Archive for February, 2011

Alzheimer’s Risk Looks Higher if Mom Had the Disease

Health Day News, February 28th, 2011

A new study adds more weight
to research showing the risk of developing Alzheimer’s disease is greater
if your mother, rather than your father, had the disorder.

Brain scans of adult children of people with Alzheimer’s found more
shrinkage in key brain regions of those whose mothers had the disease than
in those whose fathers had it, the researchers report. Brain shrinkage is
a characteristic of the age-related disorder.

“It’s consistent with other studies that suggest there is something
inherited from mothers that influences risk more so than what is passed
down through fathers,” said senior study author Dr. Jeffrey Burns, an
associate professor of neurology at University of Kansas Medical
Center.

Alzheimer’s disease has a strong inherited component, according to
background information in the study. Those whose parents had the disease
are four to 10 times more likely to get the disease themselves.

In the study, researchers created three-dimensional maps, using a
technology called voxel-based morphometry, of the brains of 53 people aged
60 and older. Eleven had a mother with Alzheimer’s, 10 had a father with
Alzheimer’s and the rest had no family history of the disease.

None of the participants had dementia when they were recruited, nor did
they show the signs of mental decline that can be an early indicator of
the disease, researchers said.

After two years, people whose mothers had Alzheimer’s had twice the
amount of gray matter atrophy, or shrinkage, in brain regions known to be
affected by Alzheimer’s compared to those with a paternal history or no
family history of the disease. The regions included the parahippocampal
gyrus and the precuneus.

Those with a maternal history of Alzheimer’s also had one and a half
times more loss in whole brain volume each year compared to those with a
paternal history or no family history of the disease.

The study is published in the March 1 issue of Neurology.

Read more of this article.

A Proposal to Help Pay for Old Age

The New York Times, February 26th, 2011

LIFE expectancy at birth for Americans is about 78. But many Americans will die well before then, while others, like Eunice Sanborn, who died in Texas last month, will live to be 114.

Anyone planning for retirement must answer an impossible question: How long will I live? If you overestimate your longevity, you might scrimp unnecessarily. If you underestimate, you might outlive your savings.

This is hardly a new problem – and yet not a single financial product offers a satisfactory solution to this risk.

We believe that a new product – a federally issued, inflation-adjusted annuity – would make it possible for people to deal with this problem, with the bonus of contributing to the public coffers. By doing good for individuals, the federal government could actually do well for itself.

The insurance industry sells an inflation-adjusted annuity that goes part of the way toward helping people cope with the possibility of outliving their savings. During your working years or at the time of retirement, you can pay a premium to an insurance company in exchange for the promise that the company will pay you a fixed annual income, adjusted for inflation, until you die.

But in a world in which A.I.G. had an excellent rating only days before it became a ward of the state, how can someone – particularly a young person – know for sure which insurance companies will be solvent half a century from now? Annuities aren’t federally guaranteed. The only backstops are state-based systems, and the current protection ceilings are sometimes modest. If an insurance company goes under, the retiree may end up with nothing close to what was promised.

The federal government can offer a product that solves that problem. Individuals would face no more risk of default than that associated with Treasury bills and other obligations backed by the United States.

Read more of this article.

Retirement Calculator:  Longevity is a necessary problem for retirement planning, and must be factored into every decision you make concerning your retirement.  To that end, consider the options available to you and how they interface with your variable longevity at NewRetirement.com

The false promise of compound interest

Reuters, February 17th, 2011

A loyal reader on the sell side emails to object in strenuous terms to my contention
that, when it comes to saving for retirement, “by far the most
important number is the total sum of dollars that you’ve put into your
retirement funds over time; the annualized rate of return on those
dollars is secondary”.

Being a sell-sider, he attached an Excel spreadsheet. He assumes you
start saving $6,000 a year every year from age 25 to age 60 and
calculates that such a person would end up with $575,000 at a 5% return
and $1.12 million at an 8% return.

But of course nobody does that. Saving is lumpy; very few of us
diligently start socking away $6,000 a year at age 25. (Well, maybe
those of us who go on to become investment bankers do. But no one’s
worried about them.) In any case, of course if you keep savings constant, then the rate of return makes all the difference. That’s a tautology.

