While considering what to write this week, my good friend Mike, a connoisseur of German sports cars and French culture, recommended that I share my first two in a series of 12 interviews conducted by Dana Hersey of “Movie Loft” fame. Interviews will be aired every Sunday morning at 8:30 on Retirement Radio, 104.9 FM.

The Retirement Radio Show, hosted by Dana Hersey, offers features and interviews on “senior” lifestyle with a special emphasis on Baby Boomers.

Check it out.

The next update will be posted on 3/25/13.

Have a productive week.

Ron

Dana used Dropbox to share some files with you!

Click here to view hvs financial.

© 2013 Dropbox

Thank goodness my frequent flier days are over.

I flew out of Boston last Sunday because I was scheduled to be on a panel at an industry technology conference for financial advisors in Miami. Because of the storm, I expected large crowds and confusion, so I arrived at Logan several hours early. Shockingly, the airport was practically a ghost town. Yet despite one cancellation after another, my flight left on time.

I don’t fly like I used to. In fact, I felt like the amateur on National Car Rental’s “Business Pro” commercial, and I am sure it showed. While attempting to get through a typical TSA examination as furtively as possible, I forgot to take my belt off.

BEEEEEP!!! “Remove your belt sir,” the agent sternly directed.

With the world watching, I, now beltless, had to re-enter one of the new body scanning x-ray machines with my arms held above my head.

“Miss, I think my pants are going to come down,” I said anxiously.

She ignored me. Luckily, I had a decent breakfast and was able to expand my digestive cavity just far enough to keep my trousers from sliding down to my ankles.

After the security debacle, as we began filing into the aircraft and took our seats, the young woman sitting next to me quietly kneeled, faced the back headrest, bowed her head, and began to pray.

Wow. This was certainly far removed from the first class upgrades I used to enjoy, when security was light and thoughts of doom never entered my mind.

I almost kneeled and joined her.

Despite feeling like a rookie, I still imparted some words of travel wisdom to my son by emphasizing the benefits of an aisle seat and asking for hotel room located away from the elevators and vending machines.

See. I haven’t completely lost it.

We arrived safely in Miami and I felt fully prepared for the conference, except for one thing:

Valentine’s Day.

I forgot.

Conjuring up images of Marea’s gleaming smile this past holiday, I went directly to the Gorsuch website, which worked so well at Christmas, and purchased two items. My friend Ray just does not understand why I go through so much trouble buying Marea gifts. Ray, who is in his mid 70’s, explains that I should do what he does: simply give the wife money or tell her to buy herself a gift, period. I can assure you, that approach will not work for me.

Well, amidst the travel chaos, I mistakenly thought Valentines was on Tuesday, so I had my gifts wrapped and delivered overnight. Well, it was a good thing, because Marea immediately exchanged both of them right back for three—just in time to open them on Thursday—the real Valentines Day.

Maybe Ray is right. I can picture him at home reading this Update nodding his head, mumbling some sort of dreck while enjoying a cigar and a vodka on the rocks.

As I was doing my thing in Florida, Beth Allen, HealthView’s marketing genius was scheduled to speak at an Investors Capital Corporation conference in Boston, which was attended by approximately 300 financial advisors. Because of my absence, Chris Leone, the co-author of the Update and a high school English teacher, agreed to man the HealthView conference booth in an effort to help financial advisors understand how to integrate the HealthView offering into their practices.

He learned our industry has a lot of jargon.

Chris is certainly well-read on Medicare, the recent healthcare legislation, and its effects on retirees; however, when the advisors began discussing downside standard deviation and alpha related issues, Chris became a bit, shall we say, passive.

“I smiled and nodded my head a lot,” he informed me the next day. In retrospect, I am sure that this is how many clients feel when inundated with industry terminology.

What was gleaned from advisors at both conferences is that most appear to be bullish on 2013, and I tend to share their positive long-term sentiments. Given the strong start to 2013, I would not be surprised to see a temporary pullback. Also, if you are close to retirement or in retirement, do not gamble with the sequester (automatic spending cuts) hanging over us, which can have serious economic consequences.

