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Month: August 2018

Back to Basics #5: 
Planning for Health Care Expenses

We have been sharing a series of articles called “BACK TO BASICS.  In each article, we examine one of the basics of financial planning.  Let’s look at:

Back to Basics #5:
Planning for Health Care Expenses

Take a moment to think about the future.  What do you see yourself doing?  Traveling the world?  Starting a new business?  Playing with grandkids?  Taking up that hobby you’ve always dreamed of doing?  Getting in shape?  Improving your short game?  Or maybe just relaxing and reading a book?  Whatever it is that you see, the future probably looks pretty exciting! 

Unfortunately, there’s something else the future holds that no one can avoid. 

Maybe it won’t happen for a few more decades.  Maybe it’s already happening.  But at some point, in the future, your body will start to slow (and even break) down. 

They say age is a state of mind, but it’s also a fact of life – and this fact means inevitable changes to both your health and your pocket book.  Make no mistake, your medical expenses will go up as you get older.  But many people fail to plan for these costs. 

Those that do plan often underestimate exactly how much their medical expenses will cost.  For example, a recent study by Fidelity Investments found that the average couple retiring at age 65 will need at least $280,000 to pay for their health-care costs in retirement.1  Another study done by the Employee Benefits Research Institute found that “a 65-year-old man and woman would need $127,000 and $143,000, respectively, if they want a 90% chance of covering all their health care costs…in retirement.”2

That’s a lot of money.  There are just so many aspects to health care that you may need to pay for some day.  There’s regular visits to your doctor, medicine, surgeries, hospital stays, long-term care, and more. 

Hopefully this gives you a little glimpse of how important it is to plan for your health care expenses.  But how do you pay for them? 

The obvious answer is “work longer and retire later,” but let’s delve a little deeper.  Here are a few things you can do:

1.  Learn your various Medicare options.

If you are one of the lucky few who will have employer-provided health care coverage even after retirement, congratulations.  But if not, start familiarizing yourself with the intricacies of Medicare now.  The Federal government’s health insurance program for seniors is often referred to as a single plan, but , it’s many types of plans rolled into one.  From the basic level of coverage (Part A) to “Medicare medical insurance” (Part B) which covers outpatient hospital care, physical therapy, and home health care, to the more elaborate “Medicare Advantage” plans, most retirees are confronted with too many options, some of which are more appropriate than others.  Choosing the best type of coverage for you will be crucial when it comes to paying for your medical expenses. 

2.  Start saving and investing – now.

One of the smartest financial decisions you’ll ever make is to set up a rainy-day fund.  This is where you regularly set aside a portion of your income for dealing with the unexpected.  Whether that’s losing your job, dealing with a natural disaster – or yes, paying for unexpected medical expenses – a rainy day fund can make all the difference. 

Similarly, if you invest wisely and consistently, you have the potential to grow your money for the future.  That means you’ll have a better chance of being able to afford any health care costs that pop up in the future. 

3.  Consider long-term care insurance.

Important disclaimer: not everyone will need long-term care or assisted living in their lives.  That said, many people do, and long-term care (LTC) insurance is one of the best ways to pay for it.  It can be beneficial to purchase LTC insurance sooner rather than later, as premiums can get higher as you grow older.  However, LTC is expensive in and of itself, so give the subject a lot of careful consideration before deciding. 

4.  Keep your body healthy.

We are financial advisors, not doctors or trainers, so we’re not in the business of providing tips on healthy living.  But this tip is just common sense, and it’s amazing how often it gets overlooked.  Keeping yourself healthy now can save you a lot of money in the future.  By getting regular exercise, eating a healthy diet, sleeping enough, and quitting smoking (among other things) you can give yourself a better chance of avoiding future medical problems.  Conditions like high blood pressure, diabetes, and cancer can extract a high toll on your finances as well as your health.  Most people don’t realize this, but one of the best ways to ensure a financially secure future is to take care of your body in the present. 

Over the last few months, we’ve tried to share a few basic tips on how to plan for and secure a bright financial future.  They may seem overly simple, but they’re fundamental to your financial health.  Remember:

“Winners don’t just learn the fundamentals, they master them.  You have to monitor your fundamentals constantly, because the only thing that changes will be your attention to them.”

– Michael Jordan

By mastering the fundamentals of financial planning, you will get yourself much closer to achieving the future you’ve always dreamed of. 

