4 Signs You’re Thinking About Social Security Benefits the Wrong Way

My Comments: For millions of us, Social Security has become a critical source of income if we expect to continue our current standard of living into the future. For those of you not yet claiming benefits, these four items are critical to your future retirement success.

Christy Bieber \ Oct 7, 2018

Social Security benefits are a major source of income for retirees, but far too many seniors have no clear idea how these benefits work. Even worse, many seniors have major misconceptions about Social Security benefits that could affect their plans for retirement in adverse ways.

To make sure you’re not one of the millions confused about how Social Security will provide for you as a senior, consider these four signs you’re thinking about Social Security benefits the wrong way.

1. You’re expecting Social Security to provide all the retirement income you need
Social Security benefits are designed to replace about 40% of your pre-retirement income, while most financial advisors suggest you’ll need at least 70% of the money you were earning prior to retiring.

If you aren’t saving money to supplement Social Security, you’re putting yourself into a position where your Social Security benefits may be your only source of funds as a senior. This is a recipe for financial disaster, as living on Social Security alone will leave you close to the poverty level.

Don’t count on Social Security to provide you with all you need. Instead, invest in a 401(k) or an IRA so you’ll have supplementary savings. Ideally, try to invest at least 15% of your income. If you can’t start there, at least set up small automated contributions to make sure you’re saving something. You can increase contributions over time as you get used to living on slightly less or when your income increases.

2. You’re counting on taking Social Security at age 65 or later
As many as 70% of workers think they’ll take Social Security benefits at age 65 or later according to Employee Benefit Research Institute. Almost 20% plan to wait until age 70, which is the last age at which you can earn delayed retirement credits to increase monthly Social Security income.

The reality, however, is that 62 is the most common age to claim Social Security, while age 63 is the median age at which retirees claim benefits. If you anticipate waiting to claim so you can increase your monthly income from Social Security, you could find yourself short of cash if illness or unemployment forces you to leave the workforce early.

To make certain you don’t end up with a shortfall, assume you’ll receive the monthly benefit amount you’d get at 62, and plan accordingly when deciding how much additional income you need from savings. If you’re lucky enough to be able to work longer and put off claiming benefits, you’ll simply have extra income — which is far better than having too little.

3. You aren’t considering your spouse when you make your plan for Social Security benefits
If you’re planning on simply claiming Social Security benefits under your own work record, you could potentially be missing out on a higher payment if you’re eligible for widow or spousal benefits. If your spouse earned more, you should carefully consider whether claiming under his or her work record could provide you with more funds than claiming on your own work history.

You can claim spousal benefits even after divorce as long as you were married for at least 10 years, so don’t assume claiming under your own work record is your only option, even if you’re currently single.

If you’re the higher earner, you also need to think about your spouse when making a decision on claiming benefits. When one spouse dies, the surviving spouse could opt to earn either widow’s benefits or their own benefits– whichever is higher. If you’ve claimed your benefits early instead of waiting to earn delayed retirement credits, you’ve reduce the widow’s benefits your surviving spouse would otherwise have received. This could leave your spouse with insufficient funds once you’re gone.

4. You think taking Social Security at 62 won’t impact your benefits over the long-term
Many people who retire at 62 have a major misconception about what claiming benefits before full retirement age does. In fact, 39% of pre-retirees think if they claim reduced benefits early their benefits will increase to a standard benefit at full retirement age.

This isn’t the case, and the reduction in benefits that occurs when you claim before full retirement age affects your annual Social Security income throughout your retirement. Your future cost of living adjustments are based on your lower starting benefit amount, and your monthly income will never be as high as it would’ve been had you waited.

Make sure you aren’t thinking about Social Security the wrong way

Since Social Security benefits are such an important source of retirement income, it’s worth doing your research to ensure you don’t make big mistakes when it comes to your benefits. Check out this guide to Social Security benefits, and ensure you know the answers to five key questions about Social Security before you claim your Social Security benefits as a senior.

Source: https://www.fool.com/retirement/2018/10/07/4-signs-youre-thinking-about-social-security-benef.aspx

Advertisements

This Data Visualization Shows What’s Really Responsible For Our Current Bull Market

My Comments: Apart from my concern that many of us will wake up one day soon and discover much of our money has disappeared, it is helpful to understand where all the gains have come from since the last significant crash in 2008.

