Your Investing Questions From FoolFest

FoolFest is a gathering of members of Motley Fool ONE, Supernova, Pro, and Options that happens every year at Fool HQ.

In this episode of Motley Fool Answers, we pick through a tasty crop of questions that we harvested from the crowd at this year's FoolFest. Find out why some of the world's biggest robo advisors allocate over 50% of their portfolios in international stocks; how to know if you're saving too much during your retirement; how it's possible to earn more money and keep on aggressively investing during retirement; why we at Motley Fool Answers usually recommend index funds over mutual funds and individual stocks; what you need to know before investing in a long-term care insurance policy; and more.

A full transcript follows the video.

This video was recorded on June 20, 2017.

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick, and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool. We're also joined by Sean Gates. He's a financial planner with Motley Fool Wealth Management.

Robert Brokamp: A sister company of The Motley Fool.

Sean Gates: A sister company of The Motley Fool.

Southwick: A sister company of The Motley Fool. Thanks, guys, for coming in and helping me on that intro. Every year, members of Motley Fool ONE, Supernova, Pro, and Options get together at Fool HQ to learn and laugh at an event we call FoolFest. So for today's episode, we're answering questions from FoolFest. I basically ran around and put my phone in people's faces and said, "Ask a question."

So questions like: "How much should you allocate to international stocks, is long-term insurance worth it, and did Bro really go to seminary? All that and more on this week's episode of Motley Fool Answers.

[...]

Southwick: So we just had FoolFest a couple of weeks ago, which is this great, big, get-together of Motley Fool members.

Brokamp: It's the Woodstock for Fools. How's that?

Southwick: I guess, so, yeah. I mean, there's a lot of old-school Fools there who are like, "I've been reading you since the AOL days." But it's great. It's a great time to just get together and hang out with people who love to talk about stocks and investing.

I had a great time every time someone would say, "I love the podcast." I would say, "Great! Ask a question." And some people were very nice to actually have questions for us, so we're just going to go through them today. Now, the audio might have a lot of noise in the background because, like Bro said, it's kind of a rowdy Woodstock for investing. So our first question comes to us from Paige.

Paige Searle: Hi, I'm Paige, and I'm from San Diego. Robert had mentioned he thinks that international stocks are going to outperform U.S. stocks over the next several years. I was wondering if that impacts his recommendation for how much of your portfolio you should have in international stocks right now?

Brokamp: Hi, Paige. It's always great to hear from Paige. I don't know if you know Paige, but she is quite awesome.

Gates: She seems lovely.

Brokamp: She is lovely. My expectation -- and it's, of course, not a guaranteed expectation -- is that international stocks will outpace U.S. stocks. It really comes down to valuation. There is a website run by a company called STAR Capital. It's a German wealth-advisory firm, and they rank the valuations of the 40 biggest national stock markets from cheapest to most expensive. The U.S. is No. 35, so it's the sixth priciest market right now. It's reflected in the P/Es, but also in dividend yields, so if you were to look at the yield on U.S. stock markets, it's like 1.8%. A diversified portfolio of international stocks is yielding closer to 3%, which is another way to gauge valuation. That's really what it comes down to.

So has it affected my recommendations? About a year-and-a-half ago, or so, I upped the international allocation in the RYR [Rule Your Retirement] model portfolios, so it has reflected the general allocation that I recommend for people.

Gates: And I just always like to provide some real-world examples. I'm in the robo-advisor space with Motley Fool Wealth Management. One of our primary competitors is Betterment, and for an aggressive allocation, their allocation is pushing over 50% in combined international exposure between developed markets and emerging markets...

Southwick: That seems high.

Brokamp: Really high.

Gates: ...which is super high, and the underlying component of that is that most of the robo-advisor firms use Black-Litterman models, which is sort of a [mathematical] formula to calculate risk versus reward and where you want to target capital allocation. Motley Fool Wealth Management -- our Black-Litterman -- would have us allocating close to 50% in those areas.

Southwick: But we don't follow that?

Gates: We put our finger on the scale a little bit to rein it in. It gets closer to the Rule Your Retirement statistics.