That’s it for our Back to Basics articles.  We hope you’ve enjoyed reading them.  Here’s to the future!

1 Elizabeth O’Brien, “Here’s How Much the Average Couple Will Spend on Health Care Costs in Retirement,” Time Magazine, April 19, 2018.

2 Sudipto Banerjee, “Cumulative Out-of-Pocket Health Care Expenses After the Age of 70,” Employee Benefits Research Institute, April 3, 2018.

Back to Basics #4: 
Important Estate Planning Documents

A few months ago, we started a new series of articles called “BACK TO BASICS.  In each article, we examine one of the basics of financial planning and investing.  This month, let’s look at:

Back to Basics #4:
Important Estate Planning Documents

Many people, young and old, don’t have a will, let alone a broader estate plan. Yet an estate plan is important, even for families who are not wealthy.

An estate plan serves four major purposes: 

  1. It directs who will receive your property when you die. 
  2. It minimizes probate costs and any estate taxes that might be owed on that property. It’s the estate tax that people tend to think about when they think of an estate plan, and because many people believe they don’t have an estate large enough to be taxed, they don’t bother drawing one up.
  3. It provides for care of minors (otherwise the state will become their guardian).
  4. It provides for your care if you are unable to provide for yourself. A proper plan ensures that you get to pick the caregivers, not the state. This is critical for young people, singles, and older persons.

You may be thinking, “I have a will so I’m all set.” While having a will is a very important part of your estate plan, it’s not the only part.  A will doesn’t specify how you want to be treated should your health fail.  It doesn’t dictate who will carry out your wishes or handle your financial affairs should you ever become incapacitated.  It doesn’t help your heirs limit their tax burden. 

In other words, it doesn’t cover all of the purposes of an estate plan as listed above. 

To ensure that both you and your loved ones will be cared for, we’ve created a list of four key documents that should be in every estate plan:


We mentioned that creating your will is an important aspect of estate planning, so let’s cover that first. A will states how you want your belongings divvied up amongst your loved ones after you pass away. Otherwise, the government will determine how to distribute your property, which may even end up belonging to the state if you don’t have an appropriate will stating otherwise.

Power of Attorney 

Another crucial document is your power of attorney, which allows you to appoint someone to act on your behalf to make legal decisions about your property and finances.  That person, usually referred to as an “agent”, could be a trusted friend, a family member, or an experienced, reputable professional.    

Power of attorney is crucial should you ever become ill or disabled to the point where you can no longer make important decisions yourself.  Keep in mind, however, that granting someone power of attorney is a huge decision in and of itself.  Give careful thought before making your choice.  Whomever you select should be trustworthy, reliable, and mature enough to handle the responsibility. 

Advance Medical Directive 

A third document is your Advance Medical Directive.   This catch-all term refers to health care directives, living wills, health care (medical) powers of attorney, and other personalized directives. These documents allow you to legally express your preference for continued health care should you become terminally ill. 

A word of advice.  As you finalize your Advance Medical Directive, make sure you have completed your HIPPA Release Forms as well.  By having this special form completed, you enable the individuals named in your Advanced Health Care Directive to have access to your healthcare information.  This way, they can deal with insurance matters on your behalf at a time when you cannot.  

Letter of Instructions 

Last, but not least, is a Letter of Instructions. This is document gives your survivors information about important financial and personal matters to attend to after your passing.  You don’t need an attorney to prepare it.  Although it doesn’t carry the legal weight of a will, and is in no way a substitute, your Letter of Instructions will clarify any special requests you want carried out after death.  It may include your funeral preferences, people to notify, account passwords, directions regarding certain possessions, or anything else you’d like your survivors to know. 

The four documents listed above are all very important, and every adult should have them in their estate plan. Having each of these important documents prepared ahead of time can relieve your family of needless worry, speculation, and expense.  Keep in mind, however, that while this letter is a good overview of some important estate planning documents, it certainly doesn’t cover everything.  When it comes to planning for your financial future and those of your loved ones, remember that there are many factors to consider. If you haven’t yet completed the documents described above, or if your circumstances have changed and you haven’t updated your estate plan accordingly, it’s high time to do so.  Because when it comes to planning, there’s no such thing as starting too early.   

But there is such a thing as too late. 

