Message From Medicare
The Medicare Board Of Trustees also have released its annual report. The conclusion: The estimated exhaustion date for the HI trust fund (the portion of Medicare that covers hospital costs) remains at 2024, the same year shown in last year’s report.
This certainly sounds grim but, as the Trustees note, “projections of Medicare costs are highly uncertain, especially when looking out more than several decades.” There is still time for making adjustments to Medicare, and that’s likely to happen before the money runs out. Possible actions include:
* Cutting costs. Medicare could reduce the payments it provides to doctors and other health care providers. This could reduce the number of professionals willing to see Medicare patients, but it’s unclear whether any reduction would be significant.
* Higher taxes and more cost-sharing. Whether the money comes from workers, in the form of higher payroll taxes, or from seniors, as higher charges for Medicare premiums, co-pays, etc., remains to be seen. Some attempt might be made to have high-income seniors pay more, as they now do for Medicare Part B, which covers medical bills.
* Later starting age. Eligibility for Medicare now kicks in at 65. That used to be the full retirement age for Social Security benefits but that milepost is now age 66, eventually moving to 67 and perhaps even higher. Making people wait longer for Medicare coverage might help control costs.
Altogether, you can expect to pay more for Medicare, one way or another. That’s just another reason to focus on building up a larger retirement fund while you’re working.
Investing In Style
Most mutual funds are labeled these days, so investors know what investment style they follow. Stock funds are sliced and diced in two ways:
* By the size of the companies they hold. Funds may focus on large, small, or mid-sized companies.
* By the attributes of the stocks they hold. Companies that are low-priced, in relation to their earnings, are known as value stocks. Relatively high-priced companies are growth stocks. Thus, stock funds may be known as growth or value funds. Some funds are known as “blend” funds, meaning they hold a mix of growth and value stocks.
A small-cap value fund, for example, tends to invest mainly in small companies with stock prices that are relatively low, in comparison to their earnings or their assets.
As an investor, you should hold stock funds with varying styles. You don’t know if growth funds will outperform value funds, or vice versa. Small-cap funds historically have been top performers but they’re volatile, because the stocks of small companies can be risky investments.
By holding a mix of funds (small- or mid-caps as well as blue chips, value funds as well as growth) you probably will get substantial long-term returns as well as some relief from extreme volatility.