Understanding the Impact of Modified Adjusted Gross Income on Retirement Health Care Costs: Strategies to Reduce Medicare Income Surcharges

Medicare Surcharges will Increasingly Impact and Surprise Many Boomers

New HealthView Services Insights White Paper and Medicare Surcharges Calculator Offer Strategies to Reduce Surcharges and Increase Net Retirement Income

___________________________

Danvers, MA, October 14, 2014 – A new Insights White Paper and Medicare Surcharges Calculator from HealthView Services, set out to help Americans better understand, manage and reduce Medicare surcharges in retirement. HealthView Services is the leading provider of retirement health care data and tools for broker-dealers, insurers, financial advisors and consumers.

The new white paper, “Understanding the Impact of Modified Adjusted Gross Income on Retirement Health Care Costs: Strategies to Reduce Medicare Income Surcharges,” highlights that many Boomers entering retirement will be surprised when they receive less than expected from Social Security because of Medicare Part B premiums and income-based surcharges that are deducted from Social Security. It shows that surcharges can more than double Medicare premiums.

The paper explains the measure used by Medicare to calculate income for surcharges: Modified Adjusted Gross Income (MAGI). MAGI includes almost every potential source of income—including working in retirement, Social Security, pensions, required minimum distributions, dividends, earned interest, and capital gains. Once MAGI surpasses $85,000 for a single person and $170,000 for a couple, surcharges are levied.

“These thresholds may seem high, but many retirees including those on traditional pensions are already crossing them,” said Ron Mastrogiovanni, Founder and CEO of HealthView Services. “Since Medicare income brackets are not indexed to inflation, over time more retirees will be impacted. Surcharges will not only impact affluent Americans, but practically everyone with a moderate income.”

The paper shows that crossing the first surcharge threshold increases Medicare Part B and D costs by approximately 35%. Crossing the highest thresholds can increase costs by more than 200%. The combined impact of these additional costs during retirement can be in excess of $100,000 (present value) for families in higher income brackets according to the paper.

The new Medicare Surcharges Calculator, which is being launched with financial advisors, provides a valuable tool to calculate expected retirement income and Medicare surcharges. The calculator is a starting point for advisor conversations about these surcharges and steps a client can take to reduce them.

“What takes a good many advisers and their clients by surprise is Medicare’s two-year look-back period, which means that income earned at age 63 can be applied to the Medicare income algorithm when the subscriber signs up at 65,” added Mastrogiovanni. “Selling a house, for example, just prior to retirement could significantly increase Medicare premiums.”

This rule can also become especially troublesome at age 70½, when required minimum distributions must be taken, or when a spouse passes away, which could leave an income stream that may catapult the lone survivor into a higher bracket.

Leveraging products including life insurance, non-qualified annuities, Roth IRAs and Roth 401(k)s, HSAs, longevity insurance, and even a reverse mortgage, can help decrease MAGI and reduce surcharges.

“Pursing the goal of higher retirement income without consideration of MAGI may move a retiree into a higher surcharge bracket and potentially reduce disposable income,” added Mastrogiovanni. “In one of the case studies in our paper, it would require a 6% return on a $400,000 investment over five years, to equal the savings an advisor would be able to attain by simply adjusting their client’s investment mix.”

The paper underscores the importance of allocating savings for retirement health care and modifying a retirement portfolio’s investment mix to lower Medicare-assessed income to help prepare Americans for future costs, reduce surcharges and increase disposable income in retirement.

HealthView Services (http://www.hvsfinancial.com) is the leading provider of retirement health care cost data and Medicare, Social Security, and long-term care retirement planning tools for broker-dealers, insurers, financial advisors, and individuals. HealthView Services believes that understanding expected future health care costs, one of the largest burdens facing retirees, should be a foundational component of retirement planning. The company’s methodology initiates advisor/client conversations that ultimately lead to portfolio optimization in both the accumulation and decumulation phases of retirement.

HealthView Services’ HealthWealthLink is an integrated retirement planning tool that draws upon cost data from more than 50 million annual health care cases to assist financial advisors in preparing personalized estimates of retirement health care costs and implementing various strategies to achieve clients’ retirement goals. Through the company’s partnership with the Insured Retirement Institute (IRI), HealthView Prime, a health care retirement cost planning tool, is being offered to IRI’s membership of major insurers, asset managers, broker dealers/distributors, and 150,000 financial professionals. Individuals can use a one-click version of HealthWealthLink to calculate average retirement health care costs (http://apps.hvsfinancial.com/hvadvisor).

The Update 10/21/13 The quest for a fancy dress

My poor wife, Marea, works hard every single day of the week, and I am truly amazed at her unyielding dedication to saving our family money—both at the mall and online. This week, I got a chance to actually witness her in action, as she invited me to join her at the Burlington Mall to dress-shop for Gillian Bernard’s wedding. I hesitantly accepted, thinking why does she need a new dress?

 

Stupid question.

So there we were, one of about nine million cars at the mall on Saturday.

“Can you park in front Lord & Taylor? There is always a big selection of formal dresses, and they are having a ‘Friends and Family’ sale,” Marea said with a hint of excitement.

There she is, saving me money again.

“Do you think L&T is referring to your friends or mine?” I quipped.

No comment.

We enter the store in the purses and scarves’ section.  Marea and my daughter Taylor start perusing.

Twenty minutes later…

“I thought you were looking for party dresses,” I muttered.  This was going to be a longer afternoon than I expected.

