Financial Advice Columnist Kevin Bourke Has an Answer
By Kevin Bourke
This article originally appeared in the Santa Barbara Independent online on June 18, 2008. To see the PDF of the article, click here.
Can Sustainable Investments Sustain You?
By Kevin Bourke
Wednesday, June 18, 2008
Kevin, with so much talk about the environment, is there a way that I can invest in “green” companies or technologies?
Judy from Santa Barbara
Judy, with hybrid cars silently sweeping along our streets, myriad nonprofits devoted to preserving the environment, and the constant mention of global warming in the media, it makes sense that there would be a trend in investing toward “green.” And there certainly is.
For many years, the investment community has been offering “socially responsible” investment strategies. Traditionally, this meant restrictions on industries like tobacco, firearms, or liquor. Now, it seems that a new investment approach centered on the “green” movement crosses my desk every week.
This new interest in environmentally friendly investments has spurred a miniature bull market in the stocks of companies dedicated to making the earth a better place to live in. Alternative energy stocks have especially been in demand. So, how can you support companies you deem green?
There are several ways to invest in protecting the environment. One obvious method is to use the products produced by companies that are dedicated to being green.
Another way is to use the services of companies that promote green technologies. For example, both my financial planning company and my family subscribe to a service that purchases wind power to offset our carbon emissions. There are several companies that offer this service. We use Renewable Choice.
But what you are probably looking for is green investments: stocks, bonds, mutual funds and so forth.
How to find green companies? Keep an eye on financial magazines and journals. Hardly an issue goes by in any financial publication without an article highlighting a company that has gone green. And the surprising part is that some of these green companies are household names. Some large blue chip companies are receiving enormous pressure to green up their products.
Hybrid cars are a perfect example. We don’t generally think of auto manufacturers as being environmentally friendly. But some of them are cleaning up their act and leading the charge toward oil alternatives. Yes, it seems that even the auto companies are going to have to make adjustments, no matter how bad their environmental record has been up until now.
Does that make them a good investment? Not necessarily. And therein lies the problem. While we may desire to promote and support companies that support the environment, those companies may still be poor investments. So, it is a challenge to invest in green companies and achieve the results investors strive for.
Which leads to the final way to invest in green, and that is to invest in some type of product that specializes in green investments. There are mutual funds, unit investment trusts, Exchange Traded Funds, and other investment opportunities that focus on environmentally friendly companies.
If used properly, these might lend us the environmentally friendly approach to investing we want, with the benefits of diversification we need. Before investing in green, ask yourself: Does this investment fit my risk tolerance? Does it complement my asset allocation? Does it take me closer to my goals?
How to find these earth-friendly investment products? If you use a financial advisor, please consult with him or her to find something appropriate for your situation. If you’re a do-it-yourselfer, Google phrases like “green investments” or “socially responsible investing” and see what happens. I tried it and found an endless supply of green investment ideas.
Thanks for your question, Judy. Like you, I’m very interested in promoting earth-friendly ideas that benefit myself and my children.
This article originally appeared in the Santa Barbara Independent online on June 8, 2008. To see the PDF of the article, click here.
Consulting with Parents on Options
By Kevin Bourke
Sunday, June 8, 2008
Kevin, my widowed mother is aging and I’m starting to worry about what kind of care she will need and who will pay for it. What can I do to prepare?
Vicki from Ann Arbor, MI
This is being asked millions of times every day as the American population ages.
Questions abound: Who will care for my parents? Should I care for them myself? They tell me they want to remain in their own home, is that possible? How much will it cost and who will pay for it?
In interviewing experts in senior care, I noticed that communication, interdependence, and the challenge of hiring competent help seem to be the primary concerns.
First, communication. Do you know what your mother’s wishes are when it comes to care? What are her values and preferences? How does she want her physical needs addressed?
Suzanne McNeely, Founder of Senior Planning Services, a Santa Barbara-based company, helps adult children understand what their aging parents are thinking. “Seniors, primarily those around age 80 and above, are concerned with their legacy. They are asking themselves what meaning their lives had and how they will be remembered.” And this developmental process requires that they feel in control of their lives.
