Broker Check

August 2018

Long-term Care Insurance

We believe that protecting your wealth from long-term care expenses can be part of a sound financial strategy. Even though most Americans don’t anticipate needing long-term care, statistics show that the majority of individuals will need some form of care during their lifetime. Having long-term care insurance, which covers care received at home as well as care received in a nursing home, can be a practical solution.

Let’s clear up some of the misconceptions about long-term care expenses:

Myth 1: It Won’t Happen to Me
The U.S. Department of Health and Human Services estimates that 70% percent of all individuals turning 65 will need some form of long-term care during their lifetime. Events such as a stroke or heart attack can be financially devastating. Why not take steps to help protect your wealth from long-term care expenses?

Myth 2: That’s What My Savings Are For
Maybe you have considerable savings or investment assets and plan to use them to pay any long-term care costs. Maybe you’ve asked yourself: Why waste the cost of insurance if I never end up needing care? Even if you have sufficient wealth and retirement income, paying for long-term care out of pocket will likely reduce your total investment assets. This decision may not only reduce your income but increase your tax exposure—a painful chain of events. Considering that most long-term care situations last multiple years, the financial impact on your total savings and subsequently your style of living in retirement may be significant.

Myth 3: We Take Care of Each Other
In past generations, families took care of loved ones when they needed attention. Why can’t the same approach work today?
If you are considering caring for a loved one in a long-term situation, understand the outlay of time and energy will take its toll on you and the relationship. Even if you are healthy and strong enough to provide care for another, your abilities may change as you age. Studies have found that caregivers tend to suffer from emotional and physical stress when caring for a loved one and are almost six times more likely to suffer from depression or anxiety.
Grown children often step in when a parent can no longer care for themselves or needs help. If you think you can care for your parent, or that your children can help you, consider the impact this role reversal can make on your entire family. Receiving assistance with eating, dressing, and bathing from a grown child can be uncomfortable for everyone. Family caregivers can spend more than 30 hours per week providing such care – almost a full-time job. Also, women caring for parents or partners are twice as likely to experience depression or anxiety as non-caregivers.

Myth 4: Medicare and Medicaid Have Me Covered
Maybe you assume that Medicare will pay for everything. But did you know that Medicare has specific circumstances that must be met before you can receive long-term care coverage? Except for certain situations, they will not pay for most long-term care services, or for custodial care such as help with bathing or supervision.

Medicaid helps people with low income and limited assets. You must meet your state’s income requirements to qualify for Medicaid. While overall program rules are based on federal requirements, it is a joint program and states have considerable leeway in how they operate specific programs. To qualify for a home or custodial care, you must meet their specific requirements.

If you plan to spend down your assets to qualify for Medicaid, you should also expect to incur any resulting taxes. Ultimately, certain requirements may mean that you won’t be able to choose where to receive care, meet other financial obligations, or help your family members.

Long-term Care Insurance
You may believe your risk of experiencing a stroke, cancer, or dementia is similar to other risks in everyday life, such as getting into a car accident or having a house fire. The only difference is that at some point, far more Americans than those who will ever experience a house fire will need long-term care.

Much like your home or auto policy, a long-term care policy can shift some of the expenses to the insurance company. Your policy can provide benefits if you encounter a qualified health condition that renders you either incapable of performing certain activities of daily living or cognitively impaired.

From a financial perspective, this insurance provides leverage to your retirement portfolio. When or if you need care, the amount you would have paid into the policy is likely to be cents on the dollar compared to the amount you would have paid out of pocket for your care.

Help prepare those you love to be ready at a critical moment by having an honest conversation with them today. Find answers to such questions: Are my loved ones able to care for me? Will they be able to afford professional help if I need it? What will happen to the financial stability I have worked so hard to earn? Talking about the challenges of long-term care in advance may help protect the wishes and emotional well-being of your entire family.

No one can see into the future. So, the smartest way to handle uncertainty is to plan. We can work with you to create a personalized plan to protect your wealth from long-term care expenses.


Market Commentary: Cut Out The Noise, Look At The Numbers

Written July 17, 2018

The second half of this year sure has started with a political bang! Chaos seems to abound on Capitol Hill and the “what abouts” appear to be never-ending. While Federal Reserve Chairman Jerome Powell’s testimony to the Senate Banking Committee was reassuring, what about the 12 Russian officials indicted for tampering with the 2016 election? What about NATO? What about the summit between Presidents Trump and Putin? What about the escalating tariff threats? It’s easy to get lost in all of the doom and gloom of these “what abouts.” Chaos can bring a huge degree of uncertainty, and that can breed fear. 

What can we do? Well, whenever I feel a tug of anxiety concerning the markets or the news, I turn to the facts. To remain as objective as possible about the markets, our Investment Management Team follows 30 important economic indicators each month. We use them to cut through the noise and create a pretty good picture of how well (or poorly) the economy is doing. Our review can show us what the stock market has going for (or against) it. I thought I’d share with you a sampling of those indicators and how we interpret the data.