Surprisingly she agreed, and we got as far as the perfume arena. “My goodness!  There’s a special on Flower Bomb!” The manufacturer bundled perfume, some kind of lotion and facial cream, and L&T offers the package at 10% off—the good ol’ “Friends and Family” price.

So we got Bombed.

And how’s this for strange: The “Friends and Family” sale doesn’t begin until Wednesday, so customers can purchase items on Saturday, but can’t pick them up until four days later! What a fantastic marketing strategy. The retailer provides the sale price days prior to the actual event, but the customer is required to return to the store to pick up the item, which, of course, may lead to the purchase of additional products.

The game is rigged, I tell ya.

After we paid for the Bomb, we finally got to the formal-dress area. I pointed out a few dresses being modeled by some lovely mannequins, but they were immediately rejected.

“Those are too short. Long dresses are more fun at weddings,” (In the past, I have written about articles of clothing being “fun,” To this day, I cannot understand the concept—but I digress.) Anyway, Marea and Taylor selected a bundle of long dresses and headed to the changing area. Luckily, directly adjacent to the dressing rooms were a couple of chairs and a couch. I happily selected the chair.

While waiting patiently, I noticed a young guy passively following his girlfriend in the hunt for “fun” formal wear. She headed into the private dressing area, and he sat on the couch next to my chair.

“Get comfortable. You’re going to have a long wait,” I say paternally. He simply nodded and looked away.

Marea finally reappeared in a full-length dress, followed by Taylor at her side.

“What do you think?” she twirled.

Does a more loaded question between husband and wife exist? I took my time checking out the dress she was wearing and exclaimed, “You look great!”

She glared at me. “You’re just saying that so you can get out of here.”

See what I mean?

“I can’t win,” I said defensively. She returned to the dressing room area, and I leaned over to my new friend on the couch, “Can you believe this?” I ask, hoping for any male response.  Once again, he just nodded and looked away. Apparently, he had no intention of bonding with me.

Marea reappeared and headed back to the unlimited racks of formal dresses. Knowing this would take a while, I decided to rest my eyes.

“BOO!” Taylor screamed wildly into my frightened face. “You were snoring,” she laughed. I stole a glance at my old friend on the couch, who at least smiled this time before gazing off into the distance again.

Marea headed back into the dressing room with another bundle. I began looking around and suddenly realized that women do not purchase formal dresses alone, and every buyer was accompanied by a gaggle of assistants—hence, the “Friends and Family” theme.

I guess that’s why I was invited.

My wife and kid reappeared again. “I’ve made a selection!” she proclaimed.

 

“Thank God,” I whispered under my breath.

Well, almost. There were two choices, and Marea needed the fashion prowess of a few nearby sales ladies to help her make the final decision. After a careful diagnostic analysis, they gave their final approval.

I was now awake and ready to leave.

“I need matching shoes,” she grabbed Taylor’s hand and began walking.

“You must have a hundred pairs of shoes,” I said, trying to catch up.

Ignored again. Do I even exist?

 

While in shoe heaven, I discovered that Marea needed champagne-colored, open-toe shoes with the right-sized heel to properly match the dress.  This could take a while.

 

Shockingly, we found some fairly quickly.  Success!  Time to go…

 

Not exactly.  Now we had to return to the dress department with the shoes so that the tailor could determine if any alterations were necessary.

 

Thirty minutes later, the tailor greeted Marea.  And wouldn’t you know? They were on a first name basis.

We finally finished, and as we walked out, Marea gave me some great news.  “Don’t worry.  I have the perfect jewelry for the outfit.”

That was certainly a relief.

By now, you may be thinking: What does any of this have to do with investments?

As we were walking to the shoe department, I told my wife that no one would be able to see her shoes while she was wearing a long dress. Regardless, she informed me that an outfit has to be properly coordinated. The lesson to be learned is that your portfolio needs to be coordinated in a similar fashion to Marea’s new formal dress ensemble.

You must have a personalized and coordinated bundle of stocks, bonds, and cash equivalents, referred to as asset allocation. Consider this: if I know your mix of stocks, bonds and cash, I can pretty much tell you what you generated in returns over a specified period of time. As I’ve mentioned in the past, long-term, stocks return 9-10%, bonds 3-5% and cash around 2-3%.

Additionally, you need to be aware of the underlying components of each asset class. For example, on the equity side, what percent of your assets are in large companies, mid-size companies and small companies? What percentage of equity is invested internationally and are those investments hedged against the dollar? Also, do you own sector funds such as technology, gold, and real estate? Are you over weight in narrow sectors, such as staples or consumer cyclicals? (Staples are less risky long-term than cyclicals.)

Everyone should have a basic understanding of how their hard-earned savings are being invested and how much risk the portfolio is carrying. I personally measure the actual cost of portfolio management not in dollars, but in risk compared to a benchmark.

 

You can easily measure the risk of your portfolio to a benchmark such as the S&P. Are you carrying 75% of the volatility of the S&P, or is it around 50%? Can you stomach the potential downside based on historical data? I always look at the best and worst one, three, five and ten-year historical performance numbers. You need to understand the numbers just like my wife understands the impact of a three-inch heal versus a two-inch heal.

 

If you were given a test, you should be able to quickly and correctly answer questions related to your asset allocation and the risk you are taking in comparison to a general index, such as the Dow or S&P.