Adult children can more effectively assist their parents if they acknowledge what their parents say. “While seniors may seem stubborn, it is really just a manifestation of their need for control,” Suzanne adds. “If their adult children can listen carefully, they will be in a much better position to negotiate a situation that satisfies everyone’s needs.”
AARP reports that over 85% of people aged 65 and over want to remain in their homes. So no one should be surprised when their parent, no matter how advanced their age, states their firm desire to remain in their own home. The adult child may feel that this is at best a mistake, and potentially a disaster. But the manner in which they discuss this can make all the difference.
Perhaps the adult child can respond by saying something like: “Let’s figure out what it would take for you to stay home and be safe. We want to avoid medical problems or an accident that might cause you to need to be hospitalized.”
It will likely take multiple conversations before the senior and the adult child reach a mutually acceptable resolution.
Next, let’s address the concept of interdependence. Complete independence means that an older person lives on their own, does their own cleaning, shopping, cooking, and so forth. But it may not be necessary for a senior to be completely alone to have a satisfying measure of independence.
Steve Barlam of LivHome, an at-home senior care company, says that seniors can “depend on someone in one arena, and be independent in other arenas. Interdependence means that some of the normal duties an older person would manage are delegated to others, giving the senior more freedom and time for themselves.”
Being interdependent may allow them to maintain a greater degree of control and freedom as it may reduce the possibility of them having a debilitating accident. Having someone to assist them may ultimately lead to a better quality of life.
In a future issue, Vicki, we’ll discuss the idea of who to hire to assist the senior, how to obtain the senior’s cooperation, and how to pay for help.
This article originally appeared in the Santa Barbara Independent online on June 1, 2008. To see the PDF of the article, click here.
It’s Like Having the US Treasury Subsidize Your Health Care
By Kevin Bourke
Sunday, June 1, 2008
Kevin, what are Health Savings Accounts? Are they a good idea?
– Dave from Montecito
Health Savings Accounts (HSAs) have been with us since President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act on December 8, 2003. An HSA is a tax-exempt trust or savings account into which you can deposit money. It allows you (and your family) to pay for current qualified medical expenses while saving for future qualified medical and retiree health expenses on a tax-free basis.
It’s like having the U.S. Treasury subsidize your health care.
With an HSA-qualified deductible plan, you get lower monthly premiums in exchange for a higher annual deductible. Unlike a traditional deductible plan, once you are enrolled in an HSA-qualified plan, you have the opportunity to open an HSA and fund it. These funds can be used to pay for current or future qualified medical expenses.
Whether you can or should use one, Dave, depends on your personal situation.
Any adult can contribute to an HSA if they have coverage under an HSA-qualified “high deductible health plan” (HDHP). So a person who has a traditional health insurance plan, the type where a co-pay is due every time they go to the doctor, will not qualify for an HSA plan. Your deductible has to be at least $1,100 for a single person, or $2,200 for a family. When you go to buy insurance, simply tell your insurance agent that you need an HDHP policy.
Also, you can have no other first-dollar medical coverage (other types of insurance like specific injury insurance or accident, disability, dental care, vision care, or longterm care insurance are permitted), cannot be enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax return.
Contributions to your HSA can be made by you, your employer, or both. However, the total contributions are limited annually. You can deduct any contributions (even if you do not itemize deductions) when completing your federal income tax return. Contributions to the account must stop once you are enrolled in Medicare.
What happens if the funds in the account are not used during the year? Funds held in the account remain from year to year, just like an IRA.
So, why use an HSA?
Affordability: Many people can lower health insurance premiums by switching to health insurance coverage with a higher deductible.
Flexibility: You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs. These needs might include health insurance or medical expenses while you are unemployed, medical expenses after retirement (but before Medicare), and out-of-pocket expenses when you are covered by Medicare, as well as long-term care expenses and insurance.
Control: You make all the decisions about how much money to put into the account, which medical expenses to pay from the account, whether to save it for future expenses or pay current expenses, which company will hold the account—and even whether to invest any of the money within the account and which investments to make.
HSAs are still relatively new, and not all institutions offer them. Please consult a qualified professional for advice particular to your situation. I suggest that you find two or three agents that offer HSAs and interview them.
Ultimately, Dave, you need to decide what makes the most sense for you personally.