What We’re Thinking

We’ve reached another Thanksgiving. A national moment for giving thanks and feeling grateful.

In this installment of Life with Money, we’d like to home in on gratitude. Before we discuss it, we would like first to express it.

First, we want to say: we’re grateful for you, our clients. We’re grateful for the depth and length of our relationships with you. Likewise, we’re grateful for the many ways our work enables us to learn from you, and about you, and to provide you and your loved ones with guidance, support, and care. This is meaningful work for all of us at Park Piedmont, and we thank you for giving us the opportunity.

Second: we’re grateful for our Park Piedmont team. We are fortunate to have outstanding individuals as colleagues. As you may well have observed from your interactions with them, the members of our team are thoughtful, collaborative and hard-working – and, even though we all work remotely, the group remains close-knit.

The Anglican priest and New York Times columnist Tish Harrison-Warren recounts a game her then 11-year-old daughter concocted. It was called “the beautiful game,” and the rules were simple: they’d walk around their neighborhood, pointing out all the beautiful things they saw. For Harrison-Warren, the game helped her “see how much goodness [she] regularly overlooks.”

One interesting thing about gratitude: it actually feels good to be grateful. There’s a great deal of research science that explains why.

Gratitude does indeed make us feel good. Expressing gratitude generates positive emotions – among them, happiness, pleasure and contentment. “When we express gratitude and receive the same, our brain releases dopamine and serotonin, the two crucial neurotransmitters responsible for our emotions, and they make us feel ‘good’. They enhance our mood immediately, making us feel happy from the inside.”

Gratitude improves our relationships. It’s a pro-social set of behaviors that bolsters feelings of connection and closeness. On our weekly team Zoom calls, we always open our discussion by having each person express something they feel grateful for from the previous week. Maybe it’s a call with one of our clients. Maybe it’s the help they received from a colleague. Maybe it’s both. Regardless, the practice is an important way we stay connected and appreciative.

Gratitude makes us healthier. It is “positively correlated to more vitality, energy, and enthusiasm” … “Feeling grateful and appreciating others when they do something good for us triggers the ‘good’ hormones and regulates effective functioning of the immune system. Scientists have suggested that by activating the reward center of the brain, gratitude exchange alters the way we see the world and ourselves.”

Gratitude re-focuses us on what we have, not what we lack. “Psychologists Shai Davidai and Thomas Gilovich, in one of their papers called the ‘Headwinds/Tailwinds Asymmetry: An Availability Bias in Assessments of Barriers and Blessings,’ mentioned that we tend to focus more on the obstacles and difficulties of life because they demand some action. We have to fight and overcome them to get back the normal flow of life. On the flip-side, we forget to attend to the better things in life because they are ‘already there’ and we don’t have to do anything to make them stay with us. Practicing gratitude, according to Gilovich, is the best way to remind ourselves of the things that give us the courage to move on in life.”

Interested in incorporating more expressions of gratitude in your own day-to-day? Here are some well-researched ways to do so:

• Gratitude exercises: Try a thoughtful thank-you note. “Dr. Amit Kumar revealed an interesting fact in his recent research on gratitude exercises (Kumar & Epley, 2018). In the study, participants were asked to leave notes to people who meant a lot in their lives – for example, teachers, spouse, or friends. And these notes were not small papers saying ‘thank you’. They had to be detailed and more in-depth. Surprisingly, participants could finish writing lengthy gratitude notes in less than five minutes and reported feelings of contentment after doing so.”
• Gratitude journal: “Keeping a gratitude journal causes less stress, improves the quality of sleep, and builds emotional awareness” (Seligman, Steen, Park & Peterson, 2005).
• Invent your own “beautiful game”: Take a walk around your own neighborhood, or visit another – and take a look around. What are you seeing now that you haven’t seen before?
• Reframe your expectations: Here’s another thought around gratitude, emphasized by financial writer Morgan Housel. There is counterintuitively great value in what Housel calls setting “purposely low expectations.” This might sound like a Larry David bit – and actually, there’s something to that. Here’s Housel’s suggestions:

“Don’t expect a lot of economic growth …
Don’t expect a ton of innovation.
Don’t expect politics to improve.
Expect occasional catastrophes.”

