Why and How to Invest in Healthcare

With life expectancies rising and a pandemic that changed the healthcare landscape, healthcare providers, medical insurance companies, employers and individuals are scrambling to meet a new world order. But that doesn’t mean you should overlook the healthcare industry as an investment. In fact, now may be a better time than ever to consider this sector.

The case for healthcare as an investment stems from the aging of the population. According to the latest census figures (from 2010), there were more people aged 65 and older in 2010 than in any previous sampling. In fact, between 2000 and 2010, the population aged 65 years and older increased at a significantly faster rate (15.1%) than the general U.S population (9.7%). According to the latest figures, the 40 million Americans over the age of 65 comprise around 13% of the U.S. population.

And the Administration on Aging projects that this group will more than double in the next 36 years, reaching 88 million by 2050. That means that we can expect consistent demand for healthcare products and services. Indeed, according to the Centers for Medicare & Medicaid Services, healthcare spending is projected to grow at an average rate of 5.5% per year from 2018 to 2027 and should reach nearly $6.0 trillion by 2027.

The aging of the population and its need for healthcare has fueled growth among healthcare companies, which include medical device manufactures, pharmaceutical producers and home healthcare services, to name just a few. As a result, now might be a good time to look into adding healthcare-related stocks to your portfolio.

Before jumping in, however, you should understand the risks and rewards of investing in this sector, especially at this tumultuous time in the sector’s history.

We can help you determine if healthcare investments are right for you based on your individual financial circumstances and goals. Please reach out to us today.

The Ups and Downs of Investing in Real Estate

Most investors understand the importance of diversification, which is investing in a variety of asset classes to help ensure that when one is performing poorly, another is performing well. And one way to diversify is to add real estate to your portfolio. But doing so isn’t easy.

That is why some investors interested in real estate choose real estate investment trusts (REITs), which are securities that (a) invest in income-producing real estate or (b) make loans to businesses in the real estate industry. Investors in REITs earn income derived from rent; they can also participate in the profits from the sale of properties in the REIT portfolio. REITs often trade on major stock exchanges, so they are liquid.

In terms of diversification, many investors consider REITs for their historically low correlation with other asset classes. That is, they tend to perform differently from other investments, including equities, fixed income and cash. For example, in calendar year 2019, the MSCI U.S. REIT Index returned 25.84%. By comparison, the S&P 500 Index returned 30.43%, and the Bloomberg Barclays U.S. Aggregate Bond Index returned 8.72%.

Of course, REITs are not without risks and can be volatile. In the last calendar year (2020), for example, the MSCI U.S. REIT Index was down almost 20% (as of September 30, 2020) due to challenges presented by COVID-19.

If you are considering investing in REITs, then please reach out to us so you can get the best information that will help you determine if they make sense for your portfolio.

5 Tips to Help Create a Successful Retirement

You may think of retirement as a time that brings freedom from many responsibilities. Retirement, however, creates a set of its own responsibilities. Below are five such responsibilities and tips for managing them.

Budget. How much income will you obtain from Social Security, pensions, and other retirement savings? How much money will you spend? Ensure that the numbers are equal and revisit the budget frequently.

Allocate your assets. You probably shifted your investment portfolio more toward income as you approached retirement, and you will probably want to do so even more once you retire.

Do some estate planning. Estate planning is not just for the wealthy. It simply refers to getting your estate in order. Ideally, you will have a will, a power of attorney and a health care proxy, and you will keep beneficiaries on your financial accounts and insurance policies current. Be sure to discuss your estate plans with your family members so they understand your wishes and their responsibilities.

Develop a nonfinancial plan. With so much talk about financial planning, it is easy to forget that a happy retirement is about much more. It is important, both mentally and physically, for retirees to stay active and engaged. If you do not yet know how you want to spend your time in retirement, it is easy to become depressed, so make a plan.

Get advice. As a retiree on a limited budget, getting advice is important. This can help you maintain a steady income stream throughout retirement, lead to significant tax savings and ensure an efficient transfer of assets upon your death.

Creating a successful retirement can be challenging on many fronts, and you may benefit from advice. I am always here to help. Call or email me, and we can determine what is right for you and your goals and circumstances.

How to Plan Ahead for Your Long-Term Care Needs

We are all living longer, and that means more and more of us will need long-term care, such as care provided in a nursing home or by in-home services. The costs of such assistance can be overwhelming, but good planning can help you prepare. What does that planning involve?