I can tell you this with the utmost certainty: just like the gals in the dress department at L&T, advisors are always willing to provide a diagnostic review and analysis of your holdings—and most are very good at it. (I recommend a diagnostic review at least annually.) However, only you can decide whether the strategy and plan makes sense.

Hey, I just thought of something: as far as Marea’s new dress is concerned, I would measure cost in terms of dollars instead of the risk of not receiving compliments. And let’s be specific, I am referring to the total cost of the dress which includes the dress, alterations, shoes, the Flower Bomb bundle and whatever else she purchases this coming Wednesday.

 

Have a productive week.

This update was written by Ron Mastrogiovanni and Chris Leone.

The next Update will be published on 11/18/13.

Please let me know if you would like to be taken off this distribution list.

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

 

MeOn Wednesday, October 23, 2013 1:50 PM, Beth Allan <ballan@hvsfinancial.com> wrote: Marian: here’s this week’s blog to post. Thanks, Beth From: Ron Mastrogiovanni Sent: Monday, October 21, 2013 9:

Oct 23 at 7:30 PM

MeOn Wednesday, October 23, 2013 1:50 PM, Beth Allan <ballan@hvsfinancial.com> wrote: Marian: here’s this week’s blog to post. Thanks, Beth From: Ron Mastrogiovanni Sent: Monday, October 21, 2013 9:

To Me
Oct 23 at 7:30 PM


Hide message history
On Wednesday, October 23, 2013 1:50 PM, Beth Allan <ballan@hvsfinancial.com> wrote:
Marian: here’s this week’s blog to post.  Thanks,
Beth
From: Ron Mastrogiovanni
Sent: Monday, October 21, 2013 9:10 AM
To: Ron Mastrogiovanni
Subject: The Update 10/21/13 The quest for a fancy dress
My poor wife, Marea, works hard every single day of the week, and I am truly amazed at her unyielding dedication to saving our family money—both at the mall and online. This week, I got a chance to actually witness her in action, as she invited me to join her at the Burlington Mall to dress-shop for Gillian Bernard’s wedding. I hesitantly accepted, thinking why does she need a new dress?
 
Stupid question.
So there we were, one of about nine million cars at the mall on Saturday.
“Can you park in front Lord & Taylor? There is always a big selection of formal dresses, and they are having a ‘Friends and Family’ sale,” Marea said with a hint of excitement.
There she is, saving me money again.
“Do you think L&T is referring to your friends or mine?” I quipped.
No comment.
We enter the store in the purses and scarves’ section.  Marea and my daughter Taylor start perusing.
Twenty minutes later…

