September 18, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 18, 2023

This Week’s Podcast – Mastering Medicare Planning in Retirement

Learn how to evaluate your prescription drug needs and choose the right Medicare plan that caters to those needs. You will also learn about Medicare supplements and Medicare Advantage plans, plus how to join our Free Webinar to learn more about Medicare planning from experts.

 

This Week’s Blog – Mastering Medicare Planning

Open enrollment for Medicare is right around the corner, and people on all points of the spectrum should begin planning for it. If you’re in one of the categories below, you’ll especially want to continue reading…

Mastering Medicare Planning

Open enrollment for Medicare is right around the corner, and people on all points of the spectrum should begin planning for it. If you’re in one of the categories below, you’ll especially want to continue reading:

  1. You’re already enrolled in Medicare and want to make sure that you’re in the right plan
  2. You’re eligible for Medicare and need to select your providers

We’re going to create a checklist of sorts for folks who are already enrolled in Medicare or need to sign up for a plan.

Note: We also have a webinar on this topic coming up, where we’ll go into all these points in far greater detail.

Prescription Drug Plans

Prescription drug plans are crucial for retirement planning because you may need very costly medicine in retirement. Each drug plan has different drugs that they cover, so you need to:

  • Review your individual medication needs
  • Find a list of prescription drugs that the plan covers
  • Have an idea of when you need to have prescriptions filled

If you’re not on any medication, your choice may be easier than someone who is on a few medications. You’ll want to read through the prescription drug plan to ensure that the medicine you’re taking now is all covered under the plan.

Anyone who is planning on switching plans must be extremely diligent to ensure that the desired plan covers the drugs you’re taking.

Comparing Part D Plans

Part D is the prescription portion of Medicare. You’ll have one plan that covers hospital visits, one for doctor’s visits and another for prescriptions. If you worked through our first point, then you’ll need to compare drug coverage and the costs you will cover.

Imagine one person with high blood pressure and cholesterol. Their medicine may be covered on one plan. However, what happens if you also have arthritis and are on blood thinners? You’ll need to consider all these factors when making a choice on which Part D plan to join.

But what if you’re not on any medication?

If you’re not on medication, you need to really look at your risk factors when choosing a plan. Perhaps there’s a history of high blood pressure in your family, so you’ll want to find a plan that covers related medications.

Evaluating Your Pharmacy Network

Next, you need to consider each plan’s pharmacy network. If you go to your local Walgreens to have your prescriptions filled, you may not be able to fill them at Walgreens if they’re not a part of the Walgreens pharmacy network.

You should consider cost and convenience.

Is the plan that you plan on entering ideal for your location? Most people don’t want to drive 30+ minutes away once or twice a month for their prescriptions. Online prescriptions are becoming more popular; however, you do have to wait for the medicine to arrive, which can be inconvenient or completely impractical for certain illnesses.

Everyone should evaluate what they’re comfortable with in terms of the pharmacy network each plan offers.

Cost Analysis

Medicare plans are not free. In most cases, you’ll still pay premium cost and out-of-pocket cost.

If you want to have 100% of everything covered, you’ll pay more in premiums. Instead, you need to consider your medications and what the cost is for each of them. What if you have a very simple scenario where your prescription drug cost is very low? In this case, you may not need the most expensive plan.

What we are really looking at here is the “coverage gap” or “donut hole.”

These two terms mean that you need to analyze:

  • Premium costs
  • Prescription costs
  • Income

If you do not have a lot of taxable income, this can work to your benefit and help you get into a more comprehensive prescription drug plan.

Annual Reviews

Annually, we recommend that you review your plan. One of the biggest Medicare mistakes we see is that people do not review their plans annually.

You might have been on the same plan for a decade, but switching plans can save you a lot of money. Some of the Medicare professionals that we work with have saved clients that we’ve worked with $2,000+ a year by simply reviewing and switching plans.

Dental, Vision and Hearing

Our second point revolves around parts of Medicare that are easy to overlook:

  • Dental
  • Vision
  • Hearing

In fact, a lot of health insurance providers are severely lacking in these three areas of coverage, which can cause you to pay out of pocket for any related expenses.

Medicare requires you to think about the dental coverage you need and find a plan that will better meet your needs. Dental issues can spill over into your overall health issues, and you certainly want to maintain your eyesight and hearing, too.

Each of these elements deteriorates faster as we age, so this is an area that you need to focus on heavily.

Vision Coverage

Do you want your:

  • Eye exams covered
  • Lenses or contacts covered

You may want to cover these costs and forget about a plan that offers them. Why? You may compare plans and find that your premiums for vision coverage are much higher, and it’s more cost effective to cover these expenses on your own.

Hearing Coverage

If you think there’s a chance that you’ll need a hearing aid or screening in the future, then you’ll want to consider coverage for hearing. Otherwise, you may be fine without having hearing coverage as a part of your plan.

Integrative Plans

Finally, an integrative plan is when you look at all these items and come across Medicare Advantage plans. There’s a lot to look at with an Advantage plan. You may even find that a Gap plan is better for you.

Unfortunately, there are a lot of things to consider with integrative plans, but it’s something we’ll discuss in greater detail in our upcoming webinar.

Individual Needs Assessment

An individual needs assessment is an integral part of Medicare planning because what works for your neighbor may not work for you. Medicare is very individualized and will help you better understand your needs, true coverage needs, and potential future needs.

