annuities.
That was a bit of a jumble. What exactly did Morningstar say? Let me make it simpler for you. If you need $100,000 in retirement income and you have more than 3.6 million in savings, you should not buy an annuity. According to the Morningstar quote, "Annuities do not add much value when an investor is already well prepared for retirement. They do not help much when Social Security or other guaranteed income sources already cover the majority of your retirement expenses". That's Morningstar speaking, and J.D. Power really ties it all together. They just released a survey of investors and found out that buying an annuity is like buying a boat.
You've heard that joke, right? What are the two happiest days of a boat owner? The day they buy it and the day they sell it. And that's what J.D. Power just found out in this survey of investor satisfaction. Investors' satisfaction with annuities begins falling as soon as they buy the product. So your happiest day is buying it. And from then on, you will be increasingly unhappy. You'll be unhappy about the fees, you'll be unhappy about the lack of liquidity, you'll be unhappy about the taxes, you'll be unhappy about the low return, you'll be unhappy about the low income. Really think twice if you're going to be buying an annuity.
The Hemline Index: Do Women’s Skirts Predict The Market?
Let me switch subjects here. We're all trying to figure out what's going on in the world of stock prices. Stock prices have fallen and are likely to stay down for a while. No, that's not me saying that. That's the Hemline Index. This index, which has been around for more than 100 years, says that the length of women's skirts rise and fall with stock prices. Skirts get shorter in good economic times. They get longer in bad economic times. Back in the 1920s (remember the Roaring 20s) and in the 1960s (remember the Nifty 50), skirts were really short. Then in the 1930s, the Great Depression, skirts went really long. Today, where are hemlines? Down around the ankle. Givenchy, Prada and others are all selling elongated skirts. The Hemline Index says the stock market stinks. You can decide for yourself if there's any legitimacy to that.
Oh, and with the money that you've got, ok, you don't want to invest it in the stock market. You're piling into cash and annuities and whatnot. What about at the end of your life? What then is going to happen to your money? In a recent survey, 41% of investors who have $1 million or more do not have a wealth transfer plan. You haven't decided what you're going to do with the money. You haven't said who is going to get it. You haven't signed a will. You haven't obtained a trust. 46% refuse to discuss money with their family. 70% say that they don't think their kids will put the money to good use. And 49% are worried about making their heirs feel entitled. 64% are concerned about giving the money away fairly. Look, whether you like it or not, the day is going to come where they're going to get your money. And if you don't spell out how and when and to who, you're creating a lot of problems for your heirs. Make sure that you pay attention to the need for estate planning.
How I Almost Died After Jean Went to the Hospital(7 mins)
And one final story that I need to share with you today. A bit of a personal note. First of all, I want to say thank you to everybody who took the time to drop me an email after I made the comments last week of Jean's rush to the hospital. Thank you so much for the well-wishing. It has meant the world to Jean and me. She's doing so much better. She's home after five days in the pulmonary care unit. She's able to breathe again. Her bronchitis is under control. She's fast recovering. And we're just very, very grateful for all of that and all the folks at Fairfax Inova Hospital for the fabulous care that Jean received. But I do have to share with you a story because I almost ended up in the hospital. No, not because I was ill or sick or injured, but because Jean was going to kill me.
Let me tell you what happened. We got to the hospital on Thursday and it was around 12:30 by the time I got there. And what I immediately discovered - Jean arrived by ambulance ahead of me, I followed and went to the emergency room parking lot - which was totally full. That itself is a sad commentary on our times, isn't it, how busy hospitals are these days? So I went to the green parking lot, which is a huge parking tower, five stories tall. And because I had gotten there around 12:30 in the afternoon, what I've come to discover is that those parking lots fill up fast because visitors come in to see family. They arrive very early in the morning and people tend to stay all day. I certainly did with Jean. So when you first show up at a parking lot early in the morning and it's empty, what do you do? Well, you park at the closest spot to the elevator on the first floor, right? And only when that floor fills up with cars do you drive to the next floor and then to the next then to the next. By the time I got there at 12:30, I ended up driving all the way to the top at the fourth floor and pretty far away from the elevator. And okay, so what? Who cares? That's where I parked.
Jean was in the ER. I met her there. After a few hours, we got moved to the pulmonary care unit, and I realized, I said to Jean in the ER, as they were telling us they were going to keep her - which we kind of knew was going to happen - and that they were going to move her to pulmonary care, I said, “Jean, give me your jewelry.” You know, we hadn't given that any thought at the house when we were waiting for the ambulance and when the paramedics had arrived. Nor in the early moments of the ER with all the bluster and trauma going on.
But as things were calming down a little bit, it occurred to me, you know, don't let patients wear jewelry if they're unconscious, if they're sedated, if they're who knows what sleeping, you know, just a reasonable note of precaution. So Jean readily agreed. She was wearing her wedding band, some stud sapphire earrings and a necklace that she loves, frankly, a little too much for my taste because I didn't buy it for her. She bought it for herself and she loves this necklace. And it's not terribly valuable. It's a few thousand dollars, but it's one of her favorites. And so she gave me all of her jewelry and said, as you can imagine, be careful. “Of course,” I said to Jean.
I took her wedding band and her stud earrings, and I wrapped them carefully in a piece of tissue paper and rolled that up very carefully. And I put the wedding band and the earrings, which are very small, into that tiny little pocket in your blue jeans, you know, on the right-hand side above your regular pocket. It's a little pocket watch pocket. I put the wedding band and earrings there - a small, snug, safe little pocket where nothing will ever disturb it. But her necklace was too large to fit in that pocket. It's about two and one half, three inches high and an inch and a half wide and a little bit bulky. There's no way it would fit in there.
