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Getting Personal: Investing, life insurance, magazine subscriptions

Getting Personal

Ever get notices in the mail for magazine subscriptions that look sort of official and ask you to send in a bunch of money because your subscription to is almost up?

"Bogus is the word that comes to mind here," says David Lazarus.

So how do you know if those notices are fake or real? David says you should definitely look at the fine print. Find out what other advice he has by listening to this week's Getting Personal segment.

This week, Tess and David also answer questions about where to invest your money when you don't know anything about investing, what to do about an older family matter who is deep in debt, and what to do about life insurance policies.


Here's the link to
Guidestar, which Tess and David mentioned this week. And for more advice on your financial questions, check out the Getting Personal blog.

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Your Life Insurance comment was totally inaccurate I hope someone stops the lady from cashing the Whole Life Insurance policy her parents purchased when she was 5 years old. The first thing I noticed is that you do not understand the reason parents and in general individuals purchase life insurance, for a child insurability and burial expenses come to mind.

Life Insurance is a very important vehicle not only to provide peace of mind to a surviving spouse but to preserve wealth. It doesn’t work as an investment (stocks or mutual funds) but it is a promise of a future pay out.

David mentioned something about Universal Life insurance, please let your audience understand that there are different types of Universal Life policies not all life insurance works the same. To have a goal or objective is very important. To review someone life insurance just as you would recommend to do with someone investments is important. The needs of an individual changes over time and finally remember not everyone qualifies for life insurance.

Regards,

Al Martinez

Regarding the elderly mother with $40,000 in credit card debt:

I am shocked that neither Tess nor David thought to raise the possibility of have this (quite literally) poor old woman declare bankruptcy. Her $40k debt is unsecured and her primary asset is her house, which would likely be protected (depending on state law).

Apart from the likely advantages to the caller and her mother, the bankruptcy option has a further benefit for the rest of us, as a way of helping to teach the credit card companies, or rather their marketing and lending algorithms, to stop taking casual and ruthless advantage of our elderly.

Cheers,
Derek

ps. I also agree with the comments/questions raised by Elizabeth Holman.

I absolutely agree with Elizabeth Holman above. From what I remember, the mother contacted at least one of the daughters herself which means that what could have been an awkward discussion isn't: the mother recognises that she needs help. The answer, per Elizabeth, is not to rely on the mother to solve this, with or without a debt counselor, but for an agreement to give financial control over to a family member or other trusted person so that this gets resolved. The time might arise, with the credit card debt paid off, the credit card accounts closed, that the mother can take back some of her financial transactions. To allow the mother to try to sort through when she has already admitted failure is to potentially pass onto the daughters a financial catastrophy.

The advice offered on the lady with the insurance policy struck me as not very well-informed. Your commentators suggested that the policy was probably an underfunded Universal Life policy, and that it should be surrendered and reinvested.

The policy is almost certainly a participating Whole Life policy, probably one that is paid up at age 65. If so, there is no danger that the caller will ever end up with "just a piece of paper" as your commentators feared.

Also, there is probably a pretty fair gain in the policy that would become taxable at ordinary income rates should the caller surrender it. This should have been mentioned.

Frankly, hanging onto the policy is probably a pretty good option. The investment qualities of a Whole Life policy should probably be compared more to CD's, Muni's or other safe investments rather than to stocks. Her policy has liquidity and values that are fairly immune to market risk, and increases in value without any tax friction (unless she takes your advice and cashes it in.)

re: your call from the two daughters concerned about their mother's credit card bills - some things to consider

Is this a recent change in their mother's ability to manage her own finances? If so, it may indicate a change in mental status. Talking with their mother may not have any real effect on behavior in that case.

The mother should be evaluated for her ability to live on her own.

The daughters could get a financial power of attorney and pay their mother's bills if their mother agreed, or have someone locally whom they trust manage their mother's bills.

Is someone taking advantage of their mother financially?

I would also suggest cutting up the credit cards so that the mother cannot use them any more.

It was not a sufficient response to skirt around the issue of competence and how older people handle their finances.

On the show this week you talked to a woman thinking about cashing out a life insurance policy. There are a few key questions to ask before she decides to cash out the policy.

Does she have any other life infurance? Even some badly priced death benefit is better than none, unless covering her funeral and household expenses after she is deceased isn't a concern for her husband.

Is she insurable? Can she get coverage to replace this policy. If she can, she should not terminate the policy until she has replacement coverage in place (comopletely through the insurance company's underwriting process).

What is the premium on the policy? If it is adding $180.00 per year in cash value and the premium is less than that, she is essentially getting coverage for free.

Does she need the coverage? Not every person in all stages of life actually need life insurance.

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