Brokamp: Right. And in our model portfolios, it ranges from 10% to 30% depending on your risk tolerance. And part of why some people might limit it -- and I don't want to speak for your group -- is that, frankly, international stocks are more volatile, and part of it is just behavioral. People are less likely to stick with international stocks because they perceive them as riskier and they're not as familiar with them. So that's part of why someone might limit them.

And I will say in a recent Bloomberg article, Jack Bogle, the founder of Vanguard, says, "I've never invested in international stocks currently and I probably never will."

Southwick: Really?

Brokamp: At 88, he's split evenly between stocks and bonds, and they're all U.S. index funds. If you look at the period that he cites from 1993 to the recent time, it's proved true. U.S. stocks have outperformed international stocks. It's a little bit of cherry picking the figures, because there are times like the '80s and the first decade of the 2000s when international stocks won.

We all love Jack Bogle here at The Motley Fool, so you don't need international stocks, but I personally have a good allocation [of] them.

Gates: And I think, to your point about behavior, these things take such a long time line to play out. [If] the math model says you should have 50% in [international], is someone who is in that portfolio with 50% of their money in international stocks actually going to hold it to have the returns play out?

Brokamp: Right, exactly.

Gates: And the answer is usually no. We have folks call into Motley Fool Wealth Management who see our allocation with 20%-30% in international, and they're like, "I want 0%."

Southwick: Well, we've talked about that before on the show. Not only are the investor protections better here in the United States, but also our markets are a little bit more stable, so you can't compare international markets to the U.S. for a number of reasons.

Brokamp: And some people will say -- and I think Jack Bogle would be warning these people -- that if you own a diversified portfolio of U.S. companies, you're already getting international exposure. Almost half of the revenue from the companies in the S&P 500 comes from overseas. So it's not like you won't benefit by global growth if you just stay with the U.S. But for me, personally, when you look at a diversified portfolio that's regularly rebalanced, you do get a little bit of a diversification boost [and] a little bit of a performance boost depending on the time frame you're looking at.

Southwick: So generally, bottom line, international exposure roughly 20%?

Brokamp: I think 10%-30%. Ten percent for people who are conservative or in retirement, up to 30% if you're more aggressive. But you just have to plan to stick with it, because there will be long periods where international stocks don't do as well.

Southwick: Our next question comes to us from Marc.

Marc Seeman: Marc Seeman from Canada. I was on the plane down to FoolFest. I was reading an article from The Fool about: "Should you spend your money in retirement or should you invest it?" Something to that effect. I'm looking for guidance as to when you're saving and investing too much money and you're not living life and spending enough of it.

Brokamp: So Marc is talking about an article that I wrote, actually, and it was based on a couple of recent studies that have found that in roughly that first decade of the 2000s, retirees could have been spending more than they did. Basically, what they saw is that the wealth of the retirees grew through that first decade of the 2000s despite the fact that we had two brutal bear markets. So how could that be? Well, part of it was they were conservative in their spending to begin with, and their spending declined about 2.5% every year.

The conclusion of these two studies was basically: "Hey, retirees. Relax a little bit. Spend a little bit more." One of the studies found that, actually, wealthy retirees could spend up to 50% more. I'm not sure I totally agree with that, but I think it's a worthwhile question. If you save your entire life, maybe you should be spending a little bit more. How do you help people determine that, Sean, down in your area of Fooldom?

Gates: It's a great question. I think I should clarify first that you need to stop stealing my articles.

Southwick: What?

Gates: But the short answer is this is a common question, and actually one of the primary value-adds that Motley Fool Wealth Management can offer folks is a lot of people who come to us are already money minded. They're in much better shape than the median or average person is already. And so we can, with some specificity, tell them, "You can actually spend more money and here's by how much." That is a valuable thing, because you get to the core of Marc's question, which is that you don't need to be frugal anymore, or pay attention to the longer-term goals. You should actually enjoy your retirement now.

I recently helped a woman retire early, and she gets to travel, now. She wouldn't have done that, I don't think, if it wasn't for the guidance that we were able to provide. This question comes up all the time, and I think people overestimate. In our models, we will reduce annual spending by about 1%-2%. I think in your article, it was referencing a potential 2.5% decline, on average.

