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The Rich and the Rest

“Let me tell you about the very rich. They are different from you and me.”

That was from The Rich Boy, written by F. Scott Fitzgerald in the mid-1920s, when the rich were getting richer and the poor also thought the rich were getting richer. The legend has it that those sentences were part of a conversation between Fitzgerald and Ernest Hemingway. But academics argue whether an exchange between the two inspired those lines or whether a reply from Hemingway in his own short story inspired the legend of the conversation. Either way, you know the fabled response: “Yes, they have more money.”

Like most glib responses, it was simple but specious. In this month’s main feature, Contributing Editor Linda Koco shows how affluent clients are different, in their needs and in how they operate. This is an increasingly relevant guide as the ranks of the wealthy grow. As we know, just like in the mid-’20s, we are in an era where the rich are getting richer.

Besides helping people keep their net worth, the challenge is in helping the middle class get richer as well. It is common knowledge that life insurance distribution focuses on the wealthy at the expense of the middle class, which is drastically underserved. Some companies, associations and producers have been changing that strategy. LIMRA helped propel that movement by ringing the alarm bell, having released the often-quoted statistic that a lower percentage of households have life insurance today than at any other time since World War II.

That is just the start of the grim statistics. Between 2000 and 2010, median wages in the United States dropped 7 percent, according to a Wall Street Journal analysis, pointing out that it was the worst 10-year performance since similar records were kept in 1967. The analysis also showed that the trend will not improve between 2010 and 2020. And that assumes the United States does not endure another deep recession during that period.

Keep in mind that global wealth doubled in that decade, growing to $241 trillion in 2010, according to Credit Suisse. That report also said that within two generations, billionaires will be commonplace and the world will have 11 trillionaires.

Meanwhile, the middle class is struggling with stagnant wages and an unclear path for retirement. This problem will not just clear up on its own. If anything, it can only get worse. As 10,000 baby boomers turn 65 each day, they will wade into the adventures of old age. Odds are good that they will need some kind of long-term medical assistance if they live long enough. The industry of the aging is excellent at keeping people alive, but not as good at keeping them healthy. That’s up to individuals, and we know how well they’re exercising and watching their diet.

A quarter of seniors today have no income but Social Security – and they retired in the era of rising wages and generous pensions. What will tomorrow’s seniors have? Will Social Security even be there?

Here are your calls to action:

» Boomers are inheriting quite a bit of money, $11.6 trillion altogether, according to the Boston College Center for Retirement Research. About 66 percent of boomers can expect something, but what will they do with it? Will it be like lottery winnings, which go as fast as they come?

» Retirement accounts have accumulated wealth but, like inheritances, most of that wealth is concentrated at the top end of the wage and affluence scale. According to one of the more dire estimates, 75 percent of Americans approaching retirement age have less than $30,000. Others estimate higher, but no one is saying that the majority of the population is set for a happy, secure retirement.


» Long-term care will devour household wealth in the next few decades at the rate we are going. We in the business know that people are not buying long-term care insurance. One estimate has it that 70 percent of people will require at least three years of care. That is long enough to gobble up most if not all of the wealth successive generations were expecting. The rest of us get to pay for their care through Medicaid at that point.

Our industry has answers for each of these problems. Therefore, you are this nation’s greatest hope.

When President Barack Obama unveiled the myRAs, the low-cost individual retirement accounts, the announcement was met with a grand head-slap. They will be safe, but pay lousy returns. They will accumulate very little, $15,000 at max – hardly enough to retire on. All true. But we have two choices in this matter: Ignore the whole thing, or use myRAs as they were intended, as starter retirement plans. These are intended for people who will save nothing and eventually, it will be up to the wealthiest to pay for them in taxes. The wealthy will be all that is left of the tax base.

So, myRAs are not wonderful by any means, but they are something that lower-

wage people can start with. After all, many individual plans require a minimum initial deposit, often $1,000, and many struggling families have trouble freeing that cash. If these lower-wage people start with a myRA, younger agents and advisors can be there to help them to the next level when they have to roll the myRA over. As those clients prosper, so do the advisors. Naïve, maybe, but a guy can dream.

Then there is the rest of the middle class, which is suddenly responsible for its retirement and long-term care. They need help. That’s our job.

I have met many agents and advisors who take this task seriously. Yet I have heard many others disparage the lower and middle classes for their lot. Typical things such as, “Yeah, they can’t save to open an IRA, but they can have a TV the size of Montana in their living room.” True, many people make bad choices. But they need you to help them see the value in making better ones. You are the one who can help those families and thereby help fortify this nation’s foundation.

In this month’s edition of the magazine, we focus on how to understand and care for the wealthy. That is also what we do. We help the successful stay that way. That’s a good living. But helping everybody else become successful – that’s a calling.

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. Steve may be reached at [email protected] Follow him on Twitter @INNSteveM. [email protected].

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