By Nicolas Rapp and Clifton Leaf September 25, 2018

Who’s responsible for the bull market: Trump, Obama, Bernanke, Yellen? Answer: Tech companies. Here’s a look at what’s really driving growth.

As Wall Street’s raging bull continues its historic charge, there has been plenty of chatter about who deserves the credit: Mr. Trump? Mr. Obama? Former Fed chairs Ben Bernanke or Janet Yellen, perhaps? But the answer seems not to be a “who” but rather a “what”: tech companies. From the market bottom in 2009 to now, the capitalization of companies listed in the S&P 500 index grew by more than $18 trillion. But three of every 10 dollars in gain came from the 73 tech companies in the index. And the true bull market of the past decade was even narrower than that. Nearly 16% of the market cap growth derived from just four stocks: Apple, Alphabet, Microsoft, and Facebook. Their combined valuations soared from just over $300 billion to more than $3 trillion.

[ FORTUNE ]

Most Americans Fail at Financial Literacy. Here Are 3 Concepts You Absolutely Need to Know

My Comments: A dilemma for many people is they find the language used by those of us in the world of finance and economics very hard to understand. It goes in one ear and comes out the other.

I’m about to launch an internet course that will help solve this problem. I call it Successful Retirement Secrets. Look for a blog post in the coming days and an opportunity for everyone to see a free preview.

In the meantime, here are three concepts to get you started.

Maurie Backman Mar 31, 2018

While Americans might have no problem spending money, managing it is a different story. In fact, nearly two-thirds of U.S. adults can’t pass a basic financial literacy test, according to the FINRA Foundation. Specifically, Americans have a hard time calculating interest payments, answering questions about financial risk, and understanding the relationship between bond prices and interest rates (the former falls when the latter rises, and vice versa). With that in mind, here are a few basic financial concepts everyone should know.

1. Compounding
If you’re not familiar with compounding, you’re not alone — but you’ll also need a quick lesson, because this is a concept that can work both for you and against you. First, the positive. Compounding is the concept of earning interest on interest. Imagine you put $2,000 in a savings account paying 1% interest per year. Let’s also assume that interest compounds once a year. At the end of the first year, your account balance will be $2,020. But if you leave that money where it is and your interest rate stays the same, then during the second year, you’ll be earning 1% interest on $2,020, as opposed to just the $2,000 you initially put in.

Now here’s where compounding really gets interesting. Imagine you’re saving for retirement by socking away $300 a month in an IRA or 401(k). Over a 40-year period, that’s $144,000 in out-of-pocket contributions. But if your investments deliver a 7% average yearly return, then you’ll actually wind up with roughly $719,000 after 40 years, because your earnings will have compounded over time.

Sounds pretty great, right? Don’t get too excited, though, because compounding can also work against you. Any time you fail to pay off your credit card, for example, the balance you owe will accrue interest. But over time, you’ll be charged interest on top of that interest, and you’ll end up paying well more than the initial outstanding amount.

Imagine you rack up $2,000 of debt on a credit card charging 20% interest. If it takes you three years to pay off that sum, it’ll cost you a total of $2,675. But if you manage to pay it off in just six months, you’ll only spend $2,118. Why? Because you’ll be giving that interest less time to compound against you.

2. Inflation
In 1940, a loaf of bread cost just $0.10 on average. In 2013, it averaged $1.98. Why is this significant? Because it illustrates the point that a dollar today will have less buying power in the future. It’s a concept known as inflation, and it basically refers to the tendency of expenses to rise over time. This affects everything from housing to consumer goods to healthcare.

Why do you need to worry about inflation? It’s simple: If you’re eager to live comfortably in retirement (which you probably are), you’ll need to start setting money aside today. But the money you contribute to your IRA or 401(k) today won’t have the same buying power in 40 years as it does now. That’s why it’s crucial to grow your savings through smart investments — to take advantage of compounding and keep up with or outpace inflation.

In the above example, we saw that investing $3,600 a year at an average annual 7% return would result in $719,000. If you were to take those same $300 monthly contributions and house them in a savings account paying just 1% interest, then in 40 years, you’d have $176,000 — more than the $144,000 you originally put away, but still hardly any growth to keep up with inflation. As a result, that ending balance likely wouldn’t be enough to pay for your living expenses when you’re older, whereas $719,000 will more likely enable you to retain the buying power you had when you first set that money aside.

