Dennis Miller's  Instablog

Ninety-eight percent of insurance brokers do not know how to use life insurance optimally.

That, anyway, is what one reader wrote in to tell me. I chuckled as I thought to myself, "You could substitute any profession for 'insurance broker' - lawyer, salesperson, politician, etc. - and that statement would still ring true."

Sure, I laughed a little, but it wouldn't be funny to realize I'd been misled into investing in something only marginally advantageous when there was a better alternative available.

Caveat emptor - let the buyer beware - has been an underlying theme in several of our recent Money Forever premium issues. It's a prudent thought to keep in mind when plunking down your money for any number of alternative investments, such as an annuity or reverse mortgage, and when selecting a professional financial advisor.

It's a warning I heard loud and clear while reading an article highlighting the pitfalls of using a stockbroker as a financial advisor. The authors gave solid examples of advisors who were supposedly helping their clients by investing their money in high-fee mutual funds. Those same funds paid high commissions and bonuses and gave out incentive packages with trips, etc. to the advisors who sold them.

This became the jumping off point for the February issue of Money Forever - Financial Advisors Should Serve Only One Master: The Client (or use this link for our new report, "The Financial Advisor Guide") - and I would like to share a few tips from that issue today.

Horror stories like those described in the article happen partly because there are two basic standards of care in the financial-services industry.

• Fiduciary Duty. Advisors with a fiduciary duty are required to put your interests first, even at their own expense. Fiduciaries owe their clients the highest standard of care. They must indeed serve one master - the client - putting the client's interests ahead of all others.

Whether you are a large or small investor, this is by far the most desirable relationship. A CFP® (certified financial planner) is someone who has achieved a recognized level of expertise and has been awarded the designation through the Certified Financial Planner Board of Standards, Inc. They have a fiduciary duty to their clients while engaged in financial planning. There are also certain professional associations such as NAPFA (The National Association of Personal Financial Advisors), which require their members to act as fiduciaries for their clients as well.

• Suitability Standard. Advisors subject to the suitability standard owe their clients a lesser standard of care than fiduciaries. They may guide clients to investments suitable for their investment objectives, comfort level, net worth, risk tolerance, and age.

  This is generally the threshold standard of care for a stockbroker, an advisor working for a company that handles mutual funds, or a bank selling client financial services.

The suitability standard does not prohibit an advisor from investing a client's funds in a mutual fund charging 2% fees rather than a cheaper alternative, say one charging 0.5%. As long as the fund was suitable to your investment needs when the advisor recommended it, he is in the clear. Where they can get in trouble is for acts such as putting a 68-year-old widow entirely in speculative tech stocks or junior mining companies. Not only would these investments not be in her best interest, they are also not suitable for a retired widow.

Much of the discussion in the article was about stockbrokers, who do not owe their clients a fiduciary duty. These stockbrokers guided their clients into mutual funds with high fees and commissions when there were other funds with much lower expenses that might have been performing better.

Nevertheless, while understanding the different standards of care and what professional certifications mean is a good starting point for selecting an advisor, there are still some gray areas. Integrity is integrity, no matter where an advisor works or what fancy acronym he has after his name.

Don't we always want to do business with someone we trust, someone who will offer ideas and products that best suit our needs? Yes, of course. And that holds true whether we're buying car insurance or an annuity, and whether we're seeking financial or medical advice. It's what we want when we deal with any professional who should be more knowledgeable than we are in an area where we need help.

So are there still trustworthy folks out there in 2013? Absolutely! Vedran Vuk, our senior research analyst, was quick to remind me that financial advisors are all salespeople. In my book, that's not such a bad thing.

I trained salespeople all over the world for 35 years and worked with 40 of the Fortune 500 companies in the process. As a general rule, the top 20% of salespeople are responsible for 80% of sales.

At one point, several of my clients funded a study to find out what made their top salespeople different from the others. I traveled with these super-salespeople to pinpoint the attitudes and habits that set them apart. If I could identify what made them extraordinary, then perhaps we could build a training program to elevate the good but mostly ordinary salespeople.