“I thought you were looking for party dresses,” I muttered.  This was going to be a longer afternoon than I expected.
Surprisingly she agreed, and we got as far as the perfume arena. “My goodness!  There’s a special on Flower Bomb!” The manufacturer bundled perfume, some kind of lotion and facial cream, and L&T offers the package at 10% off—the good ol’ “Friends and Family” price.
So we got Bombed.
And how’s this for strange: The “Friends and Family” sale doesn’t begin until Wednesday, so customers can purchase items on Saturday, but can’t pick them up until four days later! What a fantastic marketing strategy. The retailer provides the sale price days prior to the actual event, but the customer is required to return to the store to pick up the item, which, of course, may lead to the purchase of additional products.
The game is rigged, I tell ya.
After we paid for the Bomb, we finally got to the formal-dress area. I pointed out a few dresses being modeled by some lovely mannequins, but they were immediately rejected.
“Those are too short. Long dresses are more fun at weddings,” (In the past, I have written about articles of clothing being “fun,” To this day, I cannot understand the concept—but I digress.) Anyway, Marea and Taylor selected a bundle of long dresses and headed to the changing area. Luckily, directly adjacent to the dressing rooms were a couple of chairs and a couch. I happily selected the chair.
While waiting patiently, I noticed a young guy passively following his girlfriend in the hunt for “fun” formal wear. She headed into the private dressing area, and he sat on the couch next to my chair.
“Get comfortable. You’re going to have a long wait,” I say paternally. He simply nodded and looked away.
Marea finally reappeared in a full-length dress, followed by Taylor at her side.
“What do you think?” she twirled.
Does a more loaded question between husband and wife exist? I took my time checking out the dress she was wearing and exclaimed, “You look great!”
She glared at me. “You’re just saying that so you can get out of here.”
See what I mean?
“I can’t win,” I said defensively. She returned to the dressing room area, and I leaned over to my new friend on the couch, “Can you believe this?” I ask, hoping for any male response.  Once again, he just nodded and looked away. Apparently, he had no intention of bonding with me.
Marea reappeared and headed back to the unlimited racks of formal dresses. Knowing this would take a while, I decided to rest my eyes.
“BOO!” Taylor screamed wildly into my frightened face. “You were snoring,” she laughed. I stole a glance at my old friend on the couch, who at least smiled this time before gazing off into the distance again.
Marea headed back into the dressing room with another bundle. I began looking around and suddenly realized that women do not purchase formal dresses alone, and every buyer was accompanied by a gaggle of assistants—hence, the “Friends and Family” theme.
I guess that’s why I was invited.
My wife and kid reappeared again. “I’ve made a selection!” she proclaimed.
“Thank God,” I whispered under my breath.
Well, almost. There were two choices, and Marea needed the fashion prowess of a few nearby sales ladies to help her make the final decision. After a careful diagnostic analysis, they gave their final approval.
I was now awake and ready to leave.
“I need matching shoes,” she grabbed Taylor’s hand and began walking.
“You must have a hundred pairs of shoes,” I said, trying to catch up.
Ignored again. Do I even exist?
While in shoe heaven, I discovered that Marea needed champagne-colored, open-toe shoes with the right-sized heel to properly match the dress.  This could take a while.
Shockingly, we found some fairly quickly.  Success!  Time to go…
Not exactly.  Now we had to return to the dress department with the shoes so that the tailor could determine if any alterations were necessary.
Thirty minutes later, the tailor greeted Marea.  And wouldn’t you know? They were on a first name basis.
We finally finished, and as we walked out, Marea gave me some great news.  “Don’t worry.  I have the perfect jewelry for the outfit.”
That was certainly a relief.
By now, you may be thinking: What does any of this have to do with investments?
As we were walking to the shoe department, I told my wife that no one would be able to see her shoes while she was wearing a long dress. Regardless, she informed me that an outfit has to be properly coordinated. The lesson to be learned is that your portfolio needs to be coordinated in a similar fashion to Marea’s new formal dress ensemble.
You must have a personalized and coordinated bundle of stocks, bonds, and cash equivalents, referred to as asset allocation. Consider this: if I know your mix of stocks, bonds and cash, I can pretty much tell you what you generated in returns over a specified period of time. As I’ve mentioned in the past, long-term, stocks return 9-10%, bonds 3-5% and cash around 2-3%.
Additionally, you need to be aware of the underlying components of each asset class. For example, on the equity side, what percent of your assets are in large companies, mid-size companies and small companies? What percentage of equity is invested internationally and are those investments hedged against the dollar? Also, do you own sector funds such as technology, gold, and real estate? Are you over weight in narrow sectors, such as staples or consumer cyclicals? (Staples are less risky long-term than cyclicals.)
Everyone should have a basic understanding of how their hard-earned savings are being invested and how much risk the portfolio is carrying. I personally measure the actual cost of portfolio management not in dollars, but in risk compared to a benchmark.
You can easily measure the risk of your portfolio to a benchmark such as the S&P. Are you carrying 75% of the volatility of the S&P, or is it around 50%? Can you stomach the potential downside based on historical data? I always look at the best and worst one, three, five and ten-year historical performance numbers. You need to understand the numbers just like my wife understands the impact of a three-inch heal versus a two-inch heal.
If you were given a test, you should be able to quickly and correctly answer questions related to your asset allocation and the risk you are taking in comparison to a general index, such as the Dow or S&P.
I can tell you this with the utmost certainty: just like the gals in the dress department at L&T, advisors are always willing to provide a diagnostic review and analysis of your holdings—and most are very good at it. (I recommend a diagnostic review at least annually.) However, only you can decide whether the strategy and plan makes sense.
Hey, I just thought of something: as far as Marea’s new dress is concerned, I would measure cost in terms of dollars instead of the risk of not receiving compliments. And let’s be specific, I am referring to the total cost of the dress which includes the dress, alterations, shoes, the Flower Bomb bundle and whatever else she purchases this coming Wednesday.
Have a productive week.
This update was written by Ron Mastrogiovanni and Chris Leone.
The next Update will be published on 11/18/13.
Please let me know if you would like to be taken off this distribution list.
Ron Mastrogiovanni
President
HealthView Services, Inc.
150A Andover Street
Danvers, MA 01923
mobile: 617-875-9313
fax: 978-561-1857



Weekly Update 10/14/13 bella’s Dilemma

Please see attachment.
Have a productive week.
This update was written by Ron Mastrogiovanni and Chris Leone.
Please let me know if you would like to be taken off this distribution list.
Ron Mastrogiovanni
President
HealthView Services, Inc.
150A Andover Street
Danvers, MA 01923
mobile: 617-875-9313 fax: 978-561-1857

I received some disturbing news earlier this week. My wife, Marea brought our eight-year-old dog, Bella, to the vet because she has been having difficulties climbing stairs. Of course, Bella’s nightly trek to our second floor bedroom could have been avoided if I had gotten my way and left her in the kitchen—and out of my allergy zone.

“Bella has a partially torn ACL,” my wife informed me as I returned home from work.

Since I’m not a big fan of invasive medical procedures, my initial thought was the dog could survive just fine without a fully functional ACL because she certainly has numerous other ligaments to support her joint structure.

As if she could read my mind (which she usually can), Marea stated briskly, “Repairing the ACL is the right thing to do.”

I had to ask: “So, what is the cost of doggie ACL surgery?”

Marea meekly replied, “A little over $3,600 plus our $500 initial consultation.”

As a recent victim of ACL surgery and thus not buying into surgery being the only viable option, I pretended to play hard ball with my wife. “Marea, let’s perform a little cost/benefit analysis here. On one hand, we have surgery, medications and follow-up vet visits. Or we can seek a more humane alternative and adopt a new dog.”

Her glare suggested where she wanted to place my cost/benefit analysis.

” Next you’ll tell me that she’s going to need a few weeks of rehab after the surgery.”

“Well….”

That’s right; there are rehab facilities for animals.

“I have more bad news,” she pursed her lips.

“Wait.  Let me sit down. I can’t take much more of this.”

“Bella will likely need a second ACL surgery on her other hind leg around a year from now.”

I felt tears well up in my eyes. “This is worse than a federal government shutdown!”