3. Diversification
We just saw how a 7% average annual return could turn a series of smaller contributions into a much larger sum. But why 7% and not another number? The truth is, it’s hard to say exactly what average return your investments might generate, but that 7% is a reasonable assumption for a stock-heavy portfolio based on the market’s historical performance. In fact, it’s for this reason that younger investors are typically advised to load up on stocks.

That said, you don’t want to put all of your money in stocks. Rather, it’s wise to spread your assets out over a variety of options, from stocks to bonds to cash to real estate. This way, if the stock market has a major downturn, you’ll have other assets to tap that won’t necessarily lose value the same way. It’s a concept known as diversification, and it basically means putting your eggs in different baskets to protect yourself from severe market conditions.

There’s even the potential to diversify within an asset type. For example, among your stock investments, you shouldn’t have 90% in, say, biotech. Rather, you should invest in different industries so that if a particular sector goes down, you’re not totally out of luck. Index funds are another great way to get some instant diversification in your stock portfolio, especially if you’re new to investing and don’t quite know how to choose individual stocks.

While you don’t need to be a financial wizard to successfully manage your money, it’s critical that you grasp these basic concepts and learn how to work them into your investment strategy. A little extra reading today could set the stage for a wealthier future.

5 questions you should ask before buying an annuity policy

My Comments: Here are five questions about annuities that are adequately answered by Craig Hawley. However, as someone with 42 plus years as a financial professional in financial services, I can say there are more than five questions to be posed before you purchase an annuity.

Deciding whether to buy or not buy an annuity is what I refer to in Successful Retirement Secrets as a strategic decision. Once you get comfortable with a ‘yes’ or ‘no’ answer with respect to buying or not buying, you then move into the arena of tactical decisions, ie what kind of annuity to buy.

And this is where it gets even more complicated. You are confronted with literally thousands of choices, and it’s sometimes hard for even professionals like me to make intelligent recommendations. But we try and sometimes we get it right.  Caveat Emptor…  (Check out my ebook, Your Future Retirement as referenced on the right side of this web page. Email me for a coupon to get a free copy…)

Oct 3, 2018 by Craig Hawley

It’s been 10 years since the 2008 financial crisis, and discussions between advisers and investors are more likely to focus on when—not if—the next market downturn will happen. As you sit down with your adviser to explore how you can better prepare for and live in retirement in the face of this challenge, annuities might be part of the conversation.

Whether you are between the ages of 45 and 55 and looking to maximize the benefits of tax-deferred accumulation, or in your 60s and ready to begin generating an immediate stream of protected retirement income, there are annuities that may fit your investing needs.

You may be hearing more about annuities lately. And that could include some warnings — that annuities are expensive and complicated. But there are many types of annuities, and they can be an essential part of a comprehensive retirement plan.

If you’ve been thinking about an annuity, or your adviser suggests investing in one, there are five questions you should ask—and important answers that you need—to determine if it is the right solution to help you reach your financial goals.

How does an annuity help me in retirement?

Many investors say that running out of income in retirement is their No. 1 fear. Tax-deferred qualified retirement accounts such as a 401(k) or IRA allow investors to accumulate assets that they will then draw down in retirement. But those assets—and that income stream—can be subject to market risk. An annuity, on the other hand, is like an insurance policy for your retirement, that can convert your investment into a guaranteed stream of protected income for specific period of time, or even income for life.
There are so many options. How do I determine what is right for me?

For starters, you can control when you will receive income from your annuity by choosing between deferred or immediate annuities. Deferred annuities allow investors to grow assets tax-deferred, over years or decades, before choosing how to generate an income stream. Immediate annuities, such as a single premium immediate annuity (SPIA), will begin income payments soon after making an initial lump sum investment, and typically are a better fit for individuals when they are ready to begin their retirement.

You can also choose from annuities based on the growth potential of the assets that you’ll be investing. There are variable annuities, where returns are tied to market performance for greater growth potential—but with more risk as the contract value fluctuates based on the market’s ups and downs.

Indexed annuities can provide some upside potential when markets rise, but also offer protection from market downturns. There are fixed annuities, which provide a guaranteed interest rate, regardless of what may happen in the market. In recent years, many advisers have been recommending fixed index annuities (FIA) as a better bond alternative.

What are some fees I may be charged?

