Mutual Funds: investing in fixed income

Here is just one of the numerous articles I published on Answers. Please visit mutualfunds.answers.com Mutual funds are numbered in the tens of thousands investing in every conceivable investment opportunity. They range from equity (stocks) to fixed income (bonds) to money markets, commodities and beyond. And they break down even further to investments focused on domestic offerings to international, emerging markets to total global coverage. You can read the full article here.

Are We Really That Old?

 

Are we that old - wow !!! 
YEP, That's what is going on. Time Flies when You are havin FUN!

Keeping Joints Healthy and Avoiding Injury

Keeping Joints Healthy and Avoiding Injury

Avoiding joint injuries is key to long-term joint and hip health, since each injury to your hips, large or small, can contribute to chronic joint problems later in life. Hip problems are among the most common causes of disability in adults, so keeping those hard-working joints in good shape is essential to maintaining an active and enjoyable lifestyle throughout your retirement. Whether you are in your 20s or approaching the senior years, there are very simple steps you can take to keep your hips strong and healthy.

Exercise

Regular exercise is extremely important to keep joints strong and healthy. The hip joints need the support of strong bones, muscles and connective tissues to function at their best. Strong and flexible muscles keep the joint well-aligned and stable for smooth, efficient function, reducing wear-and-tear damage that can lead to injuries and arthritis. Strong bones reduce the risk of hip fractures and joint deterioration, and daily exercise is essential to maintaining bone strength, stimulating the production of new bone cells.

Maintaining hip health requires just half-an-hour of moderate weight-bearing exercise, five days a week. A walk or bike ride after dinner would do, or taking the stairs regularly at work rather than the elevator. Aerobics and swimming are great for hip health, as are low-intensity weight-lifting or resistance training. Limiting high-impact exercise that involves a lot of running or jumping is wise, since these activities pound at the joints, increasing the risk of joint injury.

Weight Control and Nutrition

Eating well helps maintain hip health in a number of ways. Maintaining a healthy body weight is very important to the health of weight-bearing joints, since being too heavy causes unnecessary stress and wear. Eating a wholesome, well-balanced diet provides your body with the vitamins, minerals, proteins and other nutrients that it needs to build and maintain strong muscles and bones. Nutrients especially important to bone, joint and muscle health are vitamin C, which helps in collagen production, calcium and vitamin D for bone density, and omega-3 essential fatty acids to aid in maintenance of cartilage and other connective tissues.

Why Hip Health Matters

Hip fractures, arthritis and other chronic degenerative conditions disable a huge number of people every year. At especially high risk are adults over the age of 55. A quarter of all Americans are affected by hip arthritis in their lifetimes, 352,000 hip fractures happen every year, and in 2010, 458,000 hip replacements were performed.

Hip replacement has restored many people disabled by hip problems to active lifestyles, but they are by no means a quick and easy fix. Recovery takes months of hard work, and like any surgery, there are risks. Additionally, hip replacement has been problematic for quite a few patients lately, due to issues with faulty hip implant devices. Several metal-on-metal devices have been recalled recently due to high rates of failures and complications. Many with these implants suffered metallosis, which is a serious and very painful inflammatory condition caused by metallic implant debris. Metallosis can lead to tissue death and bone loss around the implant and has led to many painful and costly revision surgeries.

Elizabeth Carrollton uses her background in journalism to write for DrugWatch.com. She is dedicated to educating the public about medical safety and important decisions that can impact a person’s health and life. Much of her work at Drugwatch includes editorials pertaining to hip replacements and alternatives to relieve pain, as well as complications and hip replacement lawsuit information. 

A Question of Balance

We are all familiar with the most popular stories from “The Tales of a Thousand and One Nights”. But what you may not know is that this expansive collection of stories has no named author or authors, no dates or places of composition and no single national tradition. In Marina Warner’s new book “Stranger Magic” she offers this guideline to the stories: “I think,” she writes, “that the reader should enrich what he is reading. He should misunderstand the text; he should change it into something else.” She believes that the reality of magic resides at two poles: one the poetic truth and the other bound in inquiry and speculation.

We as investors are guilty of wishing for, even trying to conjure magic for our investments and the portfolios in which they are nested. We attempt to make the leap from the known to the unknown, to embrace the magical thinking of a thousand different storytellers. And like this tale, there is always another story left incomplete at dawn.

