What Retirement Calculators Get Wrong (divorce, divorced, coverage, friend)
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Okay, I just came across this subsequent post of yours which explains that you don't believe in LTC insurance and you self-insure instead. Well, that's one option, I suppose. However, you can't on one hand claim that LTC insurance is a joke and then on the other hand write that the biggest nut one may encounter in the future is paying for long-term care.
We are maintaining our LTC insurance but not primarily for financial reasons. Rather, we want to take decision making about what to do with us and how much to pay away from our family. Disagreements over what to do with elderly and needy parents can literally tear families apart. Having LTC insurance makes that whole process a no-brainer for the family.
by the way im one of those who lost his job last month... i was going to retire next year but have gotten involved with another exciting job in a start up business venture and so retirement is officially on hold for now.
actually the major asset classes if diversified correctly are not correlated much... the problem is when assets are hybrids of each other.
such as treasury bonds are not the same as owning corporate bonds more ofton then not.
in a recession corporate bonds took a bath and dropped as they responded like stocks. what was bad for stocks was bad for bonds ..that drop was in the face of falling rates too..
on the other hand long term treasuries soard almost 28% in TLT in 2008 . that coupled with the rise in gold actually left you up 5% for 2008.
the issue is the old buy foreign stocks or buy foreign bonds is not the diversification people hoped for. corporate bonds were no equal to treasuries..
in its purist sense the only true diversification is equities,gold, treasuries and cash.... those are the only 4 that can be counted on to react to certain economic scenerios of which there really are only 4.
prosperity
inflation
recession
depression.
there is stag flation but thats just a short term stop to one of the above.
by carefully choosing what reacts strongly to those 4 out comes is the only true diversification.
as we saw last year even swapping commodites for the gold wasnt the same. oil and commodities dropped like stocks, gold broke new highs.
its not that there isnt ways of un-correlating assets its just there is to much in hybrids that are sold as proxies that arent really going to do the trick ala corporate bonds being substituted for treasury bonds.
as far as large cash positions in a portfolio , for some strategies they arent counting cash for returns,they are counting on the cash to dampen volatility and risk.
one portfolio i use is 25% cash,25% gld,25% tlt and 25% vti,rebalanced once a year.
my actively managed portfoilo is about 25% cash ,35% equities, 40% short and intermediate term investment grade bonds
i dont really care about the cash position, its merely there as an anchor to dampen volatility. the overall returns meet my goals and risk level
As an example today dow is down 140 , gold is up 1.5% and longterm treasuries are up 1.40%...
even at the paultry rates of today and with everyone generally expecting rates to rise the long term treasury took off today so the gains in gold and long term treasuries even with the dow down 140 left you with a nice gain.
usually under the worst scenerios an asset class above may fall 40-50% but anything that severe can have the other catagories double , triple etc....
Last edited by mathjak107; 04-30-2010 at 01:44 PM..
For anyone interested in more info on KMP (even if it isn't as safe an investment as a t-bill) .....
Kinder Morgan Energy Partners Increases Quarterly Distribution to $1.07 Per Unit - Yahoo! Finance (http://finance.yahoo.com/news/Kinder-Morgan-Energy-Partners-bw-2846296416.html?x=0&.v=1 - broken link)
This looks like the type of investment where you get a K-1 for tax purposes - not a 1099 - yes? If so - dealing with K-1's is a PITA IMO. Also a partnership (including some ETFs that operate in partnership form)can under certain circumstances generate taxable income in a retirement account. Robyn
As an example today dow is down 140 , gold is up 1.5% and longterm treasuries are up 1.40%...
even at the paultry rates of today and with everyone generally expecting rates to rise the long term treasury took off today so the gains in gold and long term treasuries even with the dow down 140 left you with a nice gain.
usually under the worst scenerios an asset class above may fall 40-50% but anything that severe can have the other catagories double , triple etc....
