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Old 02-01-2014, 06:38 AM   #21
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I don't understand how you can count on LTC when you have no control of the increases in the premiums.

I am not super familiar with them. I know that some but not all have jacked up their premium significantly. But neither of us know the details of what Grinder's policy is. His may have caps on the annual or lifetime rate increase. Or Grinder may have budgeted more LTC as he ages.

I don't have control over the cost of my auto, home owners, or medical insurance, or food for that matter. But if you've got 20 years of experience that shows CPI-I is accurate reflection of your cost of living and virtually all of your income (SS, TIPs, pension) is inflation adjusted, you can't get too hung up on that one component may increase more than an other. That is going to happen, but another area will decrease less.

My brilliant plan for dealing with the cost of long term care is hope my nest egg is big enough, and I think the majority of forum members have roughly the same plan. From a "which plan is safer prospective" it is pretty hard to argue that our self insured plans are safer than buying an insurance policy to help with a potentially huge cost.
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Old 02-01-2014, 07:09 AM   #22
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Looking again at the original article linked in the OP, the "mostly TIPS" portfolio strategy has much more to it. I still think it may be light on equities, but we don't know what the real numbers and can't plug them into a tool such as FIRECalc to model or do "what if" runs. This discussion was "safety first" vs "probability based growth" when in reality there are other income streams and assets. The TIPs heavy strategy may work here, but because it covers a smaller part of the total budget than we estimated.

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That 78/15% TIPS/equity allocation number in 2014 probably doesn't accurately reflect the allocation story here. For example, the TIPS balances will be falling every year, while the equity balances will hopefully be climbing, so that TIPS/equity balance is projected to change a lot over time. Since our income needs are protected, we don't assume any need to rebalance for a long time...the plan allows us to avoid equity withdrawals and basically forget about the Roth equity for 20+ years. If you present value all our income inflows over the plan period, our true asset allocation in 2014 looks like this: Wife's pension 27%, Husband's Social Security 18%, Wife's annuities 4%, Property 6%, TIPS 26%, Equity 16%, Gold 1%, Cash 1%. If you just consider the PV of the financial asset income it's 58% TIPS, 36% Equity, 3% Gold and 3% Cash. So I think the plan is really more diversified and "into" equities than it might look when using simply a first year allocation snapshot.
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Old 02-02-2014, 08:09 AM   #23
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Looking again at the original article linked in the OP, the "mostly TIPS" portfolio strategy has much more to it. I still think it may be light on equities, but we don't know what the real numbers and can't plug them into a tool such as FIRECalc to model or do "what if" runs. This discussion was "safety first" vs "probability based growth" when in reality there are other income streams and assets. The TIPs heavy strategy may work here, but because it covers a smaller part of the total budget than we estimated.
Quote:
That 78/15% TIPS/equity allocation number in 2014 probably doesn't accurately reflect the allocation story here. For example, the TIPS balances will be falling every year, while the equity balances will hopefully be climbing, so that TIPS/equity balance is projected to change a lot over time. Since our income needs are protected, we don't assume any need to rebalance for a long time...the plan allows us to avoid equity withdrawals and basically forget about the Roth equity for 20+ years. If you present value all our income inflows over the plan period, our true asset allocation in 2014 looks like this: Wife's pension 27%, Husband's Social Security 18%, Wife's annuities 4%, Property 6%, TIPS 26%, Equity 16%, Gold 1%, Cash 1%. If you just consider the PV of the financial asset income it's 58% TIPS, 36% Equity, 3% Gold and 3% Cash. So I think the plan is really more diversified and "into" equities than it might look when using simply a first year allocation snapshot.

I don't understand how both the 78/15% and 58/36% TIPs/Equity ratios can be accurate for the same portfolio at the same time. Can someone clarify this?
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