Archive for the ‘Lifestyle Choices’ Category

COVID-19 Vaccine Could Boost Seniors Housing Occupancy in 2021

This week we received preliminary very positive news that the Pfizer/BioNTech COVID-19 vaccine is 90% effective and that Pfizer could apply for emergency use approval by the end of the year.

On October 22, 2020, the Department of Health and Human Services (HHS) announced HHS’ partnership with CVS and Walgreens to provide the COVID-19 vaccine to residents in long-term care settings will include residents in independent living settings, including standalone independent living residences, IL/AL communities, and life plan or continuing care retirement communities (CCRCs).

Having a vaccine available in limited quantities that will be made available to seniors housing staff and residents on a priority basis could be a boon to seniors housing occupancy in 2021. Senior housing operators will be able to market that residing in senior housing residence will get you priority access to a vaccine, while staying in your might mean waiting 6 – 12 month or longer until a vaccine can be made available in large quantities.

We believe the impact of having access to a vaccine on a priority basis could most dramatic improve occupancy in IL and CCRC properties, where the move into a seniors housing community are most discretionary.

Seniors housing occupancy should also benefit from a track record demonstrating an ability to limiting the spread of COVID-19. For example, Ventas’ 3Q20 investor presentation indicates that its senior housing properties have not experienced a significant increase in new COVID-19 case since April 2020, while in the general community across American infections and death continue to increase.

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At the Life Care Centers skill nursing facility in Kirkland Washington two thirds of the residents and staff were infected with the Coronavirus and 37 people connected to the facility have died. In Brooklyn, the Cobble Hill skilled nursing facility had 55 Covid-19 deaths and was stacking up bodies in a makeshift morgue. In my own State of Maryland, just released statistics show nursing homes accounting for about half of all Covid-19 deaths statewide.

The drumbeat of news about widespread infection of patients and staff at senior housing and care facilities (mostly skilled nursing facilities) and large numbers of Covid-19 deaths is damaging the reputation of the entire seniors housing and care industry. While it seems clear that patients in skilled nursing facilities, who are self-selected to be frail, usually more than 80 years and who often have multiple pre-existing conditions have been hard hit by the Coronavirus and Covid-19, it is far from clear to me that the seniors housing and care industry as a whole has performed as badly as the news reports would indicate.

Most articles on Coronavirus and Covid-19 deaths in long term care lump all seniors housing and care facilities together including: skilled nursing facilities, assisted living facilities, independent living communities and continuing care retirement communities that combine two or more levels of care within a single community. Even though each of these facilities serves residents with overlapping but often very different, age, income and health profiles, press reports dramatize conditions at a relatively small number of skilled nursing facilities and generalize the skilled nursing to all types of seniors housing and care.

To do a fair comparison of how the seniors housing and care industry has performed during the Coronavirus pandemic, a number of variables need to be considered.

First, you need an accurate baseline of Coronavirus infections and deaths in the community. Because of insufficient testing it is likely impossible to get accurate Coronavirus infection rates for the community at large. It has also been widely reported that the number of community-wide Coronavirus deaths has been undercounted because the overall number of deaths in the community in 2020 has been much higher than the increased number of Coronavirus linked-deaths reported. Early deaths were not attributed to the pandemic, many early victims were misdiagnosed and were never tested for Coronavirus and little retesting of corpses has been done. Even today, many of those dying at home and even some of those dying in hospitals may not be tested and deaths may be attributed to other conditions complicated by the virus. However, Coronavirus may not account for the entire increase in death rates in 2020, as some physicians believe patients with other emergency conditions, such as heart attack and stroke, may be avoiding hospital care in an attempt to avoid the virus and, as a result, deaths from some other conditions may be up as well.

So the first step is to calculate the overall increase in deaths on a statewide or metropolitan in 2020 for the period from January 1 2020 through the most recent date for which deaths are available with the average number of deaths say over the last three years. Then to refine these numbers by looking at trends for major diseases, such as heart attacks and strokes and developing a reasonable community-wide estimate of Coronavirus/Covid-19 deaths. Ideally death statistics would be available by age and race since both are believed to increase the risk of dying from Covid-19.

The second step in a fair analysis of the performance of seniors housing and care facilities during the Coronavirus pandemic would be to control for the age, race and health status of those in facilities and in the community. Provisional death counts for the Coronavirus (Covid-19) and pneumonia and influenza reported by the CDC for the period from February 1, 2020 through April 25, 2020 show that 56% of all deaths were among those 75 years of age and above. Deaths of residents in seniors housing and care facilities contributed to these totals but were seniors in these facilities simply more at risk because of their age or did senior housing and care facilities have higher overall rates of infection and death than similarly aged seniors in the community? It has also been reported that people of color have died at higher rates from Covid-19 and whites. Ideally, we would also compare both the racial composition of seniors housing and care facility residents with those dying community-wide in order to understands if the racial composition of seniors housing and care facility resident can explain potentially higher death rates.

Finally, why did some seniors housing and care facilities perform better than others. Seasonal flu and other contagious conditions are a risk at all seniors housing and care facilities and typically result in higher death rates during the winter months when flu is most common. Senior housing and care facilities, particularly skill nursing facilities, have well-established protocols for infection control that often include segregating sick patients, shutting down new admissions, limiting visitors, use of protective equipment and enhanced cleaning regimens. Did some facilities implement infection control measures sooner than others and was implementation of infection control measures delayed because of asymptomatic staff, visitors and patients and the inability to get patients and staff tested? What role did government regulations such as mandatory social isolation play, if any, in infection and death levels in seniors housing and care facilities?

As part of this final stage of analysis, it is important for the industry to evaluate how seniors housing and care facilities of various types performed. Did skilled nursing facilities housing the oldest and most frail seniors have higher infection and death rates? Did access to testing and protective equipment make a difference? Did continuing care retirement communities, which typically have younger, more affluent, better educated senior population perform better than other types of communities and better than living in the community.

I believe it is important for the seniors housing and care industry to undertake the study outlined above in order to provide a more accurate assessment of how residents of seniors housing and care facilities faired from the Coronavirus pandemic. This should be done to provide seniors and their families with an objective basis upon which to select seniors housing and care choices. It can also provide operators, property owners and investors with useful information on how to limit future risks from a Corona virus return.

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On September 18, 2019, news sources reported the sale of the Newbury College Campus in Brookline, Massachusetts to the health care REIT Welltower for redevelopment into a senior housing community. Welltower reportedly acquired the nearly eight acre site containing 8 buildings with approximately 142,000 sq. ft. for $34 million. Welltower’s purchase confirm my view, expressed in a February post, that small college campus have the potential to be successfully converted to seniors housing (see below).

There was an opinion piece in The Wall Street Journal on Friday, February 22 entitled “America’s Disappearing Private Colleges”, written by Allen C. Guelzo, a professor of history at Gettysburg College. The piece documents the closing of Concordia College, a small historically black school in Selma, Alabama. It goes on to assert “The post-Great Recession baby bust will soon mean not enough students to keep small schools alive.”

In the early 1990s I spent more than five years advising colleges and universities on real estate issues. My clients included the University of Maryland, Johns Hopkins and the Hershey Medical Center of Penn State. Even then, future weakness was evident in demand for higher education once the Echo Boomers (children of the baby boomers) passed through their college years. As Mr. Guelzo documents, the decline in the number of future potential college students has worsened since that time because of the Great Recession.

“Birthrates plunged by almost 13% from 2007 to 2012 and the CDC believes fertility could fall further”. The birth dearth means 450,000 fewer college applicants in the 2020s according to economist Nathan Grawe in Demographics and the Demand for Higher Education.  Hardest hit will be New York, Pennsylvania, New England and around the Great Lakes, areas most populated by private colleges.