Just like other retirement accounts, such as a 401(k) or IRA, there are also expenses associated with annuities. Fees for variable annuities can easily total 3% a year or more. The industry average for five typical fees include:
1) mortality and expense fees (M&E): 1.35%
2) administrative fees: 0.10% – 0.30%
3) investment management fees charged for the underlying funds inside the annuity: 1.00%
4) fees for optional riders or insurance guarantees: 1.00%
5) surrender fees which may be charged for withdrawing funds from an annuity too soon: as much as 8.00%.

There may also be commissions that an insurance company pays to the broker or agent who sells the annuity, typically ranging from 5% to 9% of the amount you invest. This may lead directly to the size of the surrender fee, as well as impacting the overall cost. Your adviser can explain all of the fees associated with an annuity, and help you evaluate them.

If fees are a concern, consider low cost and no-load annuities when determining which annuity will fit best into your overall financial plan. These low cost, no-load annuities often charge an M&E that is one-half to one-fourth of the industry average, or even a flat subscription fee, eliminating commissions and other insurance fees. The tradeoff may be limited access to insurance guarantees and limited downside protection.

Is the income truly guaranteed?

Annuities can offer many choices for guaranteed income, from the simplicity of an immediate annuity, to a range of different optional living benefit riders that are designed to protect portfolio assets or income payments when markets decline. Some of these living benefits provide guaranteed income even if the underlying investments lose value. As another solution to protect against market risk, investors may be able to purchase an optional Return of Premium rider (ROP) to guarantee their initial investment.

Because the annuity is a contract with an insurance company, the guarantee of future payments is based on the financial strength of the insurer. Insurance companies are highly regulated, with strict requirements related to their investments and capital reserves. Their financial strength is regularly reviewed and rated by five independent firms: A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s and Standard & Poor’s, each with their own rating scale and rating standards.

In addition, each state has a Guaranty Association to protect policyholders in the unlikely event that the insurance company is unable to meet their financial obligations. A study by the U.S. Government Accountability Office determined that even following the profound effects of the 2008 financial crisis, the impact on the majority of insurance companies and their policyholders was limited, with a few exceptions.

Are there other ways I can use my annuity?

Advisers can recommend many ways that annuities can be an effective financial planning tool to meet a range of investing needs at all different stages of the financial lifecycle. For example, investment-only variable annuities (IOVAs) are built specifically to maximize the power of tax-deferred accumulation—with lower costs, more fund choices and sophisticated portfolio management platforms.

IOVAs can be beneficial for high earners and those with high net worth, who can easily max out qualified plans, such as 401(k)s and IRAs, and are looking for another tax-advantaged investment vehicle. With virtually unlimited contributions, IOVAs can also be used to shelter a large cash infusion, such as the proceeds from selling a business. And tax-inefficient asset classes, such as fixed income, commodities, dividend-yielding stock and liquid alternatives, can be “located” in IOVAs to increase returns—without increasing risk.

Annuities can also be used for tax-efficient legacy planning. Many offer a range of optional death benefits, from a lump-sum payment to a guaranteed income stream for heirs.

These proceeds typically receive favorable tax treatment, and can be transferred to heirs without the hassle of probate and legal fees. Some annuities offer a restricted stretch provision, to minimize the tax burden of a large inheritance by spreading taxes over a beneficiary’s lifetime, while controlling distributions to heirs with less complexity and expense. Advisers can also help clients with a tax-efficient strategy to fund trusts in a low-cost IOVA, allowing the assets to accumulate and grow tax-free.

Remember that annuities are long-term investments and should be considered carefully. They might not make sense for investors who want immediate and unrestricted access to their capital, because the tax-deferred structure means certain kinds of withdrawals may incur tax consequences. But for other investors who don’t have immediate liquidity needs, especially high earners and the high net worth, annuities might fit within their financial plan.

Before investing in an annuity, work with your advisers to determine your retirement income needs, evaluate liquidity needs and create a holistic picture of your existing retirement income sources, including qualified retirement plans. Then ask your adviser the right questions, including if they operate under a fiduciary standard, and get the answers you need, to determine if an annuity might fit within your holistic financial plan.

Craig Hawley is head of Nationwide Advisory Solutions, which works with registered investment advisers and fee-based advisers.

Source article: https://www.marketwatch.com/story/5-questions-you-should-ask-before-buying-an-annuity-policy-2018-10-03

We’re underestimating China’s economic power. Here’s why

My Comments: By first choosing to opt out of participating in the Trans Pacific Partnership (TPP) and then inviting a trade war with China, the US has effectively ceded global economic supremacy to China. The expressed logic behind these moves was in the guise of ‘Make America Great Again”. Hah!

