Don’t Be Too Quick to Judge Medicaid: You Might Need It in Retirement

Don’t Be Too Quick to Judge Medicaid: You Might Need It in Retirement

Long-term care planning is an important part of retirement planning and something we regularly talk to our clients about. One thing people often don’t realize, as Jordan Rau in this helpful NY Times article points out, is that Medicaid plays a vital role in long-term care planning and currently accounts for 42 percent of Medicaid expenditures. Some also don’t realize, as Rau continues, that many recipients “entered old age solidly middle class but turned to Medicaid, which was once thought of as a government program exclusively for the poor, after exhausting their insurance and assets.” Medicaid, then, isn’t a merely a system for the poor who need food assistance, but rather it’s an important social safety-net for retirees who can’t keep up with the pace of health care costs: A combination of longer life spans and spiraling health care costs has left an estimated 64 percent of the Americans in nursing homes dependent on Medicaid. In Alaska, Mississippi and West Virginia, Medicaid was the primary payer for three-quarters or more of nursing home residents in 2015, according to the Kaiser Family Foundation.   “People are simply outliving their relatives and their resources, and fortunately, Medicaid has been there,” said Mark Parkinson, the president of the American Health Care Association, a national nursing home industry group. With all of the proposed changes taking place in congress, the full article in the NY Times is worth reading, and I think it provides a helpful perspective on the need for health care reform and the need for responsible, proactive retirement...
Before You Pay for Financial Advice, Read This Guide via The NY Times

Before You Pay for Financial Advice, Read This Guide via The NY Times

Earlier this year our firm was featured in The New York Times in an article about fees and the fiduciary rule. Our thoughts in that article were cited this week in another NY Times article about what consumers need to know before paying for financial advice. Generally I thought the piece was helpful and accurate. I will say that consumers need to be chary of hiring a robo-adviser, which is something the article points out as an option to investors. Investing is best done in the context of a financial plan, and a robo-adviser simply cannot give the kind of holistic and adaptable advice that is often necessary for financial success (e.g. When was the last time a robo-adviser monitored a portfolio with a keen eye so that an appropriate amount was converted to a Roth IRA?). Additionally, the article cites that one can get a financial plan in New York for $1,200. Perhaps this is true, but I hardly know a competent financial planner who would do a financial plan for $1,200. Financial planning fees often vary by complexity, and a better estimate would be a range beginning with $2,500 for less complex plans and $5,000 and up for more complex advice. Other than these minor points, I thought the article pointed consumers in the right direction, and I appreciated its focus on the need for sound fiduciary advice....
Investors Aren’t Yet Safe: Why Working with a Fiduciary Is More Important than Ever

Investors Aren’t Yet Safe: Why Working with a Fiduciary Is More Important than Ever

A recent editorial in The New York Times points out that consumers of financial services aren’t yet safe even though the Department of Labor’s Fiduciary Rule will likely go into effect. They are not yet safe because the new secretary of labor, Alexander Acosta, is now proposing a replacement rule that will essentially rescind the original fiduciary rule. In case you’re not familiar with the issue at hand, the editorial board explains that “While some financial advisers must adhere to a legal duty to act in a client’s best interest, many others face no such obligation. One result is that consumers pay an estimated $17 billion a year in excessive fees because advisers steer them into high-cost products when lower-cost ones are available.” Why would Mr. Acosta propose such a rescission?  “Mr. Acosta objected that the rule ‘as written may not align with President Trump’s deregulatory goals.'” The editors go on to explain how striking this is given that “Mr. Acosta’s job as labor secretary is to advise Mr. Trump on how to help working people, not how to achieve his deregulatory goals. The fiduciary rule, as written, will help working people. Rescinding it will not.” So what is the consumer to do? The article is correct when it says that “some financial advisers must adhere to a legal duty to act in a client’s best interest…,” but who are these advisors? These advisors are fee-only advisors, and many of them are members of the National Association of Personal Financial Advisors. If you don’t want to worry about whether or not an advisor has your best interest in mind or, if...
Client Success Story: Senior Executive Gets Peace of Mind

