Federal Government Creates New Retirement Savings Option: MyRA
In his 2014 State of the Union message, President Obama announced a new retirement savings program for people who do not curr...
Read moreMany financial advisors counsel their elderly clients to take a conservative approach in investing their retirement portfolios. This may not be the best advice if the assets are going to have to last 30 or 40 years, according to an article in the December 2001 issue of the Journal of Financial Planning ( 'Making Retirement Income Last a Lifetime,' by John Ameriks, Robert Veres and Mark J. Warshawsky.)
In the article, the authors look at how much retirees should withdraw each year from their retirement portfolios and the investment strategy that will make assets last as long as possible. In a world where 60-year-olds living to 100 is an increasingly common scenario, a 20- or 30-year time horizon may not be long enough, they point out.
Looking at the historical record from 1946 to 1999, the authors conclude that investing retirement savings conservatively (20 percent stocks, 50 percent bonds, 30 percent cash) offered only limited protection against loss and greatly restricted the gains that were possible from the stock market upsurge. But since it is doubtful that this historical record will be replicated in the future, the authors performed what is called a 'Monte Carlo analysis' of 10,000 hypothetical asset return histories. In effect, they took economic data for each month over the past 34 years and shuffled the resulting 'cards' 10,000 times, creating 10,000 different economic scenarios.
Looking at the results, they found that if each year an investor withdrew 4.5 percent of the assets from an aggressively invested portfolio (85 percent stocks/15 percent bonds), the portfolio would still be there after 30 years about 92 percent of the time. Over 40 years, the portfolio was still in existence nearly 88 percent of the time. Surprisingly, the chances that the portfolio would dry up after 30 years were far greater with the conservative approach: the possibility of portfolio extinction before 30 years was more than 67 percent. Over shorter retirement periods like 20 years, the conservative portfolio was somewhat more reliable than an aggressive approach. In addition, the authors point out that the more stock-heavy portfolios come with a much more disastrous, although relatively rare, downside.
To download the article in PDF (Adobe Acrobat) format, click here.
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Read moreIn addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.
READ MORETo be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.
READ MORESpouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.
READ MOREIn addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.
READ MORETo be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.
READ MORESpouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.
READ MORECareful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.
READ MOREIf steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.
READ MOREThere are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.
READ MORECareful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.
READ MOREIf steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.
READ MOREThere are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.
READ MOREMost states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.
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READ MOREMedicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.
READ MOREMost states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.
READ MOREApplying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.
READ MOREMedicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.
READ MOREDistinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.
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READ MOREDistinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.
READ MORELearn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.
READ MOREUnderstand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.
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READ MOREWe explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.
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READ MORELearn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.
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