MarketWatch on How to Choose a Health-care Plan

You are going to have to figure out a health-care plan for you and your family. This is something that your government is making you do. Even if you already have a health plan, your employer's plan may drop you. If so, you are on your own in figuring out what to do.

Health-care Plans in 1953 was the last thing on the minds of  William J. Williams III (left) and Darnell L Williams (right). But things change and in 2013 health-care has priority.

This is what MarketWatch has to say about how to choose a health-care plan.

The right health insurance plan can both save you thousands of dollars and keep you from having to skimp on care when you’re sick. Most employees can sign up for health insurance through work. Those who don’t have an employer-based option can find plans through affinity groups like unions and membership associations for artists or the self-employed for example or choose to purchase an individual or family health plan. Here’s how to compare your options.

Find your health care style . Choosing between three major types of health plans comes down to personal preferences, and choosing a plan accordingly can be cheaper in the long run. To help choose what level of coverage you need, see what you might spend on various health procedures using LIFE Foundation’s health care cost estimator .

• Go HMO . Health Maintenance Organization (HMO) plans require patients to choose an in-network primary care physician and cover the care that doctor recommends. HMOs also have low co-pays and fewer bills later. But seeing a specialist requires a referral, which can take time.
• Go PPO . Preferred Provider Organization (PPO) plans cover some of the costs for seeing out-of-network doctors. Experts say that consumers choose this plan for the added flexibility of seeing a variety of specialists, but may also face paperwork and unreimbursed charges when venturing out of the network. Health plan web sites often host tools to help you find doctors within the network.
• Go POS . Think of a Point of Service (POS) health plan as a hybrid of an HMO and PPO. Inside the network, you’ll get the highly managed HMO care you’ll designate a primary care physician, get referrals to see other doctors and enjoy simplicity and less paperwork. But you’ll also have the freedom to see doctors outside the network as you would with a PPO. Of course, your premiums will be somewhere between the other plans’ costs.

Consider when and how much you want to pay . The more you pay in premiums, the less you’ll pay in co-pays and vice versa.

• Compare the deductible options . Pay attention to the deductible, the amount you’ll be responsible for paying before the plan will cover costs. Even if your premiums are low, high deductibles of several thousand dollars can be difficult to manage in the event you require a lot of unexpected care.
• High deductible plans . High-deductible, high-co-pay plans siphon less from your paycheck each month, but also require higher payments when you visit the doctor. Experts recommend finding a balance on the edge of your comfort level; patients with serious health conditions and frequent doctor’s visits might be better off in a plan with higher monthly premiums, and less per-visit fees. Use SmartMoney’s health plan worksheet to figure out which plan will save you more.

Make it back in taxes . Specialty providers like psychotherapists and chiropractors aren’t usually covered and can be expensive, but you may be able to offset the cost with tax savings.

• Flexible Spending Account . You can contribute parts of your pre-tax paycheck to a Flexible Spending Account, or FSA, which can then be used to cover additional unreimbursed care costs. The money you contribute to this fund expires at the end of the year, so you’ll forfeit the income if you don’t spend it on care. Estimate your potential tax savings from your FSA contributions with the savings calculator on FSAFeds.com.
• Health Savings Account . Similar to an FSA, a Health Savings Account (HSA) will allow you to deposit a certain amount of pre-tax income into a fund that you can spend on health care costs. The account doesn’t expire, so you can roll over your savings year after year and use the money when you retire. HSAs are designed for healthy people who want to save money by paying lower premiums and banking what they don’t spend on medical services, but you can only enroll in a HSA if your regular health plan has a high deductible (over $1200 for individuals and $2400 for families) and meets other criteria. Find out if your health plan meets the criteria for a HSA at the IRS.

What not to do . Enrolling in a plan without fully understanding your options can cost you.