Medicare Supplement and Advantage Plans

We do want you to attend the webinar because these plans are so important for you to secure your retirement. Medical expenses can rise rapidly, and you need to be prepared to cover these costs.

In the webinar, we plan to cover:

  • Medicare basics, such as supplements vs advantage plans
  • State-specific coverages and differences
  • Cost considerations
  • Out-of-pocket costs
  • Value of one plan to another
  • Restrictions of each type of plan
  • In-network and out-of-network differences
  • Additional benefits of Advantage plans and if they offer the most coverage
  • Getting access to personalized advice

We work with specialists who can help you make the best decision for your annual plan based on current and future medical needs.

During the webinar, we’ll be working with a Medicare expert who will answer all your questions and those that others have sent to us.

Want to learn more about Medicare planning? 

Click Here to register for our “Medicare Webinar” on October 9th at 12:00pm EST. The webinar is 100% free, so feel free to invite your friends to listen to it, too

September 5, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 5, 2023

This Week’s Podcast – Integrated Wealth Management Experience in Retirement

Learn more about the elements of an integrated wealth management experience: a retirement financial plan, specific-to-the-client investment process, and tax planning. You will also learn how we’re involved in every step of the wealth management process, in-house or with a partner.

 

This Week’s Blog – Integrated Wealth Management

Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

Integrated Wealth Management Experience

Integrated wealth management experiences are our way to help clients have the type of retirement planning assistance that is provided in a “family office.” If you don’t know what this term means or who it applies to, we’re going to cover that in great detail before explaining the concept of integrated wealth management to you.

Note: Click here to listen to the podcast that this article was based on using Spotify, Apple Podcasts, Google Podcasts and Amazon Music. 

What is a “Family Office?”

A “family office” caters to what can be considered ultra-high net worth. You have enough assets that you require an entire team to help manage your assets. These offices will help you with:

  • Family businesses
  • Taking care of budgets
  • Paying bills
  • Managing cash flow, credit cards, real estate

Individuals in a family office have assets of $50+ million. Anyone who falls into this category can be their “own client,” meaning that the entire team works for you to manage your wealth. Extensive assistance is offered, including tax and estate planning, to the degree that 99% of people will never require. You’ll also work with attorneys and CPAs.

All these employees work for you, they’re registered with the SEC, and they assist with managing your “family.” If a person has this high of a net worth, they may need to have a chief financial officer (CFO) who will handle hiring or working with certain experts to meet their family’s needs.

Often, with a family office, they have a CPA working with them full-time.

The family office works solely for the family and will handle all their financial and wealth management needs. If a lawyer needs to be hired to work on estate plans, that’s all handled for you behind the scenes.

Integrated Wealth Management Experience

In our office, our average client doesn’t have $100 – $200 million or a billion dollars. We can’t create a family office for these individuals, but we wanted to create a system that offered the same experience as a family office for all our clients.

What we devised is known as our integrated wealth management experience.

What Does an Integrated Wealth Management Experience Look Like?

Instead of working with one individual, we work with many and take on the role similar to a “CFO.” We look at the person’s entire financial picture and beyond to help you secure your retirement. We partner with multiple professionals on a range of services, in addition to in-house wealth management.

For simplicity, we’ll break this down into a few of our in-house and partnered services.

In-House Wealth Management

In-house, we specialize in wealth management. We are financial advisors, and fiduciaries- which means we’re required to put your best interests first. The majority of our clients are people close to or retirement, and we’re big on the retirement-focused financial plan.

In a few words, the retirement-focused financial plan:

  • Analyzes where you are today
  • Outlines retirement goals
  • Identifies changes that need to be made to reach your goals

Reaching your financial goals will often mean investing in some sort of return. We may invest in the market, bonds, annuities, or a wide range of other financial vehicles. We invest for a return that is comfortable for the client and is based on individual risk tolerance.

Next, we offer tax planning. Some of the tax planning is in-house and some of it is done by working with outside experts. We have checks and balances in place to understand:

  • What your taxes look like today
  • What strategies we can implement before the end of the year to lower the tax burden
  • What to do to save you money next year

We can also handle the tax return for you, and we have partnered with CPAs to lead this process. CPAs will also provide a stamp of approval for all the tax planning strategies that we prepare to ensure that everything moves along smoothly.

Our team helps clients understand where their income is coming from and ensures that their retirement-focused financial plan is operating to reach their goals.

Estate Planning

Estate planning is a crucial part of retirement planning that folks really struggle to talk and think about. However, we incorporate this planning into the experience because it provides you with peace of mind that your estate matters are all handled in a legal manner.

Without an up-to-date estate plan, it can be difficult for you to leave assets in your desired way for heirs and beneficiaries. If you’ve had a major life change since you’ve created or looked at your estate plan, it is a good idea to have your estate plan professionally reviewed and updated. 

For our clients, we have a system in place for the state they live in to create a:

  1. Trust
  2. Will
  3. Power of Attorney
  4. Healthcare Power of Attorney
  5. HIPAA form

We believe this aspect of your retirement-focused financial plan is urgent, and strongly encourage our clients to review and update these documents on a regular basis.

Social Security

We work with a Social Security consultant, so our clients have an expert look at avoiding mistakes when filing for Social Security. Some clients have an easy process for Social Security, and we can help them apply for their benefits. However, other clients do not have as easy of a time.

Our consultant is on retainer and will help consider:

  • Complex decisions
  • Divorce
  • Optimizing for certain forms of income
  • Survivorship

She assists us when running the numbers for Social Security to help you make the best decision on when to take your benefits and how to reach your financial goals.

