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Advisor

Re: Retirement plans

Talked with my CPA for a few minutes yesterday morning on my way out the door to an appointment.  She is thinking it over.  Got my answers on 2011 HSA contributions and such...the more routine stuff. 

She did tell me that here is a new insurance product that she has to look into for her clients - an LTC/life insurance hybrid.  That is more palatable to me than a straight LTC policy, which pretty much requires a miserable outcome in order to pay off, so to speak.  Evidently, this one pays if you need LTC, and if not, pays your beneficiary a death benefit.  

 I said it sounded like those who got life insurance to pay a benefit during life when diagnosed with AIDS some years ago.  I believe that involved a third party buying up the policy benefits for a fee, that payment being the living benefit to the terminally ill policyholder.  You do not hear as much of this now that peopel are living with AIDS, instead of simply dying of it. 

<ay be worht yoru time to look into a similar product.  My CPA has promised to inform me more on it when we meet for taxes this coming year.  I also plan to talk to my insurance agent when we do our next review.  If you learn anything, please let me know, and I will do the same. 

 

 

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Senior Contributor

Re: Retirement plans

I'm sure you'll check into the actuarial aspects, but in general it does not pay the customer to combine an insurance feature wtih an investment feature.  Thus the advice to avoid paying a large premiium for  whole life insurance in favor of buying cheaper term and investing  the difference in a product of your preference.  If there are tax advantages to the LTC/Life plan that may tip the scales, but it will be interesting to hear what your agent explains about the concept.

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Advisor

Re: Retirement plans

I know it's an oversimplification, but I tend to think of actuarial calculations sort of in terms like those of an extended warranty for an electronics or appliance purchase...I never buy those, since they are simply not good financial products  for the consumer. 

Mike and I bought some larger term policies a few years ago, and will probably buy into new ones down the road/  I see them as a good way to level our estate, with vastly disparate values in the farms we have to will to our children.  More importantly, either one of us would be able to retain hired help to replace the other's duties in our ongoing operations. 

While I know now that whole life is a lousy buy, we have held onto a smaller policy each, since my diabetes diagnosis complicated buying more policies for a while, until I got a better grip on it. 

I am interested in this new product.  The last thing I want to do is become a burden to the ones I love. 

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Advisor

Re: Retirement plans

The thing about LTC is your chance of needing it is slim.  How many people do you know who needed it?  The average time in a nursing home is 1 1/2 yrs.   My mother was in exactly that long.  Grandmother and father in law 1 day.   Landlord friend 8 months.  So you have weigh your chances.  You might be better off purchasing home health care insurance.

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Senior Contributor

Re: Retirement plans

You may be right about your particular circumstances.  I've read somewhere that average stays in the nursing home are rising, however.  It does concern me, but I'm very wary of LTC programs.  On the positive side, as baby boomers begin retiring, they are going to chance the face of geriatric health care.  Most will not retire in the same manner as previous generations, they will stay more active and expect more activities to stay healthy.  I'm not sure how that will effect overall health care costs and nursing home costs.  It may delay the inevitable, high priced care that LTC programs are designed for.  Hopefully, it might also change some underlying fundamentals that influences the price of it as well.

 

 

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Advisor

Re: Retirement plans

I have to say I get the point in spades...we acquired virtually all of the land we are responsible for in the early nineties...maybe a few shares in the partnership of my home farm in the late eighties, but not much in the overall scheme of things. 

Not even accounting for timber - which for us at one sale was worth maybe five times the land it stood on itself at the time - every acre but the farm that was mined has appreciated by 2.5-5 times its acquisition value.  Even the one that was mined - and thus totally ruined in many ways - is valued at more than it was when it came to me. 

If the land has grown in value by only an average of 3X in value in say fifteen years, given all the craziness that has ensued in the interim, that is not all that bad. When yiou take the only really highly productive farm ground and turn it upside down, throw it back into the hole with no topsoil,  and drive heavy compacting machines over it for a dozen years, then you've gutted the heart of the melon, too. 