There are many studies that it's in that range of 1%-2%, and I think most people don't account for that in their retirement projections. Any online calculator just inflates your 80% retirement goal, and it doesn't account for that decreasing spend in retirement.

Brokamp: And so, basically, what you're saying is that you help people do this through financial planning software, so it does take a tool to figure this out.

Gates: Yeah. There are some simple shortcuts. I think, as a function of the 4% withdrawal rule, one of the monikers is you can take your desired annual spend, multiply it by 25, and that gives you the rough figure that you need to retire. There are some people who might argue for or against that, but that multiplied by 25 implies a 4% withdrawal rate.

And so, if you assume that you're deflating retirement expenses a little bit, that 25 number might be 20, so you can multiply your annual spend by 20. If it's $50,000, just as an example, that would be $1 million that you need to have saved for retirement if your all-in retirement expense was $50,000.

Brokamp: Right. I will say one of the points they were trying to make in these studies is people are being too frugal. They're too afraid of running out of money. In my opinion, if that's the way they are, so be it. I don't think there's anything wrong by having a big, fat emergency fund in your portfolio, and some people do get stressed out by seeing the size of their portfolio go down in retirement. If that will cause you distress and will cause you not be able to enjoy your retirement, then fine.

Gates: And I think another component that gets lost is folks want to leave assets to the next generation, so that bucket of money might not just be for their retirement spend. It might be, "I want to maximize as much as I can leave to charities, or my kids, or things like that." So there's another component, there, but I think, generally, people are a little bit overcautious.

Southwick: That's a good segue to our next question. Did you do that on purpose?

Gates: Totally.

Tim Parrish: I'm Tim Parrish, and I'm from Harrisonburg, Virginia. I have a question for Alison and Robert. I've been convinced that money is mostly important for building a future. So I have retirement funds. I'm 57. I want, when I graduate and pass on, to have at least the same amount of money in my retirement accounts to pass on to my family, or even more. So I'm looking for ideas of [the best way] to do that.

Brokamp: I'm assuming he means graduate from life.

Gates: Don't we all?

Brokamp: Don't we all? So here's an example of someone who wants to play it a little safer. Has the next generation in mind, and I think that's perfectly fine as long as you can do that and enjoy your retirement, because you probably saved and scrimped for decades to build up your retirement funds. You want to be able to enjoy a little bit of it.

Southwick: Is it crazy to think, "I want to make this much money in retirement to not deplete my funds at all, or even make more money in retirement?" Is that a crazy idea?

Brokamp: No. In fact, that's what some of these studies have shown... that that's what most retirees are actually doing.

Southwick: Making more money in retirement.

Brokamp: Right. There was a study that we talked about probably two years ago, because I went to...

Southwick: I don't remember.

Brokamp: ... it was a retirement consortium and there were other studies that showed that people generally don't deplete their wealth throughout retirement. The only exception is people who have significant healthcare costs or long-term care. Those are the factors that will cause you to deplete your portfolio.

Otherwise most people actually don't deplete their portfolio, because, I think, first of all, it just makes them nervous. And second of all, if you are living off 4%-5% of your portfolio, and your portfolio is growing 6%-10%, it's perfectly doable.

Gates: Yes, and another thing that I think comes into this equation is there's this really key fulcrum point which is when you retire. So when you're allocating your portfolio to risk-reward assets, you're usually aggressive at a younger age, and then as you approach that fulcrum point, you become more conservative, and a lot of folks then stay conservative.

And there's an opportunity, once you've bridged that 3- to 5-year retirement-transition gap, to become more aggressive in your portfolio over time, because you've met your needs, you've figured out your retirement budget, and you can start to become more aggressive for the causes that we're referring to here, or passing on wealth to kids. It starts to take on their time line. So I think it is very possible to have the estate goals, or the wealth goals, that you want in retirement.

Southwick: So is it just about being more aggressive and having riskier stocks in your portfolio? What should Tim do to not deplete this?

Brokamp: That could part of it. The other part is that Tim would just have to adjust his spending in retirement based on what happens to his portfolio. So if his goal is to leave $500,000 to his kids, if his portfolio grows beyond that, you can spend more. If something happens to the stock market where it drops below that, then he has to be willing to cut back until his portfolio recovers. But if I were a financial planner, I would say, "So how much do you want to leave as a bequest and then let's just manage your retirement expenses and investments around that."