Unlike in the previous two years, assuming political leaders work things out in Washington, growth products look attractive globally; therefore I would slowly reduce overall cash and dollar cost average into equity. Having primarily focused on large cap positions such as XLI and SPY, I intend to compliment large caps by dollar cost averaging into growth funds including RFG (midcap growth), VBK (small cap growth) and EFG or IDV (international).

Have a productive week.

The Update is written by Chris Leone and Ron Mastrogiovanni.

Four million dollars.

That’s the cost of a thirty-second Super Bowl ad, and space is sold out. As you know from previous updates, I’ve always been fascinated by the power of advertising (remember the Update on “power pants”). In today’s world, an ad has far more reach than its exclusive premiere after the coin toss. There are teaser ads prior to the Super Bowl, and social media conduits like You Tube, Facebook, and Twitter that give legs to the commercial long after it has been aired.

Perhaps that $4 million is a bargain after all.

So I previewed the ads on Sunday afternoon and found the Doritos and Go Daddy offerings to be quite bizarre, but Audi scored a touchdown. Unlike the typical muscle car ad displaying a vehicle’s sheer power while being driven by a good looking guy sitting next to a hot female model, Audi decided to take what I consider to be a very creative approach with a commercial entitled “Prom.”

A high school senior dressed in a tux stands in front of his mom, who informs him that it’s not unusual for a guy to go to the prom without a date. His much younger sister quickly disagrees and makes it clear to her brother that it is unusual. Dad appears on screen and throws him the keys to a fancy oolong gray Audi S6. (As you may remember, I recently purchased an Audi.)

While driving the S6 to school, the testosterone level of this somewhat insecure high school senior rises to new heights. He parks in the Principal’s parking place, confidently enters the school gym, walks onto the dance floor, and bravely kisses the very pretty prom queen. This little stunt quickly garners him a black eye from the queen’s jock boyfriend.

However, all is good as our hero screams with excitement while driving back home alone, except for his newly acquired shiner. Why? It is clear that the prom queen was mesmerized by his S6-inspired kiss, and he had finally found the courage to face his fears.

Apparently, Audis inspire bravery.

I find this incredibly ironic, since I am petrified to even touch the Nasa-like computer dashboard on my Audi. Even turning on the radio was a problem, and I’m embarrassed to say, getting out of the car takes a little effort. Don’t even mention the navigation system. The manufacturer and dealer offered online videos and multiple personal training sessions, but it is likely that if I get lost while driving my car, I will be pulling up to a gas station for directions.

In contrast to the original Audi spot, an ad for the newly affordable Mercedes CLA reveals a young gentleman who is almost willing to sell his soul for a chance to own a Mercedes and all of the perks that go along with it (girls, fame, status, etc). The man reconsiders the devils offer at the end because he is brave enough to take on the $30,000 price tag.

As a high performance vehicle owner (sans the testosterone), I’ll give you a little Baby Boomer down-to-earth reality. First of all, overweight partially, bald, short guys are not picking up models with or without a fancy Audi. It is also likely that if a glamorous model does show any level of interest, her focus might be on the size of his wallet or the generosity written into his will, rather than the car. By the way, I do enjoy driving my cool looking Audi.

So how do we transition from advertising to investing? Simple. These two advertisements seem to be promoting a similar philosophy: be brave.

From a portfolio management perspective, I haven’t been. In fact, I have been holding too much cash. The Dow was up 5.7% in January alone. Remember, the market historically averages around 10% annually, so this was a stellar January for equities. My wife Marea’s portfolio was only up 3.75%, and despite the fact that I drive an Audi, I haven’t been managing bravely enough for her tastes.

So here goes my attempt to keep Marea from firing me: I’ll try the truth. Given all of the problems in Washington, I have decided to remain cautious until the debt ceiling and budget deficit issues are resolved for at least a12-month period of time. To some extent, the train has left the station, and I will not chase it, but will slowly add to equities on pullbacks. By most established standards, a 3.75% return in one month isn’t bad at all but I must admit, as of this writing, I was probably too cautious. Going forward, I will ignore my lost opportunity and make prudent decisions based on current market conditions.

Alternatively, if you captured this spectacular January upside, don’t be afraid to take some profits. Actual profits are the only profits that really count.