Insurances

Insurance includes many different options, but one of the major ones is health insurance. When you retire, you’re responsible for your own health insurance, which will be Medicare.

Medicare can be overwhelming when it comes to options, plans, and thresholds. We work with our clients and partners to help them find the best Medicare options for their health scenario and budget. We may be able to structure things to avoid IRMAA surcharges on Medicare, too.

Additionally, we help clients during open enrollment to find plans that may be more affordable or a better overall option for them. 

Long-term Care Planning

Speaking of healthcare planning, we also dive into long-term care planning. Hopefully, you’ll never need this level of care, but you just never know what the future will hold for you. We recently had a podcast on long-term care planning.

We’ll analyze your long-term care options and even help you secure the insurance you need to pay for a nursing home or assisted living facility.

Life Insurance

We’ll work through the question of life insurance and how to structure it for you and your family. 

These are just some of the insurance options that we can use to help build our clients retirement-focused financial plan. As we’ve outlined, we do our best to mimic the “family office” so that it works in your best interests.

What Getting Started with Our Integrated Wealth Management Experience Looks Like

If you call us to discuss your options, we already have:

  • Ongoing, up-to-date research to aid in building plan for your goals
  • Multiple estate planning methods in place
  • Many in-house Insurance and Wealth Management strategy options

We’re involved the entire time, working to have all your questions answered. We will do the research with the estate planner or Social Security expert to have your questions answered.

Since we work with the outside experts, you bypass the extra step to make sure your financial, tax, and estate planning professionals are all on the same page when it comes to your retirement-focused financial plan. We’re very much involved with every aspect of your plan to help you make sound financial decisions.

Want to learn more about our Integrated Wealth Management Experience? Schedule a free call with us today.

August 28, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for August 28, 2023

This Week’s Podcast – 5 Financial Planning Topics That Need to Be Discussed Annually

Listen in to learn about things to consider when doing tax strategy and planning before the end of the year to enable changes. You will also learn the importance of having a Medicare and healthcare planning, year-end investment review, estate planning update, and reviewing your RMDs.

 

This Week’s Blog – 5 Financial Planning Topics That Need to Be Discussed Annually

Annual financial planning topics evolve as you age. We believe that once you secure your retirement, or when you’re close to it, you should consider the following: 

5 Annual Financial Planning Topics 

We recommend…..

5 Financial Planning Topics That Need to Be Discussed Annually 

Annual financial planning topics evolve as you age. We believe that once you secure your retirement, or when you’re close to it, you should consider the following: 

5 Annual Financial Planning Topics 

1. Tax Planning 

Why would you be doing your tax planning in September, October, or November? Several of the following strategies need to be employed before December 31, so if you wait until your tax return is being prepared around March or April of the next year, it will be too late.  

We recommend: 

  • Conducting a review of your earned income 
  • Confirming distribution amounts from your IRA or 401(k) 
  • Identifying any interest and capital gains you may have received in taxable accounts 

In the years you have lower income than what you expect in the future, we recommend thinking about Roth conversions. Although you will likely pay more taxes in the year you convert to Roth, the ultimate goal with all tax planning strategies is to minimize lifetime taxation. 

On the flipside, if you are expecting an influx of income in the future, you can plan ahead to minimize your tax liability by considering the following strategies: 

  • Tax loss harvesting, which is selling securities at a loss to offset capital gains from securities sold at a profit in the same year.  
  • Qualified Charitable Distributions (QCD) or other charitable giving and donor-advised funds 
  • Verifying that you’re withholding a satisfactory amount of taxes on earned income and any retirement account distributions 

Everyone must pay their dues, but if you take strategic steps today, you can lower your tax burden to ensure that you’re not paying a dime more than you owe. 

2. Required Minimum Distributions (RMDs) 

IRA contributions are typically tax deductible, meaning the contributor does not pay tax on those amounts. Instead, taxes are owed on distributions. Once the IRA account owner reaches a certain age, the IRS imposes required minimum distributions (RMDs) to ensure the taxes are eventually paid rather than allowing the owner to indefinitely defer their tax liability.  

Your RMD start age depends on the year you were born. The age for these distributions was 70-and-a-half, and then the law changed to 72, and then 73. Some individuals will need to begin RMDs at 75. The IRS can assess a very hefty penalty if you miss your RMD. If you are charitably inclined, a QCD from your IRA will satisfy your RMD. We have a great article on this topic: How Do Required Minimum Distributions and QCDs Work?  

3. Medicare and Healthcare Planning 

Open enrollment happens in the last quarter of the year, somewhere at the beginning of October. You can move plans at this time without any underwriting. Everyone should look at: 

  • What their plan includes 
  • Options to change plans 
  • Coverage you may need added 

Everyone is different, and most people end up not changing their plans. However, it is still a good idea to review your plan around the last quarter, because if changes need to be made, open enrollment is the opportune time to do so. 

Note: We can put you in contact with some of our partners who specialize in Medicare and healthcare planning. You may even be able to switch to an identical plan at another provider and pay lower premiums, which is always a great way to secure your retirement. 

4. Year-end Investment Review 

If you’ve been looking at your investments throughout the year, you know that your portfolio has gone up and down quite a bit. However, you might overlook a few things and really need to perform a year-end investment review. What is a year-end investment review? 