• Beware of going out of network . Before signing up for a plan, figure out whether your doctors are in your network. Even PPO plans cover less of the expenses of seeing out-of-network doctors. Many health plans cover even less than consumers expect, leaving them with sticker shock.
• Don’t gamble with your health . Don’t pay a high monthly premium if you’re healthy and confident that you’ll stay that way, but don’t choose a deductible that is so high you couldn’t afford to pay it in a worst-case scenario.
• Don’t coast on the same plan . Health advisors say it’s important to reevaluate your health-care plan frequently. People’s needs and health risks change as they age; a plan that requires you to pay more when you see doctors often might no longer be appropriate as people require more care. On the other hand, an extensive plan that covers your children, even when they go out-of-state for college, might be more than you need.

   

When the Markets Fall!

When the Markets Fall!

Have you noticed that the Stock Market seems to be topping and running out of steam? You may not notice because you are listening to all the people who have done well in the markets in the past 4 years. So you are going to get in at the top and think you are going to do the same thing as they did. I agree somewhat with the ad that Josh Mellberg sent out by email; “98% possibility of 2014 stock crash?”  He claims that bubbles are all around us. Below is the Josh Mellberg’s ad.

Wall Street Journal’s MarketWatch contends as much from a poll, citing  “10 bubbles blowing into biggest crash in 30 years.”

http://www.marketwatch.com/story/10-investments-where-a-bubble-may-be-brewing-2013-11-12 Click on the link above. The next 10 investment bubbles

So many appear to be ignoring these indicators. Truth is, bubbles are everywhere.  Are they ready to pop? According to MarketWatch, the evidence is overwhelming,  and with only one clear outcome:

Up to 98% risk at the apex. This 2014 crash is effectively guaranteed. There’s a small 2% chance of dodging this bullet.

They claim that there is a 98% chance of a stock market crash in the year 2014. This part, I disagree with. Anything could happen but in my opinion, the stock market will correct itself but not have a bear market crash like we saw in 2006 to 2010 or in 1929.

What is Risk?

The stock market is filled with risk. You may ask, what is risk?

The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk.

Many companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk management process is risk assessment, which involves the determination of the risks surrounding a business or investment.

A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk.

For example, a U.S. Treasury bond is considered to be one of the safest (risk-free) investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.

Market Risk is the possibility for an investor to experience losses due to factors that affect the overall performance of the financial markets. Market risk, also called "systematic risk," cannot be eliminated through diversification, though it can be hedged against. The risk that a major natural disaster will cause a decline in the market as a whole is an example of market risk. Other sources of market risk include recessions, political turmoil, changes in interest rates and terrorist attacks.

For the stock market, the two major categories of investment risk are market risk and specific risk. Specific risk, also called "unsystematic risk," is tied directly to the performance of a particular security and can be protected against through investment diversification. One example of unsystematic risk is that a company, whose stock you own will declare bankruptcy, thus making your stock worthless.

Operational Risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry. Operational risk is the risk that is not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems.

Operational risk can be summarized as human risk; it is the risk of business operations failing due to human error. Operational risk will change from industry to industry, and is an important consideration to make when looking at potential investment decisions. Industries with lower human interaction are likely to have lower operational risk.

The possibility that shareholders will lose money when they invest in a company that has debt, if the company's cash flow proves inadequate to meet its financial obligations. When a company uses debt financing, its creditors will be repaid before its shareholders if the company becomes insolvent.

Investors can use a number of financial risk ratios to assess an investment's prospects. For example, the debt-to-capital ratio measures the proportion of debt used, given the total capital structure of the company. A high proportion of debt indicates a risky investment. Another ratio, the capital expenditure ratio, divides cash flow from operations by capital expenditures to see how much money a company will have left to keep the business running after it services its debt. Financial risk also refers to the possibility of a corporation or government defaulting on its bonds, which would cause those bondholders to lose money.

Now you can see why I invest 95% of my money in Corporate Bonds.

