My father is in what I think are the middle stages of dementia, sometimes you would think that he is perfectly normal then the next time you see him he may not know your name. He still recognizes that you are a familiar face, but isn’t exactly sure who you are. He lived by himself up until about a month ago, when it became obvious that we as family could not care for him anymore; he was becoming resentful as the roles had reversed. So we set out to determine care options. Unfortunately we as a family hadn’t really discussed this with Dad prior to the progression of the disease. We had established power of attorneys when mom passed away several years back; however, as time changes so do roles of children. My sister had since retired and started caring for dad, by taking him to doctor appointments, paying his bills, and administering his medicine. Even though she was the oldest she did not have her name on his bank account or power of attorney. Nor did she have the health care power of attorney. So we take Dad to the attorney’s office to do the basic power of attorneys for financial and health care. Dad immediately doesn’t trust us, thinks we are taking some of his rights away. My brother and he get into an argument at the attorney’s office. It was really ugly. Dad’s will needs to be updated, but none of us have the macho to address it, and it would be questionable at this time if Dad is of sound mind. Moral of the story, make sure you have the necessary legal paperwork done while minds are sane and emotions are calm.
Anyone old enough to drive, who drives a car younger than they are, is used to seeing the words “OBJECTS ARE CLOSER THAN THEY APPEAR” in their passenger side mirror. The warning is there because while the mirrors allow you to see behind you, they distort what you are seeing. Ignoring the warning can have expensive consequences. Making present day investment decisions based on a distorted view of what is behind us can also have expensive consequences. It is very hard for even seasoned investors to watch their account balances drop like they have the past 16 months. Unfortunately, we cannot change the past. Is your portfolio down 15% to 45%, or more, from 16 months ago? Nothing you do today is going to change that. If you continue to look back at how much you have today compared to how much you had, it will likely distort the investment decisions you make in the future.
Evaluate the options available to you today based on their value today. Consider the following criteria for your investment decisions:
• Time Frame- Number of years until the money is needed
• Inventory- List of investments you currently own
• Options- List of investments currently available
• Look Forward- Best returns likely for the next five years.
“Why would you do that?” is what spontaneously popped out my mouth in response to a client’s statement. asked the question with a tone of complete confusion and disbelief to the point of sounding sarcastic. It wasn’t politically correct or well thought out, but most gut-reaction comments aren’t. The client’s statement was “I’m going to put the money in a five year CD at my bank because I can earn 2.45%.”
Following my blurted response there was dead silence for what seemed like forever. I then asked my client three questions:
1. Are interest rates low or high right now?
2. Over the next two years do you think interest rates are going to go up or down?
3. Why would you commit to locking your money up at a low rate for five years when you think the rates are going to increase soon?
This is could have been a classic case of making a poor decision for the upcoming five years based on the past five years. See “OBJECTS ARE CLOSER THAN THEY APPEAR.”
Figurative speaking, I have met a few people that needed someone to buy them a heart because their attitudes and actions didn’t give any indication that they had one. People that truly have a medical need for a new heart are able to get one in our world of modern medicine. Heart transplants make getting a new heart possible. The combination of medical capability and insurance make heart transplants and other amazing procedures available to those that wouldn’t have the money to pay for it. Insurance is the link that makes good health care available to most individuals.
To protect individual’s right to keep their insurance benefits COBRA regulations require employers to allow employees to extend insurance coverage past the end of their employment. Failure to correctly comply with COBRA can be very expensive to an employer. There are two potential high costs to the failure to correctly comply or administrate COBRA benefits.
1. Financial penalties the government assesses to enforce compliance.
2. The potential to “buying a heart” if COBRA isn’t administrated correctly.
The greater risk comes from attempting to comply with COBRA but not doing it correctly. To date, I have yet to find an employer doing COBRA administration themselves internally that is doing it correctly. Thinking they have COBRA handled they expose themselves to “buying a heart.” Financial penalties for non-compliance can be severe, as addressed in “A Dollar Saved – Thousands Spent.” But that isn’t the biggest risk to an employer.
The greater risk is having a terminated employee of dependent that didn’t get proper notification of their COBRA rights come up with a major medical expense. COBRA provides that the individual has 60 days to elect continuation of their medical benefits. If the COBRA guidelines for notification are not followed then their 60 days doesn’t start. If that individual then comes down with a condition requiring expensive medical care seeks coverage the employer may be on the hook to pay for the expenses. If the normal period has passed to extend the coverage the insurance carrier will deny adding the individual to the insurance plan. Then the employer can end up being liable for the medical expenses.
All this risk can be minimized by administering COBRA correctly. Reviewing your COBRA practices and outsourcing COBRA administration to a company that specializes is the best approach. Use the three questions in “Playing with Snakes” to start. You don’t want to buy a heart.
How Much Does Free Cost?
It is good business to control costs. So I am not surprised when employers are proud to say that they don’t have to pay anything for administration and record keeping on their retirement plan. Zero or nothing sounds like a really good deal. If an employer does not have to write a check for administration and/or record keeping it doesn’t mean they are getting a great deal.