It’s an annual best practice to consider: 

  • Portfolio risk 
  • Tax loss harvesting 
  • Adjusting your allocations 

You may want to rebalance your portfolio, depending on how one stock performs compared to others. Perhaps one stock is responsible for 60% of your gains. Unfortunately, this is a major risk that needs rebalancing because you risk the stock falling and your portfolio struggling as a result. 

Additionally, you may be at the point in your retirement planning where you’re close to leaving your job and have enough money to live the life you want, but you have too much risk. Bonds, annuities, or other financial vehicles may need to make up more of your retirement strategy at this time. 

Different age groups have differing risk tolerances. 

Your risk tolerance at 50 will be much different than when you’re 60, and so on. Changes can be made based on how the markets performed, how the economy is doing and your feelings going into the coming year. 

5. Estate Planning Update 

Clients often drag their feet when it comes to estate planning because it’s a topic no one wants to think about. However, if you make it a routine, you will be sure that these documents are 100% in order and accurate. 

You want to be sure that: 

  • Every document is up to date 
  • Beneficiaries (and their information) are up to date 

Often, people come into our office, and they haven’t updated their plan in 10 years. Time goes by so fast, and if any major changes aren’t put down on paper, you may leave money or assets to someone who is no longer in your life. 

Beneficiaries may be incorrect or no longer with us, and these documents are final once executed. A simple review is worth your peace of mind that all the hard work and energy that you put into retirement planning will help the individuals that you love when you pass on. 

An annual update is a check and balance that your estate plan is in order. 

If you check all these items off in September or October, you can go into the coming year knowing that you have your retirement plan in order. 

Want to discuss any of these topics more? Schedule a call with us and we’ll do our best to help you.

August 7, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for August 7, 2023

This Week’s Podcast – 2023 IRMAA Update – Will You Have a Surcharge for Medicare Part B and D?

We explain the modified adjusted gross income and the 2023 surcharges if you earn more than $97k single or $194k married filing jointly.

Listen in to learn about the income-dropping circumstances the IRS considers when exempting anyone from the Medicare IRMMA surcharges. You will also learn you should be aware of your numbers when implementing any type of strategy.

 

This Week’s Blog – 2023 IRMAA Update – Will You Have a Surcharge for Medicare Part B and D?

A major part of retirement planning is ensuring that you have the healthcare insurance necessary to go to the doctor for checkups, treatment, or injuries. Medicare is one way to secure healthcare in your retirement, but you may be spending more on surcharges in 2023 than you expect due to the Income-Related Monthly Adjustment Amount known as IRMAA.

We’re going to cover the 2023 IRMAA update and what it means for you if you have Medicare Part B and/or D.

2023 IRMAA Update – Will You Have a Surcharge for Medicare Part B and D?

A major part of retirement planning is ensuring that you have the healthcare insurance necessary to go to the doctor for checkups, treatment, or injuries. Medicare is one way to secure healthcare in your retirement, but you may be spending more on surcharges in 2023 than you expect due to the Income-Related Monthly Adjustment Amount known as IRMAA.

We’re going to cover the 2023 IRMAA update and what it means for you if you have Medicare Part B and/or D.

Don’t know what IRMAA is or what surcharges you may face? Read through our guide on IRMAA Medicare Surcharges.

At its core, IRMAA is a surcharge that you’ll pay for your Medicare if you make over a certain amount of money each year. Updates to IRMAA will affect you because in most cases it means you’ll need to pay more for your Medicare.

Will You Avoid IRMAA Surcharges?

We’ve had quite a few clients who didn’t know about these surcharges and were surprised when they had to pay more for their Medicare. The baseline is based on the modified adjusted gross income (MAGI) of an individual or couple.

Based on the figures below, you will not have a surcharge if you meet the following income requirements:

  • Single person: $97,000/annually or less
  • Married filing jointly: $194,000/annually or less

If your modified adjusted gross income falls under these amounts, your monthly premiums will be $164.90.

Anyone who is still working will need to plan accordingly, because IRMAA is based on what you were earning two years ago. For example, if you are a single person and made $100,000 in modified adjusted gross income in 2021, you would be over the threshold in 2023, based on these earnings.

What to Do If You Made More Than $97,000/$194,000 in 2021?

If you exceed these figures when single or married and filing jointly, the IRS will recognize some nuances or life-changing events that can help offset the surcharge. If you or your spouse experienced the following, you would be considered for a life-changing event:

  • Retirement
  • Marriage
  • Divorce
  • Widowing
  • Layoff
  • Loss of pension
  • Loss of income-producing property

Retirement is one of the life-changing events that the Social Security Administration (SSA) will allow. If you can receive this exception, you will avoid the surcharge. We recommend looking into the life-changing events listed and understanding if you can avoid paying surcharges.

However, the rules are very specific, and the event must fall under one of the exceptions above.

With this in mind, if you believe that you have had a life-changing event and can show your income is under what it was two years ago, you can file form SSA-44. The form is relatively simple and allows you to explain:

  • Why your income is less
  • What the significant change is and why it happened

Again, if you have one of the exceptions above, we highly recommend filling out the form because it will allow you to avoid or reduce surcharges.

What to Expect if Your Modified Adjusted Gross Income Exceeds the Baseline

If you do not have exceptions and will need to pay additional surcharges on your Medicare premiums, you can expect the following monthly surcharges in 2023:

MAGI for single filerMAGI for joint filerPart B SurchargePart D Surcharge
$97,000 – $123,000$194,000 – $246,000$65.90$12.20
$123,000.01 – $153,000$246,000.01 – $306,000$164.80$31.50
$153,000.01 – $183,000$306,000.01 – $366,000$263.70$50.70
$183,000.01 – $499,999$366,000.01 – $749,999$362.60$70
$500,000 or more$750,000 or more$395.60$76.40

Note: Remember, all these surcharges are in addition to the standard monthly premium of $164.90.