Maybe I’ll try to plant a big kiss on Marea tonight after the Super Bowl, like my young Audi driver did.

Now that’s brave!

Have a productive week.

The Update is written by Chris Leone and Ron Mastrogiovanni.

I guess last week’s update dredged up some forgotten memories that, upon further reflection, are strangely relevant to the current retirement conundrum of which I regularly preach.

My dad retired when he was 65. No longer employed, he nonetheless received full Social Security benefits, a pension, Medicare benefits (more robust than what is available today), and an employer-sponsored, supplemental (Medigap) policy, which in today’s dollars would exceed $210,000 in value.

Additionally, they owned the family home, had zero debt, sent the kids to college, and paid for a wedding. It is safe to say that by today’s standards, my parents were well off. What may be even more noteworthy is that they were the norm—no different than most other middle-class couples of “The Greatest Generation.”

This stability is simply non-existent in today’s volatile world. Future retirees will have to scratch and claw just to remain above water. This is in stark contrast to my parents, who were so comfortable that my mother happily sacrificed a decade of Social Security payments just to keep a family secret.

Since my father was older than my mother by almost ten years, they had to wait until he was in his mid-70s for my stay-at-home mom to finally receive her Social Security benefits. As Mom approached her 65th birthday, Dad contacted his brother in Italy to get a copy of her birth certificate. Interestingly enough, they were both from the same town, Gaeta, but had never met while growing up. They actually met in New York City, which is story for another day…

Anyway, a week passed until Uncle Micheĺe called to inform Dad that the town hall did not have a copy of Mom’s birth certificate. Simple answer: it must have been misfiled. My uncle agreed to dig deeper. Days passed until he successfully completed the mission. I vividly remember the phone call and my father’s reaction.

“MA STIAMO SCHERZANDO?!?” he roared into the receiver. Loosely translated (and minus four or five words that I cannot say here), this means, “Are you kidding me?”

Mom may never forgive me for publicizing this, but here goes: My mom was actually a few months older than my dad! She lied about her age by almost ten years! She even forfeited years of Social Security payments in order to hide the truth.

Can you imagine anyone in today’s economy volunteering to not collect Social Security? Just for vanity’s sake?

After the typhoon of expletives and uncontrolled laughter, my father calmed down and decided to have some fun with the whole thing.

“Ima gonna get it annulled,” he joked with her over coffee one morning.

Then he calculated the overall loss in Social Security payments, and he no longer found it all that funny.

In comparison to previous generations, the Boomer retirement landscape is simply loaded with land mines. Here is a short list:

Marital status

According to the Ohio State Dept. of Aging, being married leads to a greater level of retirement satisfaction

Longevity

20 plus years

Pensions

If you have one, you are one lucky Boomer

Employer healthcare benefits

Not available for most Americans

Social Security

New eligibility and benefit guidelines under review

Medicare

New eligibility and benefit guidelines under review

Access to physicians

More limited than in the 20th Century

Long-term care

One word; expensive

CD interest rates

Close to zero

Stock market

High level of volatile in comparison to the 20th Century

Economy

Currently in a slow recovery

Baby Boomer debt level

High

Boomer level of savings

Low

Boomer living standard

High

U.S. debt level

High

Unemployment rate

High

Job expectations

Somewhat unrealistic

Before his death, Dennis Hopper, in an Ameriprise commercial, told Boomers that it was “Time to redefine [retirement].” He was right.

For Boomers to maintain a desired standard of living, it is likely that many will be retiring later in life. This realization seems to already have taken hold, as a recent survey reveals that over 70% of newly retired persons hope to remain in the workforce in some capacity. However, the reality is that only 30% (approximately) are actually able to find work in retirement. Jobs are still an issue, as well as the skills needed to compete in the 21st Century workplace.

It is time that corporations begin to see the benefit of retaining and hiring older workers, and believe it or not, there is an emerging industry sector of entrepreneurs dedicated to this endeavor. The truth of the matter is that older workers do not cost more to employ and may be more dedicated to a job than younger workers who have significantly more mobility and thus, more opportunities to leave a position.

If my generation truly wants to “turn retirement upside down,” as Hopper later suggested, satisfaction in our golden years may not be measured in terms of vacations and leisure, but in our continued professional and work-related experiences.

