That threat?  It is the chronic cost of care.

According the Market Mature Institute’s latest survey of U.S. Nursing Homes, the average stay in a long-term care facility will cost you $78,000 per year.

According to Nationwide Financial, the average nursing home patient requires a stay of 2.5 years.

So if I do the basic math, you are talking about an average cost for the average person of at least $195,000.

Now here is the rub, some cities have nursing home costs as high as $100,000 per year per person and that is not even for a private room.  These private rooms cost 10-20% more than a standard double occupancy room.

So now that planning part, let’s say dear old mom and dad have a nice little nest egg put away, but no long-term care coverage.  They believe, like so many, that they will not be one of the 4 in 10 that end up in nursing home care at least once or the 1 in 10 who will stay there five years or more (Agency for Health Care Policy Research – 1996).

Let’s assume their nest egg is $500,000 excluding the value of their home.  So you do the math, if they both end up in nursing home care, how much of this nest egg will remain?  The answer, not much.

So what are your options?

Well first realize that Medicare does not pay for long-term care and nursing home costs.

There are long-term care policies.  However, many insurers underestimated the costs of such care and have left the market.  Those that remain are charging much, much more for the same coverage.

One of corporate planning partners, Scott Barnett at the The Planning Partners, recently told me that many insurers have now entered this market void seeing an opportunity to offer long-term care as a option on some insurance and annuity policies.

According to Scott, “Some life insurance companies offer Single Premium Life Insurance contracts with available riders for Long-Term Care benefits.  You buy a Single Premium Life Insurance Policy. It can earn over 3.5% interest (far more than currently offered by banks in CDs). There is a death benefit available to your heirs of typically 2 to 2.5X what you put in.”

“For example, a $100,000.00 single premium can provide death benefits of $200,000 – $250,000; which is income tax-free to them. You buy a rider for if you ever need long-term care benefits. Then that same policy can provide at least 3-6 times your $100,000.00 single premium. That means you have a reservoir of cash from $300,000.00 to $600,000.00 (depending on underwriting) to pay for long-term care benefits. If you want greater benefits, simply increase your single premium paid into the policy. As in any life insurance policy there are other options and choices to consider when choosing a specific company and its contract. One important option returns your premium if you never use the coverage and no longer want to provide heirs an income tax free death benefit.”

So of course, there are other options.  The very wealthy can self insure this cost.  Maybe you believe your family is prepared to provide you this care.  Determining the right option for you may take some planning.

Let us help, we would love to help you sleep better by marking one more concern off your list.

Despite deteriorating economic numbers around the globe, markets keep marching higher because as one analyst said “the money needs to go somewhere and the market is the best of the worst options.”

The only market that has some level of growth is here in the U.S.  However, many of us (primarily me) have trouble believing the economic numbers being released on an almost daily basis are not somehow being massaged by Washington.  At least in Florida, there are just too many people struggling personally and in business for these growth numbers to be accurate….but then again what do I know?

The good news is this a market that continues to rise as you can see from the overall benchmark performance for April, below.

It is also a market that continues to make you money, which is what we are all here for anyways.

How Did We Do?

April was a great month for the S&P 500 as it rose 1.81%.  I am proud to say that most of our portfolios met or exceeded this benchmark or the strategy appropriate benchmark in April.

How did we do this?

We did this by being nimble, keeping our beta (i.e., volatility) below market levels and by concentrating our international and country exposure in Japan.

In our Global Opportunities portfolio we also profited from short trades in gold and commodities.

All in all it was a good month for us as the correlation between asset classes eased some and we were able to find pockets of opportunities not tied to the overall market.

Here is how we did in our active and passive strategies during the month:

Active Market Adaptive Portfolio Strategies (MAPS)

The one struggling strategy was our IA Trend Tracker strategy that was negatively affected by an inverse position in the EAFE index during the month as our SELL signal on the EAFE was rudely interrupted by an new Prime Minister appointment in Italy and talk of an end to austerity in Euro Land.  It now appears Europe could embark on the same “print till you run out of paper plan” that both the U.S. and Japan have embraced.