But much more common is the person who struggles through their 20s,
brings up kids in their 30s and then wakes up in a cold sweat one
morning in their mid-40s, worrying about what they’re going to live on
when they retire. By that point they’ve had enough pay raises that
they’re going to need an enormous sum in order to maintain the style to
which they’ve become accustomed. But at the same time they’re spending
everything they’re earning already. So they put away what they can and
count on 8% or 10% annualized returns — or even more, if they’re
investing in dot-com stocks or Miami condos — to get them where they
want to be.

This, needless to say, is a strategy which is likely to end in tears.
And it’s not just individuals thinking this way, either —
municipalities do, too, and they really ought to know better.

My point is that the range of remotely sensible investment strategies
for a working person is actually pretty narrow. You can’t just wave a
magic asset-allocation wand and change your annualized return over a
period of 35 years by 300 basis points. Frankly, you’d be doing well if
you could improve it by 30 basis points. The market will return whatever
the market will return and you will do a little bit worse than that,
most likely.

So the way to have a comfortable retirement is not to think that by
making a clever choice when it comes to stock-picking or investment
strategy that you can somehow make up for the money you’re spending
rather than saving. Instead, it’s to diligently save as much as you can,
from as early an age as possible and simply invest it in a non-idiotic
manner. The more you save, especially in your 20s and 30s, the more
you’ll end up with in retirement.

Wall Street would love us to believe that the magic of compound
interest gives us a free lunch; that a small amount of savings, if
compounded at a high enough rate, can set us up for life. That might be
true mathematically, but saving doesn’t work that way in the real world.
Interest rates are low, now, and wages are growing sluggishly.

Read more of this article.

Retiring Boomers Find 401(k) Plans Fall Short

The Wall Street Journal, February 19th, 2011

The 401(k) generation is beginning to retire, and it isn’t a pretty sight.

The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.

The median household headed by a person aged 60 to 62 with a 401(k)
account has less than one-quarter of what is needed in that account to
maintain its standard of living in retirement, according to data
compiled by the Federal Reserve and analyzed by the Center for
Retirement Research at Boston College for The Wall Street Journal. Even
counting Social Security and any pensions or other savings, most 401(k)
participants appear to have insufficient savings. Data from other
sources also show big gaps between savings and what people need, and the
financial crisis has made things worse.

This analysis uses estimates of 401(k) balances from the end of 2010
and of salaries from 2009. It assumes people need 85% of their working
income after they retire in order to maintain their standard of living,
a common yardstick.

Facing shortfalls, many people are postponing retirement, moving to
cheaper housing, buying less-expensive food, cutting back on travel,
taking bigger risks with their investments and making other sacrifices
they never imagined.

“Inevitably, we find that, for the average person, there is not
enough there,” says financial adviser Paul Merritt of NTrust Wealth
Management in Virginia Beach, Va., who has found himself advising many
retirement-age people with too little savings. “The discussion turns out
to be: What kind of part-time work do you want to do after you retire?”

He has clients contemplating part-time work into their 70s, he says.

Tax-deferred 401(k) retirement accounts came into wide use in the
1980s, making baby boomers trying to retire now among the first to rely
heavily on them.

The problems are widespread, especially among middle-income earners.
About 60% of households nearing retirement age have 401(k)-type
accounts, according to government data, and those represent the majority
of most people’s savings. The situation is less dire for those in a
higher income bracket, who tend to save more outside their 401(k)
accounts and who have more margin for error if their retirement returns
fall below the recommended 85% figure.

Read more of this article.

Sometimes it takes a village to let seniors stay at home

USA Today, February 21st, 2011

“Hell, no, we won’t go!”

That’s the answer I hear most often from seasoned
Baby Boomers when I ask if they’re getting ready to move to retirement
communities.

For starters, they don’t plan to
retire before 70. And most want no part of the elder islands where their
parents retreated from the hustle of city life into a largely
sedentary, age-segregated existence.