Gates: Another thing that you can do to help calculate it is a lot of folks wait. They leave an inheritance. You can come up with annual gifting plans which will allow you to figure out, as part of your retirement budget, how much you should be gifting. So in this case, if he wanted to leave as much as in retirement, if he starts mapping that out and he says, "OK, I'm giving $24,000 a year to the causes that I want," then you start to quickly realize how much you can actually add back and say, "Well, 10 years in retirement, I've gifted $500,000 and I spent $500,000, so I'm track." So it gives you a way to measure these goals.

Brokamp: I think that's a great point. If one of your goals is to give money to charity or to relatives, why not do it while you're still alive and bask in their gratitude.

[...]

Southwick: Back to the questions. The next one comes from our friend here at The Fool, Brian Withers.

Brian Withers: Brian Withers, New Jersey. Robert talked about, one time, the bigger the house you have, the more money you spend to put stuff in it, and I was wondering if he had any facts or backup data on that?

Southwick: I love that question.

Brokamp: So no, Brian, I never have facts backing up what I say. I have this 10-year-old in another country who writes all my articles, so I have no idea. No, I'm just kidding.

Southwick: Oh, next question. The answer is no, Brian.

Brokamp: So, Sean, what do you think? Am I full of BS, or are there facts behind this?

Gates: This is actually a really great question, because it is hard to find hard statistics about whether your expenses are higher as a function of the size of your house, but...

Southwick: Oh, wait. You actually did research.

Gates: I did.

Southwick: This is why we have Sean on, because he actually does research.

Brokamp: I might have some research, but continue, Sean.

Gates: No! You already said you didn't. So the Census Bureau comes out with a study called the Characteristics of New Housing. As of 2014, an interesting fact is that, over the last 40 years, the median average home size has increased 1,000 square feet, while the average and median household per-person unit has decreased by half a person. And so if you look at those statistics in aggregate, that's a 95% increase in per-person square footage and you have to assume that the expenses have increased. There's no way that fewer people in a [house twice as big] have less things. It would just be an empty, vacant ghost house.

Brokamp: Right. And I will say that a lot of the research on this is really about price more than size, but generally, of course, within the same market, a bigger house is going to cost you more money. So just intuitively, you would know a house that is more expensive, you're going to pay more for property taxes. You're going to pay more for homeowner's insurance and things like that. Obviously, with a bigger house there's more to furnish.

There is a report that came out from the Center for Retirement Research from Boston College that said if someone who is retired who had a $250,000 house downsized to a $150,000 house, their expenses should drop by more than $3,000 a year because of utilities, taxes, and things like that. So yes, Brian, there is some research behind what I said.

Southwick: I happen to know that Brian is in the middle of downsizing, so he's really pretty excited to hear that.

Brokamp: I think he was looking for some validation on that.

Southwick: The next question comes to us from Daryl.

Daryl Huggins: I'm Daryl from New York City. I'm real curious on why you decided to go toward just recommending index funds and not recommending any more mutual funds, as you have shown on the newsletters a few months ago.

Southwick: I should also add that Daryl's first question was how do I get the best mortgage for my new spanking house?

Gates: Does it actually spank him?

Southwick: I got so much grief...

Brokamp: So Alison, in one episode meant to say, "brand-spanking new house," but instead she said, "her brand new spanking house."

Gates: That's amazing.

Southwick: So I got so much grief at FoolFest for this. I'm continuing to get grief to this day for saying that and Daryl was no exception.

Brokamp: Isn't he also the one who made the Fraggle Rock observation?

Southwick: Yes. Apparently, when Darryl hears this show, he pictures me as Red Fraggle and Bro is Boober, which is visually pretty spot-on. That's why I'm thinking we need to go as Red and Boober for our Halloween next year.

Brokamp: That sounds great. Anyway, to answer Daryl's question...

Gates: Physically spot-on, too.

Brokamp: [Laughs] I know. Boober. So I think what Daryl is referring to is in the history of the Rule Your Retirement service, of which I've been an advisor now, and our anniversary is just now 13 years this month...