Passive Personalized Portfolio Strategy (PPS)

The Personalized Portfolio Solution is our “buy and hold” strategy that incorporates our trend following models to provide key signals when a bear market has begun.  All portfolios in this strategy were fully invested during the quarter.

Note that due to the complexity of the allocations for the customized solution we called PPS that the benchmark above is not an exact fit.  We know this, but since we continue to add clients and their customized allocation will likely differ from any other client, this benchmark is therefore a moving target.  For simplicity we chose a aggressively balanced portfolio of 75% the S&P 500 and 25% the Barclay’s Aggregate Bond Index.

More information on all our strategies is available upon request or on our website.  Here is some important disclosure information relevant to the above composite returns.

Market Forecast – May

So here we are in May and the markets continue to move higher.  As I told one client who was worried by recent market movements, it appears this market is now controlled by the Central Bankers of the world and until they decide the game is over, it is “game on.”  It is unfortunate, but this is the reality we live with today.

So my forecast for May is that markets will continue to move higher for the next several weeks.  We could thereafter see some weakness and a pretty good correction.  Whether this correction leads to a global Bear market or further upside, I don’t really know at this point.  Either way, we will likely get a bounce following this correction (if it does materialize), so it could be 2014 before we have any real risk to asset values.

Have a great month!

However, before you put that return to bed for at least another year, if not forever, please muster the strength to take one more look at that return because there are future savings to be had!

What are you looking for?

Simple, 2012 income that in the future can be earned more efficiently or sheltered from taxation.  With the advent of Obama Care and his war on high income earners, it is well worth the effort.

Here is our no brainer list of things to pay attention to for 2013:

1.  Avoid Taxable Interest Income in 2013

See all that interest income on your Form 1040? Interest income is the new Yugo or Edsel, depending on your age. It is so yesterday!!

The new tax laws really favor dividends over taxable interest. Interest is taxed as ordinary income at your top marginal tax rate, while dividends are taxed at 15% (and 20% for high earners).  This is much less than the top rates for most high income taxpayers.

I know there is market risk with high dividend equities or ETFs, but you cannot beat the current dividend yield.  You also get the chance for market appreciation with that portfolio.

Now I know many of you are nervous about the next Bear Market, so here is a way around that as well.  If you are willing to work with us, we will put together a complementary portfolio that rises in a Bull Market and partially or fully hedges that prized dividend stock or ETF portfolio when markets enter a Bear phase.

How is that for peace of mind?  Just call us or email us to find out more.

2.  Rediscover Municipal Bond Interest

If you must have bonds, why not rediscover municipal bonds.   Municipal bond interest is not subject to Federal taxes as long as you stay away from Private Activity Bond issues.  Current yields for AAA paper according to www.bloomberg.com range from 1.73% to 2.98% today for 10 – 30 year tax-free National paper.  This is higher than most comparable 10 – 30 year taxable treasuries which are yielding just 1.70% to 2.89%.

I know you may have read about recent bankruptcy filings in Jefferson County, Alabama or Stockton, California.  However, municipal bankruptcies are rare and if you stick to a diversified portfolio or a National Municipal ETF, your chances of significant damage from a surprise municipal bankruptcy are small.

3.  Shoot For Growth

If you are a younger taxpayer, why not stay away from income all together?  Why not shoot for growth?

A low turnover, high growth portfolio is tax efficient and will likely, over complete market cycles, provide better portfolio growth.

Yes there is some volatility, but when your horizon is long enough you can sit through the ups and downs.

If you simply cannot stand too much volatility, we can help with a portfolio that is fully invested in the bull markets and moves to cash, gold or treasuries in the bear market (see our Personalized Portfolio Solution).

4.  Maximize Your Contributions to 401K and Retirement Plans

I don’t know how many clients call me at the eleventh hour in a panic because their taxes are going to be higher than they thought for the year.  One of the best ways to manage this is to maximize what you contribute to tax deferred 401(k)s and other retirement plans.  However, since many of these are salary reduction plans and are taken from your pay, it is best to make that decision today, not in December of this  year.

