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Archive for August, 2010

An Uncertain Economy Your Retirement Money

Many of you are in the red zone right before retirement or you’ve already retired. No doubt your number one fear is running out of money in retirement. You’re part of a very large and growing demographic force: 35 million over age 65 50 million drawing Social Security and 78 million baby boomers now turning 62. This means the future demand for everything used by the “retirement set” will increase and “retirement prices” will rise dramatically. Many of you may have accumulated a retirement nest egg in a pension account will draw a company pension and/or have other savings and investments earmarked for retirement. Where should you keep your retirement money?

If you’re keeping up with economic and financial developments here’s what you’re seeing: subprime credit meltdown that has destroyed housing and is now spilling over into automobile debt and credit cards; highly volatile stock and bond markets; a weak dollar fueling higher prices for oil and other goods; more unemployment and rising inflation; retail sales consumer confidence and new jobs creation in sharp decline; drastic interest rate cuts by the Federal Reserve to avoid a recession; a money giveaway stimulus package from Washington to prop up the lagging economy; widespread talk of recession and stagflation. These all add up to troubled economic times which should prompt you to review where you have your retirement money.

You’re told the stock market is the best long term but “long term” has a different meaning in retirement. Didn’t the dot.com stock market meltdown in 20002002 send many retirees back to work and prevent others from retiring? Aren’t the current inflationadjusted stock market indexes below their previous peaks? Regardless the loud voices of Wall Street and investment companies are advising you to buy now at bargain prices. Are the markets headed higher or is their advice selfserving? Who can forecast the economy or the stock market?

If the stock market craters as it did in 200002 and 197374 and you lose some of your retirement money how will you replace it? Since there will be no second chance I encourage you to think carefully before you commit your money. If you’ve been told that you’ll do just fine over the longer run generally meaning ten years make sure you can wait this long for a market rebound. Also remember that a rebound is not certain!

What about fixed rate places like government bonds bank CDs and money market accounts? These are rocksolid safe unless your greatest fear is outliving your money. Since current fixed rates are lower than inflation you’ll be losing purchasing power with these choices. The potential loss of purchasing power will only add to the risk of outliving your money. What about real estate collectibles and nonmarket investments? These are not only risky but generally illiquid. Before committing your retirement money ask yourself this question: “How will I handle the worse case outcome?”

There is one savings place that offers an “opportunity” to make an abovemarket rate of return without the risk of loss if held to term. It is guaranteed by some of the world’s oldest strongest and largest financial companies. The rate of return is determined by stock/bond market indexes with owners sharing in the upside potential but avoiding downside losses. The worse case outcome is a guaranteed positive rate of return. The earned interest is income tax deferred until actually withdrawn and there is no mandatory age when the money must be used. Additionally it can be turned into a guaranteed lifetime income that can be started stopped and stored. What’s more it offers penaltyfree partial liquidity for emergencies and bypasses probate if the owner names a beneficiary. It can be opened for a small or a large amount and sometimes more money can be added later. There is no law which limits the amount of money that can be placed in it. It is truly a safe place to keep retirement money.

It is maligned by Wall Street and bankers because it competes with their products. The financial press doesn’t like it either primarily because they are uninformed misinformed or just plain biased. I’m talking about fixed indexlinked annuities that are offered by insurance companies: the same companies that insure your home live health business and other valuable assets. The worse case outcome is a positive albeit small rate of return if held to maturity but there is an opportunity to do much better. Fixed indexlinked annuities are not for everyone but you need to consider them as one of your safe options for retirement money. Where are you keeping your retirement money in today’s uncertain and troubled economic climate? If in risky places now is a great time to review your options.

Shelby J. Smith Ph.D.
March 2008

Learn about safe money places check out the Retirement Pros website http://www.theretirementpros.com/ I’m also doing free monthly video seminars online sign up at: http://www.theretirementpros.com/TeleSeminarMRM.php

About the writer:  Dr. Smith has an earned Doctorate in Economics from Iowa State University of Science and Technology along with a Bachelors and Masters degree in Economics from the University of Wyoming. He started his professional career as a college professor and held professorships at several Midwestern and Southern universities. He entered the corporate arena as the Chief Economist of a Regional Federal Home Loan Bank moved then into the banking business where he served as Economists Chief Financial Officer President CEO and Chairman of several institutions. He started a financial marketing company that catered to financial institutions and their clients by providing investment products. For the past twenty years Dr. Smith has been providing consultation and services to conservative investors and savers positioning their assets for retirement. In the process Dr. Smith has managed a broker dealer and held licenses that allowed him to offer securities and insurance products to the general public. He is currently the ask the expert at the Retirement Pros a senior officer at BHC Marketing Ltd. and writes newsletters and other retirement articles for the retirementminded.