First, you should understand what Medicare and Medicaid cover and what they do not. Medicare’s coverage for long-term care is limited. It generally only pays for about three months of nursing home care immediately following a hospitalization, and copays may apply. Meanwhile, Medicaid will cover some long-term care costs, but to be eligible, you must exhaust virtually all of your personal resources. If you are married, this could create complications for your spouse, who may not have the assets or income to live on if you enter a nursing home.

With that in mind, consider whether you need long-term care insurance. Bypassing long-term care insurance might be reasonable if you have significant assets, in which case you can likely afford to set aside enough money for years of care while still leaving enough to support a spouse. It might also be a reasonable choice if you have few assets, in which case you will qualify for Medicaid soon after entering a nursing home. If you fall somewhere between these extremes, however, you may want to consider long-term care insurance.

Please reach out today if you have any questions about whether long-term care insurance is right for you or you need assistance shopping around for a policy. I can help.

What Equity Allocation Do You Need in Retirement?

Financial experts often recommend that investors keep some amount of stocks in their nest eggs, even in retirement, because a measure of growth is important in order for a portfolio to keep pace with inflation. But I’m often asked if the risk is worth it. Let’s explore that topic.

Retirees who are getting by just fine on income from Social Security and savings may think it’s crazy to take on the risk of fluctuating stock prices for a little more growth. That’s understandable. The global financial crisis in 2008 showed us how easily the market can destroy the value of a nest egg. So what’s an investor nearing retirement to do?

On the one hand, if you are absolutely certain that you can live comfortably for the rest of your life on Social Security and savings and you don’t want to leave money to children or other beneficiaries, you have a good case for avoiding stocks. There is just no reason to take on the risk.

But the phrase “absolutely certain” is key. Are any of us “absolutely certain” at any time? What about unforeseen circumstances? Your living expenses could go up more than expected because inflation is unpredictable. Perhaps you take on some expensive hobbies (sailing, golf). Maybe you experience a costly medical crisis. You could even be the unfortunate subject of a lawsuit. Any of these predicaments could move your plan off course and do so drastically.

If those possibilities worry you, you may want a little extra cash on hand to absorb unexpected expenses. And if so, the growth potential of stocks may be appealing to you. A large allocation isn’t necessary: you just need enough to give your portfolio a little more growth potential.

If you would like to discuss your asset allocation, please reach out to me. I can help you understand your options, given your individual circumstances.

Is Gold a Good Investment in an Uncertain Environment?

The U.S. Federal Reserve is pumping money into the economy to stimulate it after the COVID-19-induced slowdown. That raises fears of inflation, and when people fear inflation, gold often becomes appealing.

Why? Historically, gold has been considered a safe haven in times of geopolitical and financial instability. Unlike financial assets and currency, gold cannot be printed at will. It also tends to perform differently from other assets, which is why investors often use it as diversification in a portfolio of stocks, bonds and real estate.

Might you want to consider gold now? Over the past 10 years, inflation has averaged less than 2% annually, but the recent monetary stimulus and rising national debt mean investors would be wise to prepare for a rise in inflation.

On the other hand, no investment is a sure thing, and gold is no exception. Its price can fluctuate widely. Gold was priced at around $250 an ounce in the 1990s and is close to $2,000 an ounce in September 2020. However, from the 1990s until today, gold prices have been volatile.

Moreover, investing in gold isn’t straightforward. There are many ways to purchase it. You can buy gold, stocks in companies that invest in gold, or even index funds that track companies that invest in gold or the spot price of gold. It can be a complex undertaking.

If you have questions about investing in gold, please give me a call. I would be happy to go over them with you.

Learn How to Live and Prosper Through Market Fluctuations

We have seen a lot of volatility in the markets in 2020, thanks in part to the impact of the COVID-19 pandemic.

From March through May of 2020, more than 40 million Americans (roughly one in four workers) filed for unemployment benefits. The US Federal Reserve (Fed) cut interest rates to zero. And oil prices plummeted. All of this impacted a variety of securities. But do events such as these always affect your portfolio? Not necessarily.

As an example, let’s look at oil prices. They tumbled because of the dynamics between oil producers Russia and Saudi Arabia. Russia refused to cut oil production in order to keep prices for oil at moderate levels. This conflict resulted in a steep drop in oil prices (around 30%) in the first few weeks of March 2020.

