If the Politicians were to Fail

Posted on May 16, 2012 by Rohith

A recent New York Times article discusses a new and informative book called Clash, written by Scott Burns and Larry Kotlikoff. The book shows the effects of current policies on young people and offers actual policy solutions for banking, taxes, healthcare, and Social Security. Other than offering advice, Clash informs us what we can do to support ourselves if the politicians fail to do so. This is what a critic has to offer about the book, “[Clash] is so well written that Scott Burns and Laurence Kotlikoff should be considered the Stieg Larssons of economics.” This book should be read by everyone, including politicians, mainly to get informed about the looming crisis and what the people would/should do if they were to fail to take action.

You can purchase the book on Amazon here.

 

Putting the Biological Clock on Hold

Posted on May 15, 2012 by Rohith

Women now have an option of buying insurance for having children; egg freezing. Egg freezing, or Oocyte Cryopreservation enables women to put their biological clock on hold, by controlling their reproductive future by preserving their fertility by freezing their eggs. According to a New York Times article, the procedure is expensive, costing between $8,000 and $18,000. Although this process has no guarantees, many would-be grandparents are willing to take the risk with their daughters by supporting them financially. Jennifer Hayes, 35, has gone through the process of preserving her fertility and blogs about her experiences and explains the basics of egg freezing here, on her website.

With all the benefits of preserving one’s fertility, there come some risks to be taken:

  • Damage to the Oocyte – Intracellular ice may damage and affect the functions of the the female reproductive cell prior to the fertilization process
  • There have been no systematic follow-up studies either of children born from frozen eggs (fewer than 2000 worldwide) or of success rates, especially for women in their late thirties who are the primary users

Merril Lynch’s Secret to Success

Posted on May 11, 2012 by Rohith

A Chicago Tribune Article reports that nearly 46 percent of the totaled 13.6 billion dollar revenue received by Merrill Lynch’s Global Wealth Management in 2011 came from just 21 percent of its top-producing brokers – about 2,500 people. In 2011, the top 2,400 brokers generated an average of $2.5 million for Merrill, double the average of advisers in the next 20 percent, who brought in $1.2 million each on average. In order to recreate this “magic” happen, firms like UBS have paid bonuses of up to double those paid by rivals for elite brokers.

So what does this mean?

One of the only quick ways to bring more revenue to a firm is to attract one of these elite brokers. “The best candidates can get up to $5 million in bonuses by taking an offer from another firm and staying for the full length of their contract of about nine years,” said Courtney Raymond, a recruiter for Merrill and founder of Houston-based Courtney Raymond Consultants. The revenue figures, which include money the firm receives from products that brokers sell and any additional money earned from managing client assets, emphasize why Wall Street brokerages are in a constant battle for recruiting the Elite brokers – because they account for a marginal portion of the firm’s revenue.

 

Online Social Security

Posted on May 10, 2012 by Rohith

Social Security now provides a service to all that will provide you with your Social Security statement online. It will provide you with the estimated Social Security and Medicare taxes you’ve paid, information about qualifying and signing up for Medicare, things to consider for those age 55 and older who are thinking of retiring, and many other pieces of information that can be useful for planning your retirement. All of the provisions can be found here. To get your Statement online, you must create a my Social Security Account.

Are you considering retirement or having trouble deciding on when to take your Social Security benefits?  Use our Free Retirement Calculator as well as our Social Security Calculator

 

MetLife to stop offering Reverse Mortgages

Posted on May 9, 2012 by Rohith

MetLife Inc. owned over 20 percent of the reverse mortgage business in the U.S., according to Reverse Mortgage Insight, and On April 26, the largest U.S. life insurer and reverse mortgage lender sold its reverse mortgage business as part of its exit from banking-related activities to Nationstar Mortgage LLC. Chief Executive Officer of MetLife, Steven Kandarian, has also agreed to sell about $7.5 billion of deposits to General Electric Co. (GE) and said in January he would stop originating traditional home loans. This announcement came immediately after MetLife reported a $174 million net loss for the first quarter, amounting to 16 cents per share and compared with a profit a year earlier of $701 million, or 66 cents per share. This sale could have been foreseen, as MetLife had been actively shedding its banking and mortgage operations to drop its bank holding company charter.

