Weekly Update 9/23/13 Birthday Week

I’m sitting at home alone again and my mind begins to travel back in time.


Because, this is my birthday week. (And yes, I take a whole week to celebrate it.)

I began to reminisce about building our house some 16 years ago. Marea and I (well, Marea anyway) spent hours on the specs to our dream home. Back in 1997, I was a cool dude, or so I thought. I wanted the mcmansion, expensive suits, European vacations, fancy cars, and the best for my wife and kids.

Looking back, aside from my wife and kids, all those wants and desires seem somewhat pointless.

Time passes in the blink of an eye: GI Joe, little league, girl scouts, boy scouts, hula hoops, “Easy Bake Ovens,” Monopoly, miniskirts, Brylcreem (“A little dab’ll do ya.”), going to the moon, first dates, double dates, any dates, maybe a prom (OK, I never went to a prom), bikinis, pill drop hats, bell bottoms, long hair (yes I did have hair), bare feet, black power, hippies, Ed Sullivan, “Laugh In,” “All in the family,” John Wayne, a war in a far off place (well, that never changes), Woodstock, The Beetles, The Supremes, Janis Joplin, Joan Baez, Bob Dylan, Aquanet, getting married, platform shoes, leg warmers, discos, “Star Wars,” “ET,” “Saturday Night Fever,” streaking, a laptop PC with a 10 megabyte drive, pet rocks, Rubik’s cube, getting married again, paying multiple college tuitions, taxes, more taxes, 401(k)s, hedge funds, 9/11, Botox, dental implants, Lasik surgery, hair club for men, plastic surgery, liposuction, comfort fit jeans, low-carb diets, metrosexuality (whatever that means), Tom Brady’s Uggs, hybrid cars, crocs, leggings, the internet, iPhones, iPads, email, texting, and of course, medications for high blood pressure, high cholesterol and low T.

Glancing ahead, we can look forward to our kids getting married and maybe moving back home, grandkids, vacations, southern winters, senior citizen discounts, driving a Cadillac, reflecting on life, relaxation, trips to the doctor, sleeping on a recliner with mouth open while “watching” TV, adding lasix (furosemide) to our medication list, playing golf in a foursome in which not one in the group can see where the ball lands, trips to the doctor, playing mahjong, wearing various versions of “depends,” Social Security, more trips to the doctor, healthcare expenses, and generally enjoying life until finally, for around 30% to 35% of us, a brief stay at a nursing home prior to checking out.

So, to enjoy all that life still has to offer, what is my long-term game plan?

First, let’s address the two looming questions facing our nation: will we have a government shutdown, and will the U.S. default on its debt? Many analysts, maybe the majority of them, believe our political leaders are simply puffing their chests, and when it counts, they will blink to avoid a catastrophe. I hope analysts are correct, but I’m not willing to take that risk, so I slowly increased my cash position last week to around 25%.

Based on what I see happening in Washington this week, I may raise cash to 35% or more; however, I will later add to equity on significant dips because I do expect a strong year-end surge. Who knows? A significant increase in downside volatility similar to last Friday may provide us with attractive buying opportunities.

Long-term, given my risk profile, I’m a 60/40 guy. That is, I average 60% in equity with a concentration in large companies and 40% in fixed income and cash (I typically hold 5% to 10% in cash.) with a focus on short-term corporate bond funds. Note that long-term, stocks average a 9-11% annual return, bonds 3-5% and cash 2-3% so, all things considered, it is fair for me to assume a 6-7% annual return over a ten-year investment period.

​Far off into my future, I will sign up for Medicare at age 65 (required), continue to work full time (because of Marea’s spending habits), and maintain group health coverage through my employer. I will eventually apply for Social Security Benefits between 66 and 70 years of age. It makes no sense for me to file prior to age 66 because of the earnings test, which would basically penalize me $1.00 for every $2.00 earned prior to age 66. The real question will be: am I better off receiving Social Security at age 66 or do I take advantage of an 8% annual bump in benefits each year I delay payments from age 66 to 70. Time will tell.​

I’m sure you have noticed that I’ve used the term “long-term” quite often in this update, so let’s quickly address a long-term care fallacy. Can we still save for future long-term care expenses?

Yes we can!

Consider this: a 60-year-old healthy male in Ohio has a 30% chance of needing some form of long-term care services if he lives to age 85. If this person puts aside around $10.00 to $12.00 every day in a 60/40 portfolio for the next twenty-twenty five years, he can fund one year of nursing home care, or he will have earned enough to leave approximately $250,000 to his heirs. By the way, if we put aside $2,000 today, our daily savings rate falls well below $10.00 a day.

The point is every Baby Boomer can still do something about long-term care. Taking action can eliminate the unnecessary burden of having family members pay for nursing homes. Other viable long-term care options include a long-term care policy, an annuity with a long-term care rider, or a universal life policy with a long-term care rider.

Now, back to the present. My parents have traveled over the rainbow; my 32-year-old son lives and studies in Brooklyn; my 29 year-old-son (who works with me) is picking up golf and is planning a golfing vacation; my 7-year-old daughter is attending an important birthday party at a roller skating rink, and Marea is in the process of remodeling a couple of rooms in the house and extending a flower bed in our garden by 15 yards, which will make it more visually appealing.

Overall, things are pretty good. But I still haven’t addressed the hot topic for this week: what will I do for my birthday?

When asked, my usual reply is, “I want to stay home and do absolutely nothing, and please, no gifts.”

This year, I’ve added another option.

“If clothing must be purchased for me, pants with elastic waistbands work best.”

There we go: pants with elastic waistbands. If that cool guy in 1997 could only see me now.

Have a productive week.

This update was written by Ron Mastrogiovanni and Chris Leone.

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

mobile: 617-875-9313
fax: 978-561-1857


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