Have a productive week….Oh, and sorry, Mom.

The Update is written by Chris Leone and Ron Mastrogiovanni.

There are some things I’ll never understand. Here’s one:

Why would my lovely wife, Marea, purchase two new pairs of sneakers and throw my old ones out without asking me first?

“You need to replace sneakers regularly and alternate them between your daily power walks,” she informed me.

I do? Who knew?

I walk for 3.5 to 4 miles for almost an hour practically every day. Apparently, according to my wife, this qualifies me as a highly tuned athlete who needs cutting edge footwear to maintain peak performance for my upcoming heat in the Senior Slow-Walk Olympics.

I wonder if Bill Russell and Bob Cousy alternated specifically designed point guard and center sneakers between games.

“Oh, and they should be replaced every 300 miles,” she added.

So I have to throw my sneakers away after every 75 walks? How do I keep count? Maybe sneaker companies can embed a hidden odometer in the soles of sneakers. Or, the foot engineers could inject a color fading dye in heels indicating when a new pair is needed. I believe toothbrush manufactures have the color of bristles fade away when it is time to buy a new brush. Why not sneakers?

Reflecting upon last week’s Update, I may have been wrong when I stated that women and women alone drive the global economy. The power of advertising is truly incredible! Not only is it innovative enough to sell designer sneakers for different purposes, it supports an infinitely sustainable business model by making consumers believe that they need multiple pairs of footwear for the same activity.

We consumers love advertising terms such as introducing, new, improved, best, original, customized, exclusive, doctor recommended, proven, free and finally, as Pandora states in its tag line, unforgettable.

And there is no reason for the creative marketing minds to stop there. I was looking through the December issue of SHAPE magazine and learned that New Balance markets training footwear just for the winter; skechers makes GOwalk footwear available so women can “GO like never before;” and best of all, Amy Schlinger, a writer for SHAPE highlighted the need for “Socks That Rock.” That’s right, activity specific socks for hiking, running, crossfit (whatever that means), yoga, and skiing.

How about this one? Gap markets pants that have a “perfect performance fit!” I should get a pair of performance fit pantaloons to wear under my suit at business meetings and, of course, while making my investment decisions. That should exponentially increase the annual performance of Marea’s portfolio.

Switching gears as we enter the New Year, I reviewed investment guidelines first published last year and concluded that it made sense to once again share them with Update readers.

Investment Guidelines:

· Stay diversified and don’t place all of your assets in one stock, bond, or fund.

· Invest globally with a concentration in the USA. (The portfolios publish in the Update do have global exposure through an international fund and large U.S. firms that sell products and services throughout the world.)

· When buying individual securities, concentrate on industry leaders offering dividends, which ultimately provide a cushion during corrections and remember, dividends generate approximately 40% of market performance.

· When increasing equity exposure, execute trades on down market days.

· Hold a cash position between 5% and 20% of a portfolio’s value.

· Fixed-income concentration should be in short to intermediate bond funds.

· Populate portfolio with both equity and bond funds charging low expenses and a better than average three and/or five-year track records.

· Know a security’s investment philosophy, objective, and style prior to purchase.

· A position/portfolio must meet personal suitability standards based on objectives, volatility, and investment time horizon.

· In a taxable account, be aware of the potential tax exposure.

· When considering bond funds, a low expense ratio is extremely important to overall annual performance.

· Index product performance should basically track its long-term category average.

· Monitor investments weekly. (For example, Yahoo finance allows you to compare the performance of your funds to its peer group over multiple periods of time.)

· Analyze a product’s performance over time (year-to-date, one year, three years, five years).

· Monitor sector investments closely.

· Performance must be assessed on a risk/return basis. (For example, Investor “A” generates a 5% return; Investor “B” generates a 10% return; which portfolio was the better performer? It completely depends on the level of risk inherent in each portfolio.)

· Note that raw performance benchmarks including the Dow, S&P 500, NASDAQ, and the Russell 2000 do not incorporate trading costs, fund expenses, and advisory fees.

