Market Commentary – Long-term Care

I recently served as a panelist, along with Dr. Katy Votava, President of, 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.

Weekly Update

In my last update, I proselytized about the cost of healthcare and long-term care, which will undoubtedly be the two largest expenses most Americans will face in retirement. One Update reader—let’s call him Ray (his name is Ray)—offered a rather callow solution to the issue. I say callow because it’s one of my favorite new words, and it also describes how Ray and the majority of Baby Boomers do not fully grasp the cryptic Medicare system. However, for those who do their homework and learn the intricacies of the program, it can be like putting money in the bank.


The following is a summary of Ray’s strategies and my subsequent attempt to provide him with a harsh—but truthful—dose of reality.


Ray and his wife, Dee, will retire in one year at the age of 63, and they intend to sign up for Social Security, which they believe entitles them to Medicare services.


Mistake number one.


Social Security and Medicare are two completely different programs. Ray and Dee may sign up for Social Security at age 63, but they will not be eligible for Medicare until age 65. Assuming they are a healthy couple, the cost of private insurance will exceed $40,000 for the two-year period prior to Medicare eligibility: a cost that many simply fail to budget.


When Ray and Dee do finally subscribe to Medicare at 65, they are going to be struck with another surprise: Medicare is not free, and the program covers only about 51% of healthcare services. The other 49% includes long-term care (which we will cover later), hearing aids, routine dental work including dentures co-pays, certain doctor visits, vision, and the list goes on.


Ray’s pell-mell knee jerk response was that he could simply purchase private insurance coverage and not enroll in Medicare, given the countless issues associated with the program.


Mistake number two.


Medicare is the only game in town. Fortunately, Medicare is a well-run program that delivers healthcare funding administered by the private sector, not the government. Also, the cost of medical services under Medicare is growing at a substantially lower inflation rate than private insurance plans. As a matter of fact, experts predict that Medicare will likely grow at an inflation rate equivalent to the nation’s historical average.


Here are our couple’s health insurance choices at age 65. They may purchase traditional Medicare services including Medicare A (hospital insurance), Medicare B (insurance covering doctor visits and tests), Medicare D (prescription drug insurance), and Medigap insurance (fees for services not covered by Medicare A and B). The second alternative is to purchase a Medicare Advantage Plan. A Medicare Advantage plan is a health insurance plan offered by private companies and funded by Medicare. At a minimum, they are the equivalent of Medicare A and B, and many plans offer the same level of coverage as Medicare A,B,D and gap insurance.


The usually jaunty Ray began to appear disquieted by this point, and then the discussion turned to long-term care.  Ray and Dee are counting on Medicare to cover nursing home expenses, and therefore feel it is completely unnecessary to save for long-term care.


Unfortunately, the truth of the matter can pretty much be summed up by Edward Cole in the Bucket List, who said, “Somewhere, some lucky guy’s having a heart attack.”


Here is the stark reality: breakthroughs in medical science and lifestyle modifications have increased average life expectancy, but long life comes with a price, especially since it escalates the likelihood that some form of long-term care will be needed. In Ray’s defense, many are under the false assumption that Medicare covers this expense.


Please, for one moment, indulge me by allowing me to scream at the top of my lungs.


Medicare is not responsible for the MAJORITY of Long-term care EXPENSES!


Consequently, given a normal life expectancy, this couple may face a future expense totaling approximately $1.9 million ($834,000 in today’s dollars) should they both reside in a nursing home for an average length of stay, which is usually anywhere between one and two years.


Think about it; the consequence of not planning for healthcare in retirement could become downright tragic for many, with nursing homes and long-term care facilities potentially eviscerating lifetimes of toil and savings in a few short years.


However, most Boomers will not require long-term care for another 25 years and spend little, if any time at all, considering its impact.  Well, it’s time to go back to our old friend Ed Cole, who, in response to his friend, Carter Chambers’ assertion that “forty five years goes pretty fast,” replies


“Like smoke through a keyhole.”


Don’t wait. Start planning now.



