N001959
Thursday, January 17, 2002 9:37 PM
offsets
To the Office of Management Programs:
As a basis for my comments:
I did not personally know any the victims or decedants in the 9-11
disaster (or have any as clients).
I was for 15 years a third generation banker to individuals and small
business's.
Have a BS in economics and an MBA in finance (University of Chicago)
I was a corporate CFO responsible for starting or revamping two company
401-k programs and educating employees to the need to save for their
future.
I am now a financial advisor in the NYC area selling financial planning,
insurance, 401-k plans, insurance, retirement products at a major NYC
(suburban) investment house.
I donated a fair amount of money to the 9-11 disaster in the days
immediately following the attack and I hope it is used wisely.
With that as a background, my thoughts are as follows:
I am basically comfortable with the concept of allocating money from
your fund based on age and family life cycle. The problem I have is
concerns the "offsets" of sound financial planning to reduce the
settlements being offered. As a secondary issue, although I agree with
the family life cycle you have chosen (age, income, children, etc),
getting a settlement of over $4 million is far too much.
All my life, I have had an exceptional exposure to people and how they
manage thier money, from the youngest of days. Today, I make my living
selling those services in the most competitive world in and around NYC.
The people in and around NYC, at all income levels, are probably more
exposed to the financial bombardment of advertising, cold calling,
exposure to investment products than anywhere else in the US. From the
diversity of my background, I have more exposrue than most to the
difference in investment attitudes at all levels of income and
backfround.
I have clients who earn less than $50k annually be very concerned about
putting money aside for thier future and accumulate over $1 million
while having met others (especially in my lender/banking background)
earning 5 times as much have to borrow money to meet monthly living
expenses.
The program as currently laid out rewards those who bought Mercedes and
BMW's rather than the Ford Escort. It rewards those who bought
expensive houses, and it rewards those who, because of all these
payments, couldn't "afford" yet to save money in their 401-k or buy
insurance. It penalizes those who did without, to have a house that
was paid for, have money in their 401-k or thought it a good idea to
purchase additional life insurance coverage in case they were run over
by a bus.
Even around NYC, an untaxed $2million settlement (max) can go a long
way. It can buy (or payoff) a half million dollar mortgage. It can
purchase a $1million worth of 7% Freddie Mac bonds that will throw off
$70k of income. And it can purchase $500k of reasonably blue chip
equities that can generate another $10k of income that could grow each
year.
If any individual needed more than $2 million to support their
lifestyle, then they should have met with someone like myself to
purchase insurance, start saving in an IRA or 401-k, bought the Ford
Escort or Chevy instead of the Porsche or Mercedes or BMW.
Basically, I sincerely think you should consider lowering the cap on
what you pay as a settlement but not adjust it lower for other forms of
offset that prudent savers got because they were wise and reward those
who got themselves so much in hock that they need the $4 million.
I am not trying to understate the value of ones life. There is no easy
way to put a value on it. The concept of helping those in need is
nobel, and---with incomes below $50-75k---- go for it.
But to accept that one person earning $175,000 should get $4,451,060 if
s/he had no collateral offsets because s/he was not prudent in buying
some life insurance or saving money, while his/her compatriot in the
next cubicle earning the same amount and in the same situation, deserves
less because they bought a cheaper house, cheaper car and bought
insurance "just in case" is just plain wrong.
I would prefer that you not use my name if you publish my comments, but
I would be happy to discuss with anyone some of the ideas I have here,
should anyone actually read this memo and think my comments worthwhile.
Sincerely
Individual Comment