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The Perfect Retirement Investment Nobody Wants



Two of your biggest financial risks in retirement involve your health, but they’re almost opposed to each other. One is that you will require expensive long-term care early on. You will probably die young, but not before going broke from nursing home bills. Another is that you will stay healthy enough to live a very long life, but as a result you will run out of savings — even if you never require long-term care.

More than 20 years ago, the economist Mark Warshawsky saw a way to protect people from both risks in a single product that could be priced low and still make money for the insurer. I think his idea is ingenious, but it has never caught on, for reasons I’ll explain.

Warshawsky was the director of research at TIAA-CREF Institute in New York in 2001 when an article titled “In Sickness and in Health: An Annuity Approach to Financing Long-Term Care and Retirement Income” appeared in The Journal of Risk and Insurance. He wrote it with Christopher Murtaugh, the associate director at the Center for Home Care Policy and Research of the Visiting Nurse Service of New York, and Brenda C. Spillman, at the time a senior research associate at the Urban Institute in Washington.

Warshawsky, now a senior fellow at the American Enterprise Institute, was a bit surprised when I called him after being referred to him by others in the field. “No one ever has taken me up on it, so for the last 10 years I have not pursued the idea,” he said.


What Warshawsky, Murtaugh and Spillman proposed was a hybrid product combining long-term care insurance with an annuity — that is, a steady stream of payments that lasts as long as the customer lives, like Social Security. Insurers could charge less for such a hybrid product than they would have to charge if they sold each product separately because the risks would partly cancel out. If the customers needed lots of long-term care early on in the policy, they probably wouldn’t live long enough to get a lot of annuity payments. If they lived long enough to suck up lots of annuity payments, it’s probably because they hadn’t needed much long-term care early in retirement. True, some customers might become disabled at age 65 and live past 100, thus drawing on both sides of the hybrid policy, but such cases would be rare.

Insurers understandably worry about adverse selection, which is the risk that they’ll get precisely the customers they don’t want and none of the ones they do. People with health problems will apply for long-term care insurance without disclosing them, driving up premiums and scaring away healthier people from applying. To minimize that risk, insurers conduct extensive medical exams and gather applicants’ and their families’ medical histories. But that’s costly, off-putting to applicants and not foolproof. On annuities, the risk is the opposite: that only people who have good reason to believe they will live long lives will sign up, which forces the insurer to charge a higher premium for the annuity, driving off other applicants, and so on.

Warshawsky’s hybrid product would drastically reduce adverse selection because people wouldn’t apply for the double-sided protection unless they perceived the two risks for themselves as roughly balanced. In fact, Warshawsky and his co-authors calculated that insurers could pretty much dispense with medical exams and the gathering of medical histories because 98 percent of 65-year-olds would be good bets for the product. Only people who were already in such bad shape that they already qualified for long-term care would need to be turned down for coverage, they calculated. What’s more, the premiums could be 3 percent to 5 percent lower than if the two products were sold separately, they calculated.

Warshawsky said he couldn’t get even TIAA itself interested. (The institute that he worked for is a research arm of TIAA, the big financial services company.) Other companies also passed. “You can never understand fully why companies don’t do something,” he said. “There’s a zillion reasons.”

Actually, I’m pretty sure I know one of those zillion reasons: A lot of people don’t like either product separately, despite what many financial advisers tell them, so a hybrid of the two is always going to be a tough sell. Moshe Milevsky, a finance professor at the Schulich School of Business of York University in Canada, wrote to me in an email that while he admires the Warshawsky-Murtaugh-Spillman concept and thinks people should have both long-term care insurance and annuities, combining them is unlikely to “change the ingrained bias against long-term rational risk management.”

Annuities got a somewhat deserved reputation for being overly complicated and expensive, but there are new products that are standardized and cheaper. Still, there’s a lingering problem of “not wanting to commit and mistrusting the insurance companies,” Robert Shiller, a Yale University economist, wrote to me by email.

For a practitioner’s perspective I interviewed Ryan Pinney, the president of Pinney Insurance Center in Roseville, Calif., which is a broker to insurance agents. (Pinney also has a company,, that sells direct to consumers.) He said there are relatively few people who are willing to give away a big chunk of their savings all at once, even if it’s for a rational reason, namely to buy an annuity that will pay them monthly checks for the rest of their lives. Warshawsky’s product would require them to do that.

Pinney referred me to OneAmerica Financial Partners, an insurance company in Indianapolis that sells a product combining an annuity with long-term care insurance. But Dennis Martin, OneAmerica’s president of individual life and financial services, told me that his company’s product isn’t quite what Warshawsky had in mind. One difference is that people aren’t required to turn the pool of money in their accounts into an immediate annuity; they can choose whether to use the money to pay for long-term care, but any unused funds are paid out at death. So the natural hedge that Warshawsky’s concept depends on doesn’t exist.