Southwick: Aw! Happy Anniversary!

Gates: Congrats!

Brokamp: Thank you so very much. At one point, we also had a separate service called Champion Funds, and then the two joined so that we had RYR, but also we were covering actively managed funds and an actively managed fund portfolio up until the last few months.

Why did we do that? Well, first of all, the evidence is clear that generally speaking, most actively managed funds have difficulty outperforming a relevant index fund. The recent research from the Standard & Poor's Indices versus Active Score Card finds that over the last five years, 85% of actively managed funds could not beat a relevant index fund. So just by those numbers alone, it makes sense to at least have part of your portfolio in index funds.

I will say as I explained in the article when I made this announcement, part of it was an editorial decision because, based on article clicks and surveys of our readers, most people really weren't buying actively managed funds, so we just decided it wasn't worth writing about them. But as I made clear in that article, that doesn't mean we don't think you shouldn't own actively managed funds. I own many actively managed funds. I'm on The Fool's 401(k) committee. We have plenty of actively managed funds within our 401(k). Just this morning, I rebalanced my 401(k). I sold some money that I have in U.S. index funds to buy more of my international...

Southwick: Eating your own cooking!

Brokamp: That's right. It's an actively managed fund. So we're not saying you shouldn't have actively managed funds, but just for the RYR service, it just made sense for us to focus on ETFs and index funds.

Southwick: Now someone else at FoolFest was like, "Why does Bro hate individual stocks so much?"

Brokamp: Where does that come from?

Southwick: I think maybe it comes from the fact that that's not what we really focus on, on this show. If you want to talk about individual stocks, try any one of our other shows. Our focus is really more about retirement.

Brokamp: And I would say 20% of my 401(k) is individual stocks just looking at it from this morning.

Gates: I would say almost 100% of mine is in individual stocks. But I'm younger.

Southwick: Bro doesn't hate stocks. He doesn't hate actively managed funds.

Gates: I think we've referenced the Dalbar study on this program several times, but a huge component of why, as a financial advisor, it's easy to recommend index funds is because it can lead to good results in just investor behavior. It's much easier to stick with index funds because there's no expectation of underperformance.

You get market return, so if the market is down 10%, you're down 10%. You're not down 20%. Or if the market is up 10% and you're up 5%, you're like, "Well, now I've got to find the next thing that's up 12%." These things lead to the Dalbar Effect and underperformance, so having index funds as your bulwark or spine of your portfolio is an easy recommendation to lead to better results.

Brokamp: Right. It's just some people aren't familiar with the Dalbar Study and there are some criticisms of it. Basically, people tend to underperform the actual funds that they own just because they buy when they're high and they sell when they're low.

Southwick: They move in and out at the wrong times. A lot of people, though, don't really care about beating the market. They just don't want to lose money.

Gates: True.

Southwick: With your experience with people, are most people really actively focused on, "Oh, did we beat the market today, Sean?" Or are they just, "I just don't want to lose any money."

Gates: I think you're spot-on in that most people, if they are gaining money, are fine. But there is a component where, "I heard that the market is up X. Why am I not up X?" And that's the component that I'm speaking to, where in index funds, that can't happen. You are up X, or whatever it is.

Brokamp: Also when you go with index funds, you're skipping a step that you may not want to take. When you start with your portfolio, you start with saying, "How much do I want in U.S. stocks? How much in international? How much in bonds?" That's the first decision. And if you choose index funds, you're done. You just buy those index funds. If you're going in actively managed funds, then you have to find actively managed funds for each of those categories and stay on top of them.

So I don't know if I would call it laziness, but by just going with index funds, you're just making the one allocation decision and you're done.

Gates: This conversation is super interesting, because we didn't even touch on expenses. Obviously, they're lower. There is an argument that says if everyone starts to invest in indexing, then the price valuation component... There are stocks like Google and Apple that have crazy price multiples and that's because they're so heavily weighted. And when you invest in the index, everyone is buying that weighting. And so it opens up the opportunity for active managers to perform better, because they can pick better valuation stocks. But it's an interesting topic.

Southwick: The next question actually comes to us from a Fool employee who was at FoolFest.