In turn, China is attempting to match their new found economic supremacy with military supremacy. It’s only a matter of time before we find ourselves in a conflict or “Cold War” with echoes of what we lived with years ago and the Soviet Union.

September 27, 2018 Knowledge@Wharton

China’s economy is so large – and growing so rapidly – that it’s difficult to get a true read on the size of its influence on the world stage, according to this opinion piece by David Erickson, a senior fellow and lecturer in finance at Wharton. Before he taught at Wharton, Erickson was on Wall Street for more than 25 years, working with private and public companies to raise equity strategically.

Some of the rhetoric out of Washington recently has been suggesting that the U.S. is “winning” the trade war because the U.S. stock market is near all-time highs as China’s domestic equity markets have declined significantly. While the domestic Chinese equity markets have suffered since the trade tensions started earlier this year, I think that premise underestimates the economic power of the rapidly growing number-two economy in the world and really needs a bit of context.

The Chinese equity stock market — as represented by Shanghai stock market — actually peaked in 2015. This is not too dissimilar from the market cycles we have experienced in the U.S. in the last 20 years. This includes what we saw in the Dow Jones Industrial Average (DJIA), which reached 11,000 in May of 1999 but took more than seven years to reach 12,000. While the DJIA advanced from October 2006 to July 2007 from 12,000 to 14,000, it took almost six years, until May 7, 2013, before it advanced to the 15,000 milestone. For the NASDAQ market, the cycle was even more dramatic where it took 15 years to reach new highs in 2015. Markets do go through cycles.

But hasn’t the Shanghai stock market been quite volatile since the trade war started? Yes, it has. This is not surprising with much of the domestic Chinese equity market activity largely being from retail investors, especially with many having very limited experience in Chinese equity investing (which I will address shortly). With the uncertainty of the trade rhetoric over the last few months, there was likely to be some significant volatility. However, by way of comparison, the U.S. equity markets went through significant volatility earlier this year after a significant run since the 2016 U.S. election. If you go back a bit further, the U.S. equity markets, which are largely institutionally driven, had significant periods of volatility during the 2008 Financial Crisis, where the DJIA fell almost 800 points on September 29th; the technology “bubble” in 2000, where on April 14th the NASDAQ fell 9% and for the week 25% (and the NASDAQ 100 index lost 78% of its value in two years); and when the Dow Jones fell almost 23% in one day on “Black Monday” of 1987.

Why do I go back to 1987 for context? Because in 1987, while a Wharton finance student could study “Black Monday” in the context of previous crashes in the U.S. stock market, the Chinese domestic equity market didn’t exist and wouldn’t until 1990. That’s right, a Chinese student studying finance on mainland China at the same time couldn’t learn about investing in the Chinese equity markets because it did not exist until a few years later. The Shanghai Stock Exchange was founded in 1990 (and Shenzhen around a similar time) creating a domestic equity market for both mainland Chinese companies to list and finance, and for Chinese institutions to invest. Today, it is estimated that the Shanghai Stock Exchange has over 200 million retail investors — total U.S. population is just 327 million — and for the full year 2017 was the number-two IPO market globally in terms of proceeds raised. So, while the Chinese equity market has suffered significant losses this year, given the “rapidity” of its evolution, these changes need to be put in context.

“Now, markets in Hong Kong, Shanghai and Shenzhen collectively represent the largest IPO market in the world….”

These are just a couple of the things we learned on our recent trip to Hong Kong, Shanghai and Shenzhen as part of Wharton’s MBA course called Strategically Investing in the Growth of China. A delegation of 58 Wharton Executive MBA students, along with three faculty members, met with prominent Chinese companies, leading Chinese public equity and private equity investors, as well as representatives of the Hong Kong and Shanghai Stock Exchanges, and explored how they strategically invest in the growth of China. While I had been to China many times during my previous investment banking career (though the last time was in 2013 before I retired), about 85% of our students had never been to Hong Kong or mainland China.

When we started our trip, given that many of our students had never been before, I wanted to give them a few numbers to provide some context as to the size and scope of the Chinese economic opportunity. Here are some of them — all approximations:
• a population of 1.4 billion people;
• 620 million mobile internet users as of 2015, according to China’s Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom;
• 400 million in the middle class.