This update is co-authored by Ron Mastrogiovanni and Chris Leone

WRKO’s Lunch Money with Barry Armstrong Interview

In an 7-minute segment that aired on August 12, Ron Mastrogiovanni is interviewed by Barry Armstrong on his radio show “Lunch Money”. The popular Boston-based radio program focused on personal investing features Barry speaking to Ron about rising health care costs for baby boomers and the future of Medicare.

Listen to the interview:

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“Baby boomers are moving into retirement right now, so contributions to Social Security are significantly decreasing”, Ron told the popular Boston talk radio show when asked about the current fed budget issue and what must be done to save Medicare. Added Ron, “I’d rather see the [Medicare eligibility] date pushed out to 67 rather than a cut back on services”.

Barry Armstrong founded the Armstrong Advisory Group in 2004, and has been discussing personal investing on WRKO since September 2010.

Looking Back



Throughout the course of investing we have always had the back yard over the fence conversations or the chats at the cocktail parties about the latest and greatest investments or financial advice.


Back in the late 1990’s we had the banter of which “Tech” stock or fund to be in or which “penny Stock” was going to be the next big hit, well how did that end? For most, things ended very badly. If we look back at the overall performance of those high fliers, we will see that the average loss was close to about 20%.


But like all buoyant things that sink eventually over time the y float back up and we did have a bounce back like we always do. And when it did happen what did that conversation or chat consists of?


“Diversification” and the conversation was something like “Yah dude, my financial guy he got me in a 70/30 portfolio. I’m in Emerging Markets, Muni Bonds, and Large Cap Funds” and that same conversation usually ended with “I’m up like 4 million percent! You should be doin’ what I’m doin.”


Well how did that end?


By the end of 2008 it didn’t matter where you were or how you were “Allocated”, unless you were in cash or short term bond instruments you got absolutely crushed.


So what’s next? What’s the new plan? What is the new thing?


The talk today at cocktail parties & backyard barbeques no longer touches on buying Tech Stocks or even Asset Allocation. The new talk is about having enough money to live a safe and happy retirement and how can this be done? Financial Planning — all that you need to do is follow a set map and by just this planning, you can insure that expenses such as your house, food, taxes, and even those vacations that everyone is talking about can be financially secured.


All we need to do is just look at Fidelity’s “Green Arrow” commercial, or Ameriprise’s “bringing in the ‘box’ campaign or even Schwab’s cartoon like commercials trying to bring reality back to investing and Planning to see where the new next best thing or topic will be. By the way these are very good commercials that hit specific points to retirement very well, they all just seem to miss one VERY important topic.


Health Care and this one topic or expense will unfortunately blow up even the best laid plans.


The reasons range from just the over all costs of Health Care to retirees getting forced to take more out of their investments ear marked for other things to pay for medicine. When this happens those withdrawals will probably be considered income in the eyes of Medicare and then that retiree will be forced to pay even more for their premiums & the cycle will continue (see our High Income Earners & MAGI article for more information).


According to HealthView Services’ RetireMark application, a perfectly healthy couple that retires when they are both 65 will live to 90 and they will need about $470,000 over the course of that retirement to cover Health Care!


$470,000 over 25 years is $18,800 per year and about $1,566 a month! $1,566 a month on Health Care throughout a person’s retirement, and that is for a healthy couple!


There is not one bill that will have this type of staying power like Health Care in a retirement plan. Yes, the mortgage may be higher but hopefully that has been planned to be paid off in the first 10 years of retirement and taxes will be high but the beauty of most bills like taxes you can always downsize it.


It would be great to get rid of all bills all together, but that is impossible. The last resort will be to downsize. You can downsize the size of your home which will lower your taxes, you can downsize your car & even your food bill, but, the one thing that will not be downsized will be your spouse’s or your health.


Once again the main issue with financial plans and these campaigns that are designed to “make you safe in retirement” is that they are not taking the most important expense seriously and without planning for what is to come the result, historically, has been tragic and now there won’t be another 10 to 15 years to wait to get it back.



