Q: My husband and I have a question about long-term care. We are both retired and 71. We have one joint account with about $200,000 and four IRAs totaling about $395,000. We took out a long-term-care policy when we were 65. The total annual premium is $4,450.

We are thinking about canceling it because we heard that IRAs are exempt from nursing-home care. That would leave our joint account to cover those expenses should we need it.

Can you help us decide what is best for us? We hate paying that large premium every year out of our savings.

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A: The answer here is up to you. I can’t contribute much because what happens in the future is all a matter of chance.

You may be fortunate and live full lives until the day you both die. It happens. You might also be unfortunate and suffer the fate the insurance folks love making us fear.

Your “IRAs are exempt from nursing-home care” comment needs to be considered in its meaningful context, which is qualifying one spouse for Medicaid and how assets can be shared or spent in order to qualify. This is a subject best discussed with an elder-law attorney.

Q: Most of our retirement is in 401(k) or Roth IRA plans managed by a large firm with a reasonable expense ratio, TIAA-CREF.

A small firm that trades in managed futures has recently contacted us. The firm’s adviser uses a trend-following algorithm to govern all trades. There is a minimum investment in the low six figures. The story looks good, the returns look good (even net of fees), and it appears to be an asset class that is not represented in our otherwise fairly diverse portfolio.

What is your opinion of trading in managed futures?

A: Managed futures accounts are really great for the managers and the brokerage operations that trade the commodity futures contracts.

They aren’t so good for you or me. The main reason is that commodities are not an earning asset, so you are really betting that your account managers will make enough speculating on price changes to overcome a 2 percent managing cost, 20 percent of any profits, and the cumulative bid/ask spread and commissions for all the trading done. Basically, you’re “playing against the house.”

If you want a big, simple protection from inflation, consider buying an exchange-traded fund that is an index of energy companies, such as the Energy Select Sector SPDR (ticker: XLE; expense ratio 0.18 percent) or Vanguard Energy (ticker: VDE; expense ratio 0.14 percent).


Copyright 2013, Universal Press Syndicate