And to get some sense of the rapidity of the change:
• Exports have grown for the last 30 years at a 17% compound annual growth rate (CAGR), making China the world’s largest exporter at $2.3 trillion in 2015, according to The China Questions – Critical Insights into the Rising Power;
• In 1980 about 70% of Chinese labor force was in agriculture; by 2016 only 30% was in agriculture;
• In 1980 only 2% were university educated; by 2016, approximately 30%;
• In 1980 Shenzhen had a population of 30,000; by 2016, Shenzhen had a population of some 12 million.

What I realized as we progressed through our visits to these companies and investors was that these numbers were understated, and significantly under-estimate the economic power of China. Let me outline three of the specific attributes that we learned about and discussed as part of our trip:

How to Prepare for Costs Medicare Won’t Cover

My Comments: Health issues in retirement are a given for those of us not already passed. Whether they end up costing an arm and a leg depends to some extent on how prepared we are before they happen.

Both my wife and I are covered by Medicare and each of us has a ‘medigap’ insurance policy, designed to cover most of what Medicare does not cover. But make no mistake, between the Medicare Part B premiums and the ‘medigap’ policy, it still represents a significant monthly outlay if you don’t think of yourself as financially comfortable.

And then there is Medicare Part D which covers prescription drugs. My wife is a diabetic, and that too can be very expensive. She and I both elected to purchase a Part D plan. All this assumes you have the resources to pay the extra premiums.

As for Medicare Part C coverage, or Advantage Plans, I have a bias against them so we didn’t go that route. But that’s a personal preference.

The real benefit to me for having what we have is that when we decide we need to speak to one of our many physicians, the out-of-pocket expense is not a deterrant. Being able to deal with health issues as they surface provides real peace of mind as the years flow by.

Katie Brockman Aug 19, 2018

When you think about how you’ll spend your retirement savings, you probably imagine traveling the world, getting more involved in your hobbies, or spoiling your grandchildren. What you probably don’t envision is spending every spare dime on healthcare expenses.

Unfortunately, that’s the ugly reality some retirees face.

The average 65-year-old couple retiring today can expect to spend roughly $280,000 on healthcare during retirement, according to a recent report from Fidelity Investments. That includes costs like premiums, deductibles, and other out-of-pocket expenses.

This may come as a shock to some, as many people mistakenly believe that Medicare will cover all their healthcare expenses during retirement. The truth is that while Medicare can offer significant financial assistance, it doesn’t cover everything. And some of the costs it doesn’t cover can put a serious crack in your nest egg.

What Medicare does (and doesn’t) cover

First, it’s important to understand what Medicare does cover and how much you’re paying for it. Original Medicare consists of Part A and Part B. Part A covers hospital visits, visits to skilled-nursing facilities, and in-home healthcare services. As long as you’ve been working and paying taxes for at least 10 years, you generally don’t need to pay a premium for Part A coverage. You do have a deductible for each benefit period, though, and for 2018, that deductible is $1,340. Also, if you have to spend an extended period of time in a hospital or skilled-nursing facility (typically longer than 60 days for hospital stays and 20 days for visits to a skilled-nursing facility), you may have to make coinsurance payments, which range from $167 to $670 per day — or Medicare may not cover your stay at all.

Part B covers more routine care, like doctor visits and flu shots, and the amount each person pays varies based on their income. Those earning less than $85,000 per year (or $170,000 for married couples filing jointly) pay $134 per month for Part B premiums. You also have to pay a yearly deductible, which for 2018 is $183. After you meet that deductible, you pay 20% of the remaining expenses.

You also have the option of enrolling in Part D, which covers prescription drugs. This coverage is provided by private insurance companies, though, so the amount you pay will vary widely depending on which plan you have.

Even considering all that Medicare Part A and Part B cover, there’s a variety of expenses that basic Medicare won’t touch. For example, you still need to pay for all copayments, deductibles, and coinsurance out of pocket, and those costs can add up quickly. You’re also not even eligible to enroll in Medicare until you turn 65, so if you retire before that and lose your health insurance when you leave your job, you’ll need to find coverage outside of Medicare.

Then there are healthcare expenses that most people don’t realize aren’t covered. Most dental care, for example, isn’t covered by Medicare, and neither are eye exams, hearing aids and exams, dentures, or long-term care.