· Let’s assume equity markets are up 10% and fixed income and cash are both flat at 0%. You have 50% invested in equity, 50% in fixed income and cash, and total expenses of 0.5%; a reasonable return for your portfolio would be approximately 4.5%.

· Be aware that markets tend to overreact to news, good or bad.

· Realize that absolutely no one knows how markets will perform next week, next month, or next year.

· So, my guess is that the market will generate an 8% return in 2013. (By the way, 10% is about the average stock market annual rate of return.)

· Be aware of a portfolio’s potential worst 1, 3, 5, and 10 year case scenario based on historical data.

· Unless you are willing to do your homework weekly, consider hiring a financial advisor.

· Dialing your equity allocation up (increased volatility) or down (less volatility) will ultimately increase the probability of capturing more or less of both the upside and downside of market performance.

· Wear performance fit pants when analyzing your investments.

· Do not

o Purchase any investment product you do not understand.

o Sell a fund because of poor performance over a limited period of time. (If a fund under performs for a couple of months, place the fund on a watch list for at least 30 days prior to making a decision to hold or sell out of the position.)

o Buy bond funds with higher than average expense ratios.

o Select a stock simply because of a potential high-dividend payout. (Make sure the company has the cash flow necessary to pay the dividend.)

o Allocate more than 5% to 7% per individual sector.

o Try to time the market.

o Overreact to the news of the day.

o Chase performance. (Performance is relative based on asset allocation, risk inherent in the portfolio, and expenses including trading costs, a fund’s expense ratio and advisory fees.)

Have a productive Week.

The Update is written by Chris Leone and Ron Mastrogiovanni.

Prior to delving into the obligatory year-end portfolio results, I’d like to provide an update on my 2012 Christmas gift buying achievements, as well as share an interesting discussion I had with my lovely wife, Marea, the other night.

I was two for six this year; given my track record, this is a major accomplishment. Marea decided to retain possession of a cashmere sweater purchased from Gorsuch and an All Clad 12-quart pot with multiple strainers from Williams Sonoma. The losers were a cashmere dress and a couple of winter accessories.

The winners! (And no, that is not Marea)

I know what you’re thinking: How could Ron have bought cookware as a Christmas gift? Well, we’ve been married quite a while; she likes to cook, and I like to eat. It was a win/win! We’ve already used it to prepare a tasty gravy (or sauce, if you prefer) and meatballs. Do I sound defensive?

However, the other night, Marea certainly caught me off guard with an unexpected grievance. There I was, in bed innocently reading the latest Vince Flynn thriller, when out of the blue, she went after me.

“You never want to go out for a “fun” dinner!” she exclaimed.

“Fun” dinner? Just what is a “fun” dinner? Chucky Cheese? Going to a ball game is fun. Eating dinner may be satisfying and enjoyable, but fun? What does that mean?

“How about we go to Costco, get a slice of pizza, and watch all the people at the checkout?” I asked.

I quickly responded to her glare by recommending a couple of nice local restaurants.

“You’re only asking because I brought it up,” she retorted, turning away.

Leftovers. Thankfully, there were a few meatballs left. Good thing I bought that pot.

The next morning, I went for a power walk with a couple of friends and broached my “fun dinner” dilemma. My walking pal, Joanne, hit the nail on the head.

“It’s not the venue; it’s the people you’re with who make dinner fun.”

Bingo, I’ll recommend that we do Chinese take-out so that I can wear my buffet pants and a sweatshirt! No cooking, no cleanup, good company! One fun time! I’m sure this will go over like a lead balloon.

Still, it’s a good thing for everybody that women want to go out to eat. Buy new homes, And shop. And shop. They are the true drivers of the economy.

Housing, home goods, precious metals, clothing, kids gear, automobiles, healthcare, restaurants: I could go on and on. The success of global business is in the hands of women. Do you think that I would actually own a dozen pair of shoes I never wear if it weren’t for my wife? Consider this, if guys were making decisions, would there be a need for a furniture superstore other than La-Z-Boy?

Luckily, women led the country to a solid market performance in 2012.