Long bonds tripling? I don't think so. Not even doubling (I do have some older ones maybe selling for 140-150 or so - but I've never had one go over 160 or so).
I really don't think of gold as an investment. It is more like the ultimate insurance against chaos. And because it is difficult to buy/sell - I consider it illiquid as well.
And I guess another problem is there one phase of retirement planning - the pure saving/investing part. And the more difficult phase - the distribution part (where people have to keep saving and investing - but also have to deal with how to get money out of their portfolios to pay the bills). I sense that a lot of people here aren't dealing with the distribution phase right now (for one reason or another). Robyn
We are maintaining our LTC insurance but not primarily for financial reasons. Rather, we want to take decision making about what to do with us and how much to pay away from our family. Disagreements over what to do with elderly and needy parents can literally tear families apart. Having LTC insurance makes that whole process a no-brainer for the family.
Buying the LTC insurance won't accomplish that goal (assuming you're correct in saying it is not being done for financial reasons). Example. My husband had medical POA over his Dad (and both parents when both were alive in the event the parent who had to make the decisions was incapacitated). When my FIL had a stroke - he lived in a smallish place in NC - same town as my SIL. We were familiar with the medical facilities there - and those where we live - and my husband moved my FIL here over the protests of his sister and her husband. They said they had the right to be near him during his final weeks. Well they might have been final weeks in NC - but those final weeks turned into 2 1/2 final years here (and about 2 of those were pretty good considering). There were a lot of very bad feelings for quite a while. Until my SIL and family came to visit here a few times - and saw that the decision was in the best interests of my FIL (they were never happy with the decision but accepted it). And there were no financial considerations involved in this case.
I think that in preparing your legal documents - like your medical POA - you have to pick the child you think is most responsible - and put that child in charge of things if one of you is dead/incapacitated. If you have children who you think are equally responsible - pick the one who's closest to you (like I have medical POA over my Dad - even though both of my brothers are responsible and one is a doctor - simply because I'm closest - both of my brothers thought this made sense since I can rush to a local hospital in the middle of the night and they can't). Robyn
Long bonds tripling? I don't think so. Not even doubling (I do have some older ones maybe selling for 140-150 or so - but I've never had one go over 160 or so).
I really don't think of gold as an investment. It is more like the ultimate insurance against chaos. And because it is difficult to buy/sell - I consider it illiquid as well.
And I guess another problem is there one phase of retirement planning - the pure saving/investing part. And the more difficult phase - the distribution part (where people have to keep saving and investing - but also have to deal with how to get money out of their portfolios to pay the bills). I sense that a lot of people here aren't dealing with the distribution phase right now (for one reason or another). Robyn
while yes we never had the long bond triple its no problem for gold or equities .
i use gld for gold and while not exactly the best way it does work well...
25% cash and 25% long bonds make for easy cash distributions.
gold is a competitor for the dollar and usually goes the reverse of the dollar.. its all part of the package ... once you start trying to guess which pieces of the mix arent going to performm you loose the protection of the mix
This looks like the type of investment where you get a K-1 for tax purposes - not a 1099 - yes? If so - dealing with K-1's is a PITA IMO. Also a partnership (including some ETFs that operate in partnership form)can under certain circumstances generate taxable income in a retirement account. Robyn
Yes, that's true. However, if you'd like to avoid the K-1 PITA or the possible taxable income issues in retirement accounts, you can buy KMR instead of KMP. It is basically the same company, except it pays its "dividend" as stock, thereby avoiding the tax issues. As far as I know, KMR/KMP is the only MLP that offers this type of alternative.
My LTC is through a professional association and when they tried to raise rates a few years ago they wre met with such outrage they didn't and the rates have remained the same. I will only tell you that when getting legal advice on wills and estates we were advised a number of things and one was LTC. The experienced attorney advised that one of the most important reasons was replacement parts and new technologies to come. LTC was part of a comprehensive health care program that was to work in concert and provide a greater level of support for maintaining quality of life. The key word is work in concert.
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