So I wrapped it very gently in two pieces of tissue because Jean admonished me, be careful with my necklace; it's very fragile, she said. She loves this necklace. So I carefully, in two pieces of tissue, wrapped it up and I put it deep into the right-hand pocket of my blue jeans. That's where I placed it. Very safe, very secure, very tight and undisturbed.
Well, we fast forward. I left the hospital at about 9:30 or 10:00 that night. Jean demanded that I go home and take care of Hoshi, our dog, and that I get some rest. And so grudgingly, I left the hospital and I went out to the parking lot, used the automated pay system, stuck in the card, stuck in my credit card, went out to the car, and I had my key in my pocket, pulled the key out of my pocket, got into the car, went home.
I get home. I'm taking everything out of my pockets as I'm getting ready to go to bed. I go into the watch pocket and I pull out the tissue that's holding Jean's wedding band and her earrings. Not a problem. All good. I then put my hand into my right-hand pocket to get the pendant. And there's nothing there. The pendant is gone. Oh, my goodness gracious. I'm thinking to myself, how did this happen? Where is it? How did I drop it? Where did I drop it? When? I'm racking my brain. I haven't put my hand in that pocket all day long. There's nothing in that pocket. My left-hand pocket is where my driver's license and credit cards are. That's how I paid in the parking lot. That's where my car key was. That was all my left-hand pocket. I deliberately put the pendant in the right pocket because I don't use that pocket. What happened? Where does it go? What am I going to do? How am I going to tell Jean? How did I lose it? Jean is going to kill me. First, she's going to recover, and then she's going to kill me. Couldn't figure it out. I'm racking my brain; my head is spinning.And then about one in the morning. While I'm lying in bed worrying both about Jean and my own safety for when she finds out I've lost one of her favorite necklaces. When do I tell her? How do I tell her? Do I wait for her to recover? Do I tell her now and upset her? As I'm going through all of this, that occurs to me. Wait a minute. When I arrived at the hospital, that morning, I figured I was going to be there with her all day and well into the night, and I was worried that my phone would lose its charge. So I took the cord for my battery charger that I keep in the center console of the car. I pulled it out of the car, wrapped it up and stuck it into my pants pocket, the right side of my jeans. Which is where I later put her pendant. When I got back to the car on my way home that night, I not only pulled the car key out of my left pocket, but I also pulled the charger cord out of my right pocket to put it back in the car. When I did that, it must have dragged along the tissue with it containing the pendant. It must have fallen out of my pocket.
So I quickly ran to the car. Nope, it wasn't in the car. Wasn't on the floor by the car in the garage. It must have fallen out at the parking lot at the hospital. I didn't hear it. I didn't notice it. I certainly didn't step on it. I would have felt that. But I wonder, is it still there? And now I'm thinking to myself, well, it's 1:00 in the morning. Do I go back to the hospital right now to go grab it? I mean, I'm thinking to myself, nah, I'm not going to do that. That's crazy. It's 1:00 in the morning. If I do that, I'll be exhausted. It'll be an hour, hour and a half before I get back home, only to find out I'm sure it's probably not there anyway. That's not going to do anybody any good. Certainly not me. Besides, this is at the top of the parking lot.
At 1:00 in the morning, the parking lot is empty. If it's laying on the ground, it's still going to be laying on the ground. The only way it's going to be gone is if a janitor comes by to clean the parking lot. And what are the odds that there's a maintenance crew doing that? Nobody else is going to touch this tissue paper? I mean, are you going to pick up a piece of tissue paper lying on the ground outside of a hospital? I don't think so. So if it's there, it's still going to be there.
Even if I get there at 1:00 in the morning and I somehow discover that it's there, that a janitor didn't clean it away, it's probably broken. Jean said it was really fragile if it really did fall out of my pocket. It has fallen to the ground and probably broke in two. Or when I drove away, I probably drove over it, crushing it. So the odds of this having a happy ending, I'm thinking to myself, are not good, and I'm not going to compound it by driving there at 1 a.m. to discover this fact. I'm going to wait till the morning.
So that's what I decided to do. Didn't have a very good night of sleeping, as you can imagine. But which was it that I was worrying about more? Jean and how she was feeling? Or the fact that she was going to kill me the next day? So sure enough, the next morning I leave really early. I get to the hospital at 7:00, 7:30 in the morning, long before most people have arrived. The parking lot is largely empty. People are piling into the first level. But as I drive up and up and up to the where I had parked the night before, up on the fourth level, no cars are around everybody's parking on the lower levels. Still, I get to my spot where my car was parked the night before and as I approach it, sure enough, I see something laying on the ground right by the spot where I had parked.
I stop the car, I jump out, I go over, I grab it, it's the tissue. I open it up and there's her pendant in perfect condition. The wave of relief that rolls over me was one of the most wonderful feelings I'd ever had. And I knew at that very moment Jean was going to be fine. If her necklace could survive this ordeal, so will she. My new question was, do I tell her of this saga? Will she find it funny or will she be furious at my laziness and thoughtlessness of failing to carefully protect her most favorite necklace?Well, I decided to share the story with her after several hours, and I prefaced it by saying, Jean, I'm going to tell you a story and I want you to know it has a happy ending. And I had to say that to her several times. As I was describing the story to her, I could notice her constricted breathing as she was holding her breath, waiting to hear what was going to happen next. And I had to keep saying, Jean, there's a happy ending. You can breathe, you can relax. This is a fun story. It's not a problem. And at the end, she laughed and she shook her head and she simply said, you're lucky. So that's me today, one of the luckiest guys in the world. Jean's back home.