Small business owners might also look at defined benefit plans or profit sharing plans to maximize what they can contribute on a tax deferred basis.

5.  Learn To Like Annuities

So many people have been turned off by annuities because some sleazy financial guy has tried at one point or another to lock them up in a high commission annuity with poor, expensive investment choices and a ten year surrender period.  However, there is a whole new world of low-cost annuities with tons of investment choices and no charges for moving or surrendering policy.

We recently started working with Jefferson National.  Their Monument Annuity has a monthly flat fee of just $20 and over 300 mutual fund choices.  Couple that with no surrender charges and an active strategy, like our IA Trend Tracker strategy, and you have a home run in this period of rising government taxation.

So in conclusion, a little pain today can save you a whole lot of green come tax time next year.  If we can help, please feel free to contact us.

1) Improved Savings Rates – Seventy percent of participants who received such advice increased their deferral rates and those savings rates nearly doubled from five to 10 percent of pay.

2) Greater Diversification – Participants had great portfolio diversification with a minimum of eight asset classes in their 401k portfolio compared to four or less for those choosing their own investments.

3) More disciplined Investing Behavior – The vast majority (92%) of advice users stayed the course in their 401k portfolios despite market upheaving during the study period.

According to Steve Anderson, Schwab Retirement Plan Services head, “A key finding in our research is the importance of getting 401k participants engaged in professional advice.”

If that was not enough to get professional help, an Aon Hewitt and Financial Engines study showed that “workers who used a professional for help between 2006 and 2010 experienced nearly a 3 percent higher return (292 basis points).”

Wow that is a powerful reason to seek help!

Strangely, however, Charles Schwab found that only 10% of employees who had access to help used it.

So why is this?  My educated guess is that most of that help is online calculators or tutorials.  Most participants would prefer someone to manage the account, not just help doing it themselves!

Many I am sure have asked their financial advisor for help but he/she has refused all but the most basic help because of the ERISA rules regarding fiduciaries.

We ourselves have stayed away from 401k / 403b management and advice due to this complicated set of ERISA rules and yet another set of SEC rules regarding account access and custody that make such work prohibitive for all but the larger advisory firms.

So what is the answer to this obvious need?

Well we believe we finally have one!

We have partnered with a firm called Retirement Management Systems or RMS that provides the 401k / 403b management for over 2000 accounts totaling over $500 million in assets via partnering with advisors. RMS creates the allocations (see below), does rebalancing and reporting.  They can work with most available employer plans on a secure basis.

InTrust Advisors then helps you evaluate and choose the proper RMS allocation to fit with the balance of your planning.  More importantly we are here to help you make allocation updates when your goals change or markets enter a sustained down period / bear market. The latter advice piggy backs our years of trend following experience and expertise.

So 3% is a substantial advantage!  Maybe you could realize a similar result if you let InTrust (and RMS) help you with the management of your 401k or 403b assets today.

Why not find out more today?

In fact adversity has been a part of human lives for centuries. Jesus Christ declared some 2000 years ago “that in this world you will have trouble.” (John 16:33)

So adversity has always been around and always will be.  The key is the lessons you learn from adversity.

In our business, we realized six years of adversity.  Many of you may be familiar with the fact that we acted as a hedge fund of fund operator and an allocator to hedge funds.  At the same time, we advised and supported several super wealthy families.  Finally, our smallest business unit was our investment advisory business.

However, one by one, these business units were stripped from us based on a set of circumstances that I can only call “Divine Providence” until only the investment advisory arm remained.

So what did we learn from this adversity?

First and foremost, we learned that as much as we thought we were in control of our business and circumstances, we were not. In my case, I learned to trust more in my creator and less in my own efforts.  Because sometimes for reasons unknown, bad things happen to good people.

Secondly, we learned that applying only one solution to a problem can be problematic. In our case, that one solution was trend following.  This investment style went through a tough period in 2010-2011 that cost us additional clients and business.

Today, we run multi-disciplined portfolios for clients so that we have exposure to multiple investment management styles, not just our proprietary trend following solutions.  This is a better solution anyways since it results smoother returns and enhances long-term performance.

