Retirement Insights

News and information for current and future retirees.

8 Things to Know When Choosing a Medicare Plan

Making the decision isn’t easy. There’s a lot of fine print when it comes to expenses and coverage. But choosing the wrong plan for your individual circumstances can be a costly mistake—and one that may be hard to undo, depending on where you live. 

When most Americans turn 65, they have three basic options for health coverage: traditional Medicare; Medicare plus supplemental insurance to cover costs that Medicare doesn’t; or Medicare Advantage, a range of managed-care plans.

1. Supplemental insurance is usually the best option for people who can afford it or who have health issues.

Ken Schumm of Olympia, Wash., who turns 65 later this year, had planned on buying a Medicare Advantage plan. It seemed the sensible and most-affordable option. Still, he wanted to be sure, since he has rheumatoid arthritis and takes expensive drugs to combat it.

To help him decide which coverage to choose, Mr. Schumm hired Medicare consultant Melinda Caughill, co-founder of 65 Inc., who calculated that with traditional Medicare with supplemental medical and drug insurance, he would face a total of $11,324 a year for premiums and his deductible. By contrast, if he chose an Advantage plan, the consultant calculated, his costs—including out-of-pocket spending for medical care and drug purchases—could run as high as $18,325 a year. Mr. Schumm’s medical costs are high in part because his out-of-pocket prescription costs will top $6,000 annually with either an Advantage plan or with traditional Medicare plus a drug supplemental plan, 65 Inc. calculated.

Advantage plans are financially risky for patients with health issues, Ms. Caughill says. With an Advantage plan, “Ken could potentially save $3,000 if he had no health needs,” she says. “But his worst-case scenario is thousands of dollars worse.” Based on his current health needs, she calculates that his annual costs with an Advantage plan would range from $8,325, if he uses only his drugs and doesn’t require doctor visits, to $18,325 if he uses doctors a lot and hits his plan’s spending caps.

In fact, people who are affluent are almost always better off with a Medicare supplemental plan, says David Armes, a California Medicare consultant. That is because, as noted later, eventually most people will have significant medical needs. Supplemental plans, while more expensive upfront, offers better coverage than the alternatives.

2. Having Medicare alone is risky.

Some 5.6 million Americans enroll in traditional Medicare but don’t buy supplemental insurance, according to the Kaiser Family Foundation. They all pay a monthly Medicare premium—people buying supplemental coverage or enrolling in Medicare Advantage must also pay this premium—but face no other costs except for drugs, if they don’t seek medical care.

The problem is if they get sick or injured and require a long-term stay in a hospital or skilled nursing facility. In that case, they are less protected from costs than patients who have supplemental coverage or who are in Medicare Advantage.

3. Medicare Advantage plans are cheaper for seniors in good health.

If you’re not going to the doctor a lot and usually stay in-network, Medicare Advantage is a less-expensive option than Medicare with a supplement. Not only do many Advantage plans have no monthly premiums, but they often include a drug plan and extra benefits like dental, vision or hearing care not covered by Medicare. Some offer gym memberships.

The catch, and it’s a big one: Medicare Advantage patients must use in-network providers or face copays that are substantially higher than what people with Medicare supplemental insurance customarily pay. So if you need to go to the top cancer hospital, and it isn’t in your plan, you might incur thousands of dollars in additional costs.

4. Not all Advantage plans are created equal.

Some Advantage plans are set up as health-maintenance organizations, where you must stay within network to get coverage; others are set up as preferred provider organizations, which generally will pay a portion of costs when you go out of network. PPOs give patients a lot more freedom than HMOs, health experts say.

5. Supplemental plans are the better option for people who travel.

Medicare Advantage plans usually have a network of doctors in a certain state or portion of a state. If you’re traveling, they generally will cover treatment for medical emergencies, but not for routine or chronic problems.

6. Supplemental plans usually get more expensive as you get older.

Most supplemental plans use attained-age pricing, meaning the premium automatically goes up for each year you hold it. The plans often have additional increases to cover rising medical costs.

7. It can be difficult switching to Medicare with supplemental insurance.

During the first six months after you enroll in Medicare Part B, which covers doctors and other outpatient services, you are guaranteed the right to buy supplemental insurance. You won’t have to answer health questions from the insurance company selling it, and you can’t be rejected for pre-existing conditions. If you try to buy supplemental insurance after that six months runs out, however, the insurer can charge more because of health issues or deny coverage altogether. A supplemental plan at that point might be impossible or unaffordable.

It is a slightly different story for patients in Advantage plans. In most states, whether you started out in an Advantage plan or switched to one later, you have 12 months from when the plan began to switch instead to Medicare and buy supplemental insurance without having to answer questions from an insurer, says Ms. Caughill of 65 Inc. Any point during that time, she adds, “you can change to original Medicare plus a supplement.”