So I thought today on the Financial Impact Factor Radio with Paul Petillo, Dave Kittredge and Neil Plein we’d discuss the magical thinking around the portfolio rebalance. We have watched with great amazement, our investments rebound and take on new life in 2012. Markets are up and this is one of those rare feel-good moments. Unfortunately, feeling good isn’t something you relax with when it comes to how you are invested. In fact, the maintenance these portfolios require is often counterintuitive. If your car, for instance is running and performing as it should, we are not inclined to look under the hood for potential problems. Rebalancing a portfolio however requires you to do just that: look for a problem where you might not have thought one exists. As I mentioned earlier, there are a thousand and one ways to do this. So let’s start there.

A quick glance at your statement might reveal a strong move to the upside. Why should we do anything?

How do we know when to do this and I have asked numerous guests who come on the show how do we pick our risk level, which is essential in the rebalancing?

How do we get beyond the concept of funding our losing positions and selling off our winning ones in an effort to adjust our portfolios?

Listen to Financial Impact Factor Radio with your hosts:
Paul Petillo of Target2025.com and BlueCollarDollar.com,
Dave Kittredge of FinancialFootprint.com and Neil Plein of InvestnRetire.com

Your Boomer Mortgage: Insurance Offers You Don't Need

On a recent episode of Financial Impact Factor Radio, we discussed the topic of insurance. If you have never tuned into this show, I think you will find it interesting and topical. We have a wide range of guests and often discuss the very questions that concern Baby Boomers, their children and their parents. Because being a Boomer is more than just being a certain age. All of our shows on Financial Impact Factor Radio can be found here.

As a Boomer, I am always intrigued by the offers that begin showing up in my inbox/mailbox. Although they don't on the surface seem to be age related, one can't help but read between the lines. Are they talking to me? Are they worried about whether I will make it to the end? That "end" involves satisfying the largest debt any of us will ever own: our mortgage.

Last week I received a letter in the mail from the bank that holds my mortgage that would make most mortgage holders think twice. It was the offer of life insurance. My bank might think there are good reasons for offering this product that is different that many of the other types of insurance offered with these types of loans. For instance, PMI is private mortgage insurance the bank makes you buy if you are putting less than 20% down on a mortgage. The sole beneficiary in this instance is the lender, who knows that if you are going to default, this riskier loan covers their interest in the transaction. Known as PMI, its cost has begun to weigh on borrowers who find their loans underwater. Once you pass 78% mark because the value of your house compared to the amount of your initial downpayment, you can cancel the policy.

There is also mortgage insurance which for some borrowers seems like a good option as well. Essentially the lure of this product is to pay-off the mortgage in the event of your death. The insurer doesn’t pay you directly instead writing a check directly to the mortgage company or lender.

The letter I received offered a term policy that would last until I turned 80 years old, which is about 26 years from now. Like all insurance policies it plays on your fears and comes at a time when the typical term policy is about to expire if you bought insurance in your thirties, which is typically the time when most folks consider coverage. But it isn’t cheap. In fact, this sort of policy has a seven year flat rate, just a few medical questions without an exam and of course the tug-on-your-heart-strings assurance that your loved ones will be taken care of.

So today I thought we’d talk about late in life insurance coverage and whether we should consider it.

Listen to Financial Impact Factor Radio with your hosts:
Paul Petillo of Target2025.com/BlueCollarDollar.com and Dave Kittredge and Dave Ng of FinancialFootprint.com

The Hard Sell

This is the point where two facts collide. You hear a lot of white noise about the so-called delayed retirement, the I'll-have-to-work-longer-because-my-plan-was-undone tales. Those headlines create anxiousness amongst even those who are prepared to retire as planned. This group second-guesses the plan they have in place even if it is viable. And then you also hear the unbelievable number of retiring Boomers that do take the leap, a number that doesn't seem real: 10,000 Boomers are reaching retirement age each day.

Who are these people? The unprepared and the prepared hurtling headlong into older adulthood. They both had expectations of retiring based on what can only be considered now as unrealistic math. They set goals and they weren't met as planned. A few got it right. Remember, there's no shame in that miscalculation. Folks have been doing it for decades. But your plan is all you really care about and if it hasn't met your expectations, which in many instances were a bit lofty, you resign to work longer. This is where the facts collide.

You know all too well that simply working longer will add to the amount of retirement income you will have but only if you significantly increase your contributions. Few resign themselves to do both.