Thirdly, we learned to just solve problems! Here is where the opportunity lies!  It is not in a product, but in listening to our clients (or prospects) and finding ways to add value.   We do that today by acting as their “personal CFO” and facilitating every aspect of their planning, not just the investment side.  We also do it with an increasing number of new investment options to solve more diverse problems (e.g. college planning to company retirement plans).

Fourth, we learned that concentrating on a small number of anything is a recipe for disaster! In our case it was serving just a small number of super-wealthy clients.  In any business there is always the risk one of your clients wakes up and decides to go a different direction.

The way around this is to have more than just a few clients.  This is why today we target a clients with a net worth (including of their home values) of $500,000 to $10 million.  These affluent households are poorly served and easier to build a diversified business around.

Finally, we learned to serve our clients and continually look for new ways to do it better. When we do this well, new business naturally comes in the door from our increasing happy clients.

As an example, we added a robust new client process with multiple steps (see Our Planning Process).  We are also in the process of finalizing a new quarterly client planning review process where we ask them a series of questions that spur discussion and further planning opportunities.  We believe this will help us add even more value to our clients, while guiding them toward their financial goals.

So can you learn from a tough period? You sure can if you are willing to move past the hurt and blame and truly take a unbiased reassessment of the root cause of the adversity.

How about you have you gone through a period of adversity in your life?  What did you learn?

Simple answer: We did!

How did we know?  This period has closely tracked the same period last year.  That is how!

This Year

Last Year

Do you see the similarity?

Look at the return comparison.

Very similar with exceptions of November and February!  We also believe April of 2013 could be a positive month and therefore another exception.  The overall return is frighteningly similar!

How Did We Do?

March was a great month for the S&P 500, but interestingly other U.S. and international indexes did not perform as well.  For example, the High Yield index continued its 2013 under performance only bringing .+33%.  While hot foreign markets cooled some over the bailout of the country of Cypress and returned just +1.31% in March.

The result was that your performance in March and for the quarter was greatly dependent (as always) on the indexes or market sectors you included in your portfolio.

Here is how the indexes performed for the quarter:

Our strategies performed well, but are more diversified so they obviously did not perform in line with the stand alone S&P 500 index as a benchmark.

Here is a synopsis of how they did:

Active Market Adaptive Portfolio Strategies (MAPS)

The IA Trend Tracker strategy as an example suffered from under performance by NASDAQ Composite, High yield and EAFE indexes relative to buying holding just the S&P 500 index.  It also was negatively impacted by NASDAQ and high yield sell signals in January that were short-lived as the market ultimate pushed higher.  This also contributed to its quarterly under-performance.

The interesting part of this is that this strategy on a back-tested basis has beaten the stuffing out of the S&P 500.  We are just in one of those periods where this particular strategy is under performing.  It should revert to the mean over time!

The Global Opportunity strategy has a 20% position in the foreign stock indexes and a 20% allocation to gold, high yield and commodities (long or inverse).  This 40% allocation to non-U.S. markets / alternative assets was the primary reason it underperformed the S&P 500 benchmark.

The Tactical Equity strategy underperformed primarily due to a February loss in the strategy while the S&P 500 earned 1.11%.  The interesting thing about this is the strategy was outperformed this benchmark until the last few days of the month when an unexpected large market move pushed the S&P 500 into positive territory while this strategy had reduced market exposure to manage possible downside risk.

Passive Personalized Portfolio Strategy (PPS)

The Personalized Portfolio Solution is our “buy and hold” strategy that incorporates our trend following models to provide key signals when a bear market has begun.  All portfolios in this strategy were fully invested during the quarter.

Note that due to the complexity of the allocations for the customized solution we called PPS that the benchmark above is not an exact fit.  We know this, but since we continue to add clients and their customized allocation will likely differ from any other client, this benchmark is therefore a moving target.  For simplicity we chose a aggressively balanced portfolio of 75% the S&P 500 and 25% the Barclay’s Aggregate Bond Index.