If you’re still working or you have events coming up that will add to your income, it’s important to plan the transactions with IRMAA in mind. For example, if you plan on selling an asset that would put you above these thresholds, it may be worthwhile to sell three years before qualifying for Medicare to avoid these additional charges.

Form SSA-44 and the exceptions it provides is almost a one-time deal with some exceptions.

We have had some folks try to apply and a nice representative at the SSA helps them out. However, the form and its exceptions do not help you if you had a one-time investment gain or were trying to follow a specific strategy for your retirement plan.

Tax strategy meetings are an important part of retirement planning because your income determines whether you will pay Medicare surcharges. We have clients who want to do Roth conversions for a variety of reasons, but Roth conversions will add to your MAGI. An increase in income means it’s important to consider both the additional tax you may owe on the Roth conversion and whether the conversion will infringe on the IRMAA thresholds, requiring you to pay a surcharge you might not have had otherwise.

To avoid these surcharges when converting to Roth, convert your accounts before you qualify for Medicare, or put specific strategies in place such as planning carefully around the thresholds.

You’re not stuck with high surcharges forever. Your premiums are recalculated from your tax return each year, so you may have to pay surcharges in 2023, but if your income in 2022 falls, the surcharges for 2024 will be based on the lower 2022 amount.

Do you have any questions about these figures, or do you need some guidance on your IRMAA surcharges?

Click here to schedule a call with us.

May 22, 2023 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 22, 2023

This Week’s Podcast – Important Age Milestones in Retirement

Listen in to learn about the different financial milestones that happen in the life of a child from birth all the way to retirement. You will also learn when to work on your catch up contributions, the social security eligibility age, when to withdraw all your retirement assets and much more.

 

This Week’s Blog – Important Age Milestones

Important age milestones seem to come in waves, especially once you secure your retirement.  A lot of rules around financial planning and tax issues impact people at different ages, which everyone should know about when retirement planning.

Important Age Milestones

Important age milestones seem to come in waves, especially once you secure your retirement.  A lot of rules around financial planning and tax issues impact people at different ages, which everyone should know about when retirement planning.

Important Age Milestones for Parents or Grandparents

Some of the most important age milestones may or may not apply to you, so keep this in mind.

Age 0: Birth of a Child

If you have younger kids or grandkids, you can set up a 529 account for the child. These accounts are college savings accounts for the child. You can also set up a UTMA or UGMA account, which are types of custodial accounts that you can set up for minors.

Age 13: Child and Dependent Care Credit

At age 13, a child is no longer eligible for the child and dependent care credit.

Age 17: No Longer Eligible for a Child Tax Credit

When a child reaches age 17, the tax credit helps you deduct as much as $2,000 per child from your taxes if they’re a dependent.

Age 18: Age of Majority

Children reach the age of majority at age 18 in most states. The government now sees the child as an adult and the accounts you set up for them, such as the UTMA or UGMA, are now transferred to the “new adult.”

You’ll revoke your power over these accounts and need to go through the transfer process.

Age 21: Age of Majority

In some states, the age of majority is 21, and this is when all the custodial transfers for these accounts must take place.

Age 24: Full-Time Student Loses Kiddie Tax

A full-time student is no longer eligible for a “kiddie tax” at 24.

Age 26: Child No Longer Eligible for a Parent’s Health Insurance Coverage

When the adult child reaches age 26, they’re no longer eligible for their parent’s health insurance under the Affordable Care Act. We hear about this one a lot. Parents help get their kids through college, the child stays on the parent’s health insurance and then they’re shocked to learn that they’re no longer eligible to be on their parent’s plan.

Important Age Milestones for Retirement Planning

Age 50: Retirement Contribution Catch-ups

As young as age 50, there’s an important milestone that occurs. You can make “catch-up” contributions for your 401(k), 403(b) and 457 plans. In 2023, if you’re under 50, you can contribute $22,500 each year.

If you’re 50 or older you can add an additional $7,500 to the account, for a total of $30,000 per calendar year.

IRAs also have a catch-up contribution that you should consider.

Age 50: Social Security Benefits for Disabled Widows and Widowers

If you are a disabled widow or widower, you can file for Social Security benefits.

Age 55: HSA Catch-up Contribution

If you have a health savings account (HSA), you have catch-up contributions of an additional $1,000 on top of regular limits of $3,850 for a single person and $7,750 for a family.

Age 59 1/2: Reach the Age of Retirement Asset Withdrawal Without Penalties

In most cases, if you take money out of your retirement account before the age of 59 ½, you’ll be penalized for doing so. The early withdrawal penalty is 10%. Now that you’re 59 ½, you still pay taxes on many of these accounts, but you aren’t penalized for the withdrawals.

You also have the option, in most cases, to rollover from a 401(k) to an IRA. When you do a rollover, you now have the option to invest in stocks and ETFs. An IRA frees up the option of investing your retirement money in a way that is not possible with an employer retirement account. 

You can work with an advisor to help you with the retirement planning at this point.