Harvard and other well regarded and well-endowed universities will continue to see high demand and have the resources to make their institutions more affordable and more attractive to U.S and international student. Rice University, my son’s alma mater, for example just announced a 30% increase in applications after the University put in place a more generous and more predictable aid formula and my alma mater, Johns Hopkins University, recently announced a major gift from alum Michael Bloomberg to provide more generous aid for undergraduates.

While the best regarded and best-endowed colleges and universities will continue to do well, Mr. Guelzo documents a number of small colleges closing, “17 in Massachusetts alone in the past six years”, and cites estimates that up to half of all U.S. colleges will close or go bankrupt within the next decade. Moody’s estimates that 15 private colleges will close per year. My experience as a real estate advisor to colleges and universities, and as a student of demographics, lead me to believe these dire predictions.

At the end of his opinion piece, Mr Guelzo identifies four options for leadership of small private colleges (1. Get serious about mergers, 2. Focus recruitment strategies westward where the decline in birthrates was lower, 3. Craft a niche for a particular student, and 4. Establish partnerships with local two-year colleges. ) I doubt any of these options alone will be very effective in combatting the “birth dearth” but see another option that small colleges should definitely consider – converting in whole or in part to seniors housing communities.

I make the connections between private colleges and seniors housing because, after working as a real estate advisor to colleges and universities, I spent 15 as a stock analyst covering senior’s housing and care companies and REITs owning seniors housing and heath care real estate. While the demographics driving potential demand for colleges and universities are dreadful in the 2020s, the demographics driving demand for seniors housing and care are very strong. The first Baby Boomers turn 75 in 2021 and turn 80 in 2026.

Senior housing operators and REITs owning senior housing real estate are currently struggling with some overcapacity pressuring rents and occupancy and higher labor cost pressuring margins. I believe the seniors housing industry was too optimistic about the age at which seniors would move to seniors housing, found capital too easy to get, which prompted some overbuilding, and has been less than fully successful in providing living environments to which seniors want to move. Lower levels of seniors housing construction and the continued aging of the population should gradual and significantly improve demand prospects for seniors housing in the 2020s. I believe converting small colleges in whole or in part to seniors housing has the potential to allow small colleges to survive or provide a softer landing for faculty and staff at colleges that need to close; and can also provide a more desirable housing option for seniors and potentially help with labor costs.

Some of the most successful and most attractive senior housing communities i have observed offer campus-like settings with a wide range of social, cultural, educational and recreational amenities. Erickson Living and Senior Living Communities and a number of large not-for-profit continuing care communities (CCRCs) provide attractive campuses with a high level or amenities. (See links below to ericksonliving.com and senior-living-communities.com). Erickson’s first senior housing community was developed on the site of a former convent with some of the same qualities as a small college campus.

https://www.ericksonliving.com

https://senior-living-communities.com/

The challenge of developing large CCRCs is that they require very large upfront investments of money and time to be created on a greenfield basis. Small colleges, which have campuses, dormitories, cultural, educational and recreational amenities in place, could potentially be converted to seniors housing campuses at a lower cost than greenfield development while offering name recognition and character from the outset. One other feature seldom seen in senior housing communities, but which appears to significantly increase a community’s appeal to seniors, is a mixed age environment rather than a senior citizen ghetto. My favorite example remains Merrill Gardens at the University (see link below).

https://www.merrillgardens.com/senior-living/wa/

Merrill Garden at the University is a community near the University of Washington in Seattle that combines a senior housing community, non-age-restricted apartments and retail on a single site with the apartment building and senior housing community sharing an interior courtyard and the senior housing community’s bars and restaurant open to the public allowing apartment and senior housing residents to mix. Senior housing communities developed on or near other university campuses also have been attractive to seniors and appeal to alumni but I believe there is an opportunity to more fully integrate seniors housing into a college or university campus and create more interaction between seniors, traditional college-age students, faculty and staff than has been done to date. It is this type of integrated seniors housing / college setting development that I see as an attractive 5th option to those Mr. Guezlo identifies to save some of America’s small colleges.

Integrating senior housing into an existing college campus or fully converting a small college campus to seniors housing may also offer labor force benefits because students, existing college staff and potentially even faculty could be employed to providing programming, patient care and building maintenance for seniors housing as well as university buildings and might form a base labor force from which senior housing could draw even if the college is closing. Seniors may also be able to help fill college classes, particularly in the humanities or even serve as adjunct faculty.

The most feasible strategy for a college to evaluate and execute a partial or full conversion to seniors housing is to engaged qualified real estate and financial advisors to evaluate the option and help run a process to select a for-profit or not-for-profit senior housing partner. For some religious-affiliated colleges, the same denomination may also develop and operate seniors housing, which might ease some of the anxiety of teaming with a senior housing partner.

I welcome inquiries from colleges and universities wishing to consider a college to senior housing conversion and may be able to help evaluate such options at a strategic level and assemble a team to help a college or university execute such a conversion. For some insights into the process see the link to an article I co-authored in 1996 entitled “Privatizing University Properties” in the Journal Planning for Higher Education.

https://www.scup.org/page/phe/read/article?data_id=31113&view=article

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Customized Tour of Northern Italy Was Great Experience

My wife and I spent nearly three weeks touring northern Italy in September and early October 2018.   As was the case with several of our recent vacations, we used a travel agent working with a in-country tour operator to design a customized tour for the two of us rather than joining a group.  The Italian tour operator we worked with was Olive Tree Escapes, which has an office in Chicago.

This was our third trip to Italy and was designed to allow us to see parts of the county we had not visited before, see great art and have some time to relax and immerse ourselves in Italian culture.   We visited Venice, Bologna which we used as a base for a number of day trips, Lake Como and Milan.  Our day trips from Bologna included Ravenna, Florence, Ferrara and the Emilia Romagna countryside.

Logistics

We flew direct from Philadelphia to Venice on American Airlines and returned from Venice to Philadelphia on another direct flight.   If we had returned from Milan, we would have had to take a connecting flight to reach Philadelphia.   For travel between major cities in Italy we used the excellent high speed rail service, the Frecciarossa, that travels up to 185 miles per hour with a much smoother ride than Acela service in the U.S.    For shorter day-trips out of Bologna we used slower but still comfortable and efficient regional train service.   It is possible to reserve trains and get tickets from the U.S. over the Internet.  We used the national rail service, Trenitalia.  A private rail company, .Italio, now offers competitive and sometimes lower priced service on some routes and it may be worth checking on this option.    Our tour company arranged for transfers to and from the airport and the major inter-city train stations in cities we visited.

Venice

There are no cars, buses or taxis in the central parts of Venice. Getting from Venice’s Marco Polo airport to the old city included a car service from the airport terminal to a water taxi and porter, a water taxi ride up the Grand Canal to a dock near our hotel and a walk from the dock to our hotel with our porter.  We stayed at the Londra Palace located on the waterfront promenade facing the Canale di San Marco, a few blocks from Piazza San Marco, the center of Venice.  This is an ideal location, close to the main tourist sites with canal views and vaparetto (Venice’s water bus) docks located just across from the front of the hotel.   Even though we booked well in advance we were unable to get a deluxe room with a canal view but our room was comfortable, big enough for two and well appointed.   Our room came with complementary breakfast served on the first floor with the option of eating outside facing the canal. Service at the Londra Palace was excellent and we would definitely recommend the hotel.

Grand Canal

On the day we arrived in Venice we walked through Piazza San Marco and explored parts of central Venice on foot, visiting Santa Maria Gloriosa dei Frari Church, which feature altarpieces and artwork by Titian, Bellini and Tiziano.   Our first full day in the city we toured the Basilica San Marco and the Doge’s Palace, for which a guide that can help you avoid the long lines is a worthwhile investment.  Other highlights of our visit to Venice included a guided tour of the Peggy Guggenheim Collection of modern art, touring the Academia museum, a visit to the Jewish ghetto where we toured several synagogues and visiting a European Crafts Fair at San Giorgio Maggiore.  Our tour company arranged a gondola ride for us one evening in Venice, which was very short and a bit of a disappointment.  If I was doing it again, I would find and negotiate my own gondola ride.  We ate well in Venice but favored small, local restaurants recommended by our guides or hotel.  We did splurge on aperitifs at the Caffe Florian on Piazza San Marco.