Attempting to maintain my hard-nosed attitude, I asked her to consider what is in Bella’s best interest. “Sometimes we need to take a pet’s potential suffering and average lifespan into account in making this type of decision.”

Marea looked down. “Our vet said that if things go well, the recovery period will be nine months per leg.”

So, $7,600 for the surgeries—assuming no complications—plus18 months of recovery basically brings us close to Bella’s average life expectancy of 10.9 years.  Going ahead with the first of two surgeries makes absolutely no sense for anyone in the family, including Bella.

“This is senseless. Bella can live with her two partially torn ACLs,” I said coldly.  I felt bad, but this was beyond practical.

Marea counter-punched: “The vet said that unlike humans, when a dog’s ACL is completely torn, it is extremely painful and requires emergency surgery; therefore, it is important for us to address the issue now.”

“If surgery is the only option, do both Bella and me a favor and let her go to doggy heaven.” That was it.  My wife’s eyes relayed an important message—she would prefer that I, instead of Bella, go to heaven—or wherever. I left the room and went to my office to do some doggie ACL research.

Eureka! There was a non-invasive alternative that had a reasonable level of success. A win all around! Bella gets healed, we have our dog, and we save some money.

Research in hand, I approached Marea. “I completed a little investigation on the internet.”

Her eyes lit up, accompanied by a sarcastic expression. “Did you find that new handbag I want?”

I ignored her comment, quickly brought her back down to planet earth and summarized my doggie ACL findings, which included seeking a second opinion and an initial treatment plan of two weeks of doggie rest and relaxation.

She thought about it. “We should have another consultation with our vet.”

So here we currently stand, Bella’s quality of life in the balance. So what do I do?  I start to think how this little event relates to investing (because everything, in some way, can be tied to the markets).

There is nothing wrong with taking advantage of modern technology. Advisors, veterinarians, physicians, and attorneys do their best for clients, but neither medicine, law or investment management is an exact science. Consequently, I always recommend that investors do their homework, become as knowledgeable as possible, set up those consultations, and use resources (such as the Internet) before making important decisions. Who knows?  My 20 minutes on the web might physically help Bella and avoid two years of needless rehab. This rule can apply to all decisions—especially when they relate to your hard-earned savings.

Clients must truly understand the risks and rewards associated with every investment decision. In Bella’s case, Marea and I need to know how much experience our vet has in ACL surgery, potential ACL surgical options, risks based on current age and her overall health, the most common setbacks, how often they occur, and finally, the success rate of simple rest and relaxation.

Alternatively, when and if your advisor suggests a strategic change to your portfolio, you should clearly understand why and whether this decision will increase or decrease the volatility (standard deviation) of your portfolio. More specifically, compare and analyze the best and worst 1, 3, 5, and 10-year statistics to your current portfolio to determine whether you are comfortable with the potential outcome.

For example, I significantly increased my cash position (thus lowering volatility) because of my discomfort with the potential impact of the U.S. defaulting on its debt. The anticipated upside market swing of attaining a political resolution is far less important to me than insulating myself from a major downside hit. So always review suggested changes based on what is important to you and your family. Don’t just look at potential upside results through rose-colored glasses.

Additionally, always review and compare differences in portfolio fees, expenses, loads, changes in asset mix (including domestic versus international exposure), and potential tax consequences, among a host of other variables. Advisors prefer that you schedule a time to review these important decisions. (Note that advisors have access to all of the data necessary to answer all of these questions.)

In a related topic, I am often asked whether I own one type of investment or another. If I do not own a specific investment type, the follow-up question is, “Why?” The fact is I don’t own many product types because I do not understand the underlying features or the contract. Like medicine and law, there are an unlimited number of specialties in the financial services industry, and one person cannot be an expert at everything. So as an industry pro, I personally only buy products I truly understand. Thus, always ask your advisor to explain new product features and contractual obligations in English.

Peace of mind is a critically important in all decisions. Our vet wants Marea and me to fully understand the benefits, as well as the potential downside ramifications, of doggie ACL surgery. Comparatively, advisors always want you to be comfortable with your current investment program.

It’s all about asking the right questions, and finding the best solutions.

Weekly Update 10/7/13 Government Shutdown and Debt Limit battle

Weekly Update 10 7 13 Shutdown and Debt Limit

Weekly Update 9/23/13 Birthday Week

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

Why?

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.

Please let me know if you would like to be taken off this distribution list.

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

Weekly Update 9/16/13 Apple Picking

Here we are—the middle of September—and things look good, real good. Equity markets are experiencing a strong late-summer recovery, with the Dow surging over 17% year-to-date; home prices are on the rise; inflation is under control; a war in Syria has been averted, and the economy continues to improve (albeit very slowly). As a matter of fact, last week’s 3% gain in the Dow was the best performing seven-day stretch since January.

Other than my ever-increasing waistline, I really can’t complain.

September also signals the end of 90-degree days and bathing suits and the beginning of crisp, cool, nights and backpacks. Fall is possibly the most defining moment of New England living, a season that brings foliage, football, and perhaps one of the biggest scams in the history of sales:

Apple picking.

Now I like apple picking as much as the next guy. My wife, Marea, and I have gone several times with Taylor, and we always have a nice family day. However, what always escapes me is the notion that thousands of people pass by perfectly good local grocery stores (packed with cases of Mcintosh, Gala, Fuji, and Red Delicious for a $1.50 a pound), waste money on gas, happily pay $15 for a small bag of apples, and then volunteer to perform labor on the farm for a day.