Age 62: Social Security Eligibility at a Reduced Rate

You’ve paid into Social Security your entire life, and now you can begin taking from this account at a reduced rate. We are having major discussions with our clients on what to do at this critical age. In 2023, you have a limit of $21,240 in income.

If you make more than this amount, for every two dollars you make, one dollar in your Social Security is reduced. We don’t recommend that anyone making more than the $21,240 figure above take Social Security because of this reduction rule.

Age 65: Medicare Eligibility

You can receive Medicare at the age of 65, but you can apply for it at age 64 and 9 months. Now is the time to review plans and learn costs.

If you have an HSA that you’ve been funding, you can use your HSA for non-medical withdrawals because you’re eligible for Medicare. Before this age, any funds in your HSA are designated for medical and healthcare purposes.

Age 66 – 67: Full Retirement Age for Social Security

If you’re working and still bringing in income, you may want to wait until full retirement age to take Social Security. The income limit we mentioned at age 62 is now removed, allowing you to take your benefits while earning as much money as you can.

You can still work, receive good money, and still get 100% of your Social Security Benefits.

The full retirement age has changed a lot in the past decade or so, and the age for full retirement depends on the year you were born. The current ages are:

  • Born between 1943 and 1954: 66
  • Born in 1955: 66 and 2 months
  • Born in 1956: 66 and 4 months
  • Born in 1957: 66 and 6 months
  • Born in 1958: 66 and 8 months
  • Born in 1959: 66 and 10 months
  • Born in 1960 and beyond: 67

We believe that this age may be adjusted again in the future.

Age 70: Maximum Social Security Benefit

Deferring your Social Security until age 70 allows you to receive your maximum Social Security benefits. Your benefits will no longer increase after this age, even if you continue contributing to the system.

For 99.9% of people, this is the age when you want to take your benefits if you haven’t already.

Age 70 1/2: Charitable Contributions from Your Retirement Accounts

At the age of 70 and a half, you can begin taking contributions from your retirement accounts, such as your IRA, and then give them to charity using a qualified charitable distribution. If you use this method of charitable contributions, the key is that the money never hits your bank account.

The money goes from the retirement account directly to the charity, allowing you to avoid any taxes on it while also maximizing the amount you give to charity.

Age 73: Required Minimum Distributions (RMDs)

Age 73 is when you start taking your RMDs. This used to happen at age 70 and a half, but now you can wait until age 73 to take RMDs. You must begin taking RMDs at age 73 if you were born before 1960.

If you were born in or after 1960, the required age is 75.

For us, when it comes to retirement planning, these are some of the things that we like to discuss. A lot of milestones change and are easy to miss. If you would like to have a review of important milestones for you, be sure to reach out to us.Click here to talk to us about important age milestones.

September 26, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 26, 2022 

This Weeks Podcast – Will I Avoid IRMAA Surcharges on Medicare?

Are you going to be able to avoid IRMAA surcharges on Medicare parts B and D? IRMAA stands for Income-Related Monthly Adjusted Amount, and there are charges on both parts B and D based on where your income lands.

If you’re thinking about retiring any time soon, there are ways to manage your income to stay at a lower amount to avoid surcharges on your Medicare premiums.

 

This Weeks Blog -IRMAA Medicare Surcharges

Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

IRMAA Medicare Surcharges

Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

Medicare kicks in at 65, and there are premiums and surcharges that you need to know about.

What is IRMMA?

Income-related monthly adjustment amount (IRMAA) is an essential part of your Medicare because it’s a sliding scale percentage, which you’ll be required to pay based on your income. Depending on your income, you may or may not have this additional surcharge.

IRMAA is on top of the Medicare premiums that you pay, so it’s something to consider.

Note: We also have a flow chart, which will show you how much you’ll be required to pay for IRMAA based on your income. Call our office at (919) 787-8866 and ask Laura or Morgan for the chart.

IRMAA Medicare Surcharges FAQs

What is modified adjusted gross income?

Modified adjusted gross income is your income minus deductions and then added back items, such as your student loan interest or retirement account contributions. You’ll find this value on your tax form.

Did your modified adjusted gross income surpass $91,000 filing single or $182,000 filing jointly in the previous two years?

  • If you answer “no,” your premium for Part B will be $170.10 per month.
  • If you answer “yes,” your surcharges will be on a sliding scale, but there are a lot of additional questions to be asked.

You Answered, “Yes.” Now What?

If you answer “yes,” then the following questions will be asked:

  • Have you or a spouse experienced a life-changing event that significantly impacts your income? This includes marriage, divorce, widowing, retirement, loss of pension or income-producing property. If you answered “yes,” this will mean that you’ll submit a form to the IRS office to show that this income is no longer accurate. You’ll need to file form SSA 44, which shows your income has dramatically changed, putting you back to the previous premium.
  • No life-changing events but your modified adjusted gross income exceeds the figures above. Now, we’ll look at your tax return two years ago to find your modified adjusted gross income. Depending on this figure, you will pay:
    • $91,000 – $114,000 (single); $182,000 – $228,000 (married filing jointly): Additional surcharge is $68 per month for Medicare Part B and $12.40 per month for Part D.
    • $114,000 – $142,000 (single); $228,000 – $284,000 (married filing jointly): Additional surcharge is $170.10 per month for Medicare Part B and $32.10 per month for Part D.
    • $142,000 – $170,000 (single); $284,000 – $340,000 (married filing jointly): Additional surcharge is $272.20 per month for Medicare Part B and $51.70 per month for Part D.
    • $500,000+ (single); $750,000 (married filing jointly): Additional surcharge is $408.20 per month for Medicare Part B and $77.90 per month for Part D.

