Do you need long-term care insurance?
Ask the Fool
Question: If I plan to move within a few years, is it dumb to buy a house?
Answer: It will be risky to buy a house, as you might not recoup the buying and selling costs, which can total more than 6 percent of a home's value. With a traditional mortgage, your payments in the first years are mainly applied to interest, not to paying off the principal. After living in the house for only a few years, you'll still owe the majority of the loan. (Plus, you'll have paid for repairs, insurance, property taxes, etc.)
Renting is an option everyone should consider. Yes, you lose the mortgage interest tax deduction and don't build equity, but if your rent is much less than your mortgage payment would be, you might invest the difference and build a little nest egg. If you expect home prices to fall or stagnate in the coming years, renting would be especially prudent. Access a rent-or-buy calculator at finance.yahoo.com/calculator.
Question: What are some clever ticker symbols?
Answer: There are many. For example, there's 3M (MMM); Yum! Brands (YUM), the parent of KFC, Taco Bell and Pizza Hut; Brinker International (EAT), the parent of Chili's; explosives specialist Dynamic Materials (BOOM); Molson Coors Brewing (TAP); Asia Tigers Fund (GRR); Gibraltar Industries (ROCK); National Beverage (FIZZ); Sotheby's (BID); Olympic Steel (ZEUS); and amusement park company Cedar Fair (FUN). Before eyewear maker Oakley was bought out, it traded under the symbol OO. (Think about it, if you don't get it at first.) Also interesting: Oil and gas company Denbury Resources has an alarming ticker: DNR. Southwest Airlines' is LUV.
Fool's School
Do You Need Long-Term Care Insurance? Long-term care insurance is designed to help pay for a nursing home or other skilled care as you age. Without it, if your health forces you to make a permanent move to a nursing home, the rest of your major assets (such as your house, your car and even your savings) become far less useful to you and can be sold to help cover the costs of care. Once your assets are nearly completely depleted, Medicaid will step in to cover remaining costs. (Note: Not all nursing home facilities accept Medicaid, so plan accordingly.)
If only one spouse needs costly care, Medicaid provides modest income and housing protection for the other spouse. You'll experience less financial disruption with long-term care insurance. Many people buy it in their 50s, when it can cost thousands of dollars per year. Wait longer, and it can cost much more. Premiums can vary based on your age, health and the insurance company's specific underwriting factors. They also depend on your personal choices, such as the maximum daily benefit level, the length of stay your policy would cover and any waiting periods before the coverage starts.
Unless you expect to work until you pass away or become incapacitated, you'll have to keep paying those premiums throughout your retirement to keep the insurance in force. Thus, you'll need enough spare income in your retirement to pay the premiums, requiring a solid asset base, a strong pension and/or a very low cost of living.
Some experts suggest that those of limited means plan to rely on Medicaid, while affluent folks can plan to simply pay long-term care costs on their own. Those in the middle can decide whether they can afford long-term care insurance or they might try to "self-insure," by stockpiling dollars in a separate account earmarked for long-term care. For context, the average annual cost of a nursing home room is around $80,300 per year for a semi-private room or $91,250 for a private room. And the vast majority of people stay in nursing homes for fewer than five years.
My Dumbest Investment
D'oh! One of my dumbest investments was a young company called Intuitive Surgical. A Motley Fool writer wrote a great article about it, and it left me with such a good impression that I purchased 3,000 shares at about $17 each (yes, that's about $50,000). For the next two years, I watched the price fluctuate between $17 and about $12. I eventually got so tired of watching that deadbeat that the first time I got a little pop (to around $18), I sold the entire position. Well, the stock has been trading around $485 per share recently, so you do the math. I definitely left a lot on the table. By the way, less than a year later, Fool co-founder David Gardner was recommending the stock to his newsletter subscribers at about 2.5 times my sale price. Unfortunately, I found it difficult to buy back something I just sold, so I never added the stock back to my portfolio,
The Fool responds: You would have made more than a million dollars had you hung on, but selling was the right thing to do if you no longer had faith in the company. Intuitive Surgical (Nasdaq: ISRG), which makes and sells robotic surgical equipment, has been volatile, but long-term believers are counting on more and more hospitals buying its machines over the coming years.