The
Village Movement is a popular alternative. The drivers of this movement
are feisty professional women in their 50s and 60s who are determined to
change the experience of aging by empowering and enabling adults to
remain in their own homes or apartments to the end of their lives.

The
movement, launched eight years ago in Boston with Beacon Hill Village,
has spread to Washington, Chicago, San Francisco and more than 50 other
cities. Hundreds more are in formation.

Boomers
now over 50 want to belong to communal families, networked into a
virtual village. It’s partly a resurgence of the commune spirit of the
1960s and a throwback to the villages of a pre-urbanized America, where
people looked out for one another through good times and bad.

Science
tells us today that anyone who hopes to enjoy a happy, healthy later
life needs to feel part of a larger group. Family members are not
enough.

We need to build new and diverse
friendships with people younger and older than ourselves — relationships
that are built on affection, not obligation.

Typically, the great majority of joiners in the Village Movement are women.

“It’s
the women who see the value of socialization,” says Bob Davis, the only
male board member of the 9-month-old Ashby Village in Berkeley, Calif.
“The men are happy in their workshops or reading or doing some solitary
activity.” Beneath this common divergence among couples is the fact that
the women anticipate becoming caregivers. The men expect to be cared
for by their wives.

Read more of this article.

Make Time for Free Preventive Health Services

US News & World Report, February 4th, 2011

The new year is barely a month old, but it’s not too soon for
Medicare users to begin taking advantage of the new, free preventive
health screenings and tests provided under the health reform law. Many
of the procedures do not require a co-pay and are not subject to any
insurance deductibles. Ideally, they should be part of an on-going
wellness plan that you and your physician develop.

[In pictures: 10 Senior-Smart Community Ideas.]

Under the new rules, a free yearly wellness exam is
available from doctors who participate in Medicare. This visit, in
turn, can be used to build a year-long wellness plan with your primary
physician. Most Medicare beneficiaries have some form of supplemental
coverage beyond basic Medicare. They should check with their insurers
for other wellness provisions provided under their policies.

The newly covered wellness exam supplements a
one-time “welcome to Medicare” exam that is now also free to people who
get it within their first 12 months of being covered by Medicare. This
welcome exam had been subject to a 20 percent co-payment but since the
first of the year, it’s been totally free.

Based on how Medicare beneficiaries have responded
to wellness programs in the past, it’s likely that the new roster of
free benefits will not be heavily used. The benefits are not being
broadly publicized, and even many physicians are not fully informed
about the new measures.

“In 2008, we did an analysis showing that only about
3 percent” of new beneficiaries used the welcome to Medicare exam,
says Dan Mendelson, head of Avalere Health, a policy and research
advisory company in Washington, D.C. “In 2008, there was legislation
that waived the deductible and doubled the eligibility period, and
still only about 3 percent [of beneficiaries] used it.”

Mendelson says it’s too early for there to be hard
data on use of the free wellness benefits, but the early feedback from
health insurers is that they are not seeing higher use. A spokeswoman
for the Medicare Rights Organization said program counselors were not
getting many consumer inquiries about the new benefits, and that the
most logical explanation was that they just weren’t aware of them.

[See 2011 Outlook for Senior Healthcare.]

“It would be a real eye-opener just to tell people
what’s available,” Mendelson said. “For example, if you asked 100
people whether smoking cessation services are provided [as a free
benefit], I bet all of them would say ‘no.’ But they are covered.”

The health reform law was enacted as the Patient
Protection and Affordable Care Act, and is referred to formally today
as the Affordable Care Act (ACA). Opponents, of course, have many other
names for it, including Obamacare and other names that usually include
a derivative of “job killing” in their title. It mandated expanded
preventive health services for all Americans, including Medicare
beneficiaries.

The pool of free preventive services is overseen by the U.S. Preventive Services Task Force,
an independent panel of medical experts that evaluates treatments and
tests and assigns them grade levels that reflect their effectiveness.

Doctors and other care providers are advised to offer measures that have received either an “A” or “B” grade,
and the free services are selected from these procedures. Not all
highly graded preventive measures are included right now among the free
procedures mandated by the ACA.