During this study, I quickly discovered that it made no difference what they sold; the extraordinary salespeople all did the same thing. I recall one in particular - a salesman who sold plastic pellets, a fungible commodity - for a Fortune 500 company. I met the president of one of his largest clients and asked why he did business with this salesman's company even though he knew its prices were a bit higher than the competition's.

He went on to tell me a story. While he was having a casual lunch with the salesman, he complained that his company's healthcare costs were skyrocketing. The salesman listened intently and said, "I think I can help you."

The salesman went back to his own company, found the person responsible for its healthcare costs, and asked if he would give his customer some ideas for saving money. He set up the meeting, and the end result was that his client saved over $1 million by implementing some of the ideas presented. On top of that, the salesman also brought in resources from his own company to help his client become ISO certified, which also saved a lot of money and improved the quality of its product.

In a nutshell, this salesman, at his own choice, acted as a business consultant. The plastic pellets he sold were almost a secondary consideration. No one would dare dump this salesman's company as a supplier. He saved his clients too much money by matching up his resources with their needs.

In my travels with the top salespeople, they were all doing the same thing: business consulting. They dealt with high-level management and helped solve their problems. In exchange, their clients were loyal and continued to buy from them.

This indeed is also how truly independent, professional financial advisors operate. They have a lot of product-specific knowledge, but they put their clients' big-picture needs first. And if a client has a particularly thorny issue, they will consult a specialist, maybe an estate-planning attorney or an insurance expert. Just like the plastic-pellet salesman, they elevate themselves above average-Joe financial advisors by looking out for their clients' overall best interests. This global, client-centric approach is what keeps clients coming back.

Integrity, my friends, is the name of the game. I have actually heard stories of salesmen who were offered 100% of a client's business and turned it down. Why? Because they were not confident that their supply could keep up with their clients' needs.

The top salespeople act as though they are fiduciaries, regardless of what they sell or what technical background they have. Who they are and how they do business is what sets them apart.

Many folks rely on their stockbroker as a financial planner. My wife and I had a stockbroker who was an excellent financial advisor and served our needs well. When she was 55 years old, a big-name brokerage firm recruited her with a nice incentive plan. As part of her contract, she insisted that she be allowed to recommend whatever products were right for her clients. She didn't want to be required or pressured to sell the company products. She was so good and had such a large client base (no wonder) that the company agreed to the deal.

So yes, they are out there. If you've found someone similar, there's no need to mess with a good thing.

My real message is simple. Many of the investment products a good professional advisor can offer are incredibly complicated. They truly need to be tailored specifically to an individual's needs. You and I might both need glasses, but our prescriptions are probably quite different, and only a real doctor can prescribe the right lenses. The same holds true for an advisor recommending financial products.

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The Money Forever team is here to help you sift through the rubble and find the exceptional advisors. If you'd like to receive more information on how to find an advisor to prescribe the right financial solutions for you, please check out our new report, "The Financial Advisor Guide." If you are not already a subscriber, you can still get your own copy HERE.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Some people claim that our Social Security system isn't broke. Technically, they're right. The Old Age and Survivors Trust Fund (OASI) currently holds $2.5 trillion in special government Treasuries that can be redeemed at any time - in theory of course.

But here's the catch. What happens when the OASI needs those trillions of dollars to pay out benefits? Essentially, the government has to find the money to pay the face value of those Treasuries. So from that standpoint, Social Security is broke. The Treasury IOUs are not backed by any cash surplus, only by faith that the US government will somehow come up with the cash... probably by indebting itself further or by raising taxes.

Social Security was created by the Federal Insurance Contribution Act (FICA) and sold as a government-managed insurance program. We pay "premiums" to the OASI during our working years (actually the government just snatches money from our paychecks), which are supposed to be invested and provide retirement income for the rest of our lives. Our retirement is supposed to come from the income on those investments.