He continues: “Then any little improvements that happen to come along feel incredible. You appreciate them more. Low expectations don’t make you depressed – they do the opposite, making little gains feel amazing while bad news feels normal.”

What are your preferred practices for expressing gratitude?

Is expressing gratitude something you do at set times in a day or week or year? Or is it more spontaneous? Do you tend to say it to yourself, or are you more apt to share the feeling with family, friends, and coworkers?

However you feel it, however you express it, we hope a helping of gratitude is on your menu this holiday season. We wish you a happy and healthy Thanksgiving.

When the world – or the market – feels unstable, unpredictable, and perhaps even unnerving, people often draw comfort from simple narratives.

Our lack of control drives us to search for some sort of explanation that we can understand – a storyline we can wrap our minds around that provides answers and creates meaning.

Maybe this desire for a tidy narrative explains why a former editor of the Economist described the job of a journalist as being to “simplify, then exaggerate.” Stick to a simple explanation, then amplify its impact.

As an article in the Wall Street Journal recently contended, however – and we would agree – this strategy isn’t adequate for last week’s stock market “correction,” typically defined as a price decline of at least 10% from a recent high.

As the author points out, a variety of causes could be offered as explanations for the drop in the stock market: the Fed keeping rates high, fears of an impending recession, war in the Middle East, or a natural correction for stocks that were previously valued too high.

Yet offering any one of these explanations as the sole cause for the correction – and then exaggerating its impact – would be inaccurate and, in our opinion, a disservice.

Park Piedmont has been telling a different story for over two decades.

Rather than emulating much of the financial media’s inclination to simplify and exaggerate, we prefer to lean into a couple of our firm’s values: humility and balance.

First, humility.

One of the core principles of our investment philosophy is that the future is unpredictable and uncertain.

Nobody – including us – can predict future events, and even if we could, we would then also need to predict how the market would respond to those events. As we’ve pointed out before, it simply cannot be done. The market reacts to events in baffling ways at times.

So we can’t predict the future, but what about the past? Can’t we assign a simple and exaggerated narrative to something like a past market correction?

This brings us to another firm value: balance.

Perhaps it’s easier to look back on history and point to a definitive cause-and-effect. But as with much of life, a simple and exaggerated explanation doesn’t offer a balanced, full picture of the innumerable and sometimes conflicting variables involved:

Wars. Investor unease. Low unemployment. Inflation. Higher interest rates. Union strikes…

So rather than attempting to predict the future or assuredly explain the past, Park Piedmont takes another approach:

Remain humble about what we can’t explain or control, and instead take a balanced and measured approach to what we can.

What does this look like in practice? Keeping fees low and having a solid understanding of our clients’ unique goals, time horizons, and risk tolerance.

This understanding translates into personalized, appropriately-balanced asset allocations that we hope eliminate your need for a tidy narrative, even when the world – and the market – feels unstable, unpredictable, and perhaps even unnerving.

For many, considering the need for life insurance happens around the time they have their first child. This makes sense, as having children is often the first time that people have another person depend on them financially.

A lot of new parents purchase term life insurance, which is designed to last for a specific period (20 years, 30 years, etc.), because it can be a solution to this financial dependence and is the least expensive form of life insurance. When that term is coming to an end, those parents are typically now in their 50s or 60s and often begin to think about their own needs for later in life, one of which is long-term care (LTC).

What Is Long-Term Care?

The term encompasses a range of services that individuals may need when they are unable to care for themselves. This need may result from a chronic or disabling medical condition such as an illness, disability, or cognitive impairment. Therefore, LTC needs can arise at any age due to an illness or injury, or simply due to the effects of aging.

Many Park Piedmont clients seek our guidance in making sure that they can cover their own costs of care and that the burden of these costs doesn’t fall on their children or other relatives. We’ve been working with a number of clients recently who are thinking about their LTC planning, and we thought it would be helpful to share information on this topic more broadly.