Read more of this article.

Study Suggests Hearing Loss-Dementia Link

Health Day News, February 14th, 2011

Adults who experience hearing
loss may face a higher risk of dementia and perhaps Alzheimer’s disease
than those who don’t suffer hearing loss, new research suggests.

And the greater the loss, the greater the risk, the study
suggested.

“This work suggests that there is a strong predictive association
between hearing loss as an adult and the likelihood of developing
cognitive decline with aging,” said study lead author Dr. Luigi Ferrucci,
chief of the U.S. National Institute on Aging’s Longitudinal Studies
Section, as well as director of the Baltimore Longitudinal Study of
Aging.

Ferrucci and his colleagues report their findings in the February issue
of the journal Archives of Neurology.

The authors noted that by the middle of the century, about 100 million
men and women worldwide (about one in 85) will be affected by
dementia.

The researchers’ investigation into the potential association between
hearing loss and dementia focused on 639 men and women between the ages of
36 and 90, none of whom had dementia at the start of the study in
1990.

Cognitive and hearing tests were conducted over a four-year period,
followed by patient tracking through 2008 (for an average of about 12
years) to monitor for signs of dementia and/or Alzheimer’s.

The researchers noted that 125 study participants were diagnosed with
“mild” hearing loss, while another 53 had “moderate” loss, and six had
“severe” loss.

Ultimately, 58 patients were diagnosed with dementia, of whom 37 had
Alzheimer’s disease.

By cross-referencing their data, the researchers found that mild
hearing loss was linked to a slight increase in dementia risk, but the
risk increased noticeably among those with moderate and severe hearing
loss.

Read more of this article.

Variable Annuity Worth Considering

American Chronicle, February 17th, 2011

Q. I am 47 years old and bought a house when I was 42 (30-year mortgage
at 5.12 percent). My job requires me to retire by 65 years old (police
officer), but I can retire as early as 57 years old. My mortgage won’t
be paid off until I am 72 years old. I have extra cash at the moment
(currently in a 1 percent savings account) that I have been debating on
investing in stocks or paying my mortgage principal down. What would the
wise choice be?

If we’ve learned anything from 2008, it’s not to be
over- leveraged. The historical return of the stock market at 9 percent
to 10 percent would suggest you could do much better in stocks –
especially if capital-gain rates stay at 15 percent — but let’s not
forget that during the last 10 years the Standard & Poor’s 500 was
flat. The math may work, but the certainty of return is not there.

Personally, I like the discipline of paying down a mortgage. If you
were to pay down your mortgage let’s say $100,000 on a $300,000 mortgage
at 5.12 percent, you would save about $153,000 over the life of the
mortgage.

You could, however, consider an investment strategy
that offers a guaranteed return or principal protection such as a
variable annuity. Let me briefly describe one general type of variable
annuity in which the amount invested, say $100,000, is guaranteed to
adjust (reset) annually at either 8 percent more or the actual account
value, whichever is higher.

The $100,000 in the variable annuity
is invested in a portfolio of mutual funds that diversify your
investment. On the anniversary date of the investment, the insurance
company looks at the account balance. If it has appreciated less than 8
percent or even lost money, your annuity base for calculating future
withdrawals is increased by 8 percent on your initial investment to
$108,000. If we had a good market that year and the account was up 15
percent or at $115,000, this higher amount is locked in and becomes your
base for applying the 8 percent, so the next year the annuity would
increase by $9,200 ($115,000 x 8 percent) to $124,200.

On a
$100,000 investment, assuming the market never beats the guaranteed 8
percent rate, the account benefit base will grow to about $196,000
($100,000 plus $8,000 per year over 12 years).

Depending on your
age when you start withdrawing the money, the insurance company will
guarantee you either 4 percent at age 62 or 5 percent at age 65 of the
benefit base (i.e., $196,000) or $7,840 at age 62 (or $9,800 at age 65) a
year for the rest of your life. It is important to understand that the
benefit base of $196,000 is available only as a withdrawal benefit. You
can, however, opt to withdraw the account balance of your mutual funds
at any time (subject to surrender charges usually in the first four to
six years).