Buy and Hold Portfolio #1

Asset allocation: 50% equity, 40% fixed income, 10% cash

3-year standard deviation (measure of risk) 7.58

3-year standard deviation for the S&P 500 16.69

2012 target return: 6.00%

2012 return: 7.40%

Symbol Weight Positions 2012

Return

AGG 20% iShares Barclays Aggregate Bond 4.04%

DVY 15% iShares Dow Jones Select Dividends 10.52%

IJH 5% iShares Midcap 400 17.76%

DIA 5% SPDR Dow Jones Industrial Average 10.04%

VIG 20% Vanguard Dividend Appreciation 11.62%

BSV 20% Vanguard Short Term Bond 2.02%

VB 5% Vanguard Small Cap 18.22%

SPRXX 10% Fidelity Money Market 0.01%

I will be making the following changes to Portfolio #1 for 2013:

Reduce AGG to 15%, DVY to 10% and BSV to 15%.

Increase DIA to 10%.

Initiate a 10% position in CSJ.

Buy and Hold Portfolio #2

Asset allocation: 55% equity, 40% fixed income, 5% cash

3-year standard deviation (measure of risk) 9.33

3-year standard deviation for the S&P 500 16.69

2012 target return: 6.50%

2012 return: 9.41%

Symbol Weight Positions YTD

Return

RFG 5% Guugenheim S&P Midcap Pure Growth 16.90%

XLI 5% Industrial Select Sector SPDR 14.86%

AGG 20% iShares Barclays Aggregate Bond 4.04%

IHE 4% iShares Dow US Pharmaceuticals 13.40%

RWR 3% SPDR Dow Jones REIT 16.81%

SPY 15% SPDR S&P 500 15.84%

BSV 20% Vanguard Short Term Bond 2.02%

VB 5% Vanguard Small Cap 18.22%

VOX 3% Vanguard Telecom 16.54%

DTN 15% Wisdom Tree Dividend Ex Financials 11.80%

SPRXX 5% Fidelity Money Market 0.01%

I will be making the following changes to Portfolio #2 for 2013:

Sell out of IHE, RWR, VOX, and DTN

Reduce AGG to 10% and BSV to 15%

Increase XLI to 10% and VB to 10%

Initiate a 10% position in VEU, a 10% position in DIA and a 10% position in FLOT

Note that I have increased equity exposure to 60%

Marea’s Actively Managed IRA

Strategic asset allocation: 80% equity, 15% fixed income, 5% cash

3-year standard deviation (measure of risk) 12.10

3-year standard deviation for the S&P 500 16.69

2012 target return: 8.00%

2012 return: 11.25%

Symbol Current Positions at end of 2012

Weight

FDL 5% First Trust Morningstar Dividend Leaders

XLI 6% Industrial Select Sector SPDR

CSJ 7% iShares Barclays 1-3 year Credit Bond

AGG 12% iShares Barclays Aggregate Bond

PGF 7% PowerShares Financial Preferred

DIA 18% SPDR Dow Jones Industrial Average

SPY 25% SPDR S&P 500

GLD 9% SPDR Gold Shares

FDRXX 11% Fidelity Cash Reserves

Based on a risk/return perspective, all three portfolios exceeded expectations. Since Marea’s Portfolio is actively managed, many of her holdings were not held for all of 2012, thus I did not post annual returns.

The key hurdle to continued gains into the New Year does not appear to be the U.S. economy, Middle East, North Korea, China, or Europe, but the U.S. Government. Markets will likely be volatile for the next six to eight weeks until our elected officials come to terms with the debt ceiling and government spending issues; however, it might be worth considering this current instability as a possible buying opportunity, since our long-term outlook is relatively positive.

I forecast equities to rise by approximately 8%, and short to intermediate-term fixed-income products to be flat to slightly negative in 2013.

Have a happy, productive and peaceful New Year.

The Update is written by Chris Leone and Ron Mastrogiovanni.

Ron Mastrogiovanni is CEO of HVS Financial, a financial planning firm specializing in Medicare, long-term care and Social Security income optimization. Prior to HVS, Ron was cofounder of FundQuest, an asset management firm responsible for more than $12 billion in assets.

Ron holds a B.S. degree from Boston State College and an M.B.A. from Babson College.

