Weekly Update 7/15/13 Fill the Gap

Investing often imitates life. Things may appear to be going great, then out of nowhere: POW! Take last week’s Update, for example, which garnered one compliment after another. So late Monday morning, I was walking with a little extra spring in my step. That is, until the phone rang.

Marea.

Unlike many of you, she didn’t find my little anecdote about her bikini wardrobe malfunction amusing at all.

“You think a bikini malfunction is really funny?” she asked incredulously. I didn’t have the heart to tell her that I did. Then she basically suggested that since I’m such a healthcare guru, I might want to consider purchasing a supplemental insurance policy…just in case something happened…

“But Marea, I’m not eligible for Medigap until 65,” I replied tenderly.

CLICK…dial tone. I was happy to hear that she is somewhat up to speed on the topic of supplemental insurance coverage.

Since we are talking about Medigap insurance, now might be a good time to move away from my wife’s bikini malfunction and discuss this optional healthcare plan for a bit.

I have been asked numerous times by people transitioning into retirement: “Why purchase anything more than Medicare parts A and B?” The underlying philosophy behind this approach is why pay for unnecessary insurance when I am healthy.

I respond by asking, “Do you own life insurance, disability insurance, property and casualty insurance, and an umbrella policy? If so, then don’t you think that comprehensive health insurance is just as important for people in their 60’s?

“I’ll buy additional insurance when it is needed,” is the standard response.

I’m sorry to inform everyone, but the Medicare system is just not that accommodating.

Here’s how it works. Regardless of health conditions, individuals are eligible to purchase a Medigap or Medicare Advantage policy during their first open enrollment period. Subscribers must be accepted by the insurer and cannot be charged a higher premium due to preexisting conditions. After the initial enrollment period, all bets are off, so the initial opportunity will not be available later on.

Also, Medicare only covers approximately 51% of medical expenses, and most people do not have the remaining 49% locked away in a health savings account. The majority of Medigap plans cover the 20% of Medicare co-pays, provide many home care services, and become a coinsurance policy when longer hospital stays are required.

Traditional Medicare, combined with a Medigap policy, is the gold standard of health insurance for retirees. One can never know what will happen from one day to the next, and the extra protection will minimize the financial burden on the afflicted and his/her families. Just be aware that Medigap rates can vary dramatically based on the policy and state of residency, sometimes by as much as 75%.

Let’s get back to this week’s theme in terms of investing. Back in 2007, when real estate was booming and the markets chugged along, who would have thought that equities would drop some 35% and the U.S. would enter a recession and near depression?

Who would have thought back during the knock down first quarter of 2009 that it would be a great idea to go all-in to stocks?

Think about it. It was only human nature for us to become more comfortable with stocks during 2007, which ultimately led to a more aggressive investment approach entering 2008. Then, as so many of us rode the landslide through 2008 and early 2009, we sold out of the market at exactly the wrong time.

The point is: the ride only goes one way for so long. Although I have been rather bullish as of late and still believe that long-term growth is likely, it is never a bad idea to take some profits off the table, which will provide the opportunity to put cash to work during a pullback. The same principal applies to our health. Thus, plan for the unexpected.

I would like to dedicate a few moments of the Update to my good friend Ray, who is “in charge” of the 652s, a group of golfing buddies who—you guessed it—tee off every Sunday morning at 6:52.

We are a creative bunch.

Ray is retired, enjoying life with his wife, Wilma, and believe me, healthy as a bull in the prime of his life. He was, however, recently diagnosed with cancer. He will undergo lung surgery this week and we will not see him on the golf course until mid October. Luckily, Ray will be fine, but make no mistake about it: this is a serious life event and typically completely unexpected.

Hey Ray, the 652s are looking forward to a speedy return to the clubhouse to have one—that’s right, count it—ONE (double) vodka. Also, please make sure that you have access to a PC during your recovery so that the 652s will continue to receive those informative and colorful emails covering the important topics of the day.

By the way, Ray, even though many guys in the group (other than me of course) may have complained about your Draconian approach to coordinating our group golfing events in the past, we need you back as soon as possible. Keep this between us: Mike is no Ray and the guys are tut-tutting about his organization skills. Consequently, many of us have begun whispering about the selfish need for you to have a very quick recovery.

Good luck brother. See you at the 19th.

Ron Mastrogiovanni and Chris Leone

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Ron Mastrogiovanni
President
HealthView Services, Inc.
150A Andover Street
Danvers, MA 01923

mobile: 617-875-9313
fax: 978-561-1857
rm@hvsfinancial.com

http://www.hvsfinancial.com

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