Mike Mulligan: My name is Mike. My question is, how do I know when the right time to have a second kid and buy a new house is?

Brokamp: Never! No, I'm just kidding.

Southwick: That's what I said. The answer is never.

Brokamp: Sean, what do you think?

Gates: I was looking at it and I was like, "I don't have kids. I'm not qualified to answer that."

Brokamp: And you don't own a house, either.

Gates: That's true.

Brokamp: That just shows how smart you are.

Gates: Yeah, I know. But one of the relevant factors that can help in this decision is just how much does a kid cost? You can find this online, but the most recent studies or statistics say that the average cost to raise a kid to 17 years old is $233,000, roughly.

Brokamp: And where does that number come from? Do you know? It's the Department of Agriculture.

Gates: Yes, Agriculture.

Brokamp: I just find that so funny.

Southwick: A bumper crop of kids coming up. But get them out in the fields.

Gates: In this sort of shorthand that I mentioned earlier, where you take your annual retirement spend and multiply it by a figure like 20 to 25 to come up with your lump that you need to save for, it's just an easy way to say: "OK. If it's $230,000 to raise a kid, amortize that over the remaining life expectancy. That gives me that incremental average annual cost and that will just help you decide if you can save for that kid."

Brokamp: For me, if I were talking to Mike about this in a financial planning context, I would say it starts with your cash flow. Can you afford to do either? And then which is the priority. And I assume it's the kid, but who knows? You never know.

Southwick: He did just have one kid, didn't he?

Brokamp: Anyway, so you look at your cash flow. Can you afford both? If not, which one are you going to prioritize? And we've talked many times on this show that you can be a perfectly fine human being with a solid financial future without ever owning a house. So in my opinion, it's fine to focus on having the kid and renting for a while until you've determined how many kids you're ultimately going to have, which school district you want to live in, and then focus on the house.

Southwick: And there's no statute of limitations on when you can buy a house, but there is kind of window on when you can have kids.

Brokamp: Yes, that's true.

[...]

Southwick: Here's the next question. It comes from Bill.

Bill Kern: My wife and I are facing the question of do we invest in a long-term care insurance policy now and they are incredibly expensive. What advice do you have for us in that situation?

Southwick: I will add that Bill is amazing because he's also given me a ton of advice about what to do for our vacation to Hawaii. It went on for a mile. The email was amazing. So thank you, Bill, not only for your question, but also for your advice about our Hawaii vacation.

Brokamp: This is a tough one, really, because depending on which stats you look at, you can become very terrified about long-term care, or feel like it's actually not that big of a deal. So one stat, according to LongTermCare.gov, is that 70% of people turning 65 will need some sort of long-term care. That sounds pretty scary.

However, other stats indicate that of that care, only like 10%-15% will actually be in a nursing home, which can be very expensive -- anywhere from $40,000 to $80,000 a year. What most people need is someone to come over and help them with the so-called activities of daily living. Cleaning, shopping, toileting, things like that, which is not as expensive, but it does mean you have to pay someone, like, $20 an hour to do that.

So where is that money going to come from?

If you have a large portfolio -- we're talking maybe $500,000 or more -- you might be able to pay for that out of pocket. If you don't have very much money at all, frankly speaking, the No. 1 provider of long-term services in this country is the government through Medicaid. This is not something that I necessarily feel comfortable saying, but some people do just say, "I'm going to let the government take care of me." You don't have much choice, by the way, at that point. You're not going to have a choice of the best nursing home, but that's what some people choose to do.

Gates: And it's a terrible way to live, because you have to spend down all your assets to qualify for it.

Brokamp: Right. It's not a great strategy. But generally speaking, long-term care insurance is for people sort of in that middle ground -- but it's not cheap. If you are in your 50s, it's going to cost anywhere from $1,500 to $3,000 a year. You wait until your 60s, like 65, you're looking at like $2,500 to $4,000, and depending on what study you read, something like one-quarter of people who apply for long-term care don't get it because they already have some sort of health problem that basically an insurance company says we're not going to insure you.

So it is not cheap, but if you want to be in a position of having some back-up coverage if you need it, there is certainly some value to that.

Gates: And most people will utilize their family to take care of the component that you're talking about -- having someone come in and help with the ADLs.

