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JUNE 2018
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PATRIOT WEALTH
THE RULE OF 100: IS THIS RETIREMENT INVESTING GUIDELINE RIGHT FOR YOU?
For those of us in or near retirement, reducing our exposure to financial risk is typically of paramount importance. The unfortunate fact of the matter is that a meltdown in the equities markets could happen at any given time without warning and without ample time to protect our assets. Since retirees don’t necessarily have the luxury of waiting years or decades for a market crash to play itself out, 100 percent exposure in equities isn’t typically recommended for investors in their golden years. In fact, even a 60/40 mix of stocks and bonds (or other relatively risk-free assets) might be too much exposure, which begs the question of how to adjust this traditional formula. Thus we come to the rule of thumb known as the Rule of 100. According to this commonly accepted guideline, the percentage of stocks an individual investor holds should be equal to 100 minus his or her age. For example, a 65-year- old should allocate 35 percent of his or her portfolio in stocks, and the rest (65 percent) should be in relatively risk-free assets such as bonds. At least, that’s what the accepted wisdom claims — but does the math translate into a reasonable balance between risk and reward for today’s retirees and near-retirees? A major issue with the Rule of 100 has always been that it doesn’t leave much room for capital growth for more seasoned retirees. This is especially true today, when seniors are living longer. Assets that are low-yield (such as
bonds) or negative-yield (such as cash, which deteriorates over time due to the ravages of inflation) can dwindle. Consider, for example, an 80-year-old retiree; this individual should, according to the Rule of 100, maintain a mere 20 percent in stocks while the remaining 80 percent is fairly safe but also yielding very little. As an example, if the S&P 500, fully reinvested year-over-year with dividends, yields an average of 8–10 percent, then there’s really not much capital growth here. We’re talking about a small slice of a small slice of the pie, and although it’s certainly low-risk, it’s also extremely low-reward. As for the 80 percent that would be allocated toward bonds in this scenario, bear in mind that the good old days of 10-year T-note yields of 5–10 percent are long gone. In fact, the current market environment puts these Treasury yields at a rate that doesn’t even keep up with the rate of inflation. In other words, bonds aren’t as “safe” as we might think they are, at least in terms of real rate of return. So where does this leave retirees? It leaves us with a somewhat outdated rule that ought to be viewed as a starting point — nothing more, nothing less. Allocating toward equities only what one can afford to lose and dialing back this allocation over time isn’t a bad idea at all. In this way, we can uphold the spirit of the Rule of 100 while being flexible with the numbers as needed.
Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Patriot Wealth and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
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IMPROVE COGNITIVE FUNCTION IN MINUTES HOW MEDITATION HELPS YOU MAINTAIN BRAIN HEALTH
THE PREFRONTAL CORTEX
Meditation has often been touted by New Age gurus as a way to find inner peace and stillness. But what if meditating could reduce the effects of aging on your brain? According to research, taking a few minutes out of your day to meditate may improve cognitive function. As meditation’s popularity has spread, so have studies of the practice. The results of 100 studies examining the cognitive effects of meditation all show evidence of improvements in psychological and cognitive functions. Some of the results are intuitive, such as how meditation helps us deal with stress. But other results are incontrovertible, such as scans showing that meditation causes structural changes in the brain. For people facing age-related changes like memory loss, the results of these tests are especially relevant. The studies point to evidence that meditation can strengthen certain areas of the brain — the prefrontal cortex, the hippocampus, and the amygdala — that weaken as we age.
Your prefrontal cortex thins with age, which is associated with decreased cognitive function in your later years. However, meditation may reduce this age-related thinning. Dr. Sara Lazar, a neuroscientist specializing in the effects of yoga and meditation on cognitive and behavioral function, reports that long-time meditators don’t show a decline in the thickness of the prefrontal cortex.
THE HIPPOCAMPUS
Your hippocampus helps you process and form new memories, and it’s very sensitive to stress. In fact, research shows that your hippocampus will shrink in response to stressful situations and chronic stress. The remedy? Meditation. Dr. Lazar’s study showed a positive correlation between meditation and a higher concentration of gray matter in the left hippocampus.
START SAVING NOW HEALTH CARE COSTS ARE RISING
Even with Medicare, medical expenses can be costly. Many retirees worry that rising medical costs will eat away at their retirement savings. Even when offset by insurance, health care costs are above what the majority of people (working or retired) can pay, regardless of whether they have Medicare, employer-subsidized health insurance, or insurance through the Affordable Care Act. Fidelity estimated that couples who retired in 2017 at age 65 faced a cost of $275,000 for health care throughout their retirement, a 6 percent hike from 2016’s estimate of $260,000 and more than a 70 percent increase since Fidelity came out with its initial estimates of retiree health costs in 2002. These totals include Medicare premiums, copays and deductibles, and prescription drug costs, but not nursing homes or long-term care. Obviously, health care costs continue to rise every year. Over time, employers have offered ways to help workers offset costs through health savings accounts, which provide tax breaks on medical expenses. However, many retirees are not prepared for the high cost of medical care when they are no longer part of a company plan. Medicare only covers a percentage of your medical bills, which means retirees have to dip into savings to pay for medical costs.
While this certainly isn’t good news, there is a silver lining. If you take steps to increase your retirement plan contributions, you can compensate for those daunting health care costs. This could mean cutting your spending or canceling trips now, but by ramping up your savings, you’ll be able to enjoy more of these things later in retirement. Given the rate at which health care costs are rising, you really have no choice but to face the problem head-on. Social Security won’t be able to provide enough income to cover medical expenses. The sooner you add to your portfolio, the better positioned you’ll be to save without worrying about dipping into your assets.