Read more of this article.

Annuity advice for retirement:  Annuities are hardly the proper solution for everyone, but they do have a place in reputable retirement planning.  Find out how much it can assist you at NewRetirement.com

What might a government shutdown look like?

The Washington Post, February 17th, 2011

If President Obama and congressional Republicans fail to agree soon
on how to fund the final seven months of the fiscal year, some veterans
might not receive benefits checks and other Americans would be unable to
apply for Social Security. The State Department might not issue new
passports, unemployment statistics would not publish as scheduled,
museums and national parks would close, and worse — piles of elephant
manure might pile up in a National Zoo parking lot because workers can’t ship it away for composting.

Budget disagreements between Bill Clinton and Republicans prompted these incidents in 1995 and 1996, as federal agencies halted operations and stopped paying workers.

Over the course of more than 20 days, about 260,000 District-area
federal employees stayed home, or reported for duty only to be sent
packing hours later. Security guards roamed the halls forcing out
workers who lingered and some frustrated feds sought temporary jobs as
bike messengers and waitresses in order to pay holiday bills, according
to Post reports from the time.

Agencies
retroactively paid workers once the doors reopened, but many government
contractors — paid separately by private employers — earned nothing
during the shutdowns.

Obama and congressional leaders must strike a deal by March 4 in
order to keep the government running. Failure to pass a bill could cause
an immediate stop to a wide range of federal services.

Depending on the proposal, the GOP is hoping to cut $60 billion to
$100 billion, in an effort to trim the deficit and make good on a
midterm election pledge to cut government spending. The White House has
vowed to veto such plans. Numerous tea party groups have called on
lawmakers to force a government shutdown, if necessary, but GOP
leadership has vowed not to go that far.

“The government isn’t going to shut down,” Sen. Jon Kyl (R-Ariz.), the second-ranking Senate Republican, insisted Tuesday night. “Nobody is talking about shutting the government down.”

Actually, they are, according to sources. Federal agencies are
beginning to instruct senior officials to prepare for a possible
shutdown, ordering the cancellation of vacations or other personal
commitments, said officials not authorized to speak on the record.

Read more of this article.

Reverse Mortgage Origination Fees Make a Comeback

Reverse Mortgage Daily, February 16th, 2011

With the recent increase in reverse mortgage rates
and lower premiums from the secondary market, originators are are
finding it increasingly difficult to make enough on their loans without
charging an origination fee.

In past years, brokers saw back end pricing increase and were able to
pass some of that money along to the consumer, by forgoing origination
fees. Waived fees were commonplace and became expected by those applying
for reverse mortgages. Not anymore.

“We’re making nothing on the back end, so we’re forced to have fees,”
says Teague McGrath, vice president of marketing for
Orange-Calif.-based American Advisers Group (AAG). “We can’t survive on
the [current prices]…we are forced to do something.”

McGrath says origination fees are already being reintroduced
throughout the industry, and they are making it very difficult for
private lenders to compete with big banks. “It drives a wedge between us
and them,” says McGrath.

AAG, which posted 658 reverse mortgages in 2010, may have a different take from that of smaller industry players.

“I don’t think the fees made a big difference to our business. It’s
six of one, half dozen of the other,” says Mike Gruley, of Plymouth,
Mich.-based 1st Financial Reverse Mortgages. “Even though we commonly
see in the media that reverse mortgages are expensive, our experience is
that consumers are not swayed by the cost; they’re swayed by not
knowing how it works.”

Additionally, brokers are waiting to see how they will be affected by
new loan officer compensation rules expected to take effect on April 1.
A recent webinar by the National Reverse Mortgage Lenders Association
on the topic of loan officer compensation discussed the new rules, how
they will potentially impact lenders and brokers, and acknowledged that
there are still questions remaining, pending clarification from the
Federal Reserve.

Read more of this article.

About Reverse Mortgages:
  As the variance in fees increases, it becomes more and more important for homeowners to get a broad view of what is available to them in terms of fees and interest rates.  Consider the options at NewRetirement.com



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