Brokamp: Ninety percent, by the way, of all that type of long-term care is provided by friends and family.

Gates: So you can save the expense, but then you're shifting it to your family as a burden, so that's something to consider. Another thing to consider is, other than just direct long-term care, which is probably your best bang for your buck in terms of the value that you'll derive from each dollar unit that you put toward the premiums, there are hybrid policies that exist now, that serve the purpose of two types of insurance.

You can basically do a single payment or a one-sum payment into an insurance policy and it creates a bucket of money that's there for you either for long-term care costs, or as a death benefit to you if you don't utilize the funds. Because one of the risks of a long-term care premium policy is that you never end up using it, but you've spent all this money on the premium.

So it gives you a way to try and cover two risks. It's not as valuable in terms of per dollar.

Brokamp: Right. You're paying for the convenience of getting a hybrid, long-term care life insurance policy, and there are more things like hybrid annuity and long-term care policies. So if you buy those separately, it might be more efficient, but some people like to have the flexibility within the policies. But you need to go to an insurance agent to get these because they can be pretty complicated.

My bottom line with long-term care is, if someone asks me about it, [do] they own their own home -- they have $200,000-500,000 in home equity -- that is something they can also use for long-term care, either through downsizing, or a reverse mortgage. So that always, for me, is part of the discussion of how you would pay for long-term care.

If you have a big house that's worth a lot of money and you own it outright, and you don't plan to tap the equity, that might be your long-term care insurance policy.

Gates: And just to give a little bit of perspective in case you're curious about the hybrid policy, it could be close to half as much as a dedicated long-term care policy. I just want you to have all the facts.

Southwick: That is a tough one.

Brokamp: That is a tough one.

Tobin Anthony: Tobin Anthony, Great Falls, Virginia. Hey, Bro. Did you really go to seminary?

Brokamp: Yes! The answer is yes! When I was in high school, I either wanted to fly helicopters for the Coast Guard, or be a priest. So I got accepted to the Immaculate Heart of Mary Seminary in Winona, Minnesota, as well as the Coast Guard Academy in Connecticut. I thought I'd give the seminary a try. I did it for a year and then I transferred to Catholic University in Washington, D.C., which is how I ended up in this area. Obviously, I did not become a priest, but at one point, I did teach at a Catholic school for five years and taught religion. I was a higher-level catechist than the three nuns at the school, I'm very proud to say.

Southwick: So have you ever actually flown a helicopter?

Brokamp: I have not. I have been in one, but that's what I was going to do.

Southwick: I just find it so hard to believe. No, I don't actually find it that hard to believe.

Brokamp: What? That I was going to be a priest?

Southwick: Well, I have a hard time imagining you being celibate, but I don't have a hard time believing that you would go into a profession that is there to help people. That is primarily there to serve... serve your fellow man.

Brokamp: I'll take that as a compliment.

Gates: Isn't that what he's doing currently? As a financial planner?

Southwick: Exactly. You still ended up doing that. You're still in a job where you serve people and help them, and help make their lives better.

Brokamp: But I don't have to be celibate.

Southwick: But you also have a bunch of kids running around, so best of both worlds.

Brokamp: Sorry, mom. I wasn't celibate.

Southwick: I think she knows, considering your oldest is in her twenties. I think your mom figured it out by now. All right, well that's the show. I want to thank you, Sean, for coming and helping us answer questions.

Gates: Always a blast.

Southwick: I appreciate it. Oh, well, it's more of a blast for us. So that's the show. Keep those postcards coming. Our address is 2000 Duke Street, Alexandria, VA 22314. Eric from Knoxville -- I want to thank you for sending a postcard from the Great Smoky Mountains.

Brokamp: I love the Smoky Mountains. One of my favorites.

Southwick: Aw! Be like Eric and make my day with a postcard. Again, our address is 2000 Duke Street, 2nd Floor, Alexandria, VA 22314. Sean, thanks again for joining us. The show is edited FoolFestingly -- something like that -- by Rick Engdahl.

Gates: Celibately.

Southwick: He also has kids running around town. For Robert Brokamp and Sean Gates, I'm Alison Southwick. Stay Foolish, everybody!