Nearman Financial Report - February 2008
Financially entertaining since 1992
From the folks at Nearman Financial Consulting of Old Town

Special Leap Year Edition

It is February, which means you have just weeks left to make that 2007 Traditional IRA or Roth IRA contribution. The IRA, remember. It’s that individual retirement planning vehicle, not the radical group in Ireland.

The limits for 2007 and 2008 are as follows, if you qualify by adjusted gross income (that means pick up the phone and call us and find out if you qualify):

If President Bush gets Congress to pass his economic stimulus package, maybe that refundification should go right into your retirement account.

How Low Can She Go?

It is no secret that the financial markets have been on the decline for the past…ummm…few months. Four months and running, to be more specific. The Dow Jones Industrial Average, which is a measure of 30 of the largest U.S. corporations if you don’t count the internet giants, has shed nearly 2,000 points since October last year.

The only thing that has shed more over that time is Rudy Guliani’s and John Edward’s popularity. Ah, to be rich enough to even be able to run for President.

In the meantime, investors are leaping into the bunkers. Nobody knows if we are near the bottom or have much further down to go before investors flock back in and eat up cheap stocks.

One horrible investing mistake we noticed during the 2000-2002 dip was that some people just flat out stopped contributing to their retirement plans. We did a significant sample of investors (N=10) and found that these very people decided at that time they loved their jobs way too much and could not even fathom the idea of retiring one day.

Well, not really. What we did find was that fear of losing money during that 2 ½-year market decline deterred people from putting more money into their retirement plan, which also cost them one of the most tax-advantaged strategies – deducting retirement plan contributions from your taxes. It also hurt them in the savings department.

These same people also saved their employers millions of dollars by not taking the employer matching contribution. Sorry, saving money for your employer that way certainly does not merit a raise.

Instead, what these people should have done was to invest in the money market option in their retirement plan, taking the deduction, receiving the employer match and sitting on a chunk of cash ready to invest when they felt comfortable to invest again.

While this strategy isn’t so bad, it isn’t so great either. Buying into funds as they decline, known as dollar-cost averaging, is the perfect way to benefit from a market decline.

Maybe that’s what the administration has in mind with this crazy tax refund idea – dollar cost averaging. Taking the refund and spending spending spending as the price at your local retailer declines.

Profitable Home-Based Business?

You probably have received some unsolicited email from the kind wife of the jailed former Treasurer, Premier, President, Chief Tribe Leader, Grand Pooba or some other high-ranking official who has US$200 million she wants to give you in your American bank account that the government of her West African country is trying to steal from her and her hard-working husband. With your bank account number, she will wire you the money, giving you a whopping 90% of the proceeds she transfers to you for your “generous and gracious assistance.” We always reply: “We work for no less than 95%!”

Of course, this is a scam, and because we have “financial” in the email address, somehow these scammers think we are stupid enough to fall for this dangerous scam. Give out your bank account number and the account will be cleaned out.

The same with all the emails posing as people from some bank in Hawaii, customer service at Paypal and other financial institutions claiming your account has been suspended until you reply with all your personal information, including the name of your very first pet. We love the typos on these emails!

Never reply to a financial institution asking for personal data via unsolicited email. Pick up the phone and call the main number to see if they really need such information.

Now the latest scam had us shocked. The IRS, giving us money back. No way, can’t be true. We never get a refund, but several emails to us in the past two weeks said otherwise. It is pretty slick, when you hear the Bush administration talking about refunds to any “Amerken” who breathed in 2007. But anybody who knows anything about anything knows that the President hasn’t signed his economic stimulication package yet.

What Your Medical Record Says Can Hurt You

Underwriting is a critical function in individual as well as small group life insurance.

When an insurance company insures you, it is somewhat similar to betting the point spread in a sporting event. One huge difference is that you cannot cheat death, as far as we know, but you can have referees and players cheat point spreads.

For life insurance, however, the point spread is your mortality. Insurance companies charge you a premium that the underwriter feels will bring in sufficient funds over a sufficient period of time to pay the death benefit.

Insurance companies hate to lose the bet, and if they lose enough bets, they will see their own untimely death. Basically, they need to win a few more than they lose to stay afloat.