As another example, consider central banks’ actions earlier this year. When COVID-19 shuttered the US (and global) economy, central banks took bold emergency actions to support the economy, cutting their target interest rates, among other things.

You could be affected by these situations, regardless of whether you hold oil stocks or international stocks because fear is contagious. What happens in one market may affect another. But it’s important to put such situations in perspective. For example, there are many segments of the energy sector (such as utilities) that are not directly impacted by volatility in oil prices. And some energy companies (such as exploration and production companies) are used to fluctuations in oil prices and prudently manage their liquidity to stay afloat within lower-price environments.

If you’re worried about market volatility affecting your portfolio, please let me know if I can help you navigate market fluctuations and make decisions that are best for you. I’m here to help, and I am just a phone call or email away.

5 Ways to Plan and Implement a Successful Retirement

Retirement brings freedom from many responsibilities but creates others. You may want to consider these five responsibilities as you approach retirement.

Create a budget. How much income will you obtain from Social Security, pensions and other retirement savings? How much money will you spend? Ensure that your income is greater than what you spend (or the numbers are equal).

Allocate your assets. Do you have the right amount of risk in your portfolio? You probably shifted your investment portfolio toward income as you approached retirement, and you will probably want to do so even more once you retire.

Do some estate planning. Estate planning is not just for the wealthy; it simply refers to getting your estate in order for transition whenever it should happen. You will likely need a will, a power of attorney and a health care proxy, and you should keep beneficiary information on your financial accounts and insurance policies current.

Develop a nonfinancial plan. A happy retirement is about more than finances. If you don’t know how you want to spend your time in retirement, it is easy to become depressed. Think about how you will stay mentally and physically active and engaged.

Get advice. As a retiree on a limited budget, getting financial advice is important. It can result in significant tax savings and accurate transition documents, such as wills and powers of attorney.

Would you like to learn more about planning for retirement? Please call or email me to review your current situation and determine the appropriate path forward.

Understanding Tax Concerns when You Lose Your Spouse

The death of a spouse may be the greatest tragedy of your life, but sadly, it can happen. While you may not want to think about the possibility, doing so in advance can help you be prepared from a tax perspective. Here are some tips, whether you need them now or store them away for later.

File a joint return in the first year. Chances are when you were married you used the “married filing jointly” tax status. If your spouse passed away in the current year, you may still file a joint return for that year. This could provide you with the best tax rates and the largest standard deductions.

File a “qualifying widow or widower” return in the second and third years. You may file using a tax status called “qualifying widow or widower” for two years after your spouse passes away. This gives you the benefits of a joint filing. However, there is one caveat: you must have a child who is a dependent in order to file as a qualifying widow or widower.

File as “head of household” after the third year. Lastly, after those benefits expire, you may want to claim head of household status on your tax return. You can do so if you have a child who qualifies as a dependent. Tax rates are better than they are for single taxpayers (although they are less favorable than they are for “married filing jointly” and “qualifying widow or widower” returns).

This is a difficult topic. We cannot emphasize enough: the death of a spouse is a tragedy no one wants to contemplate. Certainly, it is not a time when you want to think about finances.

If you have any questions about how any of this works, please reach out. We’re just a call or email away.

Cleaning up Your Finances as Year-End Nears

As the end of the year nears, many of us give thought to getting our financial houses in order. Here are things to add to your to-do list.

Review your financial accounts: Look at your bank accounts, retirement accounts, credit cards and other financial accounts. Having too many is a common problem. Ask yourself: Do they still meet my needs? If not, should I consolidate some or close them? Should I open others? While you are doing this, also update your account information. Ensure that your other financial accounts have accurate contact and beneficiary information. If you have not changed your beneficiaries in some time, you may want to review them (and make all possible accounts transfer on death, or TOD, so they avoid probate in the event of your death).

Review your budget and debts. Do you have a budget? How does your spending align with your budget? If it is not on budget, determine why. Are you spending too much money on luxury items? Are you overwhelmed with debt? Develop a strategy for keeping your spending on track and eliminating debt (perhaps by consolidating loans).

Consider doing some estate planning. Lastly, estate planning is not just for the wealthy: everyone should have a will. If you do not have one, look into getting one. If you already have a will, year-end is a good time to review it to ensure it still protects your loved ones in the manner you intended.

Do you need help getting your financial house in order? Call us today for a year-end review.