Gondoliers
St. Mark’s Square

Bologna

We picked Bologna, which is much less of a tourist destination than Venice, Florence or Milan more for its location as a base from which to explore Ravenna and Florence than for any other reason. But we found Bologna to be a delightful city featuring great food, the oldest university in Europe, attractive streets with covered arcades and good shopping options.   We stayed for a week in an apartment in Bologna located mid-way between the train station and the main square just off Via dell’ Indipendenza.    We took a walking food tour in Bologna with stops at a chocolate shop, charcuterie, pasta restaurant, bakery and gelateria, which were all great.    We also did a food tour of the Emiglia Romagna countryside to see Parmigiano Reggiano, Balsamic Vinegar and Parma Ham being made, with a stop for lunch at a vineyard restaurant.  When planning the trip we thought two food tours were excessive but we very much enjoyed them both.  We also explored the center of Bologna including historic buildings of the University of Bologna, founded in 1088.

Deli Shop Window
Making Parmigiano Reggiano
Library University of Bologna

 One of the nice things about staying in an apartment versus a hotel, in addition to having a washer and dryer, is the ability to have meals on your own.   The owner of the apartment we rented directed us to groceries and salumerias.  We ate simple breakfasts of yogurt and coffee and had two dinners in, one of fresh pasta with pesto and salad and one of cheese, charcuterie and bread with olive oil and balsamic vinegar.

Restaurant near our apartment in Bologna

Florence

We took a day trip from Bologna to Florence, only 35 minutes by train, to visit the Uffizi Gallery, the Bargello and Pitti Palace. We had spent time in Florence on a previous trip to Italy, so it was an easy choice for us to focus on the art rather than exploring the City. It is essential to make reservations in advance to tour the Uffizi and the Pitti Palace and at the Uffizi you will still wait in a long line to enter near when your timed-ticket indicates. The Uffizi is one of the world’s great museums and it is well worth putting up with the large crowds to see its collection. In Florence, we had cappuccino and breakfast at an outdoor cafe, a nice lunch in wine bar overlooking the Arno River but ended up having dinner in the train station because our train back to Bologna was 90 minutes late. Due to a problem with the tracks north of Rome, all of the trains running south to north were delayed.

Ponte Vecchio from Uffizi window

Ravenna

Ravenna dates to the 2nd century BC, when the Romans colonized the Po River Valley. It served as a major port and naval station for Caesar Augustus, was the capital of the western Roman empire and the capital for barbarian kings Odoacer and Theodoric. The magnificent mosaics found in Ravenna today combine Byzantine, Arian and Roman Christian influences.

Ravenna is a flat, compact and very walkable city and we toured the city and a number of its churches with a private guide. It was a highlight of our trip and a place you could spend more than a day. Ravenna was a high priority for my wife, who is an art museum docent, but both of us really enjoyed the mosaics and the city.

Mosaics in Basilica di San Vitale

Ferrara

Ferrara is only 20 – 30 minutes from Bologna by trains and was recommended to us as a pleasant city with a strong Jewish heritage. The city seemed pleasant enough and has a very interesting castle but all of the Jewish sites were closed for renovation when we visited and we we were a bit disappointed. We did not have a guide in Ferrara, which may have also caused us to miss some things.

Lake Como

Lake Como is simply gorgeous. We stayed in Varenna on the eastern shore of the lake, which is only a little more than an hour’s very scenic drive from Milan’s central station. We chose Varenna because Rick Steves recommends it as a base and were very pleased with our choice. We stayed at the delightful Villa Cipressi hotel, which is right on the lake, features it own botanical gardens and is only a short walk to the main square.

While on Lake Como, we took our own private boat tour of the Lake that included stops at Bellagio and Villa del Balbianello and cruising past a number of towns and villa’s including George Clooney’s. We also spent a day exploring Varenna and one day lounging on the grounds of our hotel and the Villa Monastero, which is right next door. We had meals at restaurants overlook the main square with its historic churches or overlooking the lake.

Our hotel Villa Cipressi
Sunset over Lake Como from our hotel window

Milan

We really had only one reason to visit Milan – to see Leonardo da Vinci’s Last Supper. This requires advance booking and usually booking with a guided group. Seeing the Last Supper was a great experience but it is a highly regimented and short visit. At your appointed time, your guide gives you background while you wait on the plaza outside the refectory of the Santa Maria della Grazie Church, where the painting is located. You then enter an anteroom where the humidity is adjusted before you enter the room housing the painting. Each group only gets 15 minutes to view the painting and for this year preparatory sketches for the Last Supper from the collection of the British Royal Family. While the Last Supper began deteriorating from almost the moment it was completed because of the technique da Vinci chose to use, has suffered through bad and good restoration and has very muted colors today, it is still a painting of immense power and a masterful work of art.

While our focus in Milan was the Last Supper, we spent a day and a half and two nights in the City. Our hotel, the Sina Hotel de la Ville, was nondescript but pleasant and well-located. While in Milan we visited the La Scala opera house and museum on our own and did some shopping in and around the Galleria Vittorio Emanuele II shopping arcade, a 19th century high-end mall that remind us of GUM in Moscow. We also took a guided tour of Milan’s Duomo, which is a grand while lace-like Italian Gothic Cathedral.

Milan Duomo
Duomo Dome
Galleria Vittorio Emanuele II

We also ate two very good meals in Milan, one in the restaurant hotel and one in a restaurant called Restaurante Da Bruno, which is located in a brutalist Fascist-era building a couple of blocks off the main Piazza del Duomo. The waiter did not speak English so he brought out a large basket of freshly harvested porcini mushrooms to convey his recommendation and the pasta with mushrooms were great.

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My wife and I visited Costa Rica from January 6 – 15, 2018.   It is a remarkable country both politically and naturally.   A stable democracy surrounded by countries that have gone through political upheaval, dictatorship and civil war, Costa Rica abolished its army in 1948 and put the money into education and healthcare.   Only slightly above the equator, with long shorelines along the Caribbean and the Pacific and  with diverse typography, Costa has a remarkable diversity of climates, habitats, flora and fauna, with more species of birds in this tiny country than in all of North America.    After clearing much of its rainforests for grazing land and agriculture, Costa Rica began to restore it natural environment decades ago and is now a prime location for eco tourism, with much of the country designated as nature preserves.

Costa Rica also offers a very nice lifestyle and very friendly people, almost all of whom speak English.   The universal phrase is “Pura Vida”, which means pure life in Spanish but is the way Ticos live. Costa Rica has been named one of the happiest countries in the world, mostly because its inhabitants don’t stress about things the way most foreigners do. Ticos have a very relaxed, simple way of life.  The phrase “Pura Vida can be used as a response to “How are you?” but also as hello, goodbye and great.

Our goals for the trip were to experience Costa Rica’s diverse ecology and have time for rest and relaxation.   We planned the trip through our travel agent, Louise Kemper of Travel Experts, who worked with local tour company, Rico Tours.   Based on our travel agent’s advice, we split our roughly 10 day trip between two locations, one near the Arenal Volcano, in the north central part of Costa Rica in the rainforest, and Guanacaste on the Pacific Coast.   Average temperatures in January are in mid-70s in the rainforests near Arenal, with almost daily chances for a little rain, and in the mid-80s on the Pacific coast with little chance of rain.

