Monday, May 21, 2012

Survey reveals Boomers’ failure to prepare for long-term care


A survey by John Hancock early this year discovered that many people close to retirement are ill prepared for the possibility of needing long-term care. And that could lead to a life-changing event that they had never imaged.

It seems that while making sure they will be able to afford good care is important, they cannot bring themselves to the point of addressing the issue.

The odds of ever needing long-term care are high … 35% and 55% depending upon definitions for someone 65-years-old.

The average cost for a semi-private room in a nursing home: About $75,000 a year. And if it increases 4% a year, you’re looking at more than $164,000 a year in 20 years.

If you are turning age 65, you are entering the high-incidence years for needing long-term care. So it’s obvious that with this level of risk and cost, you should not ignore planning for it.

Here are a few key points the John Hancock survey found:

The majority of people know there is a significant likelihood they will need long-term care at some time in their lives. Only 6% believe this eventuality is not at all likely. And 52% agree that it is irresponsible not to plan for your own long-term care needs. Yet only 15% have a plan on how to pay for it.

The majority think long-term care insurance is the best way to handle the cost, although 89% don’t own a policy.

Less than a third felt they understood Medicaid. But more than half hope to qualify for the government program.

Three-quarters of the survey respondents expect that the benefits covered by Medicaid will be cut back within the next 10 years. Moreover, for most people it is important they receive good quality care in a nursing home, and three-quarters do not expect this level of care in a Medicaid-approved facility.

To sum it up, consumers know the risk of their health changing as they age is high. They don’t want to be a burden to loved ones, they want the best care possible, and they want to preserve what they’ve worked a life time to accumulate.

But … they aren’t taking action.

Best wishes,

George

Sunday, May 6, 2012

Beating S&P REIT Index by More Than 2 to 1


On Tuesday, May 1, I removed Senior Housing Property Trust (SNH) from the e-FinancialWriter REIT portfolio. The balance of the stocks held for the week ending May 4, 2012, are up 25.7% since implemented, not including 3.69% in dividends!

You might notice that I added the S&P United States REIT Index to the table below. I wanted to give a better apples-to-apples comparison of how an individual investor can do managing a real estate portfolio.

And as of May 4, we’re beating the index’s 1-year return by 2.32 to 1.

REIT
Sector
Blog date
 Price
 Closing price 05/04/12
Return to date %
Dividend yield %
PSA
Self storage
      90.75
                                           140.49
54.81
2.81







VTR
Health care
      52.87
                                             58.53
10.71
4.00
HCP
Health care

       36.81
                                                40.71
10.59
4.81
HCN
Health care

      47.53
                                             56.21
18.26
5.18







IAECREIN:CN
Canada
 19.45cn
24.26cn
24.73
0
ZRE:CN
Canada

 16.29cn
19.89cn
22.10
5.04
INVRLPRA:CN
Canada

 5.45cn
 5.48 cn
0.47
1.94

NNN 
Retail
27.18
26.94
-0.88
 5.72







Index return
since inception*




25.70

Avg 12-mo
return of REITs in portfolio*




13.64

Avg dividend yield of REITs in portfolio





3.69
12-mo return
S&P REIT index*




5.89

12-mo return S&P 500*




2.16

Source: Bloomberg
*Does not include dividends paid

If you have trouble seeing the chart, just in zoom in with your web browser.

Enjoy your weekend!

George
P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement.
If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

Tuesday, May 1, 2012

Reducing Portfolio’s health-care exposure


Senior Housing Property Trust (SNH), one of the e-FinancialWriter REITs, reported its 2012 first quarter results yesterday.

Revenue rose to $145 million from $99 million. Net income was $32.4 million, or $0.20 per share, missing consensus estimate of $0.24. For the same period last year, net income was $31.8 million, or $0.22 per share.


SNH is expanding operations and has acquired or is in the process of acquiring 14 more properties. But the stock hasn’t gone anywhere since I added it at the end of 2010, and is dragging down the Portfolio’s total performance. The consolation, of course, is the 6+ percent dividend.


I think we are well-covered in the health care sector with three other holdings, in fact over weighted. 


And I’m concerned about the state of the health care industry ...


Medicare and Medicaid cutbacks for hospitals, nursing homes, and assisted living facilities are almost guaranteed. Insurance companies are getting out of the long-term care business, Prudential being the latest. So with less backstops to protect the elderly and sick, patients will be forced to pay more out of pocket, which for many will be impossible.


Plus I want to diversify into another real estate sector … residential rentals.


Therefore, I am removing SNH from the portfolio today.


Best wishes,

George

P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement.
If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.