To clarify, LTC is not the same as medical care. The goal of LTC is to help people function independently in their everyday lives and manage their activities of daily living (ADLs), which include eating, using the bathroom, bathing, getting dressed, etc. Medical care, on the other hand, seeks to improve the recipient’s medical condition through treatment received in a hospital, emergency room, or other medical facility.

LTC also differs from medical care in how it is funded. The costs of medical care are typically covered by health insurance, including private insurance and government programs like Medicare. LTC, however, is generally not covered by private health insurance or Medicare.

Risk Factors for Long-Term Care

The biggest risk factors for LTC are age, gender, and medical history. As you might expect, as people age, the probability that they will require some form of LTC increases. The chances of a person in the US over 65 years old needing LTC at some point is now 70%.

Regarding gender, women have longer life expectancies on average and are therefore at greater risk for needing LTC. In the US, women account for about two thirds of all LTC insurance claims.

Lastly, having a more serious personal or family medical history typically means a higher chance of needing LTC. Examples of medical issues that most commonly require LTC include strokes, injuries as a result of a fall, dementia, Alzheimer’s, obesity, and Parkinson’s.

Types of Long-Term Care

There are many kinds of long-term care that an individual can receive, including:

• Home care, in which a nurse or other home health aide provides care in an individual’s home during the day or around the clock. In a home care setting, many people also end up relying on a spouse or other family member to serve as a caregiver, which may be a perfectly good solution but can also cause emotional and financial strain on the caregiver.
• Skilled nursing care refers to services that can only be performed by a licensed nurse, doctor, or therapist. Skilled care is usually provided in hospitals, assisted living facilities, and nursing homes.
• Custodial care is provided by non-medical professionals and usually involves help with ADLs only. Custodial care can take place in the home, assisted living facility, or nursing home.
• Adult day care provides support in a non-residential facility during the day while an individual’s primary caretaker, typically a family member, is at work.
• Hospice care addresses the needs of terminally ill patients and is a separate type of LTC.

To clarify, assisted living facilities provide a more social lifestyle for seniors who are generally active but require assistance with everyday tasks. Nursing homes, on the other hand, provide LTC and medical care for adults with serious health issues. Nursing homes usually cost more than assisted living due to the higher level of care.

Long-Term Care Costs

As life expectancies have increased, so have the costs of LTC services. (For more information on the average costs of LTC in your area, please refer to the Genworth Cost of Care Survey, which tracks the cost of long-term care services nationwide, broken down by region and care type. This website provides valuable insights into how much LTC costs today and might cost in the future, which can help you and your family understand and plan for LTC needs.)

As of 2021, the annual median cost in the US is $62k for home care, $54k for an assisted living facility, and $108k for a private room in a nursing home. The costs are, on average, much higher in large cities than in rural areas.

Because of these high costs, long-term care has become one of the most significant health care issues for older people and their families, and one of the most common catastrophic health care expenses. So, if LTC isn’t covered by health insurance, how do people typically pay for these services?

Paying for Long-Term Care

There are many methods of paying for LTC if needs arise. The primary approaches include Medicaid, self-insurance, and private LTC insurance plans.

As mentioned previously, Medicare, the federal program that provides healthcare coverage for people who are either 65 years old or have certain chronic medical conditions, provides very limited LTC coverage and should not be relied on for this type of care. Medicare is primarily designed to provide medical care but will cover up to 100 days of LTC if very specific conditions are met. Most individuals who require LTC need it for much longer than 100 days and will not meet the Medicare criteria.

Medicaid is a state and federal program that provides medical assistance to low-income individuals and their families. Medicaid covers a wide range of services, including LTC, but a person typically must have very few assets and little income to qualify. Eligibility requirements regarding income and assets vary by state.

Another funding strategy for LTC is self-insurance, which is the concept of relying on one’s personal savings, investments, home equity, reverse mortgages, etc. to pay for LTC expenses. The problem here is that LTC can be extremely expensive, and no one knows exactly what kind of care will be needed and for how long. This strategy is only appropriate for people with significant liquid assets that extend well beyond anticipated needs during their working years and in retirement.