Logistics – We were able to fly from Baltimore-Washington International (BWI) airport directly to San Jose, Costa Rica’s capital, via Southwest and returned from Liberia in the northwest of the country to BWI via Houston, TX on Southwest.    Our tour company arranged private drivers and vans to get us from the San Jose airport to our resort new Arenal, Nayara Springs, from Nayara Springs to our second resort on the Pacific Coast, the J.W. Marriott Guanacaste, and from the J.W. to the airport in Liberia.  The drive from San Jose to Arenal takes you over the continental divide and through cloud forests and rain forests and is quite a scenic trip.

We considered some in-country air options for the trip from Arenal to the Pacific coast but were glad we elected to use vans because a charter flight crashed in Costa Rica the week before we arrived.   Costa Rican roads are a mixed bag but probably better than remembered by visitors who have been there a number of years ago.  Most roads are well-paved, well maintained two lane highways and not very crowded outside population centers.   We traveled on one stretch of new four-lane divided limited access highway near Liberia and hopefully there is more of this to come.    Side roads, however, can be heavily pot holed and partially washed out, making for a slow and very bumpy ride.   We were warned about bad roads and the need for motion sickness medicine for the car from others who had visited but only encountered relatively short stretches of really bad roads, and we survived without motion sickness medication.    It might be a bit worse if you were traveling on a big bus instead of a private van that is able to maneuver around some of the pot holes.

Nayara Springs Resort – The Nayara Springs Resort is an exclusive boutique hotel with only about 60 individual villas, each featuring a large bedroom, living room, two dressing areas, a large indoor and an outdoor shower and a patio with queen size lounge, hammock and 6 ft x 10 ft private soaking pool fed from a natural hot spring.   Daily laundry, twice daily maid service, a private concierge and option of breakfast in room are all included.    There are three restaurants, a coffee bar, fitness center with yoga sessions daily and a spa on site, as well as additional restaurants and a wine bar on an adjoining property operated by the same company.   The resort offers once daily shuttle service into La Fortuna and now offers its own private tours to nearby attractions.  We found the private tours offered by the hotel to be only modestly more expensive than group tours offered by others and Nayara Springs’ tours included a wonderful picnic lunch with wine and beer.   Nayara Springs is one of the nicest resorts in which we have ever stayed and the lush grounds and on-site nature trails give you the opportunity to experience Costa Rica’s beauty without even leaving the hotel.

Nayara Springs Villas

Bedroom Nayara Springs

Soaking Pool Nayara Springs Fed By Hot Spring

Arenal Volcano – We did two excursions near the Arenal Volcano, one was to the Mistico Hanging Bridges Park and the other to the lava flow from the 1969 eruption.   Mistico Hanging Bridges Park offers a hike along well tended mostly-paved trails over a series of fixed and hanging bridges through the rain forest.   With an attentive eye and the help of a good guide you can see an amazing diversity of plants and animals in a wonderful environment in the canopy of the rain forest.   There are some steep patches on the Hanging Bridges Park trail and you have to be comfortable crossing  hanging bridges, some at pretty good heights above the ground, but on the whole the hike is not too rigorous.   Much better seeing animals and birds with a private guide, hopefully carrying a spotting scope, than with a group.  The lava walk is interesting but with much younger (post 1969 eruption) vegetation, a less scenic natural setting and more strenuous hiking conditions.

Hanging Bridges Park

Arenal Volcano

Mukmuk in Hanging Bridges

Coatimundi

Sloth In Hanging Bridges

There are a number of other areas for touring from hotels in the Arenal volcano area but we choose to avoid those with multi-hour van rides and full day itineraries so we could enjoy some R&R at our hotel.  Both our hotel and our tour company, Rico Tours, offered lots of touring options that you can review before you go.

J.W. Marriott Guanacaste – The J.W. Marriott is a much larger property than Nayara Springs with good-size but traditional hotel rooms, five restaurants, an oceanfront bar and a large pool complex and beach.  It is located within a large private golf and beach community know as Hacienda Pinillia on the Guanacaste peninsula south of Tamarindo.   Both the community and the J.W. Marriott Resort were very nice, but not as nice as the Nayara Springs Resort in terms of accommodations, amenities or service.   The large pool complex, with plentiful lounge chairs and pool side drink and food service, is the best feature of the J.W. Marriott.  The biggest negative to the J.W. Marriott is that it is somewhat isolated and the road between the highway and Hacienda Pinillia is a couple of miles of potholes.  We ate all our meals at the J.W. Marriott.  The food was good and there was enough variety among the restaurants for our four night stay.  Our room came with a buffet breakfast and our favorite restaurants were the pool and beachside Azul Grill for lunch and the Sabanero Steak House for dinner.   Portions were very large and we shared entrees, salads and sandwiches for most meals.

J.W. Marriott Pool From Room

J.W. Marriott Pool

J.W. Marriott Beach

Howler Monkey at Hacienda Pinillia

Coast Near Tamarindo – We did two outings to coastal areas near Tamarindo and the J.W. Marriott.  One was a boat tour of a mangrove forest along Estero de Playa Grande where it meets Tamarindo Bay and the other on the beach near Parque Nacional Marino Las Baulas.    On the mangrove forest tour we saw a crocodile and many different birds and on the beach we saw sea turtles laying their eggs.   According to guides the crocodiles do occasionally pick off surfers who chose to swim across the relatively narrow Estero de Playa Grande that separates two beaches on Tamarindo Bay despite warning signs and numerous shuttle boats.   Our tours to the coast near Tamarindo were group tours with multiple-hotel pickups in small vans but featured good guides and attentive staff.  We arranged these tours through Swiss Travel, which has an office at the J.W. Marriott.   The walk to and from the beach at night to see the sea turtles was fairly rigorous and requires you to traverse the beach in total darkness.

Crocodile Near Tamarindo Bay

Heron On Mangrove Tour

Blackback Turtle Laying Eggs

Costa Rica As A Retirement Option – On many lists, Costa Rica is ranked among the top overseas locations for Americas looking for an affordable retirement location.   While we did not inspect retirement housing options during our vacation in Costa Rica, I can see its appeal, particularly for those living in the West and Southwest for whom it is a relatively short trip.   What makes Costa Rica stand out is its stable democracy, good healthcare system and diverse and pleasant climate.  Everyone readily accepts dollars and almost everyone speaks English, making it a particularly easy place for Americans to live.  Our sense is that U.S. retirees favor the Pacific coast where communities appealing to such people abound.

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Portugal – Europe’s California With Castles

My wife and I spent two weeks in Portugal on a self-guided road trip for which we had https://www.toursforyou.pt/ arrange our hotels and rental car, suggest sites we might visit and arrange select guided tours, wine tastings and a boat ride along the way.

I call Portugal, Europe’s California because it is west coat, has fine beaches, great wine and food, a diversity of landscapes north to south and very mellow people, most of whom speak English.   Portugal is a good deal smaller than California, only about the size of Indiana, and you can see a lot of it in a two week visit.

What, of course, differentiates Portugal from California is a rich history that goes back thousands of years with a native Celtic people who were in turn overrun by Phoenicians, Greeks, Carthaginians, Romans and Moors.  Portugal fought with Spain for many years to win and keep its independence and was, for a time, a major maritime power with colonies in South America, Africa, India and Asia.   It seems as if each major city and almost every small hill town has a castle or castle ruin.

We were able to fly direct from Philadelphia to Lisbon on American.  The flight is a bit shorter than most to Europe because, at Europe’s western edge, Portugal is closer to the U.S. than much of the continent.  In two weeks we saw a good deal of Portugal, with the notable exception of the southern coast and resort area of the Algarve.