After taxing baby boomers for decades, the OASI is huge. But now that millions of those baby boomers are retiring, it's time for our government to tap into that fund to keep its promises.

The problem is that our government claims it can't - or won't - honor its commitment... no surprise there. In a nutshell, it recklessly spent the money it grabbed from our paychecks... money it was supposedly holding as a custodian. Rather than be honest or have the courage to raise other taxes to support its spending, the politicians stole money from our retirement insurance premiums to pay the bills for all sorts of other programs. If folks in private industry raided their employees' pension funds and spent that money, they would be in jail. Well, if the shoe fits…

Here are the three items in President Obama's recent budget proposal that are designed to address the issue:

1. Chained Consumer Price Index (CPI);
2. Raising the income cap on the Social Security tax;
3. Additional contribution caps for IRAs and 401(k)s, and targeting those savers who have accumulated $3 million or more.

While each proposal seems different, Gary D. Halbert recently penned an article alluding to the fact that all three are related. He wrote:

"Liberal Democrats oppose the switch to chained CPI and demagogue it as a 'war on seniors,' while Republicans feel it's a way to save Social Security as we know it. Democrats prefer eliminating the cap on salary subject to Social Security taxation (read: increase taxes) to using chained CPI, which they view as a cut in benefits. It seems that only in a politician's mind can a slower rate of increasing benefits be called a 'cut.'"

So, expect your Congressional representatives to say something like, "These were the choices, and I fought hard to protect you." In the end, they will reach a theoretical compromise and the public will get fleeced once again.

Well, how about "NONE OF THE ABOVE?" All three of these proposed solutions would do more harm than good.

Let's cut to the core issue of the CPI. It's supposed to track prices of a consistent basket of goods that parallels the cost of living. In theory, when the CPI goes up, your cost of living adjustment should increase at about the same rate. But when the government attached benefit rates to the Index, it started to play games with the numbers.

The official CPI is a joke. It is continually manipulated and just doesn't match reality for most people. That's because keeping the CPI lower than the true rate of inflation benefits the government in many ways.

• It decreases benefit payments to government retirees and Social Security recipients.
• It reduces the cost of Treasury Inflation Protected Securities (TIPS), which are tied to the Index.
• It is a de facto increase to the income tax, since tax brackets are adjusted for inflation.

And of course, the politicos love it too. They do not have to face voters and cop to cutting benefits or raising taxes. Perhaps that explains why the credibility rating of politicians ranks below that of used car salesmen.

When the Bureau of Labor and Statistics started fiddling with the numbers, the phrase "constant level of satisfaction" entered the picture. Alan Greenspan, in an attempt to justify the new substitution-based inflation formula, was credited with saying, "If the price of steak got too expensive, consumers may switch to hamburger." No kidding. He is such an intellectual.

A chained CPI would just be another boost to the numbers manipulation game. CNN released some disturbing statistics on the damage a chained CPI would cause:

"Someone who started collecting the average Social Security benefit for a retired worker in 1999 would receive $12,972 in 2012. But let's say the Social Security Administration had already been using chained CPI - that person would get only $12,336 this year, according to the National Academy of Social Insurance. That's nearly 5% less.

"The difference gets bigger over time. According to the National Women's Law Center, a retiree who was collecting $17,520 last year would see 6.5% less, or $1,139, by age 85, if chained CPI were in effect. A decade after, their payments would be 9.2% smaller, or $1,612."

The CPI should be renamed the "Consumer Payment Index." It has little to do with a constant basket of goods. If it measures the cost of living at all, it's only the cost of mere survival. What happens when the price of hamburger gets too high? Do we switch to chicken? Where does it end, dog food? We need to call the CPI what it is - an index concocted by the government to hoodwink voters because none of our elected officials have the courage to tackle the problems honestly.