Its Raining Deals! Now Is The Time To Buy!!!

Arguably the most accomplished investor of our time is the Oracle of Omaha Warren Buffet. Fortunately for us Mr. Buffet is not in the real estate business or there may not be any property left for us to buy. The point is when does Buffet buy his investments? Answer: When the market or asset is at the bottom and EVERYONE else is selling. Conversely IF he sells he sells when the market or asset is at the top and everyone else is usually buying.
As real estate investors while our assets are different than Buffets the same principles applyand that means really good news for us right now in our current market phase. Thats right GOOD NEWS! Across the nation right now we are experiencing a correction in the real estate market from the aggressive bullish market of the past 5 years. This correction is portrayed by the media and perceived by many as the Bubble Bursting with a very negative connotation. From my perspective when Bubbles Burst it starts raining deals!
In order to truly understand this principle in this article we will evaluate the four 4 distinct phases of the real estate Market Cycle. If you think of the real estate market as cyclical alternating between buyers markets and sellers markets with the Buyers Market on the bottom and the sellers market on the top each half can be broken into two clearly defined phases. In industry lingo these phases are commonly referred to as Buyers Market Phase 1 BM1 Buyers Market Phase 2 BM2 Sellers Market Phase 1 SM1 and Sellers Market Phase 2 SM2.

Sellers Market Phase 1 SM1 Also called the Expansion Market In an expansion market population incomes and employment is on the rise. Because of that apartment vacancies are decreasing and rents are rising. New complexes are in the planning and construction phase. People are looking for units to buy and because you have invested in a few you have units to sell. Its an excellent time to sell.

Sellers Market Phase 2 SM2 Also called the Equilibrium Market Good news property buyer. Things have gone to hell in a handbasket. Both unemployment and inflation are on the rise. Sellers have had a reality check and the market has slowed considerably increasing the demand for apartments dramatically as people choose to rent rather and wait for home prices to adjust downward. Now heres the tricky thing about an equilibrium market. Its a ripe time for buyers if and only if they can afford to sit on the investment for a while. Other markets have a somewhat more predictable lifespan but the length of time an equilibrium market will last depends largely on how overbuilt a particular market might have become during Expansion and Absorption days and local lending policies.

Buyers Market Phase 1 BM1 Also called the Decline Market There comes a time in every markets life when it must put aside sellerfriendly trends and cuddle up to potential buyers. After all there can be no selling without initial purchase. During a decline market trends that began during the last Absorption Market BM2 have progressed to the point where its more appealing to buy than sell. Builders find that the properties planned during the expansion market and brought online during the last Absorption Market BM2 are now sitting empty making them difficult to sell. The higher interest rates introduced by the Fed are making holding onto property particularly unoccupied property a more expensive prospect. Vacancies and foreclosures are becoming a more common occurrence. Its a good time to buy but not nearly as good as a

Buyers Market Phase 2 BM2 Also called the Absorption Market Admittedly the home in the valley is not nearly as sexy as the big house on the hill and for a seller looking to unload while in an absorption market doesnt quite have the boomtown appeal of an expansion market. Still there is potential money to be made. In an absorption market the apartment projects that were planned in the expansion market are now coming online. Inflation is on the rise and in an attempt to normalize the economy the Federal Reserve will probably increase interest rates causing a leveling of prices and a slowing in property purchases. Yes there is money to be made but it is out on the horizon. Now is the time to be buying.

Across the country we are currently sitting at nearly the bottom of this visual cycle in a Buyers Phase 2 Absorption Market. This phase has also been affectionately nicknamed The Millionaire Maker Phase. In this phase there is an oversupply of properties on the market unemployment is high and foreclosures are peaking. The great news isthere is only one way to go from hereUP! As such we as real estate investors should be capitalizing on acquiring as much property as we possibly can right now while it is raining deals.
As recently as one year ago in many cities it was still extremely competitive finding and securing deals. Now that has all changed. Deals are everywhere. In fact there are so many deals that for the first time in the last 5 years or so we are actually able to cherry pick the BEST deals to shape our portfolios for the next 5 years.
In this Millionaire Maker Phase the biggest money will be made by Rehabbers that can BUY and HOLD until we transition into the upswing of a Sellers Phase 1 Market where Job Growth is driving demand and properties begin to become absorbed again into the marketplace. Since we make our money when we BUY not when we sell this is THE optimal time to buy while prices are low sellers are desperate other investors are running for the hills and its raining deals!