Our itinerary began in Lisbon(3 nights), where we picked up a car and drove southeast through Evora to an excellent hotel near Monsaraz called Sao Lourenco do Barrocal located on a large wine estate and farm that has been in the same family for over 200 years (3 nights).   From Monsaraz we turned north traveling to Belmonte where we stayed at a posada hotel created from a former convent – Convento de Belmonte (2 nights).   We then continued north to the Douro Valley where we stayed at the Wine House Hotel on a high-quality, small-production wine estate – Quinta da Pacheca (2 nights).    From Quinta da Pacheca we drove west along the Douro River and over the mountains to Porto, where we stayed at Flores Village Hotel & Spa (2 nights) before driving south, stopping at Coimbra, and heading back to the Lisbon airport where we stayed one night at Hotel Tryp Aeroporto before catching our flight home.   All of our hotels were quite good, with Sao Lourenco do Barrocal and the Wine House Hotel standing out above the rest (See Trip Advisor reviews for more details).

Portugal’s two main cities, Lisbon and Porto are both located on major rivers (the Tejo or Tagus in Lisbon and the Douro in Porto) at the point were they enter the Atlantic Ocean.   Lisbon, the capital is a city of about 500,000 people in a metro area with about three million.

Lisbon from overlook

Lisbon is a city of hills with enough elevation changes that there are elevators and funiculars to get you from one neighborhood to another.

Barrio Alto

The center of Lisbon was destroyed by an earthquake and tidal wave in 1755 and was quickly rebuilt with new housing, shops and offices and wider boulevards.  While the City center (Baixa) is attractive, the older hillside neighborhoods of Alfama and Barrio Alto retain their smaller scale buildings with whitewashed walls, orange tile roofs and narrow winding streets.

Lisbon has a cathedral, numerous churches, some good museums (notably the Calouste Gulbenkian Museum) and a wide main boulevard with upscale shopping (Avenue Liberidade) but much of its charm is found in the neighborhoods, small shops, some very good restaurants and the surrounding communities of Sintra, Estoril and Cascais, the latter both fronting the Atlantic.

Among the things we most enjoyed in Lisbon were the fanciful Pena Palace in Sintra, the coastal cities and outstanding sea bass we ate near Cabo da Rosa, Europe’s westernmost point, our evening listening to Fado (Portuguese blues) and the Gulbenkian museum.    We had a car and driver to take us to Sintra and the coast and for a half day tour of Lisbon but could have used one more day in the city for sight seeing and shopping.

Pena Palace

We had our rental car, a Vovo V40 diesel hatchback delivered to our hotel to save us having to come back to pick up our luggage after getting the car.   Portugal drives on the right, using standard international road signs and Google Maps on our phone worked well.   I order a GPS with the rental car because I read cell phone coverage might not be good in rural Portugal but the Garmin GPS that came with the car was useless outside major cities and cell coverage was fine everywhere.  Stick with Google Maps and order enough on your international data plan to cover using your phone as a mapping tool.

Heading southwest from Lisbon we visited Evora, the largest city in the dry and hot Alentejo.   We found Evora to be a bit over-hyped and the large free parking lots that reportedly ring the old city to be very poorly marked.    We ended up driving into and parking in the old part of the City – just remember to pay the meter.    Evora does contain some well preserved Roman features include a temple, a bath being excavated under town hall and an ancient aqueduct.  The cathedral and its museum are also worth seeing.

Roman Temple, Evora

From Evora we continued southwest past the walled town of Monsaraz to Sao Lourenco do Barrocal, an outstanding resort on a large wine estate and farm.   Monsaraz is a well preserved walled town and castle with some nice shops, including a very good pottery and painting gallery called Galerie Monsaraz operated by a husband/wife team of local artists.  We enjoyed our dinner at Restaurante Sabores de Monsaraz, which is a quirky locally owned restaurant where we had black pork with pearl onions and cod Bacalhau à “Sabores de Monsaraz” (see Trip Advisor for review).    While the staff struggles with English and it is a small, authentic Portuguese restaurant, Sabores de Monsaraz does have a slick website on which you can make reservations.

Ducal Palace, Vila Vicosa

We enjoyed the pool, cafe and restaurant at Sao Lourenco do Barrocal and took day trips to nearby sites such as Monsaraz, Villa Vicosa, where we highly recommend the Ducal Palace, and Sao Pedro do Corval where the locally made pottery is plentiful but pretty mundane.

From Sao Lourenco do Barrocal we traveled north to Belmonte, stopping along the way at Castelo de Vide.   Both Castelo de Vide and Belmonte were interesting to us because of their once significant Jewish populations and the history of these communities documented in museums.   The Portuguese Inquisition began in 1497, five years later than in Spain. No meaningful Jewish population remains in Castelo de Vide but it features a large former Jewish quarter and what is reported to be the oldest synagogue in Portugal, now housing a small but well done museum.   Belmonte also had a large Jewish population.  Its Jewish museum was being renovated when we visited in July, 2017 but had some exhibits set up in a nearby storefront.   What’s remarkable about Belmonte is its community of Marrano, or secret Jews, that survived from the Inquisition to today, only emerging from secrecy in 1989 and building a modern operating synagogue.   We liked our hotel in Belmonte (Convento de Belmonte) which is a wonderful renovation of an historic convent but the hotel seemed a bit understaffed (See Trip Advisor).

Heading north from Belmonte to the Douro Valley we stopped at the now abandoned walled town of Marialva, which we enjoyed but is only worth a visit if you are passing by.  As you head north toward to Douro, the land becomes more mountainous and greener and the Douro Valley itself is one of the most attractive landscapes you will see anywhere.

Douro River Valley

The Douro Valley is all about wine, is the only place you can make port wine according to the EU and is the oldest officially recognized wine region, predating those in France.   In the Douro we stayed at the Wine House Hotel on the Quinta de Pacheca wine estate and we highly recommend the hotel, its restaurant and the wine at Quinta de Pacheca.  We also enjoyed a boat ride on the Douro by FeelDouro Yaatch Charters and a tour and tasting at Quinta do Seixo, a large commercial wine estate operated by Sandeman.   We enjoyed the tour and the wine much more at Quinta da Pacheca.

We traveled from the Douro Valley to Porto by taking small winding roads along the river and over the mountains, a beautiful but somewhat harrowing ride, and the only place I thought Google Maps let us down since there were major highways options.    Porto is a wonderful old city of about 215,000 (less than half the population of Lisbon) but with a metro area population of 2.4 million, which is closer to Lisbon’s size.  Navigating Porto’s warren of narrow streets is a chore, so you want to get out of your car as quickly as you can.    We liked our hotel in Porto, Flores Village Hotel & Spa, in part because it was on a delightful pedestrian only street very near City center.   However, that meant after 10 am we had to leave our car in a nearby parking garage and transport our luggage to the hotel.

Porto from Vila Novo de Gaia

In Porto, we had a half day guided tour and also time on our own to explore the city and enjoy its character, shops and restaurants.   We had two excellent meals in Porto at DPO Porto by chef Rui Paula and Cantinho do Avillez by Michelin star chef Jose Avillez.    Porto, like Lisbon, is a very hilly city with some magnificent churches and vistas, particularly the view of Porto from Vila Novo de Gaia, across the Douro.

Before leaving Porto, we took a full day tour to the Minho or Costa Verde, which is the portion of the country north of Porto.   This is beautiful country and we particularly enjoyed the ancient city of Guimarães, where Portugal was founded, the magnificent shrine at Bom Jesus do Monte and the city of Braga.    If you get to Porto, take at least a day and explore theses areas (See photos).

Guimaraes

Bom Jesus de Monte

 

 

 

 

 

 

 

 

 

 

 

 

We return to Lisbon via Coimbra with its university dating from 1290 and a library that looks like it belongs in a Harry Potter novel.  The Hotel Tryp Aeroporto is just an airport hotel but did its job with quite good service and surprisingly good food, so I would use it if I needed a stay at the Lisbon airport.

University of Coimbra

We found Portugal to be an interesting, charming and thoroughly enjoyable vacation spot and would highly recommend it.

