Q2 2019 Market review

The second quarter of 2019 was positive across the board. The US market was up over 4%, with international right behind it and emerging market stocks squeezing out a small gain. Bonds both in the US and globally were up around 3%. For a detailed Market Overview as well as an article titled “The Uncommon Average” which discusses average market returns and the actual range of outcomes experiences, click here. Planning note: I must admit, sometimes it feels a bit amazing how long this bull market has continued as it is over 10 years old, the longest on record. For years I’ve been hearing concerns that the market is too high, at its peak and overextended. I understand those sentiments, but they haven’t stopped the market from going higher. The same holds true for the bond market as rising rates (and therefore declining bond prices) have been a concern to many people for a long time. There is no doubt the market will have struggles, there will be another recession and this bull market will end. That said, my advice is to have an investment strategy designed around your financial plan, not the latest headline news or your emotions, there is too much at stake.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

long term care

I noted in my newsletter a few months ago that the topic of aging and elderly parents needing assistance has been a frequent topic of discussion in many of my recent meetings. There is no doubt that this stage of life can present challenges. This month I want to look at long term care insurance as it is a tool designed to help ease the potential burden. What is Long Term Care (LTC) insurance?Long term care insurance is coverage that will pay for assistance with care in the event you can no longer care for yourself, generally defined as activities of daily living that include bathing, dressing, transferring, toileting, continence and eating. Many people in the business of selling LTC will rattle off statistics such as those by AARP that find 52% of people over 65 will need LTC services at some point and a nursing room costs $92,000 a year on average. While those numbers may be true, I believe a deeper dive is needed to truly understand the impact. A blog post by Vanguard tells the story of two grandmothers, one which needed substantial care and the other that didn’t, and nobody knows which one they will be. Vanguard’s research shows that of retirees, only 15% will incur costs over $250,000. Further, 48% of retirees will have no LTC costs and another 26% will have costs of $100,000 or less. Of course, those who are part of the minority and do incur substantial needs for a long period of time will be grateful to have the coverage. Types of LTC insurance:Traditional LTC insurance provides benefits of a certain amount (often a daily amount) for a certain period and you generally pay premiums until you qualify for coverage. Costs on these policies have gone up substantially since introduced in the 90’s.Hybrid LTC policies were introduced to offer additional features and help people who didn’t like the idea that they could pay substantial premiums over time and never realize the benefits. These policies can include life insurance or annuities that offer specific benefits for LTC, yet have more flexibility with how funds can be accessed or inherited by beneficiaries.Note: On any policy there are many options to consider such as if there is a cost of living adjustment to help keep up with inflation, will they pay for home care, do you receive a check for a certain amount or get reimbursed, can family provide care, etc. Potential alternatives if you don’t have LTC insurance:Medicaid (Medi-Cal in CA). Keep in mind, this is not Medicare insurance that provides health insurance coverage for those 65 and older (which doesn’t provide LTC coverage as being discussed here). This coverage is available when you have essentially depleted all your resources. The coverage is more limited, and facilities are often a lower standard than desired.Veterans benefits. There are many complexities to the program but if you or a family member are a veteran you can contact the Department of Veterans Affairs to learn more.Home equity. Many people I talk with have a lot of equity in their home and in the event they spend down assets they view their equity as a backup plan that can fund LTC expenses. This may be by selling and downsizing or moving into a senior facility, a line of credit or a reverse mortgage (which would need to be very carefully considered and explored).Family. In many cases and often by default rather than design, families end up bearing the brunt of the burden. This often isn’t the best choice but if it is your plan make sure it is discussed with those involved. They may even want to help you purchase LTC insurance rather than be your backup plan. When helping people decide if they should purchase LTC insurance I often start by using three categories of individuals:Behind on retirement savings: The first category is those who are not well prepared for their future retirement and need to focus on saving more money and LTC insurance shouldn’t be their priority in my opinion.Have more than enough: On the opposite end, there are those who have more than enough financial resources to support their needs and can fund their own LTC expenses if the need arises. Some people in this group may elect to purchase LTC insurance as a strategic decision, but they really don’t need it.On track: The middle category is one that is generally on track for retirement and can afford LTC insurance, yet a significant LTC event could derail their retirement plans. I believe this group should consider options available and then make an informed decision. As you can see, there is no clear-cut answer on whether to purchase LTC insurance or not, but it is worth discussing so as to make an informed and purposeful decision. Also remember, coverage doesn’t have to be all or nothing in the sense of fully covering the risk, but some coverage may help take the sting out of these costs. If you would like to discuss this, email me at advisor@blakegallion.com or call 858-805-1022.  Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

how to measure returns

market returns - how you measure matters

In a recent conversation with a potential client, he was telling me about his investment experience. He mentioned how he has heard how great the last 10 years in the market have been, but he doesn’t feel that his portfolio has grown nearly that much. I believe there could be several reasons for this, and part of it could have to do with the way investment returns are realized and measured. It’s now been 10 years since we hit a market-bottom during the Great Recession in March 2009. Given that, if you look back on 10-year returns for many investments, they look great, but does that tell the whole story? Let’s look at returns for the S&P 500, which has been the best performing major index over the last decade. Period                                                   Annualized Return           Notes 10 Years5/10/2009 – 5/9/2019                                    14.3%                    Recent 10-year period starting                                                                                                              in May 2009 12 Years5/10/2007 – 5/9/2019                                    7.75%                    Going back just 2 additional                                                                                                                 years reduced returns by                                                                                                                       almost half                                   20 Years5/10/1999 – 5/9/2019                                    5.87%                    The last 20 years include the                                                                                                      tech bubble burst early in                                                                   the 2000s The most recent 10-year numbers may feel misleading for several reasons. First, you only really feel like those were your returns if you happened to get in near the bottom. If you were fully invested in the S&P 500 prior to the 2008 recession, it took you until 2012, or over 4 years just to get back to break even. Second, this index is 100% in US stocks, which is likely not an appropriate portfolio for most investors nor how most people are invested (and if they were, the “lost decade” of 2000-2010 was not a fun experience for them), especially as they approach or are in retirement. One additional note, it is often said that long term returns of the stock market are 10-12%. But here again, the timing can make this number vary widely. Crestmont Research looked at different 20-year return periods of the S&P 500 and found that returns over twenty-year periods ranged from 3.1% to 17.1%. Therefore, be cautious when using averages and assumptions when planning, and have a strategy for when they deviate. Takeaways: - Market returns can vary widely over various time periods - You can’t control when a market is going to zig or zag, but the timing can have a significant impact on your plans - Have a purposeful investment strategy matched with how you plan to use your investments to deal with the ups, downs and uncertainty of the market - If you are needing to take withdrawals from your accounts, be sure you understand the concept of “sequence of returns (market timing) risk” and have an income strategy that takes the ups and downs of the market into account, to give yourself the best chance of not depleting your portfolio - Broad diversification can help smooth out returns  Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns. An investor cannot invest directly in an index.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

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Retirement Planner in San Diego

 

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557​

Rancho Bernardo Financial Planner