Medicaid and self-insurance are therefore for people on opposite ends of the wealth spectrum, and Medicare doesn’t sufficiently cover LTC. For people who have too many assets and income to qualify for Medicaid and too few to self-insure, the solution is generally private LTC insurance. This type of insurance involves paying premiums to an insurance company, which will then pay out a benefit in the case of a covered LTC claim.

Types of LTC Insurance

Stand alone, or “traditional,” insurance covers LTC services only. These policies have a specified maximum monthly and lifetime benefit amount, a maximum period over which benefits can be paid out, and can include inflation protection so that the benefit limits increase every year by a fixed percentage.

Another advantage is that the premiums paid may be tax deductible. However, the premiums are not fixed and can increase in the future. Additionally, because these policies only cover LTC, if the insured individual doesn’t end up needing LTC, no benefits will be received.

“Hybrid” products combine LTC with permanent life insurance. Essentially, these policies offer a pool of money that can either be accessed during life for LTC, at death in the form of a death benefit paid to the insured person’s beneficiary, or a combination of the two.

The initial premiums for these policies are typically higher than those of an equivalent standalone policy, but the premiums are fixed and cannot increase. Therefore, if standalone LTC premiums increase enough over time, as they have in the past, a hybrid policy may actually cost less in the long run.

Another benefit of this type of coverage is that if the insured person doesn’t need LTC, there will be a death benefit from the life insurance component paid to the beneficiary at death. So, regardless of whether there is an LTC need or not, the insurance company will pay some kind of benefit.

When to Consider LTC Coverage

While many people first start to think about LTC in their 50s or 60s, we’ve seen a number of clients cover this risk earlier as well.

Many young professionals in their 30s and 40s identify a need for permanent life insurance, as opposed to term insurance. In these cases, it’s often prudent to purchase a hybrid life and LTC policy that accomplishes their life insurance goals while also covering the risk of LTC.

With life and LTC insurance, the younger and healthier a person is when purchasing a policy, the less expensive the premiums will be. So, it can be beneficial to seek coverage earlier, especially for people who know that they are at a higher risk for eventually needing LTC.

How Park Piedmont Can Help

Park Piedmont frequently helps clients in this area of planning, including working with vetted outside insurance firms that coordinate the process of acquiring LTC insurance. As fiduciary advisors, we often prepare quotes, evaluate different policy options, provide second opinions on coverage, and analyze how LTC fits into the broader financial plan.

For clients who decide to pursue LTC and/or life insurance through Park Piedmont, our team acts as a primary point of contact throughout the entire application process. Please reach out to your advisor if you have any questions about Long-Term Care planning.

Important Additional Disclosures

As your investment advisor, Park Piedmont is a fiduciary. Whenever making recommendations – on investments, insurance, or any other financial life planning topic – Park Piedmont’s focus, first and foremost, is on what’s in your and your family’s best interest.

Disclosing potential conflicts of interest is an important part of being a fiduciary. Nick Levinson and Nate Levinson, as licensed insurance agents, earn commission-based compensation for selling insurance products to our PPA clients. Park Piedmont receives 50% of the commission payable on the sale of any life, disability, or Long-Term Care insurance product to Park Piedmont clients if purchased through Quantum Insurance Services or RIA Insurance Solutions. Insurance commissions earned by Nick Levinson and Nate Levinson are separate and in addition to our advisory fees.

Park Piedmont clients are under no obligation to take PPA’s recommendations or implement any insurance policies, even if they have already applied for policies and/or been approved for coverage.

For the past 15 years or so, I’ve had a very important hold on my calendar on Wednesdays at 5 pm. If I’m in Chicago, I make it there, with surprisingly few exceptions.

My appointment is at the basketball court in our local neighborhood Jewish Community Center. There, 8-10 middle-aged men gather to stretch, play, sweat, hydrate, rinse and repeat until our access to the gym wraps up at 7 o’clock.