“Mark has done really good work on this, and I think his combination concept is promising,” Mark Iwry, a nonresident senior fellow at the Brookings Institution and former senior adviser to the Treasury secretary, told me. But, he said, “It’s been a multidecade challenge to get people to buy, and industry to offer, consumer-protective, transparent and competitively priced annuities.” And, he said, the long-term care insurance market “has not worked well for many years.” If you don’t like broccoli and you don’t like brussels sprouts, you probably aren’t going to like a broccoli and brussels sprouts salad. Then again, hope springs eternal.

Regarding your skepticism about buy-American rules: Perhaps you should visit a few towns in New York State or Massachusetts, where factories and industries have been shut down and their products offshored to low-cost regions like China and India. The U.S.A. is destroying its manufacturing capability and capacity. It will become strategically dependent on adversaries, not allies.
Ian A. Crossley
Brixham, England

The Maritime Administration’s recent decision to deny ports the ability to procure cargo-handling equipment from overseas with grant funds will almost certainly limit the effectiveness of the Bipartisan Infrastructure Law’s historic funding.
Chris Connor
Washington, D.C.
The writer is the president of the American Association of Port Authorities.

I have a thought concerning your newsletter about lessons from the Super Bowl. To make teams play their hardest on every down, play to a target point total in the fourth quarter, rather than until time expires. The N.B.A. did this in the All Star game last year.
Michael McCarthy
Huntington Beach, Calif.

“We need not be artists, but we should be able to appreciate the work of artists. Crafts of every kind, the value of things made by hand, by skilled people who love to work with wood or clay or stone will develop taste in our people.”

— Eleanor Roosevelt, “My Day” column, Nov. 5, 1958

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For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio



Fee competition in the exchange-traded fund business is driving down the cost of investing to new lows.

A simple little ETF strategy I call the Freedom .08 Portfolio proves it. Some previous names for this portfolio included Freedom 0.15 and Freedom 0.11. The numbers are based on the aggregate management expense ratio for the portfolio, which has fallen ever lower through the years. That’s how we get to Freedom .08 in early 2023. That’s 8 cents in fees for every $100 you have invested.

Here’s how the Freedom .08 Portfolio is put together using a 70:30 asset mix of stocks and bonds.:

-30 per cent in the Desjardins Canadian Universe Bond Index ETF (DCU-T): The MER for this fund is 0.08 per cent, which is at the low end for aggregate bond ETFs covering the broad Canadian market for government and corporate bonds. It tracks the Solactive Canadian Bond Universe total return Index, which is a relative newcomer to the Canadian market. You can compare returns to competitors using the bond fund installment of the 2023 Globe and Mail ETF Buyer’s Guide, but they’re very similar to more established indexes.


-30 per cent in the iShares Core S&P/TSX Capped Composite Index ETF (XIC-T): The MER for this fund is 0.06 per cent and the underlying index is the ultimate benchmark for Canadian stocks.

-20 per cent in the Franklin International Equity Index ETF (FLUR-NE): The MER here is 0.1 per cent, which is strikingly low for the international equity category. That’s markets outside North America, by the way. Solactive is again the index provider. In doing your research, compare returns against international equity ETFs tracking the more traditional MSCI EAFE index.

-20 per cent in the Vanguard S&P 500 Index ETF (VFV-T): The MER is 0.09 per cent and the index is one you know and love, the S&P 500.

ETFs trade like stocks, which means you’ll need a digital brokerage account to build a portfolio. For extreme frugal investing, consider the zero-commission brokers Wealthsimple, National Bank Direct Brokerage, and Desjardins Online Investing. CI Direct Trading and Questrade offer ETF purchases at no cost, but you pay the usual commission to sell.

A final point of comparison for the Freedom 0.08 Portfolio is a popular kind of exchange-trade fund called the asset allocation fund. You can buy these fully diversified portfolios with MERs of 0.2 to 0.24 per cent.

— Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Bombardier Inc. (BBD-B-T) The plane maker is generating cash, paying down debt and raising its financial targets. Investors are paying attention, too: The share price has rallied more than 250 per cent over the past eight months. David Berman asks: Has the stock become relevant again?

WELL Health Technologies Corp. (WELL-T) After this health-care company reported record quarterly financial results last week, the share price rallied nearly 16 per cent on high volume. Analysts believe this positive price momentum will continue. The average one-year target price implies a 61 per cent potential gain for the stock. Jennifer Dowty takes a look at the investment case.

The Rundown

Banking woes, Fed keep investors on edge in nervous stock market

Investors are settling in for a long slog in the U.S. stock market in coming months, braced for more tumult in the banking sector and worries over how the Federal Reserve’s tightening will ripple through the economy. As David Randall of Reuters reports, many worry that other nasty surprises are lurking as the rapid series of interest rate hikes the Fed has delivered over the past year dry up cheap money and widen fissures in the economy.