 

Portfolio Allocation 101

Posted on May 8, 2012 by Rohith

Portfolio Allocation 101

Five years from now, there’s going to be one investment that did better than any other, and of course, you don’t know what that investment will turn out to be. Due to this issue, the desire to come up with an ideal asset allocation is a strong one. Given that we don’t know the future, what guidelines can we use to make our investment decisions?
The Basics: Asset Allocation:
Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

Time Horizon – Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier investment because he or she can wait out slow economic cycles and the ups and downs of our markets. By contrast, an investor saving up for a teenager’s college education would likely take on less risk because he or she has a shorter time horizon.

Risk Tolerance – Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favor investments that will preserve his or her original investment.

Risk versus Reward
When it comes to investing, risk and reward are entwined. All investments involve some degree of risk. If you intend to purchases securities – such as stocks, bonds, or mutual funds – it’s important to understand that the potential exists to lose money.

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals.
Investment Choices
A vast array of investment products exist – including stocks and stock mutual funds, corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded funds, money market funds, and U.S. Treasury securities. However, there are three major ones to consider:

Stocks - Stocks have historically had the greatest risk and highest returns among the three major asset categories. As an asset category, stocks are a portfolio’s “heavy hitter,” offering the greatest potential for growth.

Bonds - Bonds generally contain less risk than stocks but offer more modest returns. As a result, an investor approaching a financial goal might increase his or her bond holdings relative to his or her stock holdings because the reduced risk of holding more bonds would be attractive to the investor despite their lower potential for growth.

Cash - Cash and cash equivalents – such as savings deposits, certificates of deposit, treasury bills, money market deposit accounts, and money market funds – are the safest investments, but offer the lowest return of the three major asset categories. Generally speaking, the chances of losing money on an investment in this category are extremely low.

These are the asset categories you would likely choose from when investing in a retirement savings program or a college savings plan. But before you make any investment, you should understand the risks of the investment and make sure the risks are appropriate for you.
Why Asset Allocation Is So Important

By including asset categories that behave differently under varying market conditions, an investor can protect against significant losses. Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you’ll reduce the risk that you’ll lose money and your portfolio’s overall investment returns will have a smoother ride.

The Magic of Diversification
The practice of spreading money among different investments to reduce risk is known as diversification. By picking a diversified group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.  If you don’t include enough risk in your portfolio, your investments may not earn a large enough return to meet your goal.
By having a good portfolio, you are already one step closer to planning a safe retirement. To take a few more steps closer to an even safer retirement, check out our Retirement Calculator.

Reverse Mortgages may be Riskier for Younger Retirees

Posted on May 7, 2012 by Rohith

A reverse mortgage taken too early could be a mistake, a New York Times article published last month points out. Homeowners who wait until age 72, as supposed to the minimum age of 62; to take out a reverse mortgage will get considerably more money. Gathering input from consumer advocates, the Times addresses what it finds as potential downsides for people taking reverse mortgages at a younger age and concludes that homeowners at or near retirement should work with a financial planner or a lawyer specializing in estates to make sure they have a clear plan for the next 20 years of living expenses

A reverse mortgage allows people age 62 and older to tap the equity they have in their home, pay no money to the bank as long as they stay in the home, and potentially have $1,000, $2,000, or more income each month. This may seem like a lifesaver, but like all other seemingly too-good to be true deals, it does run some risks.

According to Suze Orman, the biggest risk with a reverse mortgage is that while it can indeed be a viable way to generate income, it is very important to understand that after you take out a reverse mortgage you will still be responsible for paying the property tax, the insurance premium, and all the maintenance costs for your home. If you can’t continue to cover those costs you will risk losing your home to foreclosure.