The biggest difference between the employers that write a check and those that don’t is that the check writers know exactly how much they are paying for these services and the others do not. Experience has taught that if you don’t know how much the true cost is then you are likely paying too much. It is hard to think that some employers believe that the insurance companies, investment companies, banks, trust companies, and other providers of retirement plans doe the work for free. How much does free cost? If you don’t know you should. There is a cost to providing all of the following services for a retirement plan:
· Administration
· Record Keeping
· Custody of assets
· Education Materials
· Investment Advice
· Investment Management
Employers and their employees can be paying several thousand dollars more through hidden charges than they should. It pays to know how much free is costing you.
Growing up my parents used a common sense approach regarding snakes. They taught us recognition and respect. Growing up we saw four kinds of snakes fairly regularly. The garter snake, bull snake, water snake and rattle snake. I learned the hard way that not respecting snakes comes with a price.
Today the scariest snake I deal with is COBRA. The COBRA in business isn’t really a snake, but an acronym. An acronym for the legislation that provides employees and their rights to continue employer sponsored benefits when they no longer work for the employer. It always surprises me the number of employers that are playing with this dangerous snake without recognizing the risk.
The key to COBRA is recognition and respect. Recognizing when COBRA applies and what benefits it covers. Respecting how complex the guidelines are and the substantial costs that can be incurred if the guidelines are not followed.
Employers need to answer three primary questions to determine proper recognition and respect for COBRA:
1. Does COBRA apply to us?
2. What does COBRA require us to do?
3. Do we administer COBRA internally or outsource it?
Not knowing the answers to the above questions is like playing with snakes. You may never get bit. But, if you do the consequences range from painful to fatal. See “Who wants to buy a heart?”
Wednesday January 18th Don and Mary joined fellow Rotarian Jack Cafferty to volunteer at the Boise Bike Project located at 6th and Front St. in Boise. The Boise Bike Project is a not for profit organization that accepts donated bikes in every condition. The bikes are evaluated, sorted, and then processed. Bikes in better condition are repaired and made ready to be donated to refugees, underprivileged children, and the homeless. Damaged bikes are stripped down and the parts salvaged to be used for building bikes from frames and repairing the bikes with minor problems. In two hours we managed to repair three bikes and dismantle five others for salvage parts. If you have any interest in bicycles the Boise Bike Project is a great experience. I learned more about bikes in two hours than I had in the previous twenty years. Looking through the lines of restored bicycles was taking a step back in time. Their collection of bikes spans the history of the bike from the forties to the present. It was great fun working next to other volunteers learning, laughing, and lending a hand for a great cause.
January 8th Don and Brendan, his little brother from Big Brothers Big Sisters, took a big step back in time. Attending the Walking with Dinosaurs show at the Idaho Center was an amazing experience. Besides having a great time hanging out together Don and Brendan were awed by the realness of the dinosaur robots. The program rated a “10” for entertainment, education, and excitement. It made for a late weeknight with the show end time and traffic delay leaving the parking lot, but it was worth it. Seeing the many types of dinosaurs and hearing their stories gave Don and Brendan a lot to talk about on the ride home.
I have been so privileged to participate in several years of Rake Up Boise. The first year was a little rough in having to cut out early leaving fellow friends left to finish up a monstrous yard by themselves. But this last year’s event was great. A bunch of friends and I joined another office team and had such a blast knocking out three yards in less than three hours.
What wasn’t different was who showed up. Every time we do a service project I can almost predict who will and who will not show up. Even to the point that I can give you names of who will arrive late and/or leave early!
Maybe it’s just personalities or maybe it’s more. I can’t say that I’ve always been one to stop and volunteer. In fact, I think I spent much of my life so busy that I missed out on and had an excuse for every opportunity to give of my time. I am trying to reverse that now. Sorry to be so mushy around the holidays, it’s just that I had so much fun this last year meeting new people, cheering on my friends, and helping those unable to help themselves. Hopefully I’ll see you out there again next year as well!
Participating in the Friends in Action Phone-A-Thon was a very unique experience for me. Each Board member was asked to come with their cells phones, address books, and a list of 10-15 names they expected to reach that night. As each member picked up their phones and started dialing, it was amazing the amount of money that we brought in.
What was also very interesting to me is the generosity of some folks and lack of generosity of others. There was one board member who called a neighbor only to have the neighbor ask if $500 was enough or if she had been expecting more! What a treat to hear when we were asking for donations starting around $50 in order to raise 1,600 friends and keep our organization sustainable.
Furthermore, I personally received comments such as, “we can sacrificially offer $25.” What a blessing and treat to both the giver and receiver when this occurs. I was also stunned by those whom I expected to be larger contributors and weren’t as well as by those from whom I didn’t expect much yet they gave more. Double incomes and no kids, houses or not, family or friends; the only thing that truly matters is the heart of the giver.