But the other half of the equation, the Boomers who do retire, are often caught in the same anxiety ridden place. They question whether they made the right choice and more importantly, whether the money they have amassed will serve their purpose, remains hanging over every plan as an unknown.

That purpose is often clouded with not only the unpredictable cost of longevity but whether they might have enough to take care of their heirs - a serious consideration among a wide swath of retired adults and those about to retire. This last consideration is entertained by women more so than men, statistics have uncovered, which is often surprising. Why? This same group of women approaching retirement has often saved less, another unfortunate statistic concerning women and retirement.

Those that do retire should consider where they retire. And while there are many suggestions as to what to do and how to go about it, but a quick survey of your current surroundings will offer a great many answers to your dilemma.

For instance, seniors or those about to become seniors often fail to inventory the services they may need. Once retired, your daily life will require things you had previously not considered. More than just the availability of medical services, more than the infrastructure of city services such as public transportation and well-lit and well-patrolled neighborhoods, your current location needs to stimulate you or at least have accessible stimulation to keep you mentally sharp and involved. This is not how many American cities were designed. Far too many cities and their suburbs require a car. And while this may be seen by many older Americans as a freedom, not being able to drive can imprison some seniors if they find where they live too far away from these activities. Only vast sums of retirement income can change that one item and few seniors, who essentially are on a fixed income, want to reach for their wallet or purse to pay to go shopping.

To pre-Boomers or those who are still working, where you live is not often what you can afford. If you live in the city, chances are you rent. If you live in the suburbs, chances are you have a mortgage. If you have a mortgage, chances are you can't afford it. That's a lot of "ifs" but they are an approaching nightmare for those about to retire.

While many of believe that the cities we live in should adjust to us and our current and future retirement needs, it probably won't happen soon. So retirees look to communities that cater to their needs. This ghetto-izing of seniors, much like Florida and Arizona is not only unappealing to many Boomers, it is not as healthy as it first appears. Sure, these senior-only communities do provide like-minded companionship, concentrated services and accommodations that cater to gradual aging, but they are often culturally void of the stimulation that all walks of life can provide. Being isolated is not the answer.

So what is? Cities are struggling with their finances and as a result are cutting back on services that once were taken for granted. We might be living longer but in far too many instances, your health may compromise that statistic or impact the quality of that longer life. And the cost of where you live - assuming your mortgage is paid off before you retire - is not getting cheaper. Add inflation into the mix and you have eliminated all but the most obvious choice: you have fewer options.

Of course, you can stay put in a house that might be too big and too costly to maintain. This will gradually eat away at your fixed income and reduce your opportunities to engage with the outside world. Now one plans on spending their day at McDonalds sipping bad coffee with fellow seniors, no matter how well-lit, no matter how inexpensive the house brew and no matter if the loitering rules don't apply. But take away any portion of that spendable income and you limit the choices.

Where is the right place? While there is no firm answer, you do have options. For instance, if family is important to you, be sure your family shares this thinking as well. The dynamic of marriage - and I am speaking of your children's marriage - can create some confusion. Deciding that you can rely on your children and their spouses for the help you might need is something you need to discuss well in advance of retiring.

At some point, one of your kids or their spouses may find you in their care. Perhaps not in the day-to-day sense or even the long-term care situation, but in the need to check-in, help with errands or assume a financial role. This needs to be discussed in advance, a discussion that should be instigated by you. This is no easy discussion.

You do need to tell your children what you expect from retirement, even if you are unsure. Answer the hard questions (can you afford to stay in your house for instance) and when the time comes, unfold your finances for them to see. Let them know where you stand and what your plan is.

Boomers will be sold a retirement that is unlike any other before them. If you live longer as the statistics suggest you will, what do you expect of your surroundings? What role does your community play in the decision? What role will your kids have? Retirement is much more than simply amassing cash. It is amassing support. And believe it or not, that is old school thinking, a throwback to the time when retired family members depended on their kids for everything. But those kids, who may not be thinking along the same lines as you need to be involved now, rather than later.


Paul Petillo is the Managing Editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer

Borrowing to Build Retirement?

Over the years I have written about the topic of retirement planning, I have witnessed some incredibly crazy thinking. Many of those thoughts have come home to roost often too late for the investor to do anything to fix the situation. We plan, we tell ourselves, to retire at a certain age with a certain amount of money based on a certain withdrawal rate.  But those plans are often dashed by unforeseen events that, in hindsight we should have anticipated.