What a concept! The farms actually get people to pay to work for them.

I suppose there is some personal level of epicurean satisfaction in picking fresh apples for your pie al-a-mode, but this transaction certainly favors the seller. Despite these extortive practices, people still return, year after year, for the privilege to work and then overpay for something that they purchase every week at their local market for less.

Let’s look at this in terms of a different market—the stock market. Would anyone hold or want to buy positions that are clearly selling at a premium? Of course not. Therefore, it may be prudent to closely analyze your portfolio to see if any of those ripened positions require fall pruning.

Additionally, we are nearing the latest Fed meeting and two serious politically self-imposed crises: a budget deadline in two weeks that could shut down our federal government, and a debt ceiling dilemma in mid-October which, if not resolved, could send global markets into a major tailspin. Let’s assume our elected officials have an epiphany and decide to work together. Do you believe they will quickly resolve these issues, or do you think they will pontificate until the last possible moment before finally kicking the ball down the field and scheduling a new crisis deadline? Sorry to admit, we all know the answer.

Therefore, with equities up over 17% and our politicians frothing over a new series of looming economic disasters, why not book some profits? I don’t have a crystal ball, but why make bets with your hard earned principal and a year of very healthy gains? Personally, I’m taking some money off the table despite the possibility that the market may continue to surge. My midsection may indicate that I’m a pig when it comes to food, but I’m not greedy when it comes to my investments. I’ve learned from experience.

I may actually take the family out apple picking with some of my hard-earned 2013 gains, as an apple a day should keep the doctor away without placing any additional strain on my waistline.

Have a productive week.

This update was written by Ron Mastrogiovanni and Chris Leone.

Please let me know if you would like to be taken off this distribution list.

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

Weekly Update 9/9/13 Social Security Q&A

I’ve been yelling from the rooftops for quite a while regarding the importance of optimizing Social Security benefits. A few weeks ago, an MSN online article entitled, “10 Worst Moves for Retirees” echoed my sentiments, as high on the list was, “Claiming Social Security without a Strategy.” In keeping with this theme, I am submitting a few questions recently posed to Bob Powell and Beth Allan by financial advisors. (The inquiries were actually submitted to advisors by clients.)

Q. How long do you think Social Security will remain funded?

A. The official 2013 Annual Report to Congress by The Social Security Board of Trustees issued on May 31, 2013, states that the combined assets of the Old-Age and Survivors Insurance and Disabilities Insurance (OASDI) Trust Funds will be depleted in 2033. However, the Trustees also project that, at that time, the system will have sufficient income to pay about 77% of scheduled benefits through 2087.

Q. If a person waits until age 70 to take Social Security benefits, can his/her spouse receive half of that increased benefit or is the maximum 50% of the lower Full Retirement Age (FRA) benefit?

A. The maximum benefit is 50% of the Full Retirement Age (FRA) amount. For example, FRA for a 60-year-old is attained at age 66, so if a 60 year old waits until age 70 to file for Social Security benefits, his or her spouse will receive 50% of payable benefits as of age 66.

Q. Can a person at Full Retirement Age (FRA) collect Social Security, still work full time, and make $40,000+ without paying taxes on their Social Security?

A. There are two issues embedded within this question.

1) Can a person at FRA collect Social Security, still work full time, and earn $40,000 in a calendar year?

• After FRA, the Earnings Test (which withholds Social Security benefits of a beneficiary if earnings are over $15,120 and he or she is under FRA) no longer applies, so the beneficiary would receive all Social Security benefits in addition to their earned income.

2) Can a beneficiary avoid paying taxes on Social Security income?

• We would need to know both annual Social Security income and gross income (which includes any interest, dividends, or exclusions that are tax exempt) to do the calculation on provisional taxes. Let’s take a look at the process.

1) Write down gross income, not counting Social Security benefits. (Let’s use $20,000 per year.)

2) Add any interest, benefits, or exclusions that are tax-exempt. For example: a municipal bond might have earned $1,000 in interest. Add this to the original income for a total of $21,000.

3) Multiply Social Security benefits by 50 percent and add this amount to the previous total. For example: if the Social Security benefits are $15,000, multiply 0.5 times 15,000 which equals $7,500. Add this to $21,000 to get a total of $28,500.

4) Determine tax status from the overall total. Refer to the table below to see whether income is high enough to levy taxes on Social Security benefits.

% of Social Security Benefits That Will Be Taxed

Filing Single or Head of Household Return

<$25,000
0%
$25,000 – $34,000
50%
$34,000+
85%
Filing Joint Return
<$32,000
0%
$32,000-$44,000
50%
$44,000
85%

No institution, including the Social Security Administration, is going to volunteer information to ensure that consumers are optimizing Social Security benefits. Education is the key to ensure that you receive what is rightfully yours. If you don’t know what questions to ask, seek the help of a professional advisor who is well-versed in the most current retirement trends, including maximizing Social Security.

Have a productive week.

Please let me know if you would like to be taken off this distribution list.

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

Weekly Update 9/3/13 Is Medicare more expensive than an employer sponsored plan?

I am often asked whether Medicare is as good a buy as health insurance purchased through an employer.

So, here is a one-word answer accompanied by long-winded analysis.

Question: Is Medicare more expensive than a typical employer sponsored plan?

Answer: No.

Annual insurance premiums covering a 65-year-old couple through an employer’s group plan are approximately $16,000. (Note that premiums in a group type plan are based on a 45-year-old healthy male.)