8. Don’t forget the “nuclear option.”

For people who don’t live in one of these states and are in desperate need of affordable health coverage, Ms. Caughill of 65 Inc. will sometimes recommend what she calls the “nuclear option.” Such patients can get a redo by moving outside their Advantage plan’s service area. Any time you move out of an Advantage plan’s service area, which could be a county, several counties, or an entire state, you have the right to get supplemental insurance in the new service area as if you were just entering the market. The insurer can adjust the price based on age, gender or smoking status, but it can’t charge more because of existing conditions.

READ MORE @WSJ.COM

When You’re Required To Pull Money Out Of Your Retirement Plan

Did you know that once you reach a certain age (72), the IRS requires that you pull money out of most of your conventional IRA retirement plans — if you already haven’t done so?

That’s right. So-called “Required Minimum Distributions (RMDs)” don’t let you keep money in your Individual Retirement Accounts (IRAs) forever. You may have to plan for this with your tax accountant or financial planner if it’s not on your radar screen.

This rule applies to conventional IRAs, 401 (k)s, 403 (b)s, SEP-IRAs and SIMPLE Plans. It doesn’t apply to Roth IRAs and 401(k)s, which carry a different set of rules.

Here is the basic rulebook for RMDs, courtesy of Legacy Retirement Solutions:

  • Depending upon the terms of the specific retirement plan, RMDs must begin to be withdrawn by April 1 of the year following the later of: 1) the year you attain age 72; or 2) the year you retire, provided you are not a 5% or greater owner of the business.
  • For years after the initial RMD is made, the requisite RMD amount must be withdrawn by December 31 of each year. This includes the calendar year after an individual attains age 72, even if the first RMD is withdrawn during that same year.
  • If an RMD is not withdrawn by the applicable deadline or is withdrawn in less than the full required amount, the amount not withdrawn is subject to a 50% excise tax.

Although Congress gave everyone a break by extending the RMD deadline to age 72 (it used to be 70 1/2), you still need to look ahead. Talking with a financial advisor can help you plan. 

READ MORE @FORBES.COM

How Volunteering in Retirement Can Help Your Community—and Your Own Health

Volunteering helps not only organizations, but also the volunteers, health experts say. Older adults who participate in volunteer activities experience emotional, cognitive, and physical health benefits, including a reduced risk for depression and anxiety.

Shortly after Jill Bellarmino and her husband, Lee, retired and moved from Toms River to Cape May, N.J., about 10 years ago, the couple dove back into work. Volunteer work, that is.

“We wanted to give back to the community,” she says, and so they chose Cape May MAC, an acronym for Museums + Arts + Culture, a nonprofit organization that works with 225 volunteers to promote the cultural enrichment of the historic Jersey Shore resort.

As a volunteer since 2014, Bellarmino, 72 years old, has been able to tap the organizational abilities she used in her jobs as a school district secretary and library worker. Her husband, who had been a bank president, serves as treasurer and is a member of the MAC board.

Volunteering helps not only organizations, but also the volunteers, health experts say. Older adults who participate in volunteer activities experience emotional, cognitive, and physical health benefits, including a reduced risk for depression and anxiety.

“Older adults who volunteer find themselves doing more walking, lifting, bending, and stretching. This degree of physical activity is essential for the prevention of disability and physical loss,” says Dr. Ericka Tung, a geriatrician with the Mayo Clinic in Rochester, Minn. “Engagement in service activities also keeps individuals cognitively engaged,” she adds. “Research suggests that consistent community engagement protects against cognitive impairment.”

Results of an AARP survey released in 2019 found adults 65 and older are more likely than younger adults to volunteer regularly. Thirty-two percent volunteer on a weekly basis, averaging about 10 hours a month. One in four adults, however, say they are more likely than other age groups to be kept from volunteering by health issues or other physical limits.

Health setbacks haven’t deterred Joan Sampieri from volunteering. After being diagnosed with multiple myeloma, the Bridgewater, Mich., resident has continued to serve as president of the League of Women Voters in Washtenaw County and as treasurer of the faith-based Friends General Conference of North America.

Politics led her to join the local chapter of the league, a nonpartisan organization that encourages informed and active participation in government. “In late 2015, the League had begun working on gerrymandering issues in Michigan and that interested me,” says Sampieri, 77. She took over as president of the League chapter in 2019 as membership has risen from 75 to more than 300 in the last five years.