Getting the Wrong Advice from the Right People

Being With Your Investment Adviser

People ask me questions all the time about finance. Most of the time they ask me what I would do in their situation. Most of the time, they never tell me what their situation is so I can’t answer their question. One man asked me what financial item should he buy but would not tell me why or how much money he plan to put into it, or anything else about his situation. He said it was none of my business. So I can’t help him.

This is why you see articles like the U.S. News article below that is rather veg about how to invest.

5 Money Myths You Shouldn't Fall For

When it comes to these so-called money rules, following conventional wisdom can cost you. by U.S. News  Dec 6th 2013 12:43PM

Conventional wisdom is often a good thing, or at least harmless. For instance, even if chicken soup doesn't help your cold -- and research shows it probably does help -- it won't hurt you. Plus, you'll help keep someone employed in the soup industry.

But there are plenty of times when conventional wisdom isn't just wrong -- it can cost you money. So the next time you're about to make a big financial decision, keep in mind that rarely is anything black and white when it comes to the green stuff. Here are five money "rules" that are largely wrong.

Carrying a credit card balance will help your credit score. Not at all. If you are carrying a balance you can't pay off, it will help to keep the balance as low as possible because credit bureaus don't like to see a high debt-to-income ratio. In other words, they want to see that you aren't maxed out to the limit every month. So intentionally carrying a balance on your card won't put your credit in better standing or save you money; paying interest only benefits the credit card companies. 

I agree with this one.

Having a zero balance every month on your credit card is fine, especially if you're making regular or occasional purchases and paying them off monthly. Credit bureaus like to see that people are using credit cards responsibly. That's why never using a credit card that has a zero balance won't appreciably help your credit score, either. 

The author should come out and tell you to use your credit card and pay it off at the end of every credit card cycle.
Pay off credit card debt before saving for retirement. Ultimately, it comes down to how much debt you're talking about, and what kind.

"One myth that young professionals -- actually, many professionals -- initially question is whether they should pay off consumer debt, like credit cards and student loans, 

before fully investing in their company's 401(k) plan," says John Oxford, director of external affairs at Renasant, a financial services company headquartered in Tupelo, Miss.

What's so wrong with paying off the massive credit card debt you accumulated in your early 20s before sinking money into a 401(k) plan? Oxford says if your company offers a 401(k) contribution match, and you instead shovel money into debt, you'll pass up on what amounts to free money that could have gone toward your retirement.

You're also losing out on the potential interest growth, he says.

So, yes, save for retirement at the same time, even if that means it will take longer to pay off your debt. 

Most 401(k) plans no longer match funds. Some will only match up to 3% of the 6% max. Pay contribution. If you are getting such a match then I would speculate in some of their mutual funds. However, if you have high credit card debt and your interest rate is over 10%, I would pay off my debt over a 10% interest rate as fast as I can, paying credit cards first. If you only have a car or mortgage left then I would buy junk bonds in an IRA if I could not take advantage of a 401(k) matching fund program.

Keep in mind that you may be able to reduce your interest rate by consolidating your loan.
Stocks make you rich -- and bonds keep you rich. A good rule of thumb, but this is another gray area.

"The bond bull market for the past 30 years is coming to an end," says Jon Ulin, a managing principal at Ulin & Co. Wealth Management, a branch of LPL Financial in Boca Raton, Fla. "Interest rates will begin to rise when the Fed starts to taper the monetary stimulus program. Bonds tend to fall in value when interest rates rise. As [when] there is a greater degree of price volatility for longer bond maturities, investors should move more into short-duration bond investments."

Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group in Scarsdale, N.Y., echoes that thought.

He says it's a myth that retirees should be fully invested in bonds. "Even retirees may have a relatively long time horizon for a portion of their money," he says. "They need the superior growth that stocks can provide to retain purchasing power over their life." 

