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As our nation and the world continue to watch the actions and react to the rhetoric of the new Administration in Washington, we have already witnessed some incredible activity.
From the resignation of National Security Advisor Michael Flynn to Kim Jong Un’s missile launch, we are witnessing daily tests – both domestic and global.
How is this influencing the markets?
- Emerging market (EM) assets outperformed, U.S. Treasury yields fell sharply during the last week of January, and U.S. value stocks underperformed a flat market.
- Political uncertainty sent French and Italian government bond yields to multi-year highs relative to their German peers. Half of the European firms that have reported earnings have beaten estimates.
- Oil fell to a near three-week low under the pressure of growing U.S. crude inventories, but pared some losses. China’s PMI data showed expansion in both services and manufacturing sectors.
And what might be coming?
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What will you pay for health care in retirement?
This is the final installment of the blog series. See previous posts from Nov. 2nd and 14th.
Here is the third factor that influences what you will pay for health care in retirement:
Your Source of Coverage:
Some Americans are still fortunate to have a certain percentage of their health care benefits provided by their former employer.
For most Americans, this is not the case.
Most retirees need to choose between an Original Medicare, plan which includes buying supplemental Medigap insurance, OR to choose a Medicare Advantage Plan.
Here’s a chart comparing the two:
(Source: Merrill Lynch)
The fourth and fifth factors of heath care premiums in retirement are:
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What will you pay for health care in retirement?
In Part One of this series, I shared that Fidelity research suggests that a 65-year old couple retiring in 2016 will need an estimated $260,000 to cover their retirement health care costs. Please reference the entire blog dated Nov. 2nd.
In addition to your own genetics and health history, five factors will have a significant influence on your overall costs for care.
In this blog, I cover the first two factors:
Where You Live:
While Medigap and Medicare Advantage plans are offered in each state, the premiums can vary by as much as 30%. (Source: HealthView Services.)
Here is their research on the 10 states with the highest cost for Part B, Part D and supplemental insurance for a 65 year-old person.
| State | First Year | Total Over 20 Years |
| 1. Florida | $3,710 | $152,184 |
| 2. Michigan | $3,707 | $152,175 |
| 3. Maryland | $3,695 | $151,438 |
| 4. Massachusetts | $3,686 | $151,110 |
| 5. Nevada | $3,682 | $151,014 |
| 6. Louisiana | $3,651 | $149,661 |
| 7. New Jersey | $3,683 | $148,865 |
| 8. Illinois | $3,595 | $147,203 |
| 9. Texas | $3,592 | $146,969 |
| 10. Indiana | $3,549 | $145,235 |
Source: FA Magazine
If you want to check out rates for where you live, go to the Medicare Plan Finder and enter your information.
Here is the next factor that will influence your retirement health care expenses:
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The August-September issue of the Morningstar Magazine for professional advisors has an interesting interview with Sylvia Kwan. Sylvia is the chief financial officer of Ellevest – a company that specializes in investing for women.
Here are some of their positions with which your Resonate team agrees:
1. “Investing shouldn’t be unisex.” Women’s investment preferences and goals are often different from men’s. These preferences need to be heard, acknowledged, and factored into the investment portfolios.
2. “Women working outside the home experiences more wage losses than male counterparts.” This is due to taking career breaks to honor family commitments and due to the ongoing gender pay gap. Couple this with women’s actuarially longer lifespans and there is an obvious need for custom planning for women.
3. “Life changes are a certainty.” While we may not yet know what will change (health, issues with aging parents, divorce, special needs of children), we are committed to continually building our relationship so that we are there when you need us to again listen and provide appropriate (although different) recommendations.
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I am increasingly reading about the “Rise of the Robo-Advisor” and thought some recent information might interest you as it did me.
For those of you who might not be familiar with the concept, Robo-Advisors are computers programmed to create investment portfolios. They tend to be most popular with younger investors.
Did you know that, a “decision to protect its investors by Betterment, (a large Robo-advisor) resulted in Betterment temporarily suspending trading the morning after the Brexit vote? “This decision, made on only a 2% drop in the market, disappointed and surprised many Betterment users. “
(Source: “Betterment’s Brexit Shock” by Suleman Din Techzone Financial Planning August 2016)
Read MoreWells Fargo is the latest recipient of a massive fine ($185 million) for fraudulent activity impacting thousands of their customers. The employees who opened thousands of accounts without the knowledge of their clients, say that the corporate imposed sales quotas were simply impossible to reach consistently. So they chose to break the law to reach their goals. (The source for this information is the Wall Street Journal September 14. “Wells Boss Says Staff At Fault For Scams” and “Wells Fargo Isn’t Sorry Enough”)
Quotas and sale goals are common throughout the entire banking and large wire-house industry. Conflicts of interest can be a natural outcome any time there are shareholders to satisfy.
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Due to a number of increased requests regarding various types of retirement plans, I have created a three part Blog on “RETIREMENT ACCOUNTS MADE EASY!” This is Part Two of the series.
PART ONE covered traditional and Roth IRA’s. If you missed Part One you can resource it in a previous blog posted on August 18th, 2016.
I’ll conclude the series with Inherited IRA’s.
*** PART TWO ***
401(k)s and 403(b)s
Contributions: As long as you’re working, you can contribute to your employer’s plan, even if you’re over 70 1/2. If your employer offers a Roth option, you can contribute regardless of your income.
RMDs: Accounts with former employers are governed by most of the same RMD rules as traditional IRAs. This includes Roth 401(k)s and Roth 403(b)s, which are subject to RMDS — but you can get around them by rolling the money over to a Roth IRA. (Note: Rolling over accounts with former employers into IRAs has all kinds of other benefits, including potentially lower costs and more investment choices.)
However, there are no required distributions from your current employer’s plan if you’re still working — even if you’re older than 70 1/2 — as long as you don’t own 5% or more of the company. But once you do retire, if you’re 70 1/2 or older you should take your first RMD from that account by April 1 of the next year; you will then have to take another RMD by Dec. 31 of that year.
If you have multiple 401(k)s with former employers, each RMD must be taken from each individual account. The total value of RMDs from multiple 403(b)s, however, can be taken from just one account; also, money contributed to a 403(b) before 1987 doesn’t have to be distributed until age 75 if those amounts have been accounted for with separate records.
Read MoreWhen tragedies such as shootings in the South Carolina church or the Orlando bar happen, people often question how long they might live.
While no one knows for sure, of course, here are some interesting facts from the October 9, 2014 USA Today article by Larry Copeland.
Life expectancy in the USA rose in 2012 to 78.74 years.
Life expectancy for a woman is 81.2 years and for men it’s 76.4 years. That difference of 4.6 years has not changed from the 2011 figures.
Since we also know that 800,000 women become widowed each year in the U.S., this gives special reasons for women to be sure that their finances will be adequate to support them throughout life expectancy.
We work with all clients to answer the questions:
“Will our money last as long as we do?”
“What lifestyle can we afford?”
“Can we gift to our children and grandchildren?”
“Can we help our grandchildren with college expenses without hurting ourselves?”
These questions are especially important when one member of the couple has passed on.
The Resonate team is ready to listen to your questions and concerns and to partner with you to create solid, supportive answers.
Barbara A. Culver
CFP®, ChFC®, CLU, AEP®
Resonate, Inc.
(513) 605-2500
Read MoreA new study has raised eyebrows about the retirement prospects of women. Download the article attached.
Do Women Face Greater Retirement Challenges Than Men?
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