Your overall financial plan isn’t just about investments and money. As financial advisors we take a wholistic approach and know that a plan is only as strong as its weakest link. While we aren’t attorneys who can create these documents, we do want to make sure our clients have taken care of this very important part of the overall planning process.

 If you don’t have an attorney and would like an introduction, please let us know. The coordination of all advisors is very important. ​

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Back to Basics #3: Investment Funds

A few months ago, we started a new series of articles called “BACK TO BASICS.  In each article, we examine one of the basics of financial planning and investing.  In this article, we’ll look at:

Back to Basics #3:
Investment Funds

While it’s possible to invest in individual stocks, bonds, and other securities, many investors prefer to use investment funds.

An investment fund is when a group of investors pool their money together to collectively invest in a certain way.  This makes it simple and easy for individuals to invest in a wide range of securities at the same time.  There are several types of investment funds, and as you can imagine, each comes with different pros and cons.

Funds are very popular, but in our experience, most people don’t know how they work or which type is right for them.  We can’t answer that second question here, of course, but we can at least give you a breakdown on how some of the main types work.

Quick disclaimer before we go any further: Every type of investment comes with risk.  And nothing you’re about to read should be taken as an endorsement or a recommendation.  We don’t do that sort of thing in an article.

Okay, ready?  Let’s start with:

Mutual Funds

Here’s how the Securities and Exchange Commission (SEC) defines mutual funds:

A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.1

There are two main types of mutual funds: actively-managed, and passively-managed.  More on the latter in a moment.  An actively-managed mutual fund means the fund employs one or more managers to perform investment research, select the individual investments in the fund, and monitor performance.

Many investors flock to mutual funds because they offer several potential benefits:

  • The possibility of “outperforming” the market.  If a manager picks the right investments at the right time, it’s possible the fund could bring a higher return than the overall market.
  • Diversification.  Mutual funds often invest in a wide range of companies and industries in order to lower your overall risk.  This means that if one company or industry does poorly, you may not experience the same kind of loss that you would if all your money was invested in that company or industry.

There are potential issues with mutual funds, though.  Statistically, most funds do not outperform the market – or at least not for very long.  Mutual funds often come with more expenses than other funds, too, including management fees.  These expenses can eat into your returns, thereby lowering your overall profit.  For this reason, some people prefer to invest in:

Index Funds

Remember how we said there were two types of mutual funds, active and passive?  Passive means the fund does not have a manager actively choosing investments.  Instead, the fund tracks a specific index, like the S&P 500.

Understand, it’s not possible to invest in an actual index.  What an index fund does is invest in the same companies that make up a particular index.  Some funds will invest in all the companies in an index, while others will rely on a “representative sample.”

With an index fund, you’re essentially tying your fortunes to what the target index does.  If the index goes up, so does the fund – and vice versa.  The downside is that this makes investors particularly vulnerable to overall market volatility.  During a bear market, for example, an index fund could suffer heavily.  The upside is that the markets generally go up over the long-term.  Another benefit?  Index funds often have far lower expenses than mutual funds and “more favorable income tax consequences.”2

Exchange-Traded Funds

ETFs, as they are often called, can be similar to either mutual funds or index funds.  Some ETFs are actively managed; most, however, track the companies in a specific index.

But ETFs differ from other types of funds in a few key ways.  For one thing, the shares each investor has in an ETF can be traded on the open market.  That means you can buy or sell your shares in an ETF just like you would an individual stock.  You can’t do that with regular mutual- or index funds.  That’s a big advantage for investors who value flexibility and liquidity.

Most ETFs also come with lower expenses than mutual funds.

But of course, nothing’s perfect.  While ETFs can be traded like common stock, if you trade too often, you may find yourself paying more than you anticipated in trading fees.  Then, too, some ETFs are thinly traded, meaning there’s just not a lot of activity between buyers and sellers.  This can make it difficult to sell your shares.


There is a lot more information we could share on each of these types of funds that we just don’t have room for in a letter.  Keep in mind, too, that there are many ways to invest.  Each comes with its own advantages and disadvantages.  Different professionals may say that one is better than the other, but what’s important is choosing what’s right for you.  That’s why it pays to take a little time to educate yourself on how they work and what they’re for.

That’s why we’re going Back to Basics.

In our next article, we’ll pivot away from investing to something a little more personal.

1 “What are Mutual Funds?” Securities and Exchange Commission,

2 “Index Funds,” Securities and Exchange Commission,

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