Daily Bullets ….September 10, 2014

·        Fed considers change to rate guidance…News out this morning that the Federal Reserve is considering a change in the way it issues guidance on interest rate policy. The idea would be to move from guidance based on specific time periods to guidance based on economic developments or “outcomes”-based.

What’s the point? The Federal Reserve has a huge impact on the global financial markets. Its formal guidance, press releases, speeches, open market operations, and other forms of communication can have a major effect on financial market trading and financial asset valuations. We are encouraged that the Fed is grappling with the issue of improved communication on policy. Why? Because through better communications and focus on visible, understandable goals, it should help to reduce policy uncertainty in the financial markets and thereby help to reduce speculation and trading volatility. While volatility (and speculation) are normal aspects of the financial markets, we believe lower volatility around Fed policy would be a benefit to all market participants.
Link: http://www.bloomberg.com/news/2014-09-10/fed-weighs-change-to-rate-guidance-for-added-flexibility.html
 

·        Long-term care insurance, good or bad?....This article provides a very good discussion of the pros and cons of long-term care insurance. Whether it is “good or bad” for an individual or couple depends on their individual situation and goals.

What’s the point? The issue of long-term care insurance comes up often in developing financial plans for clients. Long-term care is a major consideration for most people and, of course, fraught with unknowns: “will I pay the premiums for years and never use it?” The financial planning analysis is also not easy, as it depends on a mix of the client’s goals, financial position, ability to pay, optimal use of assets, legacy issues, etc. We believe pure long-term care insurance is not only expensive but also in most cases not a good “risk-reward” proposition. That said, there are many folks who are in a position where it can improve the outcome of a financial plan and can provide peace of mind. The article discusses some of the new insurance products, such as single premium life with a long-term care rider. We believe these new products are a step in right direction and offer a better risk-reward trade off for the client.

Link: http://www.usatoday.com/story/money/columnist/brooks/2014/09/09/retire-long-term-care-insurance-baby-boomer/14968081/