About the writer:  Justin Anderson is a seasoned real estate investor with over 10 years experience in the Real Estate industry. He owns over 500 rental units has rehabbed over 300 units in the last 5 years and has an additional 170 units in the pipeline to be redeveloped or rehabbed in the next 12 months. Additionally Justin has mentored and trained over 2000 students over the course of the last 4 years. He is the cofounder of the Art of Real Estate Investing www.ArtOfRealEstateInvesting.com where you can get Your FREE Copy of The Official Rehabbers Guide to Financial Freedom! The Best Free Real Estate Investment Resource Out There!

How To Select The Right Health Insurance Policy

A health insurance policy provides protection against high medical expenses and it is also an important taxsaving tool. Policyholders do not have to bear the cost up to the amount of the insurance cover taken and they can save their tax under Section 80D of the Income Tax Act 1961. Selecting a particular health policy requires checking out the various details from different insurance companies and then making a decision. Here are several factors that need attention while buying such a policy:

Coverage of Hospitals

One of the first things that have to be considered while selecting a particular insurance provider and its policy is the coverage of hospitals relevant to you. Just having a tieup with a large number of hospitals is not enough there has to be adequate hospitals that are present near your area of residence so that the required treatment can be taken. At the same time hospitals covering various areas of medical treatment also have to be included. This is the reason why the coverage of the hospitals with which the insurance company and its third party administrators have a tieup has to be checked. So figures like 3000 plus hospitals covered and so on are meaningless till the actual spread and quality are considered.

At the same time the overall coverage across the country also has to be checked because sometimes there might be a situation where there has to be an admission to a hospital elsewhere and this should also be possible. Usually an insurance company reimburses money when the necessary treatment in an emergency has to be taken at a hospital that is not a part of its tieup list but any conditions about exclusions here also need to be checked.

Exclusion in Policy

Most people pay attention to only the amount of the health insurance policy and the premium to be paid but another factor that plays a very important role in the entire issue is that of the exclusions in the policy. Exclusions refer to the conditions that will not be covered by the policy. This is known only after reading the fine print of the policy but once again very few people even ask about this point. There are several important diseases that are excluded from the policy some of which include HIV cancer and so on. At the same time most policies for females also exclude costs related to pregnancy. All these details have to be known before any decision about the purchase of a policy is taken. This is necessary to ensure that the insurance company does not disallow some of the expenses.

In several cases a health insurance policy says that if there are already existing diseases and these are intimated to the company then they will be covered after a specific number of years say 2 years or 3 years. There are also conditions where some diseases even if not intimated to the insurance company are covered after a certain period of existence of the insurance policy is complete. Clarity on these issues and a shorter time period for coverage of existing diseases are in the interest of the policyholders.

Cashless Facility

There has to be the facility of cashless insurance available at a large number of hospitals with a particular insurance policy. While most insurance companies will say that we offer cashless insurance there are often conditions under which the process is not followed and the reimbursement method has to be adopted. This has to be considered because the insurance company can very well say that for a particular hospital or area there is no cashless insurance as has happened in several cases.

This factor is important because suddenly you will be required to ensure that initially the amount of treatment will have to be paid by you and then the amount can be claimed back. This can also take a lot of time and there will also be conditions under which the amount is disallowed increasing your burden. The larger the coverage of the cashless facility the better it is for you.

Age Coverage and Premium

The age till which the insurance company provides you with the necessary health cover is essential. For a young person this might not seem to be important because every company seems to be rolling out the red carpet but the situation changes as the years pass by. The longer the age for coverage the better it is. Many insurance companies will cover you only till the age of 70. Others will continue to cover you if you remain with them even after passing the specific age. The longer the time period for which cover is available the better it is so that you are not denied the coverage when it is needed the most.

There are several companies that have raised the premium significantly for those who are either senior in age or who have made a claim. The rise is even 200300 per cent in a year. This creates a lot of pressure and problems in maintaining the policy and hence the premium policy of the company also calls for a careful perusal.

Other Factors

There are several other factors related to the health insurance process that needs attention. For example the number of days for which expenses will be provided pre hospitalisation and post hospitalisation needs to be considered. In this case too the longer the period the better it is for you. Another issue that has come up in recent times is that of sub limits where specific expenses are restricted to a specific sum. For example there are policies where there is a condition that every day you will be paid up to Rs 5000 for doctors fees and Rs 2000 of room rent and so on. This has to be considered carefully to see whether it is feasible because in such cases even if you remain within overall limits if your expense exceeds these figures a part of your claim will not be given. Some policies also cover the ambulance cost during a treatment.

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