Don’t Do It

August 13, 2015

An elderly relative of mine died recently.  Her death certificate says she died from complications of an existing chronic health problem.  However, I would argue that the real cause of death was entering into a late in life 2ndmarriage.   Let me explain… Read the rest of this entry »

Competition Is Good

July 9, 2015

Yesterday the New York Stock Exchange (NYSE) experienced a technical “glitch”, and all trading was halted for a few hours.  Yet to the average investor, this was a non-event.  Had this happened a decade or more ago, this would have been a major disruption, as it would have brought a large part of the US financial system to a complete stop.  But in the last decade, stocks and other instruments that once traded on only one exchange now trade on multiple exchanges.  Stocks traded all day as if nothing had happened.  That the NYSE has lost its monopoly on trading shares listed there clearly benefited the overwhelming majority of us.  Yes, competing exchanges have created some issues that are anti- consumer, such as order flow payments, but on the whole, competition is a good thing.  The shutdown cost the NYSE money and prestige.  They will now have even more incentive to make sure their systems work properly.

The Bottom Line:  Competition improves the breed.

–Michael Ross, CFP®

Just Like The Airlines

July 6, 2015

Last week, the Department of Justice opened an investigation of the airline industry to determine if the major carriers are colluding to keep fares high.  I have no idea if they have colluded, but one thing is for sure, there is far less competition due to decades of carrier mergers.  These mergers were sold to the public as ways to cut costs and deliver better service.  Does anyone believe that has happened?

Now merger mania is hitting the medical carriers.  The number of insurers has already dwindled over the past two decades.  In many markets, mergers have left consumers and businesses with only a handful of competitors to choose from.  Now, Anthem wants to buy Cigna, Aetna wants to buy Humana, and Assurant just wants out.  This will mean fewer competitors and even less choice, and will only lead to higher costs and premiums along with take it or leave it service (kind of like cable TV).

It’s being sold to us as their chance to bargain with hospitals, doctors, and big pharma with more clout, cutting medical expenses.  But with reduced competition and large market shares assured, they will have no incentive to cut those costs – in fact they would benefit from higher medical costs.  Obamacare limits their gross profit to 15-20% of premiums.  So the higher the medical expenses (a minimum of 80-85%+ of premiums), the higher our premiums are, and the higher their cut and profit is.  Think of them like waiters – the higher the cost of the entree, the more they make.

Fasten Your Seatbelt!

The Bottom Line:  Higher premiums in healthcare are likely due to reduced insurer competition.

–Michael Ross, CFP®

Timing Is Everything

June 17, 2015

Conventional wisdom says that it’s best to wait until retirement to convert a traditional IRA into a Roth IRA, which allows money to grow tax free.  The theory is based on the belief that most people will have lower incomes and be in lower (certainly not higher) tax brackets.  And that much is usually true.

However the decision is not so simple.  There are many potential benefits to conversion. Anyone can do it – there are no longer any income limitations, but choosing the right timing can be complex.  Yes the marginal tax bracket the conversion income is likely to be subject to is a major factor in the decision, but the timing of the additional income generated by the conversion can create issues with other retirement programs, mainly Social Security and Medicare. Read the rest of this entry »