Second, there are concerns over the expense of and use of the reverse mortgage proceeds. Some borrowers withdraw the maximum amount of equity ($625,500) because they think they should, rather than leaving it in a line of credit account to accumulate interest. Many borrowers also make the mistake of treating reverse mortgage proceeds as a windfall – when it is really a loan – and spend it on frivolous or lifestyle purchases, rather than on necessary living expenses.

Finally, borrowers also fail to realize that a reverse mortgage can affect their eligibility for certain government benefits, such as social security and Medicaid. According to Consumers Union, a ‘lump sum’ reverse mortgage payout may immediately put the elder above the asset limit for SSI/Medicaid and disqualify the senior for these important benefits, unless careful legal planning is done to avoid this result. Before obtaining a reverse mortgage then, all prospective borrowers should research the impact on the money they expect to receive from government entitlement programs.

Are you on the fence on whether or not you should receive a reverse mortgage? Take 30 seconds to use the Reverse Mortgage Calculator to help finalize your decision.

 

 

 

“The Doctor Will You–If You’re Quick”

Posted on April 19, 2012 by Steve

The following is a guest post from Bud Hebeler

The Apr. 23/30, 2012 Newsweek has an article by Shannon Brownlee starting on page 46 about the little amount of time doctors can now spend with their patients. The average doctor has 2,300 patients. The average doctor spends 23 seconds listening to your problem before he/she interrupts and has less than 15 minutes to review test data, see the patient, write a prescription and update the records after the visit. In a test of 300 patient visits, the doctors spend only “1.3 minutes conveying crucial information about the patient’s condition and treatment, and most of the information they provided was far too technical for the average patient to grasp.” If a doctor had 2,000 patients, less than average, he/she “would have to spend more than 17 hours a day providing the recommended care.”

It’s going to get worse. Our population is aging quickly–and it’s the aged that use most of the medical care. The mandated reduction in Medicare payments to doctors is going to exacerbate the declining number of general practice physicians as will the ever diminishing number of medical school graduates in general practice who know they will be unable to pay several hundred thousand dollars of college loans on $150k a year. It doesn’t take a genius to know what’s going to happen when the number of patients increases and the number of primary doctors decreases. Costs will grow, ques will get longer, care quality will decline and emergency room use will expand greatly. Already, patients who are on Medicare know how difficult it is to find doctors who will take Medicare patients.

This morning’s newscasts said that the expiration of drug patents has reduced the production of key drugs for anesthesiology, cancer, heart disease and other illnesses. Most prescription drugs are imported and supplies are now so low that doctors must find alternatives–and the alternatives don’t seem as good or are slow in coming.

Welcome to our forthcoming medical care.

Bud

Content and tools regarding Medicare Supplemental insurance and a Medicare Supplemental insurance marketplace.

 

How prepared are people approaching retirement?

Posted on March 19, 2012 by Steve

Not very – consider some of these stats from a recent NYT article on the impact of the 2008 financial crisis:

  • 36% of American workers age 55 to 64 say they have less than $25,000 in retirement savings
  • 52% of American workers age 45 to 54 say they have less than $25,000 in retirement savings
  • 33% of retirees get more than 90% of their income from Social Security (the avg SS payment is ~ $1,000 per month)
  • 17 % of workers have defined-benefit pensions
  • 39 % have 401(k)’s
  • 53 % of all workers have neither…

To compound the problem some professional investors are predicting lower long term returns for stocks of about 5% vs. 8-9% historically, based on the historical relationship with bonds which are now providing lower returns.

Anyway – some things to consider as you plan your own future.  Good luck!

Life expectancy has gone up 30 years in the past century – the cost of living longer

Posted on March 5, 2012 by Steve

Americans are gaining 1.1 years of life expectancy every five years -

This article does a good job of summarizing the costs faced by people and our society as we continue to extend life expectancies.

Today there are approximately 53,000 Americans who are age 100 or older, compared with just 2,300 in 1950.

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