1. Corporate Profits.

As you can see from the left side of the chart above, S&P 500 earnings have been skyrocketing since 2015. Not only that, but S&P 500 profit margins reached a new high as of the first quarter of 2018. This tells me that these earnings aren’t vaper, but tangible improvements to the bottom line.

However, I don’t believe this boom will last forever. Notice how earnings projected to keep climbing for the next four quarters and then drop a notch lower in 2019? The reason is due to higher inflation, rising interest rates, and trade tariffs. Those will be a big drag (literally and figuratively) on corporate earnings after the “new car smell” of the tax cuts wears off. We are well aware of these risks that lie on the murky horizon of the future and keep a close eye on how they may impact the markets.

2. U.S. GDP

According to the US Bureau of Economic Analysis, U.S. GDP growth is projected to hit 2.8% in 2018 then fade in 2019 and 2020. Their projection is due to a growing deficit and higher interest rates. As the deficit grows, government borrowing increases. Higher government borrowing puts upward pressure on interest rates because the government is competing with the private sector for limited capital. This is what economists call “crowding out,” and the result is slower economic growth. Notice how the bullseye of risk shows up again in 2019 and into 2020. This is the same time frame that corporate earnings are expected to slow.

3. Market Valuation

What do you get when you combine a sideways stock market with rising earnings? A lower price to earnings ratio!  Known as the “P/E ratio” it is one of many metrics that show how cheap or expensive a stock is when compared to its peers. A lower P/E ratio means the stock is potentially inexpensive. A higher P/E ratio means the stock is potentially pricey. 

An important side note I need to make is that this isn’t the be-all-end-all metric to determine whether or not you should buy something. A stock with a low P/E might be a terrible company. A stock with a high P/E might have a higher growth rate than their peers and they’re knocking the cover off the ball. But in this context, we look at the P/E ratio for an entire index: the S&P 500.

The S&P 500’s P/E ratio was higher than its 25-year average early this year, meaning S&P 500 stocks were pricier than average. Notice how the S&P 500’s P/E ratio is right at its 25-year average now. It’s no longer as overvalued as it once was. This is because the stock market has been moving sideways this year while earnings have been gaining.  The ”price/earnings” ratio went down because ”price” was the same while ”earnings” went higher. I interpret this to mean that we aren’t in a stock bubble like we were in the late ‘90s.  I don’t see over-exuberance in the market.

These are only three examples of the long list of metrics we follow every month. I do see a positive end to 2018 when I look at the big picture. But it’s important to not get ahead of ourselves. We understand that the current landscape can change due to inflation, interest rates, and the deficit as we head into 2019. If corporate earnings can’t outrun those big hurdles, the stock market will probably struggle. If headwinds begin to blow too hard it might be time to make some adjustments toward calmer waters.  For now, we’re enjoying the relative calm before a potential 2019 storm.

 -Victoria Bogner, CFP®, CFA, AIF®

Disclaimers and Notes

The views are those of Victoria Bogner and should not be construed as investment advice. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. 

Securities offered through Cetera Advisor Networks LLC, Member FINRA/ SIPC. Investment Advisory Services offered through Cetera Advisor Networks LLC and McDaniel Knutson Financial Partners. Cetera is under separate ownership than any other named entity. All information provided in this e-mail has been prepared from sources believed to be reliable, but is not guaranteed by Cetera Advisor Networks and/or McDaniel Knutson and is not a complete summary or statement of all available data necessary for making an investment decision. All information provided is for informational purposes only and does not constitute a recommendation. 

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

Celebrating Karey and Tammy

If you’ve worked with McDaniel Knutson at any point over the last several years, then chances are that you’ve had the expertise of Karey Chester and Tammy Barnes working for you. That’s because this month marks Karey’s 20th and Tammy’s 10th anniversary with us! We thought we’d celebrate these anniversaries by sharing what they do for us…and more importantly, YOU!

Karey joined our team in 1998 as Wayne and Jude’s administrative assistant. Since then she has pursued many avenues of education and is now our Office of Supervisory Jurisdiction (OSJ) Branch Manager. This means she knows her stuff when it comes to doing what’s in your best interest. Karey makes sure we stay well inside the lines of compliance with laws, regulations, company policies and contracts. Karey also serves as our Chief Operations Officer and is an Accredited Investment Fiduciary®.

When not at work, Karey serves on the board for Just Food; the Douglas County food bank. She is committed to health and wellness – you might find her on any given night at the gym or a sporting event cheering for her kids.

Tammy has been working in the financial planning industry since 2003 and joined MKFP in 2008. She took over our special projects and marketing in 2011 and further transitioned to our investment advisory team in 2013. She trades and audits all actively managed accounts at McDaniel Knutson. Many large financial institutions have trading rooms where traders buy and sell products on behalf of the company. That is why we consider ourselves lucky to have a full-time trader working for you.

A Kansas City native, Tammy is a proud Air Force wife and currently stationed in New Mexico. She supports her local community as the Treasurer of the Pregnancy Resource Center in Eastern New Mexico.