Grocery REITs are a safe harbour in the market storm

Feeling gouged by high grocery prices? Bummed out by bank runs? Sick of stock market volatility? With inflation and rising interest rates creating turmoil in the economy and financial markets, these are tough times to be a consumer – or an investor. John Heinzl is here to offer some help by profiling some real estate investment trusts in the grocery sector. The goal: put some of that grocery money back in your pocket while enabling you to sleep better even as markets gyrate.

Throw caution to the wind with the Free Cash portfolio

It’s time to catch up on the value stock race. Norman Rothery pitted 14 popular measures of value against each other in the U.S. market. Each measure was used to form a tracking portfolio containing the cheapest 10 per cent of the stocks in the S&P 500 index based on that measure. The 14 tracking portfolios were equally weighted and rebalanced annually. So far, the trend favours investors who keep an eye on debt while hunting for bargains.

Read more from Norman Rothery: Portfolios for Value and Dividend Investors

Canadian bank stocks may not be quite as special as we think

Canadians are used to thinking of bank stocks as a safe, nearly guaranteed way to bet the market. They may want to think again. As Ian McGugan tell us, investors would be wise then to consider the prospect of a future in which Canadian banks no longer churn out market-beating results with clockwork regularity.

Strength in megacap stocks masks broader U.S. market woes

Investors are relying on an old strategy to navigate the current tumult in asset prices: buying shares of the massive U.S. companies that led markets higher for years. Shares of the top five companies by market value — Apple , Microsoft, Alphabet, Amazon and Nvidia — have gained between 4.5% and 12% since March 8, when troubles at Silicon Valley Bank set off banking system worries. In that period, the S&P 500 has fallen 0.5%. Lewis Krauskopf of Reuters tells us more.

Others (for subscribers)

Monday’s analyst upgrades and downgrades

Globe Advisor

Where investors put their money in this year’s RRSP season

How to play the demand for microprocessors as chatbots, robots and EVs disrupt sectors

Are you a financial advisor? Register for Globe Advisor ( for free daily and weekly newsletters, in-depth industry coverage and analysis.

Ask Globe Investor

Question: Harvest Healthcare Leaders has units that trade in U.S. dollars on the TSX. For tax purposes, is the income considered foreign income or Canadian? For example, can donations to registered charities in the U.S. be deducted against the income from HHL.U? – Michael K.

Answer: Only a small amount (9.26 per cent) of the income from this ETF was classified as foreign income in 2022, according to the Harvest Funds website. Most of the distributions (about 94 per cent) are treated as return of capital. So, you won’t get much help here for U.S. charitable contributions.

–Gordon Pape (Send questions to and write Globe Question in the subject line.)

What’s up in the days ahead

Bond markets are suggesting interest rate cuts loom for this summer in both Canada and the U.S. But central bankers are dropping few hints. Who should we believe? Veteran bond fund manager Tom Czitron will provide some insight.


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Online investment fraud increasing in Manitoba



Manitobans are being warned about the rise in fraudulent online investment websites, which have exploited some Manitobans out of more than $200,000.

During the Manitoba Securities Commission’s (MSC) ongoing investigation into cryptocurrency fraud, the agency uncovered 66 victims in Manitoba who were scammed through 34 separate online platforms. These Manitobans had transferred money to offshore crypto exchanges based in Lithuania and Bulgaria.

According to Jason Roy, MSC senior investigator, the initial investments were smaller amounts of money as the fraudsters know if they ask for too much money right off the bat, then people are more likely to decline the offer.

“They start with these small amounts and then show you fake trading results and get you excited about putting more money in,” he said in an interview with CTV Morning Live on Monday.


The victims’ losses ranged from $306 to $206,000, with the total losses coming to $710,000.

Roy said there are likely a lot more investment fraud victims in Manitoba, but they may feel too embarrassed to report what happened to them.

“Really, only five to 10 per cent of victims actually report being victimized,” he said.

For those who come across an online investment website, there are certain things to look out for to ensure it is legitimate. Roy recommends ensuring that you are dealing with a company that is registered to do business in Canada. Checking a company’s registration can be done online.

Other common attributes of the investment fraud websites uncovered in the MSC investigation include:

  1. Targeting victims on social media;
  2. Promoting cryptocurrency or Forex trading;
  3. Promising an unreasonably high or quick return on investment;
  4. Victims being unable to withdraw their initial investment or fake returns;
  5. Operating offshore, but telling investors they have offices in Canada;
  6. Requesting investors to convert funds to cryptocurrency; and
  7. Getting investors to provide remote access to their computers or phones.

Those who are solicited by a fake trading website, which can appear to be legitimate, are asked to report the incident by calling 1-855-372-8362.

