Question for the Money Doctors
Question submitted on Dec 20, 2011.
QuestionCan a house be sold if medicaid has a lein on it?
This will be a very generic answer as initial discussions with clients regarding goals and investing take several lengthy meetings. That being said, here is your step by step process:
First, you have to figure out where you are today. Prepare a personal financial statement, (which is nothing more than a list of all assets and liabilities) and a cash flow statement (which is a listing of your income and expense items).
Step 2, with the information from step one above, project into the future if your retirement goals are attainable. This is done by starting with the net assets that you currently have available and considering annual excess cash flow that you are saving each year (hopefully it is a cash flow surplus and not a deficit because you are not yet retired). When you are retired, the cash flow will turn to a deficit because you will be using your retirement funds to live on. This step will require some knowledge regarding appropriate assumptions for inflation (use 3%) and investment portfolio earnings, which will depend upon how you plan to invest your dollars. Because you are investing in cash right now, you will have to use something less than 1%.
Step 3, reading the information. Does the projection above work—i.e. do you run out of money before you reach your life expectancy age? If you do, you need to change one or more of the following variables: 1) retirement age, 2) spending levels or 3) how you are investing. Working through this step will determine how much risk you need to take to achieve your goals from a number’s/financial perspective.
Step 4, determining the risk level at which you are comfortable. This is more of an art than a science since you really don't know how someone is going to react to market swings until they actually live through the market swings. Your risk level in this step has to be reconciled with how much risk you need to take based on step 3. We go through a series of questionnaires and discussions with clients to determine their risk capacity. You need to find a level at which you will achieve your goals (step 3) and the level at which you will not panic and sell out at the first sight of volatility.
Step 5, after reconciling how much risk you need to take in step 3 and your risk comfort level that you can live with in step 4, you can begin investing. I would suggest a slow approach to getting into the market such as dollar cost averaging in.
I hope the above helps. This will not be an easy task without having the experience, data, knowledge, software, etc to work through this. If you don't want to be sold investments, I suggest you find a fee only financial planner who will do a financial plan/projection for you based on an hourly fee.
For additional information visit http://www.360financialliteracy.org/