I can tell a stock broker or Mutual fund salesman a mile away. If you are retired or about to retire, I would not buy stocks at all. I would buy bonds with a Standard and Poor’s rating of “BBB” to “B-“.  They give interest rates of 7% to 16%. I would “latter” them meaning that I would have some maturing in less than 3 years, other maturing in less than 6 years, and some going out more than 6 years.  

Home additions increase your home sale value. Usually they don't, says Patrick Roberts, a certified financial planner and CEO of PKR Investments in St. Louis. If you add on a room or an amenity like a swimming pool for the sole purpose of adding value to your home, he says, you're likely to hurt your pocketbook. That's because even if your addition does add value to the house, you've likely taken on more debt in the process, so you may lose money in the long run.

Now, if your house needs a fresh coat of paint, feel free to slather it on. You will probably sell it faster and maybe for a bit more. But when it comes to high-priced add-ons and features proceed cautiously if your only goal is to add value to your home. 

What real estate people are not going to tell you is that houses do not sell as fast as they did in the 1990s. The baby boom people are in their late 50s to early 70s. They are starting to die off or going into nursing homes. Soon the housing market will be in a big glut. Instead of a house selling in 3 months, it may take 3 years. The chance of home prices falling is a better possibility than prices rising.  

Your money is safest in the bank. Not exactly. Money market accounts, savings bonds, your 401(k), a 529 plan and index funds may all be better alternatives (obviously, do your research or talk to your financial adviser). True, if your money is in the bank, it's safe because it isn't going anywhere. Banks' checking and savings accounts and certificates of deposit are insured by the Federal Deposit Insurance Corporation up to $250,000.

But if you have a lot of cash sitting in a savings account, you're technically losing money with interest rates so low these days, Sullivan says.

"You might have the comfort of seeing a stable account balance, but you are guaranteeing that your buying power will decrease due to inflation," he says.

Currently, inflation is at about 1 percent, which is pretty low. Unfortunately, the average savings account yields about 0.06 percent, so you're still losing a bit of money. But a couple of years ago, when inflation was about 3 percent, the loss was more pronounced: People were losing about 3 percent of their income's worth because their savings yields weren't keeping up with inflation, Sullivan says. 

If you are going to make a large purchase in 6 months or more, invest it in Junk Bonds. If this money is for emergencies like a sudden layoff or firing then invest it in Junk Bonds that mature in less than 1.5 Years.
So the next time you're faced with a big financial decision, do your homework rather than making a snap decision based on what you've heard your entire life. You probably won't lose much if you believe in myths involving vampires and zombies. But losing thousands of dollars or your entire life savings -- now that's scary.

The Financial Land mine for Pre-Retirees

Suze Orman

I am going to show you how people can save money in a Variable Annuity and have nothing to show for it when you retire.  Variable Annuity is very popular among brokers and insurance companies. But your taxes and risk is higher with a Variable Annuity.  Your broker may not tell you about the fees and taxes. They may not tell you about the risk.

I personally would not put this type of investment inside an IRA. I know a woman who did this and she could not get out of this bad investment for 8 years. With a bad market, she lost money all that time. 

http://www.seniorannuityalert.com/variable-annuities/?pid=1&eid=470?pid=1&elq=bdd743c28e52494fa4bfc85ce93e338c&elqCampaignId=564

Click on the link above.

The video above explains these fees and why you should not put this Variable Annuity in your IRA. Below is what this video covers.

§  Hard facts and evidence that the expenses, fees, costs, and POTENTIAL returns of Variable Annuities (VAs) may make them a poor savings and investment vehicle for retirees

§  What top experts, such as Suze Orman, have to say about VAs

§  Why J.D. Mellberg  Financial don’t sell VAs at their firm

§  Why a VA might not be a good choice for a retiree of today and why you may not receive as much income as you hope to receive with one in this day and age—it is the belief of J.D. Mellberg Financial that they were more suitable in the 80s and 90s but not now. 

Here is what Suze Orman says about Variable Annuities in her own words.