– With files from CTV’s Katherine Dow.


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Sen. Bob Casey oversaw Pa. pension investment in China-linked firm



Sen. Bob Casey (D-Pa.) supervised a potentially risky investment worth more than $31 million from state worker pensions into a Chinese government-backed firm — that has since been deemed a threat to the US — while he served as the commonwealth’s treasurer in 2006.

A state report on the fund from 2007 notes holdings by the Pennsylvania State Employees’ Retirement System in China Mobile Ltd. valued at $31,386,930 — the eighth-largest foreign asset held by the state at the time, joining a list that included major brands like Nestle, UBS and BP.

A report covering the previous year, 2005, does not list China Mobile as one of the fund’s 10 largest overseas holdings, nor does one for the year before that — though the value of many other foreign investments remained similar.

The state report for 2007 also does not show China Mobile among the fund’s ten largest international assets.


China Mobile has since been designated a national security threat, with the Department of Defense in June 2020 noting the company was part of the Chinese Communist Party’s “military-civil fusion national strategy.”


Sen. Bob Casey (D-Pa.) as Pennsylvania treasurer in 2006 placed more than $31 million of state employees’ pensions into a Chinese firm.
NurPhoto via Getty Images

The New York Stock Exchange delisted China Mobile in January 2021 following the Pentagon’s designation.

President Biden, in a June 2021 executive order, further demanded US shareholders divest from the company, citing China Mobile as one of many threats “posed by the military-industrial complex of the People’s Republic of China.”

The Federal Communications Commission also deemed China Mobile a threat to national security in March 2022.

Founded in Hong Kong on Sept. 3, 1997 — weeks after the territory was handed over to Beijing by the United Kingdom — China Mobile is owned by China Mobile Communications Corp., which is a subsidiary of the People’s Republic of China.


President Joe Biden.

President Biden in 2021 called China Mobile one of many threats “posed by the military-industrial complex of the People’s Republic of China.”
Bloomberg via Getty Images

The China Mobile assets were one of many lucrative holdings Casey oversaw when he served as state treasurer from 2005 to 2007, investing much of Pennsylvania taxpayers’ money in international equity.

The holdings in China Mobile were overseen by Casey as the fund’s custodian as well as 10 other board members of the Pennsylvania State Employees’ Retirement System, including former Pennsylvania House members Nicholas J. Maiale, Michael F. Gerber, and Robert W. Godshall; and former Pennsylvania state senators Gibson E. Armstrong, Raphael J. Musto, and M. Joseph Rocks.

A spokeswoman for Casey’s office told The Post Monday that the senator should not be held responsible for the investment.


President Xi Jinping.

China Mobile is owned by China Mobile Communications Corp., which is a subsidiary of the People’s Republic of China.
Xinhua News Agency via Getty Images

“This story is a false attack — the investment in question was made before Bob Casey became State Treasurer in 2005,” she said.

“No one is tougher on China than Senator Casey. During his time in the Senate, he has fought to crack down on China’s currency manipulation, and against unfair trade practices and US corporations that invest in China at the expense of American workers,” she added.

The spokesperson did not respond to a follow-up question about whether Casey approved further investments in China Mobile in 2006.

Casey has touted his experience handling the Pennsylvania state employee retirement fund, both as treasurer and in his eight years as the commonwealth’s auditor general.


Chinese President Xi Jinping

Chinese President Xi Jinping
Getty Images

“As Auditor General and State Treasurer of Pennsylvania, I took a particular interest in the two state public pension funds, for teachers and public employees, which are traditional defined benefit plans,” Casey said in a July 2008 press release.

“As Auditor General, I audited both funds and as State Treasurer, I served as a trustee for both funds. It gave me an insight into the benefits of well-run defined benefit plans, both to retirees and to our economy as a whole,” he added.

Additionally, Pennsylvania’s pension fund paid $15,315 to the state-owned Bank of China for trading broker commissions under Casey in 2006.

Most state employees are required by law to enroll in the Pennsylvania State Employees’ Retirement Code, which handles benefits for around 240,000 employees and retirees, according to its website.

Employees gain a lifetime pension after contributing roughly 6% to the fund for a minimum of five years, or at least 10 years if they were hired after Dec. 31, 2009.

Casey was succeeded as state treasurer by Robin Wiessmann, whom Biden chose last April to serve on the board of Amtrak.

Wiessmann is listed as state treasurer on the financial report for 2006, since the document was finalized in June 2007, six months after Casey was sworn in as a senator.

Casey’s financial ties have drawn scrutiny from ethics watchdogs in recent weeks, after The Post revealed his campaigns have paid more than $500,000 to a printing company owned by his sister and brother-in-law.

Meanwhile, as Congress weighs a ban on TikTok over national security concerns, Casey is one of the few federal lawmakers with an account on the Chinese-controlled social media app.


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