More information on all our strategies is available upon request or on our website.  Here is some important disclosure information relevant to the above composite returns.

Market Forecast – April

We stated last month that the powers that be will continue to juice this market higher into April.  Now that we have entered April, it will be important to watch the intraday highs on the S&P 500 of 1476.  We have already exceeded the daily closing high.

Our guess is that we make new highs on the S&P 500.   We have already put in new highs on the Dow Jones Industrial and Russell 2000 averages.  However, the volume behind this advance has been anything but impressive.  This would lead us to caution investors to be careful!

The fact that we set new highs will in our opinion not necessarily set up further advances, nor a new bull run.  In fact, we think these new highs will suck in more sideline money just in time for a significant corrective move in late April or early May.  So the watch word here is to stay awake and be careful!

Life insurance provides a product that compensates the beneficiaries in the event of sudden death. This can help families survive the financial loss that results from death and supply families with adequate financial income.

However, life insurance is not for everyone. For example, if you do not have kids or anyone who depends on you for financial support, then you do not have a need for life insurance.

Life Insurance as a Safeguard

Life insurance can be a great safeguard if you are young and have children. If you were to die prematurely while your kid is still wearing diapers, who would provide the money to raise them and get them through school? This is where life insurance comes into play.

Additionally, for married couples who are getting up in age but still have a mortgage to pay off, life insurance could also provide security in this instance. Such as if a married couple is in their late 50’s and has a mortgage balance of $50,000 to pay off with another 10 years of payments. Having a substantial amount of life insurance capable of paying off the existing mortgage balance could ensure that the surviving spouse can live in the home until they pass away.

Retirement

Using life insurance in retirement is almost never a beneficiary option, the majority of times people who have retired just simply do not need it. With the deterioration of the economy and many retirement plans, people who are getting close to retirement are exploring ways to build savings that could protect their spouses if they were to pass away. Life insurance however, is not always the answer in this case.

The main reason is because life insurance is essential for people who want to support their family if the breadwinner dies. So if you are retired there is almost no reason to get life insurance if no one is depending on you. The cost of life insurance also rises as you get older. This is because life insurance companies know that the older you get the more likely you are to die, and increase the price of premiums as a result.

Policies

A healthy adult at 35 years old could buy $500,000 of 20-year ‘term life’ insurance for around $400 a year, but an adult that is 60 years or older could pay several times that for the same coverage. Life insurance is not always inexpensive as said to be. Fees for life insurance could take all of the money you put into a cash value policy within the first year.

There are also high annual costs that could cancel out the interest you may earn in upcoming years. You may never really know how well a life insurance policy has performed, although most mutual funds disclose their fees. The total cost of life insurance is dependent upon risk factors like your medical history and age, so it will usually be cheaper to buy life insurance if you are young and healthy.

Alternatives

There are financial alternatives to life insurance if insurance does not seem like the right route for you to take. Today, funeral expenses can be prepaid so that you can pay to cover your own funeral, including your burial site or cremation. This may be ideal if you would want to lessen the burden on your family financially and when it comes to arrangements. You do not need a life insurance policy to cover the costs of funeral expenses if they are prepaid. Savings accounts can also be an ideal alternative to life insurance.

You can open a savings account and deposit a percent of your check in there bi-weekly or monthly. When you pass away, your family will have instant access to your funds to pay for funeral costs or other costs that are related to your death.

However, you would need to start saving early or depositing bigger amounts of money into your savings account in order to reach your goal. You would need to figure out how much you would need to deposit yearly and how long it would take you to reach your monetary goals.

Money market accounts are also an option if you would like to invest in savings that could yield high interest rates. Money market accounts generally offer twice as much interest or more than traditional saving accounts do. Although they usually require that you have a higher minimum balance. Figures such as $10,000 or $15,000 for a minimum balance for money market accounts are not uncommon. If you can invest large amounts of money into money market accounts then they may very well be worth it.