The chained CPI will probably continue to make a lot of headlines. One political party will accuse the other of wanting to mess with the formula even further and reduce Social Security benefits; and one will accuse the other side of pushing for a tax increase.

Here is what will likely happen. We will be hammered by the politicians trying to strike fear into our hearts. At the last minute, the "Mighty Mouse" politicos will come in to save the day and "rescue" us from the Chained CPI. The real motive is to make the other choices sound like a fair compromise.

The next proposal is to raise the cap on income subject to the Social Security tax. This will be sold as a way to reduce the deficit and save an underfunded program.

Can anyone remember a tax increase sold to the public as a way to reduce the deficit that actually did just that? Regardless of the party in power, the deficit just keeps growing.

This would be a simple 6.2% tax increase on income over $113,700 for both employees and their employers. For folks who are self-employed, the tax rate is 12.4%. High-income baby boomers already fear being "retired early" by employers looking to replace them with less expensive, younger workers. This would add another incentive for employers to cut out their highest wage earners.

It's the same old crap. One political party will scream that this is a tax increase, while the other will say the rich don't pay their fair share. They will argue over the amount, then claim to come to a bipartisan compromise.

Obama's budget would "limit an individual's total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year." According to Matthew Hiemer's back-of-the-envelope calculation in a MarketWatch post, this would affect around 100,000 American households.

This looks like pure politics to me. These 100,000 families won't get much sympathy from regular folks. Any politician who opposes this proposal risks being labeled an elitist, and those who support it will crown themselves the champions of the poor… just as an election is coming up.

This is just another unwarranted attack on the rich who were successful enough to build up more than $3 million in their retirement accounts.

Money in a traditional IRA or 401(k) is nothing more than tax deferred. When it's withdrawn, the government still gets its ever-increasing share. And there are mandatory withdrawals once a person reaches 70 ½ years old, so that money will be taxed eventually. The government sounds like a petulant child, screaming, "I want it now!"

Over the course of the summer, political emotions will rise as both political parties take their stands. Then, at the last minute when all the hype has been milked, they will strike a convoluted compromise. Both parties will tell their constituents it was the best they could get, and ask for contributions so they can fix the mess after the next election.

"NONE OF THE ABOVE" won't be seriously considered, and more wealth will be stolen from hard-working Americans, many of whom would never consider themselves wealthy to begin with.

In an attempt to limit any political hate mail, I offer this. I don't want to hear a word about "fairness" until all elected federal officials scrap their retirement programs and put themselves under Social Security like the rest of us. Opensecrets.org reports that the average net worth of a Senator is $13.9 million and that of a member of the House is $6.5 million. Why should we pay for their fancy retirement and healthcare programs?

You're probably thinking you want to contact your elected officials and let them know how you feel about this. I sure have, but I'll leave that up to you; politics is not my area of expertise. However, managing my retirement finances and sharing my knowledge and strategies with my fellow seniors are exactly what I do. I'm one of you, a retiree who wanted answers.

I spent the bulk of my career teaching adults, and I know that complicated information can be taught in simple, easy-to -follow ways. You may feel differently, but all the geek talk we're bombarded with just frustrates me. That's why in articles like this one and in my Money Forever service we explain matters in plain English, so you won't need to go out and get a Ph.D. in economics or finance to follow along.

I'm sure we have all told our children and grandchildren that an education is one thing that can never be taken away. In our case, a financial education can keep us independent and in the game, and in this case, protect us from the shenanigans of politicians.

I'd like for you to consider taking a look at Money Forever, it's written by a senior (me!) for seniors. The current subscription rate is affordable - less than half that of a typical morning newspaper. The best part is you can take advantage of our 90-day, no-risk offer. If for some reason you find it's just not for you, you can cancel for any reason (no questions asked) within the first 90 days to get all your money back and never be billed again. Period. But as you might expect, our cancellation rates are very low, and we aim to keep it that way.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Go into any fast food restaurant or retail store and you'll find a lot of seniors working for minimum wage. Here's why.