The following is a breakdown of Medicare costs (for equivalent coverage) for a couple that earns less than $170,000 in total retirement income:

Basic Medicare Coverage

Cost

Medicare Parts A and B (hospital and doctor visits)

$2518

Middle of the road Medicare Part D (drugs) plan

$852

Subtotal

$3,370

Supplemental insurance premiums based on state average

Cost

California

$3,133

Hawaii

$2,071

Maryland

$3,620

Massachusetts

$3,535

Grand Total Range

$5,441 to $6,990

The total annual premium cost of Medicare (plus supplemental insurance), based on the four states above, range from $5,441 in Hawaii to $6.990 in Maryland. Should this couple have jointly earned above $428,000 in one of the last two years of employment, year-one healthcare premiums would likely exceed $14,000 because of “means testing.”

In a nutshell, regardless of state of residence and income level, Medicare offers equivalent health insurance at a reasonable price compared to employer sponsored plans.

However, often lost in translation is the fact that employers cover 70 to 75% of that $16,000 premium. Thus, employees with family coverage will see $4,000 to $4,800 deducted annually from their paychecks in small weekly increments. This system simply does not have the same economic or psychological impact as a retiree writing a $6,000 check out of his/her life savings. And consider this: these are year-one costs. Unfortunately, retirees can anticipate around a 6% to 7% annual increase in these costs each year.

Whether one is receiving health insurance benefits from Medicare or an employer, out-of-pocket costs, such as co-pays, also exist. Expect this year’s additional out-of-pocket costs for retirees to range from around $1,500 to $2,000 depending on state of residence. It is also fair to assume that these costs will also rise by 6% annually.

Given the expected inflation rate on healthcare costs, by the time this couple celebrates their 80th birthday, annual healthcare expenses may exceed $24,000.

All things considered, Medicare is a good buy in comparison to an employer-based plan, but over time, it is likely that the total cost of healthcare may be greater than net income generated from Social Security.

Next Question: Is a better alternative available?

Answer: Without prevarication, the answer is no.

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

Weekly Update 8/26/13 Fast Food

Last Tuesday, the HVS staff had a busy day preparing for an Ask The Expert webinar for financial advisors on the topic of Social Security benefits, so, like the truly thoughtful guy that I am, I offered to pick up lunch for everyone as I drove back to the office from a meeting.

Since I was running late, I decided to take advantage of the drive-through at a popular fast food restaurant.

To put it mildly, I am not exactly an experienced drive-through consumer.

I pull up to this large red and yellow device located next to the menu and wait for someone to take my order.

Two minutes pass…

“Hello! Hello! I begin to speak into what appears to be a red colored intercom gadget that protrudes from its base. This is fast food?

Finally, a young lady responds. Her voice is muffled and almost impossible hear. I think she’s saying something like, “Dry cup.” Dry cup? Is that on special?

“DRIVE UP!” I can finally make out her words. I peek ahead to another device with a speaker attached, look to my left, and come to the dreaded realization that I was having a nice conversation with a garbage receptacle! Wow! What a fancy, schmancy drive-through! Even their trash barrels look high tech! Why they put one adjacent to an actual order-taking doohickey is beyond me. Am I the first person who has ever done this?

She condescendingly beckons me to the actual intercom. I place my order and then drive up another 20 yards to the take-out window.

Boy, this is complicated.

When I get there, she is busy taking another customer’s order. Eventually, I pay my bill and collect my change. Ten minutes later, I park my oolong gray Audi at the office and look to grab the bag from the passenger seat.

It’s not there.

I never picked up the food at the second window!

Can you believe this guy gives his order to a trash can, pays, and forgets his food? I imagine the young cashier, doubled over in laughter, telling her equally amused co-workers.

I can’t do it. I am simply too embarrassed to return to pick up the food. It is just too much for me to handle.

So I drive to another Mc something or other, place my order into an actual speaker, and pick up lunch like a fast-food pro. I never mention a word to my colleagues, but later give my wife Marea the gory details. She laughs harder than the cashier probably did…until I ask her for a favor.

I pull out the receipt. “Will you go get me a refund, or at least an equal bag of Mc-this or Mc- that?”

She continues laughing. “No way!”

“Come on. You can tell the window cashier that your father is beginning to have memory issues and left the food behind.”

“My father, if he were around, would NEVER have done something that ridiculous!” she giggles. “How’s this! I’ll do it, but you have to come with me!”

My embarrassment supersedes my principals. I throw the receipt away.

Embarrassment can be a costly emotion. Being embarrassed to face a 16-year-old kid who may have seen you talking to a garbage pail may cost a few dollars, but being embarrassed to broach a conversation on retirement income issues with your advisor because you think it’s too late, will negatively impact the final 25 to 30 years of your life.

Even if you have been retired for several years, it’s not too late. If you are reluctant, perhaps, unlike asking Marea to represent me at a Mc something or other, consider asking your spouse go to the first meeting. Just make sure to focus on four pivotal areas: Social Security benefits, the impact of working in retirement, Medicare, and long-term care expenses. Good advisors who are staying current will be trained in these matters, and their input can lead to a much more stable retirement.

Let’s review an example that may motivate you to talk to an expert.