IRMAA is per person, so if you’re married and filing jointly, you’ll need to pay these additional surcharges for each person in the household on Medicare.

Strategizing for your Medicare is a smart decision because there are ways to reduce income to help save on these premiums.

Note: This will look back two years, so for 2023, your 2021 modified adjusted gross income will change.

If you liked this blog post, we highly recommend that you sign up for our podcast, where we share other great financial information with you.

Click here to listen to your Secure Your Retirement podcast.

How Does Medicare Work?

Medicare is such an essential part of retirement planning because you can save for your retirement, but there’s often no way to cover 100% of your medical expenses out of pocket. There are also a lot of Medicare mistakes you can make simply because you’re not well-informed on the topic.

In our most recent podcast, we had the pleasure of speaking with one of the leading experts in Medicare: Diane Omdahl.

She’s the co-founder and President of 65 Incorporated.

Who is 65 Incorporated?

65 Incorporated is a business that provides Baby Boomers and seniors with unbiased Medicare information. The company offers software and consulting services that help guide you to the right Medicare option for you. 

You’ll find the company on:

  • Kiplinger
  • MarketWatch
  • U.S. News

Diane is a registered nurse working in long-term care, and then she became a director of a home health agency, where she learned all about Medicare rules first-hand. Now, for over two decades, she has helped educate seniors on Medicare.

When Should a Person Begin Planning for Medicare?

Retirement planning is different for everyone, and while many people retire at 65, some retire at 62. First and foremost, it’s crucial to know that you cannot be on Medicare until you’re 65. If you retire early, you’ll need to get health insurance to cover those years.

Diane recommends that you start planning out your Medicare 9 – 12 months before you plan on going on Medicare.

You’ll need to create a My Social Security account to apply, so this is something that you can do beforehand to get the ball rolling. The biggest issue Diane finds is that people run out of time because they don’t take measures beforehand.

One of the biggest misconceptions that Diane sees is that people think they need to take Medicare at 65 no matter what.

You can:

  • Enroll in Medicare
  • Stay on health insurance if you work with a company that has 20 or more employees
  • Contribute to an HSA

If you have health insurance through your employer or contribute to an HSA, it may not be in your best interest to go on Medicare just yet. However, if you’re on Social Security or on disability, you will automatically be enrolled in Medicare.

Every person’s situation is unique, and that’s why it’s important to sit down with a professional to learn when the best time is to enroll in Medicare. 

What is Open Enrollment?

Open enrollment starts on October 15 and ends on December 7 of each year. This period allows people with a Part D or Advantage plan the option to change plans. You may love your current plan, but if you’re not paying attention during open enrollment, it’s not uncommon for plans to change.

Some people will be on very low-cost Part D plans, and then find that the price of their current plan doubles after open enrollment.

You have to pay attention to your plan during open enrollment.

Can You Change Your Medicare Plan?

There are two main Medicare “paths,” as Diane likes to call them.

  1. Original Medicare with supplement plans
  2. Medicare Advantage 

When you make your initial plan to go on either path, it is very important. You can change plans, but things are getting a little more complicated in some states. You may not be able to change plans easily due to health reasons or where you live.

Also, note that there are three main Medicare parts:

  • Part A, which covers hospital and home healthcare.
  • Part B, which is an outpatient medical component.
  • Part D, which is your prescription drug plan.

What is Original Medicare?

Original Medicare has multiple parts:

  • A
  • B

You’ll also want Part D and some sort of Medigap plan.

What is Medicare Advantage?

Medicare Advantage is also considered Part C, and it was introduced to help combine Part A, B and D into one.

How to Choose Your Medicare Path

Medicare has these two paths, but which one is right for you? This is where it gets tricky. Eventually, everyone’s health will begin to decline to some degree. However, the biggest issue is financials.

  • Original Medicare is where you pay monthly and have to pay for certain procedures.
  • Medicare Advantage is more like a pay later solution, where you pay for procedures later.

Coverage rules differ, too. If you want to see a specialist, you need a referral on the Advantage plan and not on the Original plan.

Original Medicare has a lot less coverage rules than Advantage plans with some caveats, such as buying a mobile wheelchair. Under the Original Medicare plan, your doctor can recommend physical therapy without additional approval.

So, there’s a lot to think about.

Unfortunately, many people want to get Medicare as quickly as possible. There’s a lot of information surrounding Medicare, and you may want to just get it over with and choose a plan that isn’t optimal for you.

Don’t do this.

It may be more difficult in the future to change your plan, and in some cases, it may not even be possible.

That’s why it’s so important to sit down with an expert like Diane to choose the right path the first time.

For example, Diane received a call from someone with:

  • Cancer
  • Cannot get a referral
  • Cannot get the supplement

He’s stuck in an HMO plan, and he needs prior approval before chemo can begin. Unfortunately, he needs to jump through hoops and may even need to delay treatment because he’s not on the right plan to begin with.

When to Sit Down with a Financial Advisor to Discuss Medicare

Ideally, you’ll want to sit down with a financial advisor at 62 or so to discuss Medicare. Medicare has a two-year look-back period, and the period will determine how much you pay for Medicare.

Financial advisors can help you restructure your wealth to help reduce your Medicare expenses.