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Financial Planning For Retirement

As with most articles on my blog, this one started with a conversation with a friend.   The friend recently turned 60 and is starting to seriously think about retiring from a professional position.   He is thinking about a range of options: fully retiring at age 62, shifting to part-time with his firm and delaying retirement until 65 or 66, or continuing to work full-time until 65 or 66.   From a lifestyle perspective, my friend would like to retire sooner, rather than later, but wants to feel confident about having enough financial resources for he and his wife to live comfortably throughout their retirement.

Health Insurance

It may seem odd to start a discussion of financial planning for retirement with health insurance but Presidential executive actions to not enforce the requirement for mandatory insurance coverage and leave uncertain the fate of some insurance subsidies under the Affordable Care Act (ACA/ObamaCare) have already disrupted the individual insurance market.   Republican proposals to repeal and replace ObamaCare are creating further uncertainty in the insurance market for individuals and, if enacted, are expected to significantly increase the cost of coverage for older, pre-Medicare age, individuals.     One CNN report on the Senate bill as of June 27, 2017 shows the cost of ACA Silver Plan coverage increasing from $1,800 to $8,300 because the proposed Republican legislation allows insurers to adjust rates by age and reduces insurance coverage.   Until things are settled in Washington, it will be very difficult for any individual contemplating retirement before age 65 (when Medicare kicks in) to determine if individual health care insurance will be available and at what cost.

The best advice for now for someone considering retirement is to work full or part time until age 65 in order to retain employer-based health insurance coverage or confirm that you can purchase coverage through your employer using COBRA benefits and retire up to 18 months before turning age 65.   The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, with the individual paying the full cost of insurance.

Savings/Investments

When considering how much savings/investments you will need for retirement there are two issues to consider.

  1. Will your savings/investments generate enough income to allow you to live comfortably and
  2. Will the income from your savings/investment last long enough if you have a very long life?

Generating Enough Income

Popular guidelines for retirement income suggest that you should have sufficient income to replace about 70% to 85% of your pre-retirement annual after tax income to live comfortably in retirement but some more recent thinking suggests your income needs will not decrease that much in retirement as travel and entertainment, recreation expenses will offset reduced income use for business clothing, commuting costs, etc. (See Kiplinger Article).

Rather than focusing on your pre-retirement income, I believe most of those contemplating retirement prefer to focus on pre-retirement expenses to determine if they will be able to afford the lifestyle to which they are accustomed when they retire.   If you plan a major lifestyle change in conjunction with your retirement, like moving to a different community or buying a vacation home, you will need to adjust your expenses, and potentially your taxes, to account for these major lifestyle changes. Looking at actual spending, perhaps over a couple of years, with adjustments for any major lifestyle changes, should provide a solid basis for estimating your expenses in retirement.

The most widely used tool for determining the income that your savings/investments will generate is the 4% rule.   As explained in a CNN Money article (CNN Money Article), “The basic mechanics of the 4% rule are pretty simple. You start with an initial withdrawal of 4% of savings and then increase the dollar amount of that first withdrawal by inflation each year to maintain purchasing power.

So, for example, if you have a nest egg of $500,000 and inflation is running at 2% a year, you would withdraw $20,000 the first year of retirement, $20,400 the second year, $20,800 the third and so on. This regimen results from research done in the early 1990s by now retired financial planner William Bengen. After testing different withdrawal rates using historical rates of return for stocks and bonds, Bengen concluded that 4% was the highest withdrawal rate you could use if you want your savings to last 30 or more years.

Some experts have suggested, however, that a 4% withdrawal rate might be too ambitious given today’s low bond yields and lower projected returns for stocks.  For example, Wade Pfau, a professor of retirement income at The American College, says that retirees should probably limit themselves to an initial withdrawal rate of 3% or so if they want a high level of assurance (although not a guarantee) that their savings will support them for at least 30 years. For more on how much lifetime income one can expect to get through inflation-adjusted withdrawals, income annuities and other methods of creating income based on current market conditions, check out Pfau’s Retirement Income Dashboard (Pfau’s Retirement Dashboard).”

Many financial firms also offer retirement planning services, some of which use a range of alternative models to estimate retirement income needs. One I have used personally in the past is from TRowePrice at TRowePrice Retirement Planner.

I continue to find the 4% rule works well provided you maintain a portfolio that includes stocks as well as presently low yielding bonds and have adequate cash reserves to stay invested through market downturns.   But one common mistake many pre-retirees make is failing to adjust pre-tax retirement income when comparing it to post-tax retirement expenses.   While some retirement income is tax sheltered and some state’s do not tax certain retirement income, be sure to remember that most of your retirement income will be subject to Federal, state and local income tax, even Social Security, and typically taxes are a big enough expense that it will be worth consulting a financial planner or your tax accountant to make sure you get your post-retirement tax calculation right.

Assuring Enough Income For A Long Retirement

A 65-year-old woman has a 68% chance of living to 80 and a 28% chance of living to 90. And a 65-year-old man has a 58% chance of living to 80 and a 17% chance of living to 90.2  (BLS Spending Patterns Of Older Americans).  And these are averages for the entire population. A physically fit, more affluent senior who enjoys better medical care and diet than average and is less likely than average to smoke can expect to live longer than the above statistics suggest.   As a result, a healthy, affluent baby boomers retiring today should assume 30 – 40 years of life in retirement – living to age 95 or 105 if retiring at age 65.

Assuming you are not spending beyond your means and have sufficient savings under the 4% rule to pay for your post-retirement expenses, there are two primary risk areas that might cause a retiree to outlive their savings:

  1. A large unexpected expense, most likely the cost of institutional care for yourself or your spouse for a prolonged period, or
  2. A significant market downturn from which your savings are unable to recover.

Long-term care insurance can protect you against much of the risk of prolonged institutional care but the ideal time to purchase such a policy was when you were in your 50s. It may be cost prohibitive to purchase such a policy at or near retirement age.   My wife and I have policies through Lincoln National Life Insurance Company that we purchased when I was 53 and my wife 52.   These used a lump-sum up-front payment to purchase as annuity that pays the premiums for a long-term care insurance policy while also offering a death benefit if the LTC insurance is not used. The mechanics of this are complicated but I like the idea that the payment amount was locked in at the beginning. If you do not have long term care insurance, you may want to build an additional cushion into your retirement savings to “self-insure” against this risk.   Setting aside $150,000 to $200,000 when you retire that will grow with inflation, which is enough to cover up to 24 months in an assisted living facility, should provide reasonable protection against you or a spouse requiring institutional care in the future (See The Cost of Care and other posts on this blog for more information on the cost of care, what Medicare, Medicaid and the VA will pay for and the cost of institutional vs. at-home care).

My preferred method for guarding against the adverse impact of a market downturn is to have a larger than recommended cash component to my savings/investments that will allow me to draw cash in lieu of stock principal for more that a year in the case of a significant market downturn and to use Social Security in lieu of a commercial annuity product to assure long-term income. Many financial planning websites will recommend an annuity to assure continuity of income into very old age.   While an annuity purchased from a financially sound and reputable company can assure long-term retirement income, the combination of high up-front fees and current low interest rates make commercial annuities less attractive to me, although I am using one in conjunction with my LTC insurance policy.

For a senior with a sufficient savings / investment portfolio to be able to afford retirement, I believe Social Security offers the most attractive option to create the type of guaranteed income that an annuity offers. Social Security pays an inflation-adjusted retirement benefit for as long as you live. A Social Security benefit for someone who contributed the maximum to the system retiring in 2017 at age 66 (Full Retirement Age) is $2,687 per month but will rise to $3,538 per month if you defer collecting Social Security benefits until age 70.  And this higher benefit will continue to grow with inflation over time. If you have sufficient savings to be able to defer collecting Social Security Benefits until age 70, I believe Social Security offers the most cost-effective way to create a guaranteed annuity-like investment stream for your very old age.