These aren’t necessarily hard rules, because there are always exceptions. Expenses that are considered medically necessary are often covered by Medicare, while routine care is not. So if, for example, you have a dental emergency, then Medicare may pick up the tab, but if you simply get your teeth cleaned or have a cavity filled, then you’ll likely need to pay for that out of pocket. And even routine care can cost hundreds of dollars per visit. If you’re not prepared for those expenses, they can drain your savings quickly.

Don’t let healthcare costs catch you off guard

The best way to avoid paying tens (or hundreds) of thousands of dollars in healthcare costs is to do your research, understand what Medicare does and doesn’t cover, and figure out how to pay for uncovered medical care before you retire.

One option is to enroll in a Medicare Advantage Plan (also known as Medicare Part C). A Medicare Advantage Plan is a health plan offered through private insurance companies that includes all the benefits of Medicare Part A and Part B, as well as some additional coverage for vision, hearing, and dental. Advantage Plans are similar to the insurance plans you likely enrolled in while you were working: You have to visit a doctor within your plan’s network or risk not being covered, and the premiums and deductibles vary by plan and provider.

Although prices vary, you typically get more coverage with an Advantage Plan. Depending on the type of care you need, it could be worth it to pay more for an Advantage Plan in order to pay much less out of pocket for routine care.

Another option is to use a health savings account (HSA) to cover some of your medical expenses. An HSA is essentially a retirement savings account just for healthcare costs. You’re eligible for an HSA if you have a high-deductible health insurance plan, and for 2018, that means you have a deductible of $1,350 for an individual or $2,700 for a family, as well as maximum out-of-pocket costs of $6,650 or $13,300 for an individual or family, respectively.

If you’re eligible to open an HSA, you can contribute up to $3,450 per year (or $6,850 for family health plans) in pre-tax dollars. Those aged 50 and over can contribute an extra $1,000 per year. When you withdraw the funds, so long as you spend them on qualified medical expenses, you don’t need to pay taxes on withdrawals either.

Regardless of which route you choose, it’s crucial to have a plan in place. If you go into retirement assuming you won’t need to pay a dime more in medical expenses than you used to, you’ll be in for a rude awakening. But if you prepare yourself and come up with a plan before you make the leap into retirement, your wallet will thank you.

Source: https://www.fool.com/retirement/2018/08/19/how-to-prepare-for-costs-medicare-wont-cover.aspx

Ride Out The Next Market Storm With These Balanced Vanguard Funds

My Comments: Readers of my blog posts know at least two things: (1) I’ve been expecting a significant downturn for longer than I can remember and (2) I like Vanguard Funds. I have much of my money there, to some extent because of their insanely low fees compared with what I lived with for most of my 42 years in the money business.

The economic consensus is that a downturn is really coming, though at this point whether it’s tomorrow or 3 years from now is anyone’s guess. That being said, this article explains the logic behind the idea and offers reasons why two of Vanguards funds should be considered.

The article below is very long, has many charts, and is not an easy read. If you are so inclined, there is a link to it at the bottom. Have fun…

Also, please understand that I no longer charge anyone for investment advice and am offering this because I can and because many people out there are going to get hammered when the inevitable happens. (BTW, I cannot find the name of the author below so please forgive me for not providing proper attribution.)

Sep. 24, 2018

The stock market has sailed to record gains of more than 400% since the 2007-2009 financial crisis, and investors who didn’t abandon ship have weathered the storm and are now likely in terrific financial shape. However, as the market waters have risen to new heights, investors flush with unrealized gains may be looking to navigate toward calmer seas during the next crisis. In this article, I take a thorough look at two actively managed, balanced mutual funds from Vanguard that provide capital appreciation as well as income from stock dividends and bond distributions, and that also provide a level of capital preservation during periods of market turbulence. The data below reveal how adding these funds can help buoy your hard-fought portfolio from sinking to the next market bottom.

Riding the Current Bull Market Tailwinds

For investors who have witnessed their portfolio value rise dramatically as we have officially entered the second-longest bull market in history, it may be difficult to remember the dread and angst that was felt by many as the S&P 500 index lost 56.8% of its value from Oct 9, 2007 to the market bottom on March 9, 2009. Since then the S&P 500 share price has more than quadrupled, rising 329.3% as of Sept. 18, 2018 and is currently trading near its all-time high. When factoring in reinvested dividends, the S&P 500 has done even better, generating total returns of 424.4%.

Continue Reading HERE