After the myeloma diagnosis, she pulled back briefly. “My health impacted my involvement for about two months when I underwent the stem cell transplant,” she says, “but in both instances good people (from both organizations) stepped in” to help.”Virtual meetings allowed me to continue to work with both groups when I could not travel,” adds Sampieri, who held a variety of jobs before retiring, including carpenter, business manager for the Department of Rehabilitation Medicine at Thomas Jefferson Hospital in Philadelphia, and vice president and CEO of Planned Parenthood of Greater Miami and the Florida Keys.In retrospect, she believes her outside activities contributed to her recovery.”Volunteering, and especially being able to do it in a limited fashion with support after the stem cell transplant, definitely kept me from focusing on how tired and not quite like myself I felt after the transplant,” she says. “The transplant has added several years and quality of life for me, but it’s not a cancer that one ‘recovers’ from.”How much volunteering does it take to see the benefits of it?Dr. Tyler J. VanderWeele, a professor of epidemiology at Harvard University and director of the school’s Human Flourishing Program, has done research based on 13,000 adults in a health and retirement study with eight years of data on each participant. During the study period, participants who volunteered at least two hours per week, compared with not at all, subsequently had higher levels of happiness, optimism, and purpose in life, and more contact with friends, he says. They were also notably less likely to die in the four years of follow-up—about 40% less so.

Still, Tung says the optimal amount of time is variable and depends on the person. “Finding a balance is really important—so that the activity feels fulfilling and inspiring, but not so much time that they feel burdened or burned out from their service activities,” she says.

There are exceptions to the rule, she adds. “I have some patients that they actually volunteer more hours per week than they spent in their pre-retirement job. The service is just that gratifying.”

For Bellarmino, who volunteers six hours a week in two three-hour shifts, flexibility is key. “As a volunteer, you can set your own hours. That’s a good thing,” she points out.

One of her first projects was to photograph most of the 6,000 artifacts in the Emlen Physick Estate, a museum in one of Cape May’s famed Victorian houses. She also checks artifacts for cracks, recording them on paper and a computer to ensure they match, and has cataloged about 600 books in the museum’s reference library.

“I like detail work and delving into something. There’s always something to do,” says Bellarmino. “When I complete a project, I feel proud.”

READ MORE @BARRONS.COM

5 Money Mistakes People Make During the Holidays

To help stay on track with savings, financial planners share the biggest money mistakes their clients make during the holiday season.

 
1. They overspend on Black Friday and during other big sales 

Shopping deals should be accounted for in your financial plan. 

Black Fridays and all of the great sales are awesome, but if you can’t afford to buy the item or have to put it on your credit card in order to afford it, then you should reconsider buying it. A sale is not an excuse to overspend.

2. They don’t set a budget per gift

At the start of the holiday season, you might make a list of people who you want to give gifts to, but never price out how much you want to spend on each person. It’s important to set a budget per gift.

If you don’t have a strategy for how much you are going to spend, trust me, all of the flashy ads and guilt-ridden commercials will make you feel like you hate your kids if you don’t buy them a $400 gift. Set a budget and stick to it.

3. They sign up for store credit cards

Even though it can be tempting to sign up for store credit cards to get an extra discount, there are risks to signing up for many new store credit cards because of attractive financing terms during the holidays.

Opening a lot of store credit cards may result in many hard pulls on your credit history, which will remain on your report for 24 months and could lower your credit score. 

Also, many people are bad at estimating their monthly cash flow and think they can afford to purchase on credit. If money is tight, only purchase on credit if you have funds set aside in advance for the equivalent cash purchase.

4. They choose the buy now, pay later option on purchases

So many stores and online merchants are providing the option for people to buy now and pay later, but that could be a mistake.

For one, they can impact your overall credit, and two, they can creep up on you and you need to either have the cash to pay them off or significant interest can kick in. It can become the gift that keeps on costing you.

5. They miss important end-of-year financial deadlines

The last few months of the year can be filled with so much excitement that people might forget about important financial deadlines. Missing these deadlines can be a costly mistake. 

Forgetting to file your taxes if you planned on an extension to October, or missing the January 18 deadline to file your fourth-quarter earnings as examples of things that clients forget to do during the holiday season.

READ MORE @BUSINESSINSIDER.COM

 

Some large employers suspended matching contributions to retirement plans last year, but this was only temporary for many of them. Studying 260 such companies, consulting firm Towers Watson reports that 75% have already restored employer matches, with 74% matching at the same level they did before the arrival of the pandemic.*

Source: MarketWatch, December , 2020

Did you know?

Looking for the tallest mountain on earth? Try Hawaii.

Mt. Everest, at the border of Nepal and Tibet, is generally ranked as the world’s highest peak, towering more than 29,000′ above sea level. Hawaii’s Mauna Kea volcano, however, is in one sense even grander. While Mauna Kea rises 13,796′ from the shoreline, it actually measures 32,808′ from its base on the floor of the Pacific Ocean.*

Source: FarandWide.com, December 15, 2020

On the Bright Side

Investment Advisory Services offered through Trek Financial LLC., a (SEC) Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. DISCLOSURES