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Best defense against rising medical costs: Educate yourself


What about medical expenses when you are retired? I have substantial assets, but I am worried about medical expenses eating up everything before I die. They can be quite costly, even with Medicare. — G.G., Austin

Sadly, your concern is entirely reasonable. Even when mediated by insurance, including Medicare, health care costs in America have simply priced themselves beyond what the vast majority of people, working or retired, can pay. This is the case whether you look through the window of Medicare, employer-subsidized health insurance, or subsidized insurance through the Affordable Care Act.

While there is no way you can be guaranteed that medical or long-term-care expenses won’t overwhelm your assets, you have much more control of spending if you do something the vast majority of Americans have failed to do: educate yourself about the excesses of our health care system.

For starters, read “Less Medicine: More Health” by Gilbert Welch. Once you’ve done that, you’ll have a foundation for declining a good deal of testing and a significant amount of treatment. You might even live a longer and healthier life than you would live with active testing and aggressive treatment.

Another line of defense is to move, when appropriate, to a well-funded continuing-care retirement community. These are the communities where you can live independently, then have assisted living, then nursing care — with the expenses all covered by your entry fee. All of this would be done under one organizational roof. It’s not cheap, but medical expenses won’t be part of your daily worries.

Would you recommend a book or two about shorting stocks? I feel that if the market tanks, as some are predicting, that would be a good way to offset the decline. — R.J., by email

The trouble with shorting stocks is that your liability, if things go the wrong way, is infinite. Many people have gone broke borrowing shares to sell and promising to buy them back at what they hope will be a lower price. At least on a long transaction, one where you buy shares and hold them, the worst that can happen is that you’ll lose 100 percent of your money.

I’ve advocated nothing but index investing for more than two decades. It limits what I write about quite a bit, but that’s a small price to pay for knowing that readers will be far better off if they avoid the purchase, or sale, of individual stocks and focus on a low-cost, diversified portfolio of index funds.

I am 70 years old and thinking of investing in a superfund of closed-end funds. The stock market symbol is PCEF. Do you think this is a safe investment? — K.S., by email

The fund you mention, PowerShares CEF Income Composite ETF, is not a “superfund.” It is an exchange-traded fund that holds a portfolio of closed-end funds, all of which are devoted to providing high returns. Funds like this are often called a “fund of funds.” By owning a portfolio of closed-end funds that specialize in different forms of high-yield portfolios, you have the benefit of greater diversification.

That’s nice, but it doesn’t deserve to be called a superfund. Indeed, since each of the ETFs in the portfolio has its own management expense, the additional management expense of this fund could be called “fee pyramiding” — increasing the total cost burden on each of your investment dollars.

Is it a safe investment? Not likely. Remember, its reason for existence is to provide a much higher-than-average income yield. You don’t get high yields without taking on risk.



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