Nearly 15 Million Alzheimer’s and Dementia Caregivers Provide Unpaid Care Valued at More Than $200 Billion

As our population starts to grow older the trend toward this disease will impact not only the individual diagnosed with this condition but also other generations in the family.

Those diagnosed with with Alzheimer’s that happen to be 65 and older survive an average of four to eight years after a diagnosis. The costs for not only treatment but care are staggering.

What is the Financial Industry doing to prepare for the costs?

See full article;

New Retirement Income Management Planning Software Offers Simple Module Approach to Planning for a Secure Retirement

Innovative Platform Features Unique Healthcare Cost Analysis Tool

Boston, MA (January 12, 2011) — In partnership with the Retirement
Income Industry Association (RIIA), HealthView Services has developed a new, comprehensive
retirement income management software platform for financial advisors to use with
their clients, announces Ron Mastrogiovanni, CEO of HealthView Services.

The new platform embraces the RIIA Advisory Process which recommends that advisors
first build a retirement income stream floor that their clients can count on to
meet their key expenses in retirement. “It is absolutely critical that advisors
look at retirement income management beyond traditional asset allocation and investment
management,” says Francois Gadenne, Executive Director and Chairman of RIIA. “During
retirement, clients need a sufficient level of income — a floor — created from
guaranteed or low-risk sources first. Only after the floor is built should advisors
look for potential growth through exposure to risky assets.”

Comprehensive Modular Approach to Retirement Income Management and Planning

The Retirement Income Management system offers a comprehensive, yet simple, method
for advisors to help their clients achieve a secure retirement. “The power of the
platform’s “what if” scenarios and specific planning modules allow advisors use
a retirement income planning approach centered on a life cycle plan to ensure an
income floor throughout retirement,” comments Gadenne.

Using a modular approach, advisors can simplify the process for clients by focusing
on one need at a time and moving on to the next need in a progressive fashion. “Trying
to do all the planning at once can be very overwhelming for clients,” explains Mastrogiavanni.
“Plus, this software is so flexible that advisors can use the entire platform or
just specific modules to add to any software planning application they are now using.”
Institutions may also customize and brand the platform for seamless integration
into existing advisor-facing or customer-facing web-based reporting systems.

Specific modules include estimating out-of-pocket healthcare expenses, a budgeting
process that ranges from the very simplest budget to an inclusive one, a process
for identifying basic retirement expenses that must be part of the income floor
such as housing as well as a comprehensive investment portfolio building tool. Just
as important, the Retirement Income Management system has been designed to complement
the advisory and selling practices being employed by advisors. Unlike tools currently
available, a specific module from the Retirement Income Management system or a more
comprehensive plan can be developed and reviewed with a client at one meeting.

One-of-A-Kind Planning Module to Address Devastating Healthcare Costs

Perhaps one of the most overlooked and unplanned for expenses facing pre-retirees,
retirees and their advisors is the often devastating impact of healthcare costs
on retirement security. “People entering retirement don’t realize that Medicare
covers only about 51% of expected expenses and most retirees will need to purchase
a variety of other insurance coverage such as prescription drug coverage and gap
insurance. Also note that hearing, dental and vision care is not covered by Medicare,”observes
Mastrogiovanni. “Healthcare costs are typically the greatest or second greatest
expense during retirement; it’s growing at 7% annually; and, most baby Boomers do
not include many of these expenses as a part of their retirement income management
plan This lack of planning ultimately could have huge, negative implications for
retirement security of millions of Americans.”

The new Retirement Income Management platform includes HealthView’s patent-pending
healthcare cost analysis tools that help advisors fill this key void in the planning
process. The healthcare cost analysis module can assess an individual’s health risks
and project out-of-pocket costs based on personalized health history. These costs
must be incorporated into a retirement income budget if a financial advisor is going
to be successful in building an income floor that will last throughout a client’s

Developed in Collaboration with Leaders From Across the Industry

The Retirement Income Management software platform was designed first as a teaching
application to help financial advisors and other retirement income professionals
master the curriculum and body of knowledge necessary to earn RIIA’s Retirement
Management Analyst ℠designation. The RMA℠ program is an advanced educational curriculum
that allows financial advisors to attain proficiency in delivering retirement income
management planning services to customers.

