Paper Chase: Is Long-Term Care Actually, Absolutely Worth It?
Elderly female patient holds her doctor’s hand for reassurance
Retail sales increased .1% in April which were below analysts’ expectations of .4%. The number is watched because consumers make up nearly 70% of the economy.
Cashless Society
According to bankrate.com, 1 in 10 Americans no longer carry paper money. 80% carry less than $50. 50% carry less than $20
Market Confusion
Currently, real interest rates are falling which is usually a negative growth signal; however, the stock market is at an all time high which is a positive growth signal. What gives? The bond and stock markets are at odds with each other. Equity investors are looking at the bond market wondering if it knows something the stock market does not know.
Is It Me?
When markets are at record highs, there is going to be an element of rethinking, including the questioning of assumptions. We see that profitability is strong as we are bouncing back from a harsh winter. There are tepid, but positive numbers on housing, and strong numbers on employment. This would indicate that the stock market is not wrong on their growth story.
On the other hand, the bond market has had higher inflation numbers than what the Fed would have thought months ago. Things are lining up for the stock market for bond yields to be too low.
Stock Market Wins
The market is justified in terms of its valuations in terms of profit. The stock market at the macro level looks as if its the way to go.
Inflation
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. It’s no secret that the Fed has wanted to see a little inflation come into the system. This can be dangerous, similar to going to a party and saying your going to have a little to drink. It’s easy to get carried away. We have had essentially 0% rates from the Fed entering the 6th year of economic recovery. This is uncharted territory as far as policy is concerned. Like with too much partying, it can end with a bad hangover. The Fed has to call a cab or get the designated driver and get out of this without too bad of a hangover. Current inflation and unemployment figures are saying the Fed should do this sooner rather than later which would be a surprise for the bond market if they did so.
When Will Rates Rise?
Chairwoman Yellen’s comments have been interpreted to mean that 6 months from now, we could see an increase in interest rates. What was actually meant is that about 6 months from when the Fed stops buying bonds. Many expect that to be in October which would make a rate increase in March. Falling bond yields would lead one to believe it will come in September or October of next year. Again, I believe employment and inflation trends will indicate a surprise for bond market.
Dodd-Frank Wall St. Reform
Americans have never lived with a financial crisis the depths of what we saw in the 2008 recession since the Great Depression. We essentially have no memory of it. People essentially wanted the financial system to be saved and the “bad guys” to be punished.
The Dodd-Frank Wall St. Reform Bill is the major legislation formed in response to the crisis. The bill created the Consumer Financial Protection Bureau, limited “too big to fail” bailouts, created a council to identify systemic risks, provided shareholders with say on executive pay, and provided new rules for credit rating agencies.
While the system was not changed or altered to the satisfaction of many including yours truly, what we got was transformative reform with much stronger consumer protection, much stronger authority for regulators than before the crisis, banks are forced to run much more capital, and are limited in size as no individual bank can be more than 10% of the banking system through acquisition. These constraints are much tougher than anywhere else around the world.
Tough Sell
People wanted blood since the amount of damage caused by the crisis was enormous. We are still living with the scars of the crisis today. The amount of anger was rightfully though not wholly addressed in fixing the problem instead of bringing out the guillotine.
It’s always going to be a difficult task convincing people the worst crisis in our lifetime could have been much worse. It’s always going to be difficult to justify doing things you have to do to protect people from worse damage they have experienced, especially when it looks as though the people responsible for the mess were being rewarded.
Better and Stronger
From 2008, the country still has many challenges including poverty, stagnating median incomes, increased inequality, and decreased confidence-just off the top of my head. Still, We are healing as a country from the effects of the crisis. We are a stronger country today, and relative to the challenges of other major economies, we are much better off.
Long Term Care
Less than 8% of Americans have protections for long-term care, but we will all need it. Nursing homes, home health aids, and therapists are apart of a 210 billion dollar industry that can impact you and your loved ones.
We insure ourselves for car wrecks, house fires, and even disease but what about old age? Unlike traditional health insurance, long-term care insurance is designed to cover services for those who can no longer take care of themselves and pay for services as part of their daily lives such as bathing, eating, and getting dressed.
Now Or Later
Do you want to spend money today on insurance, or do you want to spend money today for things today? Long term care insurance is not aimed at the very wealthy with means to pay for long-term care, should the need arise, nor the very poor who can qualify for Medicaid.
Those in the middle should compare premiums because the cost of coverage can vary widely. You should choose a comprehensive plan that covers a wide array of services, and also choose a portable policy that will cover you in case you move.
You Will Need It
70% of those 65 and older will need long-term care in their own home or in a nursing home. Nursing home care can cost anywhere from $55,000 to $250,000. The average long-term care insurance policy is $2000 per year which gives you $160,000 in benefits that turns into $330,000 by the time you are 80.
Pricing
When pricing long-term care, variables that determine cost include the age at the time of purchase (younger you are, the cheaper it’s going to be), the type of policy selected, and the coverage needed (at home care, nursing home care, etc).
The average age of people buying long-term care insurance is between 50-60. The earlier you start, the lower the premium. Make sure to calculate affordability over time, as insurers are raising rates and your income changes.
Disclaimer: Killing The Breeze is not a registered investment advisor or advisory service. It does not tell or suggest which securities or currencies should be bought or sold. The employees or affiliates of Killing The Breeze may hold positions in the stocks, currencies or industries discussed here. There is a very high degree of risk involved in the market. Killing The Breeze assumes no responsibility or liability for any trading or investment results. All content posted is for educational purposes only and independent advice should be sought from a professional to confirm validity and accuracy of any claim made.
The information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