Asset Allocation

A CNN Money asset allocation model suggest a mix of 65% bonds, 20% large cap stocks, 5% small cap stocks and 10% foreign stocks for someone 3 -5 years from retirement with a medium risk tolerance and some flexibility about when income is received CNN Money Asset Allocation Wizard.  This is consistent with the financial maxim that the percentage of bonds in your portfolio should equal your age.

However, T Rowe Price’s asset allocation model recommends 50% – 65% stock, 25% – 35% bonds and 5% – 15% short term liquid assets for someone about to retire at age 65.   Within the stock portion of the portfolio, TRowe recommends 15% – 19% international/global stocks, 7% – 10% U.S. mid/small cap stocks and 28% to 36% U.S. large cap stocks.   Within the bond portfolio, TRowe recommends 5% – 7% international bonds, 2% to 4% high yield bonds and 18% to 24% investment grade bonds TRowePrice Asset Allocation Tool.

I believe thinking about and consciously deciding on an asset allocation for your retirement savings/investment portfolio is one of the most important things an investor should do with their portfolio on an annual basis.   Many financial publications and mutual fund companies offer asset allocation models and it may be helpful to consider several and understand what is driving them to help you make a good asset allocation decision for your own portfolio.

My own allocation is a bit closer to the TRowePrice model with 51% equities including a small amount of alternative investments, 32% bonds and 17% short-term cash-equivalent investments.   My bond allocation includes a significant amount of tax-exempt municipal bonds and, in my mind, the higher allocation to cash offsets the potential market risk of a larger allocation to equities while allowing me to benefit from dividend yields that are in many cases higher than bond yields and from potential stock price appreciation over time.   My stock portfolio includes a healthy dose of individual income producing stocks, exposure to Real Estate Investment Trusts (REITs) through an index fund and some individual stocks and a managed bond portfolio in which I own individual bonds rather than bond funds. I see a real advantage to owning individual bonds over a bond fund because, absent a default, you can hold individual bonds to maturity and protect your principal while the value of a bond fund can fluctuate with market conditions and the actions of other fund investors.

Good Advisors

As my bio under “The Blogger” heading above indicates, I worked for 15 years as a stock analyst with Legg Mason and Stifel Nicolaus and was recognized seven times as a Wall Street Journal All-Star analyst. While I have the skills to manage my own investments I work with a full service investment advisor at Stifel, Nicolaus & Company to manage my portfolio and in recent months have shifted from a commission based to fee based compensation structure as Stifel, like many other firms, has implemented the fiduciary rule.

The focus of many investors today is on minimizing investment fees and purchasing low cost index funds or exchange traded funds (ETFs) over using full service advisors and owning actively managed funds or individual stocks. Understanding and minimizing the fees on your investment portfolio is important and there is a lot of investment analysis that passive investments have outperformed most active managers and individual stock pickers.   However, I continue to see value in a full service advisor and a degree of active management, particularly if you have a larger amount of investments.

The key advantages I see to a full service advisor/active management include:

  • Keeping all or almost all your investments in a single place.   This makes it much easier to understand and monitor your asset allocation and will be extremely helpful to your spouse and other surviving relatives if you die or are incapacitated. Some low-cost brokers and funds companies offer a broad enough array of investment options and can provide some advisory services over the phone or in person in the event of a death or impairment but not the same personalized attention as an experienced broker or fee advisor in my view.
  • Index funds may do less well in a more volatile market.   We are approaching 10 years of unprecedented low interest rates and market stimulus from central banks throughout the world.   In this low-volatility, interest/stimulus driven, broad-based post-downturn stock market rally passive investments have outperformed.  But with index funds and the entire market more highly valued and influenced by a relatively small number of mega-market-cap stocks, like Apple and Amazon, will index funds continue to outperform when and if the market and investors are tested by a significant correction and increased volatility?   I can’t predict the future, but believe there is a case to be made that the underlying assumptions that have allowed passive investments to outperform may change and again create an opportunity for value-based investing and active management.
  • You may need an active manager to buy individual bonds.   As noted above, because owning individual bonds provides greater principal protection than a bond fund, I prefer to own individual bonds.   The only practical way to do this may be to work with an active bond manager because buying bonds as individual, particularly tax-exempt issues, can be difficult. In addition, I want to hold individual bonds through a single account with my other investments for administrative convenience and to keep down overall fees.
  • A good advisor can save you from yourself.   Much has been written in recent years on the psychology of investing. One of the most difficult things for even experienced investors to do is to keep one’s nerve when the market is selling off and potentially even buy on dips.   An experienced and trusted advisor can help you keep your nerve in a market downturn and help protect you against following the herd. A good advisor can also protect you against being lazy in a good market by periodically adjusting your asset allocation and culling your portfolio in a tax-efficient manner.

I hope these ideas for evaluating and managing your financial resources for retirement are helpful and will be happy to respond to questions and comments.

I formerly worked at Legg Mason Wood Walker, Inc. and at Stifel Nicolaus & Company, Inc. and previously had some of my investment portfolio with T Rowe Price Investment Services, Inc.  I do not currently receive and do not expect to receive in the future remuneration from any of these companies.

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On the page “What Is Retirement” (see link above on the banner of this blog) I propose a new definition for retirement as “The period of one’s life when one shifts from working primarily for the means of earning income to working primarily for the satisfaction of producing a purpose or result while devoting additional time to recreation, education and leisure activities.” to replace the current Oxford English Dictionary definition of ”The period of one’s life after leaving one’s job and ceasing to work.”

Today’s New York Times has an article entitled “Working Longer May Benefit Your Health https://www.nytimes.com/2017/03/03/business/retirement/working-longer-may-benefit-your-health.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0

While ultimately concluding that the scientific evidence is inconclusive about whether working longer benefits your health, The New York Times article says the answer tends toward yes and asserts this is true not just for more highly educated, healthier adults in more fulfilling jobs but for many types of jobs that keep the mind active and provide networks for social interactions.

The headline of The New York Times article seems to imply a choice between working full-time and full-time retirement but most of those cited in the article as working past retirement age have shifted from full-time to some type of part-time employment or consulting.    My experience, and that of many well-educated friends, shows them most satisfied in a partial retirement lifestyle where part-time work, consulting or a challenging volunteer position offers the mental stimulation and social networking opportunities that The New York Times article asserts benefit seniors’ health.    I believe seniors, their employers and society in general all benefit from meaningful part-time, consulting and volunteer experiences and that we will see more and more baby-boomer seniors in these partially-retired positions going forward.

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A Wall Street Journal article on Tuesday, July 26, 2016 entitled “Can This Brain Exercise Put Off Dementia?” hitp://on.wsj.com/2arSPfA reported on the results of a new study, called “ACTIVE” for Advanced Cognitive Training in Vital Elderly, that were presented the previous Sunday at the Alzheimer’s Association International Conference in Toronto, the world’s largest gathering of Alzheimer’s researchers.    The article immediately attracted attention within a group of my close Baby Boomer friends who have known each other since elementary school.  The New Yorker also published an article on the same study on July 24, 2016 http://www.newyorker.com/tech/elements/could-brain-training-prevent-dementia.

According the Journal “The study results showed that speed training—computer exercises that get users to visually process information more quickly—beat out memory and reasoning exercises, two other popular brain-training techniques sometimes suggested for improving cognitive function and reducing dementia. Researchers found that a total of 11 to 14 hours of speed training has the potential to cut by as much as 48% the risk of developing dementia 10 years later.”

As reported by the WSJ, the ACTIVE study, which was funded by the National Institute on Aging and the National Institute of Nursing Research, included 2,832 healthy subjects, ages 65 to 94, at six study sites around the U.S. Participants were randomized to get one of the three cognitive-training programs or be in a control group.  Since 1998 the study has received a total of $33.8M in funding and is still in touch with all but 4o of the original participants.