Medicare is one of those things that you need to focus on when trying to secure your retirement. You want to sit down with an expert to discuss Medicare and learn which option is the best choice for you. Don’t just fall for everything they say on television about Advantage plans because you’ll often find that there are missing tidbits and misleading claims that can cost you a lot of money.

Want to hear the podcast for yourself?

Click here to look through our list of podcasts.

5 Medicare Mistakes to Avoid

Medicare is crucial when trying to secure your retirement because private health insurance is very expensive. And if you’re in retirement without any form of insurance, you’re one medical emergency away from depleting your funds.

We had the pleasure of speaking to Roderick Spann of Senior Advisors and discussed five Medicare mistakes to avoid so that you can enjoy a worry-free retirement.

5 Most Common Medicare Mistakes to Avoid

1. Not Enrolling in Part B Under the Right Circumstances

Medicare has what is considered an “initial” enrollment period. This enrollment period revolves around a person’s 65th birthday. The period is valid during the following time periods:

  • Three months before turning 65
  • The month of turning 65
  • Three months after turning 65

Generally, a person will enroll in the three months before they turn 65 so that Medicare begins on the first of the month that they turn 65.

If you have an employer with over 20 employees, you can remain on their group plan and not go on Medicare Part B. However, if your employer has fewer than 20 employees or you’re no longer employed, you need to enroll in Part B.

It’s crucial to enroll in Part B because it is the medical insurance portion of Medicare. Essentially, Part B covers any medical care outside of the hospital. Part A only covers your in-hospital care.

Part B covers your:

  • Outpatient surgery
  • Doctors
  • X-rays
  • CAT scans
  • Etc.

Ideally, if you need to enroll in Medicare, do it at the beginning of the initial three-month period. Delays can lead to penalties, and you never know what may go wrong during the initial enrollment that must be rectified.

2. Ignoring Medicare Part D

Medicare has a lot of parts. For example, let’s say that you get sick, visit the doctor and are prescribed medication. Parts A and B of Medicare will not cover prescriptions. Instead, you’ll need to have Part D, which offers you drug coverage.

Part D prescription plans are all very different, and there are 25 – 30 of these plans available. Many people choose a plan recommended by a friend or coworker, but this is a bad idea because you may need specific coverage not offered in the plan.

Plans have different:

  • Co-pays
  • Premiums
  • Etc.

If you’re not analyzing your prescription drug coverage when choosing a plan, you can spend thousands of dollars more than necessary. For example, plans have preferred pharmacies that offer the best prices and coverage. If you don’t go to this pharmacy because it’s too far away, you may spend thousands of dollars more per year than you would on a different plan.

Analyzing your prescription drug coverage is crucial when opting into Part D.

3. Not Understanding Medicare Advantage vs. Medigap Coverage

Unfortunately, navigating Medicare is complex. Just when you think you have all the coverage you’ll possibly need, you’re presented with options for Medicare Advantage or Medigap coverage.

And these plans are worth considering because they offer additional coverage.

Before going into these coverages, let’s backtrack and discuss original Medicare.

Original Medicare

Original Medicare is your Part A and B coverage. Under these plans, just 80% of medically necessary services are covered. You’re responsible for an unlimited 20% of coverage.

So, what can you do?

Enroll in a Medicare Supplement or Medigap plan. These two plans do exactly what they sound like: fill the gap in original Medicare. However, Medicare Advantage is Different.

Understanding Medicare Advantage

Medicare Advantage works differently from Medigap and Medicare Supplement plans. You’ll move from original Medicare to private insurance under Medicare Advantage. The main difference here is:

  • Plan costs
  • Choice of doctors

Original Medicare allows you to go to 99% of hospitals and 90% of providers. Advantage plans are like HMOs, where you must go to specific doctors and hospitals. These plans are regional based.

4. You Have Retiree Coverage or Employer Plans and Don’t Think You Need Medicare

Retiree coverage may not be the most cost-effective or robust as you need. Some plans have $0 premiums, and that’s something you’ll want to stay on. However, we’re seeing many retiree plans that have monthly premiums, making them less effective than Medicare Advantage or even an Original Medicare plan.

You must sit down and analyze:

  • What your plan covers
  • Coverage and cost versus Medicare

Again, you need to analyze every portion of your current coverage to determine whether Medicare is a good option for you.

5. Selecting a Plan Based on a Friend or Family Member’s Advice

Friends and family may not have the best insight into the right plan for you. A plan may be optimal for you and horrible for your neighbor. Unfortunately, Medicare is not a one-size-fits-all solution.

You should speak to someone in the area who is a specialist and can help you sift through the plans and options that you have available through Medicare.

It’s important to have a thorough understanding of your:

  • Medical needs
  • Medicare options

This way, you can then weigh the pros and cons of supplement or Medigap plans or even the different parts of Medicare.

If you’re 64 and turning 65 soon, planning for Medicare with an expert would take an hour of your time and can be extremely beneficial for your healthcare needs. A few of the questions that are asked are:

  • Are you employed?
  • Do you plan to retire at 65?
  • Does your current insurance cover just you or others?

Once you answer all the questions, you’re presented with plans and options that will best fit your unique needs. Experts can even help and assist you with the actual enrollment process, so you know how to navigate Medicare from start to finish.

Did you spot the recurring theme with all these plans? You need to know the coverage you really need and to understand what’s available through Medicare that can help you maximize your coverage.

Roderick is a professional Medicare Agent, so if you need help with Medicare or have questions, reach out to him at (908) 481-5678 or send him an email.

If you need help with securing your retirement, schedule an introduction call with us today.