JUST PLAIN TALK: Medicare planning revised and The Great Recession
Thanks for the positive responses my Medicare planning column generated, but I omitted some critical considerations. The new Medicare Plan Finder at Medicare.gov was supposed to be an upgrade, but it’s not. As an example, the system did not sort Part D drug plans by cost. Another factor is the decision to sign up for Medicare Advantage should be considered as a life-long choice. Yes, you can change plans annually, but the more comprehensive Medigap policies are guaranteed issue for the first 63 days you are Medicare-eligible. Guaranteed issue means the insurance company cannot consider any pre-existing conditions. If your health changes for the worse, initial enrollment in Medicare Advantage eliminates the Medigap option without underwriting.
The main benefit of Advantage plans is they are more affordable compared with Medigap plans, at least initially, but the cost advantage could be illusory. Advantage plans are limited to specific networks. Make sure your physician is a provider. Also, if you travel and have an emergency, you could be in an out of network facility with higher costs. Advantage plans make sense in metropolitan areas with multiple health maintenance organizations (HMOs).
The Crash of The Great Recession, 90th Anniversary
Halloween has come and gone, but don’t overlook Ghost of the Great Depression. Investors should never ignore the stock market took years to recover from its October 1929 peak, assuming no reinvested dividends. For perspective, from the Dow Jones Industrial Average’s zenith in September 1929 to bottom in July 1923, the index shed 89.2%. Given the Dow’s current level, a similar extrapolation means a 24,000 point decline. Only buy and hold investors with the patience of Job and stone-like emotions could endure. A retiree planning to live off their portfolio utilizing Bill Bengen’s 4% rule would have had to reduce spending almost 50%, an unlikely and decidedly undesirable situation.
Shakespeare said centuries ago, the past is prologue, but sometimes history is filled with misconceptions. In a recent Great Depression post-mortem, Jason Zwieg pointed out enduring fantasies. Some blamed excessive speculation, but margin standards were higher in 1929 than earlier years. Stock market price to earnings ratios declined during 1929, throw out the notion of over-priced stocks. Higher interest could have been the trigger, but rates had been rising for over two years.
No one knows why the market collapsed in 1929. One thing is sure; stocks can be priced irrationally longer than you can stay solvent. With markets setting new highs, don’t forget the risk of catastrophic losses never goes away. Maintain a degree of safety in your portfolio or keep some powder dry; choose whatever homily works, but risk never sleeps. Ignore it at your peril.
You can’t always get what you want, but Buz Livingston, CFP, can help you get what you need. For specific recommendations visit us online at livingstonfinancial.net or come by our office in Redfish Village, 2050 Scenic 30A, M-1 Suite 230.