Chris Leone has been an educator for over a decade, teaching English at Wheelock College as well as Business Communication and a variety of courses in the Education Department at Suffolk University. He recently wrote and instructed the healthcare module for the RMA curriculum at Boston University, and has contributed to numerous articles on the topic of healthcare in retirement.

Chris earned his B.A. in Communications and Masters in Education from Suffolk University.

I recently served as a panelist, along with Dr. Katy Votava, President of Goodcare.com, and Thomas West, ChFC, of Signature Estate & Investment Advisors, for a webcast sponsored by Investment News entitled, “Women in Retirement: Managing Longevity.” With over 1,200 financial advisors registering to be in attendance, moderators Frederick Gabriel and Mary Beth Franklin attempted to shed light on a growing financial problem among Baby Boomers: most women retiring today are projected to outlive their savings.

As the founder of HVS Financial, I have been proselytizing for years about the financial dangers related to long-term care costs in retirement. Women are especially vulnerable financially because they have longer life expectancies than men and are often left without enough savings after their spouses pass on. Here are some important facts:

•According to a Women and Long-Term Care Fact Sheet published by AARP,
•Over 70% of nursing home residents are women
•70% of women 75 or older are widowed, divorced, or never married
•48% of Americans living alone are women compared to 22% of men
•A healthy 58-year-old woman living in Boston will have a life expectancy of 90 years and close to a 50% chance of needing long-term care by age 88
•Average length of stay in a nursing home for a woman will be over 2 years
•Average annual cost of nursing home care in the Boston area today is $123,000
•Estimated annual cost 30 years from now will be $613,000

The aforementioned statistics are not the total story. Let’s say this 58-year-old woman is happily married to her husband of the same age. More than likely, she will live approximately five years longer. Here are some other projections:

•His life expectancy will be approximately 85 years
•Average length of stay in a nursing home for a healthy 58 year old male will be 1.5 years
•Estimated annual cost 25 years from now will be $495,000
•Based on his potential 1.5-year stay, the couple may be responsible for $770,000 in nursing home expenses
•Additionally, beginning at age 80, they will also be responsible for approximately $40,000 in health insurance premiums and other out of pocket healthcare expenses, such as co-pays
•Note that the $40,000 mentioned above is the equivalent of around $22,000 in today’s dollars, not much more than the $16,000 cost of medical insurance premiums your current employer is paying for your family plan

According to Medicare, by 2020, between 12 and 14 million people are going to need some form of long-term care. That means roughly 1 in 6 Boomers—or more importantly, one third of all couples—will require some level of LTC—enough to cripple a family’s life savings.

A common reaction is to assume that Medicaid is the solution. Think twice before depending on Medicaid, as benefits will likely be cut to help address the country’s deficit problems, and for the most part, current Medicaid benefits do not cover facilities with any real amenities. The key is to have assets available to cover the cost of at least a one-year stay.

On a personal note, since I am considerably older than my lovely wife Marea, I should probably keep these statistics and all sharp objects away from her (only kidding). I am sure that she would not look forward to the possibility that keeping me alive in a nursing home might one day put her in the poorhouse. Let’s face facts: LTC almost exclusively occurs during the final years of life, when loved ones are hooked up to a myriad of tubes and bags and often cannot perform the most basic daily functions. I am sure that my wife cares about me very much and would do anything for me. But, writing a check for $500,000 a year just to keep me propped on some pillows is difficult for me to swallow. What if it goes on for two years? Three?

Fortunately, financial industry professionals are prepared to address this issue, and the time to act is now. Potential solutions to catastrophic long-term care costs include purchasing LTC insurance, looking into annuity products that offer long-term care riders, carving a portion of savings that can be allocated to LTC costs, and/or purchasing a universal life policy that offers LTC or catastrophic care riders (an additional benefit is related to the favorable tax status built into life policies). Since the average Baby Boomer is looking at an investment period of 20 to 30 years, it is worth talking to an advisor about considering a more aggressive portfolio dedicated to LTC savings. If investors do not require LTC services, the accrued assets can be left to heirs.

Think about it: tackling this problem today could be the ultimate holiday gift for your spouse and children.

Happy Holidays!

The next Update will be posted on January 7, 2013.

The Update is written by Chris Leone and Ron Mastrogiovanni.