I first got invited to the game by an older friend. At the time, my wife Elizabeth and I had two kids under five. We both had demanding jobs. We both had to commute, 5 days a week, at the start and end of each workday. Our pace of life felt breakneck. When I look back now, I’m amazed and grateful we held it all together.

If you ask me how we – and more specifically, I – made it through that stretch in one piece, playing basketball is near the top of the list.

Now, I get it – you might be thinking, “Tom, so glad you’re having fun re-kindling your junior varsity glory days, but isn’t that just an escape from the demands and responsibilities of real life?” [Author’s note: my younger glory days on the basketball court were few and far between.]

So why do I give such high marks to what’s really the equivalent of adult recess?

It turns out, play is important for everybody – no matter the age or life stage.

What is “play”? The examples are just about unlimited, but it can be boiled down to something you do because it brings you joy or pleasure, without promising a particular outcome.

As a New York Times article phrased it, “A lot of us do everything hoping for a result … It’s always, ‘What am I getting out of this?’ Play has no result.”

According to scholar Peter Gray at Boston College, there are a few key ingredients of “play”:

• Play is something you do because you want to, not because you have to.
• Play is done for its own sake, not for a reward or prize.
• Play has structure – but importantly, it still leaves ample space for creativity.
• Play always involves some element of mentally removing oneself from the “real world.” While players have to be thoughtful about their activity, “the person at play is relatively free from pressure or stress.”
• As a result, the person at play is frequently able to accomplish a mental state called flow. “This state of mind has been shown, in many psychological research studies, to be ideal for creativity and the learning of new skills.”

All of this resonates for me. If you asked me, “Tommy, what do you love about playing basketball?” I’d tell you: I love that when I’m playing, everything else melts into the background. All I’m thinking about is making good passes, hitting open shots, setting good screens, and not getting beat (too often) on defense. Even though we keep score, the focus is always more on process than outcome.

One of the really energizing things about play is that it has so many ways to fit different people. Board games are a way to play. Same with practicing music, or woodworking, or building a sandcastle.

For my wife Elizabeth, who studies and teaches about “play” in her work as a psychiatrist and medical educator, making pottery has been a huge source of fun, escape, and community-building over the years. It’s brought her a lot of joy – and our cupboards, a lot of mugs!

Play has residual benefits, too – we learn new skills, explore areas of interest, build relationships, and get re-energized for the everyday.

It’s interesting that play represents a part of our lives where earning money isn’t really a factor. After all, play isn’t a job. And it’s not a hustle, or something you do for pay or for profit.

On the other hand, it often costs a lot to play: big trips offer one notable example. Do you work, save, and invest in part so you can build time and opportunities for play?

At its bedrock, play connects us with our authentic selves – which in turn allows us to make grounded, thoughtful decisions – particularly with our money.

As we launch Year 2 of our “Life with Money” series, we invite you to consider – and share – the ways you play. When you think about what your money is for, is carving out opportunities for play one of the answers?

Drop us a line and let us know about the relationship between money and play in your own life.

And if you’re in our neighborhood some Wednesday at 5 pm, let me know – you can join my game.

For many of us, Labor Day Weekend indicates a transition.

The unofficial end of summer; the herald of fall activities; a new school year for kids, grandkids, or even ourselves; the subtle shift in nighttime temperatures; the sudden ubiquitous pumpkin spice everything.

Within the last few weeks at Park Piedmont, one of us announced a pregnancy. One of us dropped off a kid for her first day of preschool. One of us settled a kid into his first dorm room. One of us helped a kid move cross-country for his first full-time job.

Transitions can be exciting, and they can be difficult. New beginnings, inherently, also signify endings.

One of the joys of our work here at Park Piedmont is both celebrating and supporting others in the many transitions that life serves up. We’re blessed to witness these transitions in each other’s lives, and also in yours.

As we head into Labor Day Weekend, we wish you the very best in whatever season of transition you’re currently living. And, as always, we’re here to both celebrate and support you in it.