When personal computers hit the scene, numerous retirement-planning programs quickly became available. You entered your personal financial information, along with yield and inflation projections, and the computer would tell you how long your retirement nest egg would last.

The first time I ran the numbers, my computer told me I had enough money to retire as long as I died before I was 72 (I'm currently 73). That's when my wife and I got serious about saving for retirement.

For years, financial planners considered four basic numbers to be conservative estimates:

• Return on your portfolio: 6%.
• Inflation: 2%.
• Age your money needs to last to: 120 years old.
• Percentage of your portfolio to invest outside of CDs and high-quality bonds: 100 minus your age at retirement.

The final number on the list was part of a conservative investment formula. If you retired at age 65, then 65% of your nest egg went into CDs and high-quality bonds, with a 6% locked-in return. The other 35% went into the market. I can confirm that the formula worked well for my first few years of retirement.

To keep the math simple, imagine a couple with a $1 million portfolio and $20,000 in combined annual Social Security payments. A 6% return on their entire portfolio ($60,000), combined with Social Security, gave them $80,000 to live on every year.

These numbers no longer apply. The best CD rate I can find these days is 1.2%. And while the Bureau of Labor Statistics is reporting a 1.7% inflation rate, I'm confident that the 1990-based alternate rate reported by Shadow Government Statistics - just under 6% - is much more accurate. In a recent unscientific poll of Miller's Money Weekly readers, we found the weighted average inflation rate reported by readers was just over 8%; whether it's 6% or 8% it's still nowhere near the government's 1.7%.

Let's revisit the imaginary couple with a $1 million portfolio. If they put 65% of their portfolio in CDs earning 1.2%, that gives them $7,800. Even if the remaining 35% of their portfolio earns a 6% yield in the market ($21,000), combined with their $20,000 in Social Security, that's only $48,800 every year. That's quite a downward adjustment in their standard of living. And at the same time, inflation is driving prices up, which only amplifies the problem.

So what is a senior to do?

There is no one, simple answer. First, we cannot ignore the problem. While there is no shame in a hard day's work, no retiree wants to spend his golden years stocking Cheerios at Walmart. No matter what your first profession was, you need to become your own amateur financial guru.

Second, we all have to put a much higher percentage of our life savings in riskier investments to compensate for low interest rates. Many seniors are also looking to reverse mortgages and annuities for some relief. While neither of these are a sure fix for all of your financial woes, they are partial solutions for some retirees. We've covered both of these in-depth in recent issues of Money Forever.

Third, many seniors are scaling back even more than they already have. Cutting your living expenses and shifting your expectations about retirement can be emotionally difficult. If you were the household breadwinner, this can be particularly draining. While some common sense adjustments are easy, like swapping a $4 latte for a regular cup of Joe, others are more taxing. No one wants things to get so bad that they must give up traveling to see their grandkids.

And when none of these changes are enough, many seniors continue to work longer than planned. I recently read that:

In May 2012, the Transamerica Center for Retirement Studies released its 13th annual retirement survey. A survey of over 3,600 workers showed that 56% plan to work after age 65, and 54% indicated they would continue working after they retire. The lead paragraph of the news release states, "American workers, shaken by the realities of the Great Recession, have adjusted their visions of retirement..." That report may be about a year old, but I doubt seriously the numbers have changed much.

The simple, mathematical retirement formula of yesteryear is long gone. Would-be retirees are chasing a moving target. Investors must be prudent, conservative, and still find investments that yield enough to adequately supplement their Social Security checks.

The only conservative number that survived the old regime is "120 years old." If you run out of money at 119, don't worry about it; you will be the envy of all your peers.

We've put together a monthly income plan to supplement Social Security checks and pension payments (if you're one of the lucky few to have a pension). The plan calls for making certain investments at certain times of the year to ensure you've got steady income each and every month. And the beauty of it is that you're guaranteed payments every month. Click here to find out more about this plan used by me and thousands of my readers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.