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Near-Zero Interest Rates: Good, Bad, and Ugly
Tweet Share on Facebook August 12, 2011 CommentThe Federal Reserve's recent decision to keep interest rates near zero for two more years will have a major impact on seniors and retirement plans. The Fed said it took the action because it felt continued low rates would encourage economic expansion. But the Fed's decision was opposed by three voting governors, an unusual response to what are outwardly collegial and often unanimous votes.
[See 50 Best Funds for the Everyday Investor.]
Keeping credit costs very low is supposed to encourage business borrowing and economic expansion. But there is little recent evidence that this is happening. Big businesses have already built up big cash reserves and are not investing these funds. Part of the reason is that they are more cautious coming out of the recession. But it's also true that they are not investing because they can't find attractive uses for their capital.
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Solid Dividend Stocks Remain Investor Refuge
Tweet Share on Facebook August 10, 2011 CommentWhen nearly every stock has fallen sharply in value, it may be hard to take comfort in any fundamental investment advice. What good does it do to "stay the course" when your retirement assets are vanishing in real time? Despite the market's loss of nearly a sixth of its value in only a few weeks, the stocks of companies with strong dividend records remain a relatively safe haven.
[See 50 Best Funds for the Everyday Investor.]
Market downturns spur a flight to safety by investors. Demand for U.S. treasury securities has risen, ironically, since Standard & Poor's downgraded the U.S. credit rating to AA+ from AAA. That's because few people feel there's a safer investment out there, despite what S&P says. Similarly, blue-chip stocks have held up better than other equities. While all stock indexes have plunged, the decline in the Dow Jones Industrial Average of 30 big stocks has been smaller.
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How to Save on Insurance Costs
Tweet Share on Facebook August 9, 2011 CommentMore than other age groups, people over 65 are reluctant to consider changes in their insurance needs. According to industry surveys, older consumers get locked into insurance policies for the long run, and are less likely to change them than younger consumers. Of course, with grown families and less likelihood of lifestyle changes, there may be fewer reasons for seniors to change the coverage terms of their policies.
[See Medicare Drug Premiums Won't Rise in 2012.]
However, premiums for even the same coverage change, and so do the comparative rates charged by competing insurance companies. Insurers often have different financial reasons for their decisions on rates, and these may show up in major price variations for the identical coverage.
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Nursing Homes Squeezed by Medicare Cuts
Tweet Share on Facebook August 8, 2011 Comment (16)The nation's nursing homes are facing a $4 billion drop in annual payments from Medicare. The cuts affect reimbursement fees for what's known as "post-acute care" for seniors at skilled nursing facilities. Such services are needed by seniors who have been hospitalized and require rehabilitative services before returning to their own homes. Medicare does not cover long-term nursing home stays.
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Medicare Drug Premiums Won't Rise in 2012
Tweet Share on Facebook August 5, 2011 Comment (7)Medicare has handed out a rare piece of good news for consumers, announcing that insurance premiums for its prescription drug programs will not increase in 2012. The agency said competition for consumer business among private insurers would keep rates stable.
[See Getting Shoppers Back in the Game.]
Premiums for Medicare's Part D prescription drug coverage averaged $30.76 a month in 2011, the agency said. It said the average premium in 2012 would be about $30 a month.
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Retirement Community Prices May Turn Up
Tweet Share on Facebook August 3, 2011 CommentRental rates at high-end senior housing complexes firmed up last quarter. While results vary by market, the industry is encouraged by signs of stronger senior demand for housing units. Valuations of entire housing complexes also have been rising, supporting the view that weak conditions finally may be giving way to growth and, eventually, the addition of more new units.
[See Getting Shoppers Back in the Game.]
Since the housing bust began several years ago, many prospective residents of retirement communities have been unable to sell their homes. Proceeds from such home sales have been the dominant source of community entrance fees. Coming off a strong period of national expansion, many of the country's retirement communities were not able to fill their units and had to offer reduced-cost packages to attract new residents. Vacancy rates edged up, numerous complexes were sold to better-funded owners, and a small number of facilities went bankrupt.
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How to Use Annuities for Retirement Income
Tweet Share on Facebook August 2, 2011 Comment (8)With retirement outlooks growing increasingly uncertain, the safety of guaranteed income streams looks more attractive each day. Annuities can provide such guarantees, so let's take a look at them and consider whether they make sense for you.
[See Getting Shoppers Back in the Game.]
Simply stated, an annuity is a financial product sold by insurance companies that allows you to put aside money and "buy" a stream of lifetime income. You can start the payments right away or defer them. If you set aside money now but defer the income to a later date, any earnings on your premiums accrue tax free. Future payments are taxed as ordinary income. Unlike IRAs, there is no income limitation on how much you can place in an annuity.
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5 Ways to Battle Economic Storm Facing Seniors
Tweet Share on Facebook August 1, 2011 Comment (3)There are many doubts about whether our national government can lead us out of our current economic malaise and help stem horrendous federal spending deficits. There are no doubts that for at least the next 10 years, if not longer, older Americans will be facing recessionary conditions and erosion of financial gains they've achieved during the past 40 years.
[See 10 Ways to Get Americans Spending Again.]
The two-stage modest debt-ceiling plan agreed to on Sunday is at most just the first scene in what will be an extended drama over federal spending, taxation, and social welfare programs. Rhetoric aside, however, it includes no meaningful changes to the big three entitlement programs—Medicare, Medicaid, and Social Security. Yet none of the credible deficit-reduction plans issued during the past year has figured out how to balance the nation's books without significant reductions in these programs.