They do lose, though, like when younger people die in car accidents or when some nutcase goes on a shooting rampage.

Underwriting is a challenge. The process requires more than an application, unless you are applying for guaranteed issue insurance which costs you more than an arm and a leg so you don’t have to give blood from your arm.

It requires a blood sample and urine specimen, a summary report from your physician(s) and your motor vehicle record.

Nothing except for an autopsy tells you more about what’s going on inside of you than your blood and urine, and it is reasonable to conclude that most of us would rather pass on the autopsy. If it were humanly possible to have an autopsy for an insurance application, the insurance companies would make it a requirement.

It is important to note that every insurance company has its own set of rules. This is why it is crucial to work with an independent insurance agent like us to determine your health status and match you with the insurance company best suited to offering you the lowest rate for the benefits you seek.

Some of the key issues which we have seen differentiate insurance companies is their treatment of family history, their opinion on the dangers of your driving history, and the maximum body mass index.

The way to get around the family history issue is to be adopted, with no information on your parents. Aside from that, you cannot escape your jeans (you know what we mean).

The driving record – Mario Andretti drives fast, but is he a safe driver? Of course. So what’s the problem with a few speeding tickets? Well, everything. For some silly reason, insurance companies equate fast driving with fast demise.

And the body mass index. The toughest call to make to a client is to explain that they are too phat for preferred health status (yes, you know what we mean here too). We kindly put it like this – “Mr. Jones, the insurance company called us to say you were given a standard issued policy based on your build. It appears that you are too short for your weight.” Just gain a few inches north and you’ll be in great shape.

The one thing that has driven us virtually crazy is the manner in which insurance companies view our clients who have had some psychological counseling. Even worse, how insurance companies have treated our clients who maintain their lives quite well through anti-depressants and anti-anxiety pills.

It seems that those people who seek counseling are in better control of their lives than the millions of impaired people who refuse to seek help. But that’s not the opinion of the insurance companies and unfortunately that’s what we have to live with (or die without.)

One reason we have seen applications rated up (clients asked to pay a higher premium) or flat-out declined has to do with information on your medical record. So you’re sitting there with your doctor, he/she tells you something like directions down the hallway to get your labwork and you respond: “Gee Doc, I’m confused. Is it the second or third door on the right?” So he/she writes on your medical record, “Pt complains of confusion. Test to rule out dementia.”

Years later, when you are applying for insurance, some underwriter at an insurance company sees “r/o dementia” on the physician’s summary and you are shocked when you receive the rejection letter in the mail.

Heart Break Kids

And don’t think just because we are insurance agents that we get any breaks, either. On a personal note, during the course of applying for life insurance recently, our President and CEO Steve Nearman received word that an underwriter who obviously was a non-athlete had a major problem with his EKG results and his 42 resting pulse. He was offered a rated policy, which for a competitive, fit and healthy runner, is a slap in the face.

So the insurance company recommended that Steve have another EKG performed. It was, by his personal physician Dr. Priscilla Taylor, and the result was similar: she said he had Bradycardia. According to our expert online source Wikipedia, “Bradycardia, as applied to adult medicine, is defined as a resting heart rate of under 60 beats per minute, though it is seldom symptomatic until the rate drops below 50 beat/min. Trained athletes tend to have slow resting heart rates, and resting bradycardia in athletes should not be considered abnormal if the individual has no symptoms associated with it.” 

Since Steve is a Boston native with the heart of a Patriot, could it be that he really has Tombradycardia?

Nearman Financial Report is a complimentary newsletter for clients and friends of Nearman Financial Consulting Inc. of Old Town Alexandria, a leading provider of financial products and services including fixed annuities, retirement plans, life/health/dental/ disability and long-term care insurance, and mortgages. Securities and advisory services offered through representatives of Jefferson Pilot Securities Corporation, Member FINRA/SIPC. Nearman Financial Consulting and Jefferson Pilot Securities Corporation are not affiliated.

snearman@securitiesmail.com    703-683-4660 February 2008

If you would like to be removed, just tell us. Sure it will hurt our feelings, but after this year’s Super Bowl, we can stand some additional disappointments.