It is essential that you know where your money is going before you can plan where it should be going.  This next step is called developing a cash flow plan (see Cash Flow Planning & Budgeting 101 for general information on cash flow planning).  Cash flow planning is the precursor to developing a budget and actually feeds the budget lines that you use for your comparison with your actual monthly expenditures.

Today in the video below, we will try to help you better understand how to work with a cash flow template and how to adjust your goals if your income rises (or falls).

The key takeaways from the video and this exercise:

• Cash flow planning is a necessary step in budgeting;
• A template like ours can be helpful, but this really not rocket science…..it just takes a willingness to be a good steward of your resources and some time.
• Prioritize what is important to you first and then learn to live on what you have left.  So if your priority is saving for retirement and tithing, deduct those items first.
• If your income rises, raise the priority items first.  Try not to let lifestyle consume all your increase.
• If your income falls, try to adjust your lifestyle expenses first (your variable expenses) and only after you have cut these to the bone should you adjust your priority items (saving and charity).
• This plan feeds your monthly budget spreadsheet or Quicken budget line items.

Let us know what you think below.  Also please like this video on YouTube.

The reason this is so important is that you must have a good idea of what your actual monthly income and expenses are before you can prepare a plan for your cash flow and a monthly budget.  We have found over the years that many families have no idea where their money goes on the monthly basis….it just goes.

In this video, I will briefly walk you through the spending record and how to use it to get a better handle on your day to day spending and fixed expenses.

The important points to remember are:

1. Be consistent in recording your expenses everyday.  If fact at the bottom of the form are 1-31 that you can use to check off that you have entered that days expenses to help you stay organized.
2. Be honest.  No one is going to see this but you and this is a record of your actual expenditures that gives you the ammunition to better plan out your cash flow on a more intentional basis.
3. You may need to do this spending record over more than a single month.  In fact, many savvy individuals continue to use a spending record on an ongoing basis so they have the information to compete their budget.

So best of luck!  Let us know how you are doing or if you have questions.

The good news is February is behind us.  Although I believe we could see some weakness to start the month of March (post the first few trading days), I believe global stock markets will move higher into March and possibly April.  Of course, this is just an educated guess and anything could happen in this Fed induced market.

So what went right in February?  Obviously, the S&P 500 made money which is a  good thing.  This benchmark was pushed higher by strength in utilities, consumer staples and health care.  These are all defensive names and should be enough to tell you how professional investors viewed the month that just ended.

You can also see that the S&P 500 easily led the mid and small caps and the Nasdaq to the upside during the month.  (I apologize the returns don’t quite match up, but the best I can fine turn this chart is for the period of January 28th- February 28th.)

How Did We Do?

Our investment strategies were generally flat for the month with returns in the range of (.23%) to +.64%, depending on the portfolio.

Our solutions with the greatest international or global stock exposure tended to be on the low end of the performance, above, as the EAFE Index lost (1.16%) during the month of February.

Our portfolios with greater bond exposure (the more conservative) did better due as the same exposure that hurt them in January now benefited them.  The Barclay’s Aggregate Bond Index was up +.54% in February.

We were also a bit too conservative as it turns out in February, unsure of whether the rally would continue or whether we would get a bigger pullback.  Our exposure models kept vacillating between ~70-100% invested all month long and we tended to stay on the lower end of that range.  This was most clearly demonstrated in our Tactical Equity solution which finished the month down (.04%) despite S&P 500 like holdings.

In this market it just has not paid to manage risk.  Of course it never does until it does!  I think that time where risk management will matter may happen in 2013 when the next Bear market begins.

Market Forecast – March

I hinted above that I believe the powers that be continue to juice this market higher into April after some possible weakness to start the month of march.   It is possible we head lower over the next few weeks and the test 1460-1475 on the S&P 500 before charging higher into the end of March and April.

Of course, events in Europe or even political indecision and fighting here in the U.S. could derail a perfectly good melt up.  In any event, if you are a subscriber, we will attempt to keep you on the right side of the trade no matter what happens around the globe or here at home.

Unsure if you are prepared for the next Bear Market, why not let us give you a free second opinion on your investments and plan.  You can sign up online or call me at 813-253-2388 x 222.