Putting trees making silent progress on 60% of our total land base makes for an even better overall picture.  The timber on this place will be a nice chunk of change we we hit around 70. 

Actually when I did a calculation of our present Roth contributions, we are putting away a sum comparable to a 4% 401(k) with a full match, on an income of $100,l000 each, every year.  I just hadn't put it into those terms before....

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Senior Contributor

A Simple Plan

put 1/3 of your wealth in land, or other fixed assets like a closely held business.

 

put 1/3 of your wealth in stocks

 

put the last third in CD's and/or bonds.

 

When you invest new money, or after a decade of growth on the old, rebalance. Age old strategy for insuring you buy low and sell high...diversification among asset classes.

 

You probably will always have over 1/3 in land and your business , so avoid this class with retirement funds. Just split the rest between growth and income.

 

Maximize your tax savings...this is money left to invest and who knows what the government will tax in the future? I have zero confidence that Roth investments will never be taxes. Remember when they said that about social security? But I would still do them if you have extra money to invest, just fund the tax deductible ones first.

 

Maybe do SEP plans, or SIMPLE IRA plans and put as much away as you can. Mine goes to a combination of things, and into mutual funds that are nationally recognized. Also, the basic CD at your local bank can be ok, too if they give you an unadvertised rate.....just ask them for a good rate...these are all negotiable, too. If you don't have employees, there is an owner 401K that can be funded with $40,000 per year or so.

 

Do these moves every year, pay yourself first, and sit back and let the wonder of compound interest and growth work its wonders.

 

 

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Senior Advisor

Re: A Simple Plan

Yup! The thought of 1% interest that is taxable makes me wonder where the marvel of compounding is.

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Advisor

Re: A Simple Plan

May of '08 I sold all stocks and mutual funds. The dow was about 13,500.  The pundits are raving how good the stock market was this year and what did it end up at?  11,700 or so?  In that 2 1/2 yrs. land increased $1,000 or more an acre.  Remember 20 or 30 years ago when grains got too high the gummint would release from reserves?  Guess what?  There are no more reserves.   BTW   The local elevator tells me farmers are hanging tight on what they didn't sell at harvest to pay bills.

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Frequent Contributor

Re: Retirement plans

The last few years have made me very skeptical of investing in anything other than what I know best and that is land.  Retirement plans for many have been permanently damaged by the volatility of the stock market and financial crooks who seem to have a strangle hold on Washington.  In addition to this we have financial instability at the local, state and federal levels of government.  We have deflation, inflation and the potential for hyperinflation.  The question is what impact, if any, should all of this have on our retirement planning? 

 

Having said all of this I just don't trust much of anything when it comes to money anymore.  My perspective, be it right or wrong, is to keep pumping money into the farming operation and let the chips fall where they may.  I plan on pulling all of my money out of my 401K this year and purchasing more land with it, assuming a decent opportunity arises in the land market.  We each just have to find our level of comfort and proceed in that direction.  

 

When it comes to estate planning there is one thing I would like to mention.  Recently had an experience with a relative that showed me the importance of having an iron clad estate plan.  My aunt and uncle had a small farm and one child.  A few years ago my aunt passed away.   A couple of years later my uncle remarried and soon his health declined.  The new wife was not too happy about having to care for a sick husband.  To make a long story short my uncle suddenly changed his will leaving everything to the new wife. A couple of years later my uncle passed away. 

 

You can use your imagination as to what  happened to get the will changed.  There is no way I, or any of the rest of the family, thought that the only child would be cut out of the will.  I am sure my deceased aunt did not.  Moral of the story is to never assume things will be left as you want them in case you precede your spouse in death.  By the way, one of the new wife's children wound up with the house and land.   

 

To anyone reading this, get a good estate planning lawyer and make sure things such as this do not happen.  

 

 

 

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