“Because of the input from RIIA, its membership and the creation of the RMA℠ curriculum,
this software platform was developed with a unique ‘View Across the Silos’ of the
financial services industry,” says RIIA’s Gadenne. “That means that it was created
in collaboration with all the players in our industry: financial planning practitioners,
academics and scholars, as well as experts and leaders from major banks, mutual
fund houses, insurance companies, and broker dealer organizations.”

About HealthView Services

Founded in 2008, HealthView Services (HVS) is a software firm that builds and utilizes
financial planning and health risk assessment tools and solutions designed to generate
increased wallet share for financial institutions, independent advisors, and healthcare
related firms.

About the Retirement Income Industry Association

The Retirement Income Industry Association was founded by leading financial companies,
advisors, and academics and is a resource and catalyst to address major challenges
facing Americans on creating a secure future in retirement. Its “View Across Silos”
is a forum for the freshest outlooks, modern thinking, new products, research and
advanced education.

Media Relations Contact: Susan Bumstead Chanley,
, (781) 587-0115

Restless in Retirement

It might sound oxymoronic to think about “working in retirement” yet more than 75% of us expect to work in retirement per a recent study by Merrill Lynch and nationally recognized gerontologist, author, and President of Age Way, Ken Dychtwald.  Working in retirement can put a little extra folding money in your pocket.  It can keep you engaged.  It can provide that basic sense of purpose that is so uniquely American… to be able to answer that cocktail party question, “So, what do you do?”  (Especially for us “Type A” types that never quite got their foot off the throttle!).   Perhaps, for many of us, it is work we always wanted to do for the first time in our lives.  Yet, for others, it isn’t just a lifestyle choice but rather a deep desire to defray living costs-especially health care-and not tap into that nest egg.  With that said, how we work in retirement is taking whole new shapes.  The authors suggest that many of those working in retirement “cycle” through periods of work and a smaller number working on a part-time basis.  This flexibility can allow retirees greater time for leisure activity and also provides the need for people to manage healthcare issues that they or their spouses may face. 

Considering these observations, we recommend a few things to keep in mind as you plan ahead:


  • Continuing to work could help delay taking your Social Security benefits which may result in higher benefits later on.
  • This income could help you avoid drawing down your investments.  While you may not have a great deal new savings, you will be covering day-to-day costs.
  • Employers may offer healthcare.  If either you or your spouse is under 65 for a child under 26 years old could be of significant benefit.

Watch Items:

  • If you are collecting Social Security, working may impact your benefits.
  • The additional income could impact your tax bracket.  Traditional financial and tax planning might not always take this into account.
  • Start planning specifically for health care costs along with general expenses in retirement.

The contents of this site, such as text, graphics, images, and any other material contained on site are for informational purposes only.  Always seek professional advice for your personal situation.


Back to School

Apparently, rising unemployment is hitting everybody.

According to an article in USA Today, nearly one quarter of
retirees are searching for employment—and finding little success.  Traditionally, pensions, coupled with
conservative investments, guaranteed retirees at least a modicum of confidence
as they entered their golden years. However, rising healthcare costs and the
market downturn are just some of the reasons why Americans who had envisioned a
well-deserved respite after years of toil are now being forced to re-enter the
workplace. There are some measurable advantages to going back to work.  Gaining health benefits at a part-time
job can offset some of those unforeseen healthcare costs that inevitably occur
as we age.  (Of course, earnings
can offset Social Security, so one should consult an advisor.)  There is also a certain a level of
enrichment in being a valued member of an organization.  The problem is that after long careers
in particular industries, retirees are finding it difficult to transfer their
skill sets into the few jobs available, especially in the technology
sector.  So what is one to do?

Maybe Rodney Dangerfield had the right idea.

Going to college is a daunting challenge even for the most ebullient
18-year-old freshman, so how can someone who has been out of the classroom for
decades be expected to compete?