Clients

Jake

Sally

Age

60

57

Life expectancy

86

92

Monthly benefit at full retirement age of 66

$2,500

$1,200

Cumulative lifetime benefit if Jake and Sally retire at age 62

$1,527,710

Sally suspends at 66 and Jake files restricted at age 66

$2,122,266

Sally’s last year of survivor benefits if they claim at age 62

$52,095

Sally’s last year of survivor benefits if Sally suspends at

age 66 and Jake files restricted at age 66

$91,687

By being aware of available filing strategies, Jake and Sally can add an additional $594,556 to their overall retirement income. Sally will also gain a future survivor benefit of $91,687—75% more than if she filed at age 62. These decisions will not only improve Sally’s quality of life, but also expand her options for assisted living and skilled nursing care facilities.

Take comfort in knowing that if you have not addressed these issues, you are certainly not alone. There is still time to change the quality of your retirement lifestyle—Baby Boomers included.

If I can talk to a garbage bin, you can talk to your financial advisor.

Have a productive week.

This update was written by Ron Mastrogiovanni and Chris Leone.

Please let me know if you would like to be taken off this distribution list.

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

Weekly Update 8/19/13 Europa

At age eleven, I began to spend summers in Gaeta, Italy, a small city located on the Mediterranean coast between Rome and Naples. Gaeta was, at one time, an old fishing town, but in the 1960s it became a tourist destination for Europeans and the home base of the United States’ Sixth Fleet.

On my summer excursions, there seemed to be just as many Germans and Americans in Gaeta as Italians, and I quickly began to notice the cultural differences: Italians, and Europeans in general, were bilingual; drove smaller cars; didn’t have great TV shows; kids didn’t drink milk; alcohol was not restricted by age; and my cousins at the same grade level at school were far ahead of me in math.

True to their hospitable nature, my Italian relatives always did their best to accommodate me. I’ll never forget my first morning. We stayed with my grandmother, who had an American friend pick up a few things at the NEX or PX (base retail store) so that I would have a seamless transition to living on Via Indipendenza. When I awoke, my grandmother proudly poured Cheerios into a bowl of milk for me.

I placed that first spoonful of Cheerios into my mouth and then immediately discharged all of the contents over the kitchen table. My relatives were stunned and a few choice Italian phrases that cannot be repeated here flew from my embarrassed father’s mouth.

“The milk’s warm and bad…real bad,” I said quietly.

Apparently, my grandmother didn’t have her friend pick up regular old cow’s milk at the PX. Instead, she bought fresh goat milk. No offense to lovers of goat milk, but that foul tasting liquid has yet to pass these lips again since that memorable morning.

Here’s an interesting point I quickly learned during my vacations. I might be considered to be Italian here in the U.S., but to native Europeans, I’m American. No matter how many vowels my last name has (approximately 5), I was an American at 11, and still am today.

I spoke Italian—sort of. My parents never spoke English at home. They spoke to my brother, sister, and me in Italian, and we responded in English. Here’s the problem. My parents talked to us in a dialect that was only spoken in the Naples region of Italy prior to World War II. My Italian relatives loved to hear this 11-year-old speak in a dialect they hadn’t heard in decades. One time while traveling on a train to a nearby city, I began talking to a lady sitting next to me. She asked my Dad if we were from some remote Italian town on some mountainside outside of Naples.

Everyone with “Napolitano” roots over the age of 40 understood me, but kids my age throughout Italy had no idea what I was saying, so everyone eventually just spoke to me in English.

Later, while I was in college, I had the opportunity to travel the European continent on a Euro Pass and stayed at youth hostels. There are around 50 countries in Europe, including Vatican City (yes, technically the Vatican is a country), which is situated on 110 acres inside of Rome. It is interesting that despite the pervading religious iconography and architecture throughout the continent, most Europeans are not very religious and they clearly separate politics from religion—a far cry from our domestic leaders who constantly refer to the Lord in political speeches.

Over the past several years, Europe has suffered from a multitude of economic problems, ranging from serious recessionary pressures to the potential demise of the economic powerhouse known as the European Union. News often bordered on catastrophic, and Europe’s decline would have had tremendous economic impact, as the world relies on many European products and companies, from Royal Dutch Shell gasoline to Nestle’s Quik.

In a recent article in Financial Planning Weekend Update, Cindy Sweeting, Director of Portfolio Management at Templeton Global Equity Group, asserted, “Europe is a once-in-a-generation buying opportunity right now. Today, the price of European equities as a whole is at a 40-year low relative to U.S. equities. And we believe the current gap in earnings is likely to close over the coming months and years.”

Growing up, I was very lucky to have a once-in-a-lifetime opportunity to backpack through both western and eastern Europe during the Cold War era. Is this a second one? Can I actually have a second once-in-a-lifetime European opportunity?

You may ask, why would I suggest you invest in an area of the world fraught with problems? Because, looking forward, Europe will recover and investors will be handsomely rewarded.

As you know, I have been recommending the Vanguard Europe ETF (VGK) for some time, and since then, I have been slowly increasing my exposure to the European continent. VGK has a year-to-date return of 11.4%, over a 5% yield and carries a net expense ratio of only 0.12%. Holdings include Nestle, HSBC, Novartis, Vodafone, BP, GlaxoSmithKline and Royal Dutch Shell.

Simply put: Europe is an important long-term opportunity that should not be ignored.

By the way, my favorite European cities are Paris, Prague and of course, Gaeta.

Ciao.

Have a productive week.

This update was written by Ron Mastrogiovanni and Chris Leone.

Please let me know if you would like to be taken off this distribution list.

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