Client Success Story: Senior Executive Gets Peace of Mind

One of our clients is a C-level executive for a large international company. He came to our firm with a complex set of needs ranging from restricted stock planning, real estate investment needs, concerns about his investment portfolio, and worries about his overall risk management plan. His primary goals were to build wealth and to protect it. After analyzing his financial situation in great detail, we were able to help him devise a risk management plan that gave him significantly better insurance coverage for his real estate portfolio, and we also rescued him from some very poor whole life insurance products. We also helped him devise a much more robust life insurance, property & casualty insurance, and disability income insurance strategy. When we first sat down, his group disability income insurance was no where near sufficient to protect his family in the event of a long-term disability. After working with his HR department, we were able to build an executive-level supplemental disability insurance strategy that augmented his disability coverage from about 60% of his pay to around 80% of his pay. For someone at his income level, this was a critical risk that needed to be ameliorated. He also completed the financial planning process with an investment strategy, a clear retirement plan, and some advice on what to do with his restricted stock. Most importantly, our client had peace of mind that his family would be taken care of financially in the event something were to happen to him. Every client has different goals, but this was a clear example of a client who was able to greatly benefit from...
Client Success Story: Retirement Hopes Become a Reality

Client Success Story: Retirement Hopes Become a Reality

When we first met with Phil and Nancy (clients’ names changed for confidentiality purposes), they weren’t sure if they could retire. As their financial planners, we had not yet taken them through the financial planning process, so we weren’t sure either. Phil was an IT professional who worked for the state government. He enjoyed his job, but he was ready for a change and wanted to retire. Nancy was a homemaker who enjoyed singing in her church choir. Phil was not a high income earner, but he and Nancy were frugal and did a good job saving over the years. Phil had a keen eye for details, and he asked us a lot of very good questions. One of Phil’s biggest concerns was deciding which retirement pension plan option to select at retirement. He also had questions about whether or not it made sense to purchase additional years of pension service credit and long-term care insurance. After analyzing Phil and Nancy’s finances in great detail, it became clear that their retirement plan could benefit from the purchase of additional years of service credit. We assisted them with this process, and we also helped them determine the most efficient means of funding that purchase. We further analyzed Phil’s pension, and we were able to advise him on the best pension payout option, one that would ensure that Nancy was protected in the event of Phil’s passing. Fast forward several weeks later when we met for a final review of their financial plan, and we were able to present some very good news. Not only was Phil in a position to...
Making Retirement Money Last: A Summary of Withdrawal Strategies

Making Retirement Money Last: A Summary of Withdrawal Strategies

As prospective retirees near retirement, one of the most important things they’ll need to do is come up with a sustainable withdrawal strategy for the retirement assets they’ve accumulated. Importantly, this decision could determine whether or not one’s portfolio will run out of money. Here’s a brief summary of many of the methods available to retirees:  FIXED AMOUNT METHODS 1.) Constant Dollar Amount (adjusted for inflation each year) One method to accomplish this has historically been the “Income Portfolio” wherein a portfolio is invested in dividend stocks and interest bearing bonds. 2.) Fixed Percentage Amount (adjusted for inflation each year) – For example, William Bengen’s well-known 4% rule. Designed to address sequence of returns risk, the idea is that withdrawing 4% of a portfolio’s total value each year resulted in the portfolio safely lasting for 30 years (3.8% is the safe withdrawal rate if one does not want to spend down principal). The downside is that simply because a portfolio will last 30 years doesn’t mean that it will meet one’s income needs (i.e. 4% might be too low of an income). Additionally, research has shown that this strategy usually results in significant under spending. Nevertheless, this approach is widely known and still represents a helpful point-of departure for many practitioners when beginning to frame the retirement income discussion.   3.) Bucket Strategy / Evensky & Katz Cash Flow Reserve Strategy – This is a needs-based strategy that is a fixed dollar amount, but is also in conversation with the fixed percentage amount strategy. A financial planner works with a client to determine a realistic dollar amount that can...