How does free sound? (Or at least cheap…)

That’s right.  
Many colleges and universities offer discounted tuition rates for senior
citizens, including participation in certificate programs.   Professors will also often allow
seniors to “audit” classes: that is, acquire the knowledge without having to do
the required assignments.  This is
a good way for some to test the waters before diving into a demanding program.

While I don’t foresee a slew of senior fraternities popping
up on college campuses across the country, starting a second career after
retirement isn’t so farfetched.  In
fact, since American life expectancy is projected to increase over the next
several decades, it may become more commonplace than you think.

Without a Choice

A report in the Boston Herald yesterday cited that
Medicare Advantage Plans will soon be extinct in Massachusetts, and over
200,000 elderly subscribers will have to re-evaluate their Medicare options.

Medicare Advantage, formerly know as Medicare Plus
Choice (and also Medicare part C) is a private insurance plan, designed like
traditional Health Maintenance Organizations (HMO) that provides almost the
same coverage as Medicare Parts A and B at a lower cost. Subscribers enjoy some flexibility
in these programs, as opposed to the clearly defined parameters of Parts A and
B, but while the initial savings may be attractive, some referrals and
“in-network” restrictions can apply.
There are also some considerable disadvantages and complexities to the
program. Subscribers are
responsible for 100% of cost for out-of-network doctor visits, and some
specialists may not be covered.

Despite some unpredictability, over 11 million
Americans are currently enrolled in Medicare Advantage Plans and seem satisfied
with their performance. However,
with the inevitable shifting of current government healthcare distribution to
make way for the new legislation, it is likely that this option will soon be
reduced to levels of inefficacy or eliminated altogether.

New Alzheimer’s Study Sheds Light

A recent report found that spinal taps can precisely
diagnose Alzheimer’s in people who are experiencing considerable memory loss. In
addition, the researchers believe that spinal tap testing may also be able to
predict whether a person with no symptoms will eventually develop the disease.
These findings mark an important step in our understanding of this devastating
cognitive disorder and provide clues into possible treatments and management

The study was published in the Archives of Neurology and is ground breaking in that it presents
proof that spinal taps are one hundred percent accurate in determining whether
a person will have Alzheimer’s. The study examined more than 300 hundred
patients in their seventies. Among this group were people who had normal memory
retention, were experiencing difficulties with memory loss, and those who had
ongoing Alzheimer’s. These various patients had their spinal fluid analyzed for
amyloid beta and tau, proteins that are known to accumulate in the dead and
dying nerve cells in the brain.

Researchers found that almost all the patients with
Alzheimer’s had the anticipated protein levels. Among those with memory loss,
nearly 75% had the characteristic protein pattern and every one of these
patients went on to develop the disease within the next five years.  Approximately one-third of the patients
with no symptoms also had the indicative spinal fluid makeup, and the
scientists believe these people will eventually have Alzheimer’s.

The treatment of Alzheimer’s has been unguided and
ineffective due to a crippling lack of information about the disease. Recently,
however, there have been a slew of studies that have provided much needed
insight into the disorder, including this most recent report. The more
information we have, the more likely a care options or maybe even medicinal
strategies can be developed. A disease that has been untreatable could become

To this end, the spinal tap study is important because it
confirms that protein buildup in the brain is likely the source of the disease.
Therefore, medications that prevent this scenario could treat the disorder.
However, not enough is known about the role of these proteins in normal brain
performance to confirm this plan of action. More testing needs to be done in
order to better understand this correlation between protein levels and memory

It is unclear how these findings will be incorporated into
the medical field. It is believed that Alzheimer’s starts to develop
approximately ten years before it culminates in a diagnosis. The spinal tap
test would allow doctors to diagnosis patients in the early stages and test
various treatments. However, there are ethical questions involved. What is the
merit of diagnosing patients with a degenerative disease that is currently
untreatable? When should doctors test for the disease? Also, the accuracy of
spinal taps varies according to the doctor and the lab; how will these
differences be taken into account?

Though more testing needs to be done in order to determine how
spinal taps should utilized, it is clear that this breakthrough has provided
much needed insight into this devastating disease.