Recent reports have pointed towards an increase in employee contributions to their 401(k) plans. These upticks, however slight lead many to conclude that we are starting to get the message. But which message are we holding on to? Is it the need to simply save more because we know the chances are we will need more or is it the result of some other encouraging news? I'm inclined to go with the second choice.

Retirement planning is a whole package endeavor. In other words, simply putting money away for retirement is not enough. Numerous other pieces of the puzzle come into play and this is what is often ignored. The effort is noteworthy only if you have developed a budget that is actually less generous, forcing you to face the reality of an income in retirement that is not the same as the one the you had while working.

This income reduced budgeting is practiced by too few close-to-retirement planners. At no time in the history of retirement planning - and I'm going way back to the generous days of the defined benefit plan or pension - was the payout at retirement designed to replace 100% of what you live on now. The number was actually closer to 70% replacement and that was only if you had worked within the confines of that pension for thirty years or more (and it was not impacted by changes from the company). The remainder was to be supplemented by Social Security.

But with advent of the defined contribution plan (401(k), 403(b)), with the responsibility for funding your retirement placed squarely on your shoulders, we were forced to face the possibility that 70% of our current income would not be replaced. In order to get those kinds of post-work rewards, we would have had to invest 12-15% of our pre-tax income, every year without fail, in good markets and bad. For too many people with this plan, that sort of budget-busting restriction was simply too much to embrace.

We are to be forgiven for our human-ness however. We make mistakes and follow the herd - when they sell, we sell and when they pile in, we follow. In both instances we turn our backs on the whole concept of retirement planning: steady and ever-increasing contributions without consideration for what the overall market is doing.

Our employers didn't help much either. They gave us matching contributions, took them away or reduced them, and when they re-introduced them, they were far smaller. And we misinterpreted this as a sign that they knew something we didn't and mimicked their actions: we reduced our contributions when the matches were lowered and increased them when they were raised. As I said, we can be forgiven this tendency but we won't be absolved of this sin of remission when we begin thinking about retirement.

One of the other keys to the seemingly good news about an increase in contributions in 2011 is backlit with some additional news. Auto-enrollment helped to raise the account balances of the overall plan (and as employment improves, so will the news that we are using the plans in a more robust way). But those auto-enrolled new hires were placed squarely in the plan's target date fund of choice.

Long-time readers know about my reservations with these funds. New readers should note: target date funds are often less transparent than stand-alone funds, the underlying portfolio can be suspect, the target date may not be far enough in the future to be realistic and to date, the rebalancing implied in the fund is not determined by any specific guidelines. In other words, those who are put in a target date fund via auto-enrollment would be wise to get into an index fund (or four raging across a variety of markets) as soon as possible.

Those folks, the youngest among us who are the most likely candidates for these auto-enrollment options can make changes that will get them much closer to the goal. Older workers, however don't. And they know it. But they have some advantages, at least in their mind that the younger worker doesn't: equity.

And that equity in their homes, combined with the historically low interest rate environment has given many Baby Boomers a second option: to borrow against their homes and take the refinanced money and put into their retirement accounts. Is it a good idea or one that is bound to backfire?

Three things make it risky. One the equity in your home may not recover. Older homeowners who tap their home's equity are doing so at the risk of increasing their mortgages at a time when additional debt, no matter how inexpensive is not prudent. Two: They are eliminating a safety valve that could be used if retirement got too rough: the reverse mortgage. And third, if they are forced to or simply want to sell, the equity in their property is not there to give them a downpayment for new housing.

Leveraging your home to finance your retirement account does come with some tax advantages though. Just because one account increases as one is leveraged doesn't necessarily give you a balanced approach. In other words, there are "veiled risks".

You will still need to allocate your portfolio to perform better than the cost of the new loan and the interest rate you pay. This means that year-over-year, you will need to do much better than you may have calculated. A four percent mortgage added into the cost of the refinance (another one percent) added to the rate of inflation (another three percent if it holds steady) means your portfolio will need to return north of eight percent year over year - without fail.

The only way to give your retirement income any sort of sure footing is to increase your contributions by a much wider margin than what has become known as the average - 8% - and pay down your mortgage.

Fifteen percent is still the optimum contribution rate and even that number will give you only 75% of your current income in retirement - provided you saved for twenty years or more. Paying down the mortgage reduces your overall cost of debt service while increasing your equity.

Paul Petillo is the Managing Editor of BlueCollarDollar.com/Target2025.com and a fellow Boomer