Saturday, May 23, 2020

The Rest Home Problem

Retirement, Ahhh the land of fulfillment. Everyone is wondering why New York sent Corona virus patients back to rest homes.

Let’s figure it out. You retire and later on when you get really old you have a stroke or get Alzheimer’s; you have a problem. Nursing homes cost $50.000 to $140,000 a year for complete care. Now if you are married, the other spouse may be in good shape, not needing the services. Paying for the service could deplete you family’s retirement savings very fast. In most states you don’t have to sell the house to get Medicare benefits for your spouse.

Usually the first step is the rest home, and then it progresses to the nursing home. Most of these places have to make a profit. So, if you have run out of funds, they try to unload you onto a Medicare home. The wait times to get in are ridiculous. If at any time you come down with an emergency health issue; heart attack, stroke, influenza or Corona virus, the hospital will accept you for treatment.

Once their situation has been addressed by the hospital, they try to ship them back to the rest home they came from. If the person is indigent, the rest home doesn’t want them back. And in some states like New York, the governor made a point that the people had to go back to the rest home they came from, otherwise they became wards of the state. The real issue was who had to pay for the person’s expenses. Gov. Cuomo did not want to fund it. And by State government decree, he inadvertently killed about 4,000 rest home patients by returning recovering corona case patients back to their rest home.

The other problem here is one that escapes most people. 50 years ago, interest rates ranged between 6 to 13 percent. And most people who saved for retirement were getting about 8 percent on their savings and their nest egg doubled every 9 years. So, today, it isn’t surprising to see retired people with savings of one million dollars. The catch is, the money no longer returns 8% interest or 80K per year, maybe about 10K. This is where seniors are getting ripped off, very low artificial interest rates.

The real question that needs to be asked, did risk leave the market? Increased risk implies higher interest rates. 1 to 2 percent return on your savings has to be a joke. The market has no risk? Is this even possible?

If the government wanted to tax someone with money how can they do it? One, by taxing the total amount saved or by printing more dollars that makes the saved dollars’ worth less. By reducing the interest rates to 1% the government is taxing savers about 7% on their money in the bank. Notice how clean this is, you don’t have to ask anyone how much money they have in the bank, the saver just get less interest.

So, if you are a senior in retirement, you get hit twice, no real interest on your savings and inflation on your savings of about 8 to 12 percent a year. And of course, you’re too old to do anything about it. And if you did, your lawsuit would outlive you. You don’t buy green bananas when your 85.

We have a new group of people in the mix, the young adults. To them cigarettes have always been $8.00 a pack. They are not about to save any money; the miracle of compound interest is dead. They will go out and buy a home, and the government loves that, more taxes and the taxes increase with the homes “value.” The old people (like me) can warn them about cigarettes costing 25 cents a pack way back when-- and that has a name “inflation.” “But grandpa that was a long time ago, times have changed.”

So, we the seniors can see that there are no future incentives to save with these very low interest rates, and now we know why our plans for retirement no longer deliver the interest rates we anticipated 40 years ago. If we live to be 85, we have a very good chance to run out of our savings if we have to go into a rest home. The governments artificially set low interest rate is stealing from those who have saved money, the people who saved for retirement. Congress knows that they can’t tax people that are broke.

If all the banks want to pay is 1 percent, convert your holdings to gold silver and platinum. Nobody on the internet can steal your savings if it is in a deposit box. It is invisible nobody knows you have it. There is absolutely no reason to have a bank account for savings, the present inflation rate of 12 percent will eat you alive (mostly in the medical field). The Government is counting on everyone to contribute to an IRA or 401 K to save on income taxes. Forget that, cigarettes will be $140 a pack when the young retire. Congress cannot print gold and silver. People need to realize that there is no risk buying precious metals. There is a risk on holding on to savings long term, the return is not there.


dearieme said...

I'm tempted to buy gold guineas which, being coin of the realm, are free of capital gains tax - rather a big deal if you expect eventual inflation.

But I have nowhere secure to keep them. Our local bank branches closed their safety deposits years ago. It turns out that I could store them at the Royal Mint which is doubtless secure against all robbers except Our Elected Government.

Every solution brings a problem.

Jim in San Marcos said...

Hi dearieme

I can't believe that you have no access to safety deposit boxes. We have two and my son is on the list of people who can access the box. He doesn't have a key to either, but he would use ours upon our death. Everything in the boxes can transfer to him, without the government even knowing about it. Plus if we get put in a rest home, the precious metals don't show up as an asset on our bank statement when they ask for money.

The cheapest deposit box is about $45 a year and I imagine it could hold 400 gold coins. Plus we put our valuable documents in the box also.

Silver in a safety deposit box is a drag. 1,000 ounces is about 72 pound of weigh. I swapped most of mine for gold and platinum. The safety deposit boxes weren't meant to hold that much weight.

I only access a box very rarely so if you have to travel a bit to get to it, that shouldn't be a hang up.

I would expect the Royal mint to be a safe place. Have an account there and hide the rest in the basement until you can get to the deposit box.

dearieme said...

We used to have a safety deposit box at a local bank branch, in which we stored documents and a couple of heirlooms. Then they closed it. They did, bless them, say I could instead use a branch in Scotland and that my box could be brought south for access in only a few days.

In the financial crisis in Cyprus a few years ago the government simply forbad all access to safety deposit boxes. Policemen with submachine guns enforced the diktat.