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THE BEST TIME TO BOOK A FLIGHT SAVE BIG ON AIRFARE WITH THIS SIMPLE RULE
THE AMYGDALA
Often called the fear center of the brain, the amygdala is triggered by stressful situations. But unlike the hippocampus, which shrinks in response to stress, the amygdala has been shown to become denser. In one study, people who attended mindfulness meditation classes showed a smaller stress response in brain scans compared to those who did not attend the classes. Meditation may help to decrease the density of the amygdala and therefore increase your ability to handle stress. Of course, in addition to these benefits, there’s a good chance that five minutes of meditation each day will simply make you feel better. People who meditate report an increase in overall well-being. Why not give it a try?
In case you haven’t noticed, traveling is expensive . It can feel like you’re signing away your soul when you sit down to plan a vacation. But when it comes to flights, there’s good news: They’re getting cheaper! According to a 2017 report published by online travel company ODIGEO, long-distance trips across Europe fell 7 percent last year. Luckily, the same trend is reflected in North American airlines as they engage in a price war to woo a growing base of ultrafrugal travelers. Still, a $600 summer flight to Honolulu isn’t exactly pocket change. What’s worse, flight prices are slippery; CheapAir. com’s 2017 Annual Airfare Study determined that the fares for any given trip go up or down an average of 71 times, about $33 each shift. When you purchase your flight is nearly as important as where you’re going. But how do you choose a booking window that will maximize your savings? According to the CheapAir.com study, in which they evaluated 921 million airfares, the best time to book is 21–105 days in advance of your flight, on average. If you want to get even more specific, try to book 55–75 days out, and book on a Sunday. Many travelers swear by Tuesday and Wednesday bookings, but as Condé Nast Traveler reports, Expedia and the Airlines Reporting Corporation say that Sunday is the way to go, based on data from billions of flights. Tuesday and Wednesday are usually the cheapest days to actually fly, though. The CheapAir.com study also pinpoints the absolute best windows for specific seasons: 54 days for winter trips, 75 days for spring, 76 days for summer, and 45 days for fall. Of course, these are averages, but if you stick to these rules and check fares regularly on sites like Kayak.com, SkyScanner.com, Momondo.com, and on the handy app Hopper, you can rest easy knowing you’re getting close to the best price possible.
SPICY CHIMICHURRI GRILLED CHEESE
INGREDIENTS
For chimichurri: • 2 jalapeños
For sandwiches: • 1 tablespoon olive oil
• 4 green onions • 1/2 cup cilantro • 1 clove garlic • 2 tablespoons olive oil • Juice of 1 lime • 2 teaspoons honey
• 1 ripe avocado, cut into slices • 2–4 ounces fresh mozzarella • 4 slices whole-wheat bread
DIRECTIONS
1. Pulse chimichurri ingredients in a food processor or blender until combined but not pureed. Add extra olive oil as needed. 2. Heat grill or skillet to medium-low. Brush outsides of bread with olive oil. Smear 1 tablespoon chimichurri on each slice of bread. Place a layer of avocado and cheese between slices.
3. Cook gently until bread is crisp and cheese is melted.
4. Slice and serve.
[inspired by naturallyella.com]
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INSIDE THIS ISSUE
The Rule of 100 and Your Investment Portfolio PAGE 1
How Meditation Can Help the Aging Brain PAGE 2
Are You Prepared for Rising Health Care Costs? PAGE 2
Cut Down on Flight Costs With This Simple Rule PAGE 3 3 Fathers Who Risked It All for Their Kids PAGE 4
3 AWESOME DADS
FATHERS WHO PUT THEIR LIVES ON THE LINE FOR THEIR KIDS
This Father’s Day, thousands of dads will receive a “No. 1 Dad” mug to sip coffee out of at the office. But the following dads took that “No. 1” to a new level.
started punching it in the face. When the bear finally released Gabriel, Greg threw rocks until it fled. His son was hurt but made a full recovery in the hospital over the coming weeks.
BRIAN MUNN GAVE HIS SON A LIVER TRANSPLANT.
ARTUR MAGOMEDOV SAVED HIS DAUGHTERS FROM ISIS.
When doctors discovered that baby Caleb Munn had a rare disease called biliary atresia, they told his parents that he was unlikely to survive past age 2 without a liver transplant. Luckily, his father was a perfect match, and he eagerly donated part of his liver in March of 2015 to save his son’s life.
Artur Magomedov was devastated to discover that his wife had taken his 3- and 10-year-old daughters from their home in Dagestan under the cover of night, flown to Turkey, and crossed into Syria to join ISIS. But he resolved to get his kids back. After a long, hazardous journey, he arrived in Tabqa to embrace his two daughters. To leave the caliphate — under penalty of death — they hitched a
GREG ALEXANDER BATTLED A BEAR FOR HIS SON’S LIFE.
ride to the border one night and crawled along a railway line until they were within 70 meters of the border. Then they ran under fire from Turkish border guards until they could scramble into tall grasses. After some help from the Russian consulate in Istanbul, they made it back home, together again and safe.
While camping in the backcountry of Great Smoky Mountains National Park, Greg Alexander was startled awake at dawn by the screams of his 16-year-old son, Gabriel. He rushed out of his hammock to see a black bear dragging his son away by the head. Without hesitation, he kicked the beast in the side, and when that didn’t work, he leapt onto its back and
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