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Why Kaiser Long Term Healthcare is the best starter savings program


If you are just starting out to venture into investments and savings, IMG has been promoting Kaiser long-term healthcare program as the best starter savings program. 

Here are three reasons why:

1. It is the base in building a solid financial foundation.
Saving for healthcare is the base in building a solid financial foundation because before going into investments, we need to invest first in ourselves. We need to protect ourselves first. 
Solid Financial Foundation
Solid Financial Foundation
The number 1 reason why most people retire broke is that saving for healthcare is the most neglected savings. It is because most are still dependent and enjoying on company's HMO benefit while being employed. The challenge is that by the time we retire, we are no longer covered. We may receive a lump sum retirement pay but with one major illness, it can wipe out all the retirement money. 

It is therefore important to set aside a separate health savings account intended for your long-term healthcare needs. Kaiser long-term is the best starter savings program for that.

2. It is a 3 in 1 product.
Kaiser long-term healthcare is a product combination of life insurance, healthcare and investments. It solves the problems: what if I die to soon? (solution: life insurance) and what if I live too long? (solution: long-term care and investments). Therefore, it jump-starts building your solid financial foundation. 

The coverage may not be high enough because it is a combination of three financial products. However, it acts like a 3-in-1 coffee wherein when you need more coffee, you can just add pure coffee. If you want it sweeter, just add pure sugar and is the same with creamer. No need to open another 3-in-1 coffee.

With Kaiser, if you need more life insurance, just supplement it with pure or term life insurance. If you want more healthcare coverage, just add on pure short-term healthcare coverage or HMO. And if you want more investments on retirement, invest in pure investments like mutual funds.

Therefore, Kaiser long-term care program is the best starter product to jump-start building your financial foundation.

3. It is a moderate-risk, moderate-return type of investment.
If you are a beginner in investing, you don't want to cry seeing a red portfolio in your investments. Thus high-risk, high-return investments may not yet be for you. The same with low-risk, low-return instruments. You don't want to let your money sleep in the banks while inflation is eating it up. 

Now let's get a little technical, assuming there are two types of investments: 
(this computation is for illustration purposes only and does not represent any actual financial product)

Investment A: high risk and high return 
Investment B: moderate-risk and moderate return

Scenario 1: Investment A gains 40% in the first year but loses 20% on the second year, thus the investment gains 20% in 2 years. While investment B gains 10% on the 1st year and gains another 10% on the second year, thus it also gains 20% for 2 years.

Scenario 2: Investment A gains 20% on the first year but loses another 20% on the second year, the return therefor is 0%. While Investment B gains 0% on the first and second years. 

Looking at their returns they may have equal performances in terms of percentages, but looking at their actual values, it may shock you:

Assuming an investment of 100.

Scenario 1:
High risk, high return versus moderate risk, moderate returns scenario 1
High risk, high return versus moderate risk, moderate returns scenario 1
Investment B yielded better results than A. 

Scenario 2:
High risk, high return versus moderate risk, moderate returns scenario 2
High risk, high return versus moderate risk, moderate returns scenario 2 
Even if investment B yielded no increase in value, investment A yielded a poorer result. 

However: The computation above does not intend to point out that moderate-risk investments are better than high-risk investments, it just shows that high risk, high returns investments may give higher returns but it surely comes with higher risks. 

The beauty of Kaiser Long-term Healthcare program is that it is a moderate-risk, moderate-return type of investment. It does not guarantee high returns like the stock market or mutual funds, but it has a cap or ceiling and a flooring. Even if the market goes up to 40%, it has a ceiling interest. But when the market is down and negative, it has a flooring interest. The ceiling limits the interest given to its clients to fund its flooring when the market is down. 

Personal finance is an art, not an exact science. That is why it is called personal. Depending on your risk-return appetite, you decide in what investment you want to venture in. Sophisticated investors may not be enticed by Kaiser's moderate returns. 

But if you are new in the world of investing and are looking for a starter investment, start with a moderate-risk, moderate-return type of investment and Kaiser is the best program for that.

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