Prior to release of the ACTIVE results there was no evidence that computerized brain training had any effect on cognitive ability or dementia prevention.   The New Yorker cites a consensus statement by more than 70 academics in 2014 that “playing brain games has been shown to improve little more than the ability to play brain games.”  And in January of this year the Federal Trade Commission fined Luminosity, the largest and best known provider of brain games, two million dollars for making unsubstantiated claims of cognitive improvement for its games.   Thus, the large and well-funded ACTIVE study is likely to provide a big credibility boost for the use of computer mind stimulation games to combat cognitive decline and dementia.

The speed training component of the ACTIVE study used a computer game in which, for the briefest instant, two images appear, one in the middle and one on the periphery of the screen (see below).   The computer then prompts you to identify whether the central image is a little car or little truck along with which edge the second image appeared.   The more accurate you get, the more quickly the images appear and the more complex the background becomes.

Double Decision Image

Double Decision is a more user friendly version of the speed training game used in the ACTIVE research that was acquired by Posit Science, of San Francisco, in 2007 and is now part of the company’s BrainHQ online service, a cognitive-training program. A monthly subscription, which includes access to Double Decision, is $14 a month, or $96 a year. Posit Science says the company intends to file a medical-device application to the Food and Drug Administration based on the recent clinical trial findings.

After reading the WSJ article my friends and I were immediately tempted to purchase Double Decision through the Brain IQ service, as would any Boomers concerned about their future cognitive abilities.   However, our group of friends includes Mitchell Clionsky, Ph.D. who is a clinical neuropsychologist and has worked extensively on dementia testing and evaluation.   Dr. Clionsky, or Mitch as we know him, pointed out that, unfortunately, these kinds of stories hit the news with some regularity, always look really great, but sometimes aren’t.

Mitch points out that the ACTIVE research was presented at AAIC as a talk. It has never been subjected to peer review or published in a journal, which the WSJ and The New Yorker also mention. In other words, lotsa sizzle, maybe not so much steak. It also defies reason that 10 sessions of training would impact cognitive functioning 10 years later.  Finally, the 48% difference in the frequency of dementia in the ACTIVE study is the calculation of decline from a conversion rate after 1o years of 14% for healthy adults with an average initial age of 73 to a conversion rate of 8% for the subgroup undergoing computerized speed brain training for 10 hours and receiving just four more hours of training. In a large group this is statistically significant. However, it may be less meaningful when applied to individuals.

Mitch is hoping that there is something to the ACTIVE research and looks forward to a replicated study, with a more varied dosing schedule of exposure to training, and better measures of cognitive functioning 1, 2, 3, 5, and 10 years later. In the meantime, he thinks it the impact of using computerized speed training exercises on dementia are way overblown.

Mitch believes it would be better for us Boomers to take home the message: Don’t retire entirely or, if you do, stay mentally and physically active (by writing a blog, playing golf and exercising for example). Get yourself a cool gaming station and play some intense shoot em up games or other video games that require lots of visual processing and reaction time. That way, at least you will be having fun. Control your diet, keep your BMI at about 25, don’t drink too many margaritas at one sitting, take a 30 minute walk every day.

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On Monday June 6, 2016, The “Ask Encore” column by Glenn Ruffenach in the Wall Street Journal responded to a question from a reader about “what features, at a minimum, should be added to our current home or incorporated in a new home so that we can stay in our home as we get older.”   The columnist’s response identified three resources to make a home accessible and adaptable for seniors.   These included:

These all appear to be useful resources and the Wall Street Journal column cites the Harvard Study as saying five features, in particular, that make for safe and acceptable homes are: no-step entries; single-floor living; switches and outlets reachable at any height; extra-wide hallways and doors and lever-style door and faucet handles.   The Harvard Study indicates that 90% of existing homes have one of these features but that only 57% have more than one.

Research (AARP United States of Aging Survey, 2012) indicates that 90% of seniors would prefer to stay in their own home vs. moving to a seniors housing community and I have no doubt that for some seniors making adaptations to an existing home or buying a new home with adaptable feature may allow them to defer a move to seniors housing for some period of time.  However, because of most seniors’ strong bias toward staying in an existing home, I see far too many seniors resisting a move to seniors housing even when this would be more beneficial for their health, their finances and their families.

I believe it is important for a senior and her or his family to also consider other issues when considering whether to modify an existing home vs. moving to a seniors housing community. Chief among these are (1) the location of one’s existing home, (2) the age and medical conditions of the residents, (3) access to companions and support services, and (4) the cost of maintaining a home.  The key points I want to make are:

  • seniors and their families need to think through how making accessibility improvements to a home will meet a senior’s physical and mental health needs over time, not just at a single point in time, and
  • staying vs. moving should be considered in light of the full occupancy and care costs for each alternative.

Location

Location is important for the resident, her or his family and other formal or informal caregivers. Too often, seniors of advancing age become increasingly isolated in their homes because they are not located where public transportation, taxi or Uber-like services are readily available. If this is the case, as a senior’s ability to drive diminishes, which it invariably does, a senior’s ability to visit friends, see medical professionals, attend social, educational and civic events will be restricted with negative implications for their physical and mental health. If they are living alone, studies have show poor diet and social isolation can take a heavy toll. Technology may be able to reduce these isolating effects in the future but is not yet able to overcome all the location issues noted here.

Location is also important for family members and other formal and informal caregivers. If you live hundreds of miles from your children or if your home is not readily accessible in good and bad weather to formal and informal caregivers, a home modified to be accessible for a senior may still prove unable to meet a senior’s needs over time as their physical or mental health deteriorates and caregivers are needed.

Age and Medical Condition

The age and medical condition of residents is also important to consider when thinking about whether to modify one’s home or move to a retirement community. Physical limitations, such as needing a walker, shower grab bars, lever door handles can help extend the ability of an existing home to accommodate a senior. But, if a senior is 85 or older or has medical conditions that will escalate over time, the benefit of these types of improvements may be short lived and fully modifying a home for a wheelchair equipped senior – completely flat floors, wider doorways, larger baths with turning radius for a wheelchair can get very expensive. In addition, if a senior has early signs of dementia, this condition too is likely to deteriorate over time and may require a more secure setting with full time care at some point, which an individual’s home cannot provide.

Access to Companions and Support Services

The cost to bring qualified caregivers and other support services into one home can quickly exceed the cost of a seniors housing community if care is required on a 24/7 basis. It can also be difficult for a senior or their family to manage care and home maintenance services and to monitor the quality of care delivered in a senior’s home, particularly if the family does not live nearby.   The availability of qualified caregivers varies with geography, with access to public transportation and with population density tending to improve the availability of care.

Cost of Maintaining A Home

When comparing the costs of staying in one’s home vs. moving to a senior housing community, seniors and their families too often view the cost of staying in one’s home as only including the cost of making accessibility modifications and do not fully consider the cost of part-time or full-item care, the cost of taxes and maintenance, or the income that can be generated from investing proceeds from the sale of a home. This sticker shock of a $2,500 to $6,000 per month fee for seniors housing may seem a lot less daunting when one makes a accurate assessment of the costs of staying at home.   It is also important to understand that the average length of stay for an 85 + senior in assisted living is about two years, so $150,000 in home sales proceeds is usually sufficient to fund an average stay.

There is some additional discussion of housing options and issues to consider when moving to seniors housing on this blog www.robustretirement.com.  The American Seniors Housing Association also has a new website Where You Live Matters with a lot of information for seniors considering whether to stay in their existing homes or move to a retirement community, including cost calculators.    Specific posts on this website that may be of interest include:

 

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Posted in Finance, Lifestyle Choices, Senior Housing & Care | 2 Comments »