Category: Medicare

Some Surprising Expenses in Retirement

After working hard and saving your money wisely, you’re ready for a successful retirement. Unfortunately, there can be bumps and hiccups with the plans. Nobody wants to be caught off-guard when it comes to saving for the future, so Forbes has published info on four retirement expenses that may catch you by surprise—and steps you can take to still come out ahead—in “Four Retirement Expenses That May Catch You By Surprise.” 10-21-16

1: Medical Co-Pays and Long-Term Care Expenses. The co-pays for doctors and treatment surprise many folks. They don’t realize that insurance premiums and even co-pays can change over time, and they typically don’t plan for those changes. Some people, in years where they have a large income, will often be victims of the “donut hole” of Medicare insurance premiums. These can increase to $200 per month. Anticipate that these costs will increase and budget additional savings to cover the changes. As far as long-term care, it’s a major issue. You should speak with an elder or estate planning attorney about the best way to cover long-term care expenses. Keep this in mind when planning for the future and save extra money for this expense.

2: Financial Support for Children and Grandchildren. This is more and more common. Grandparents don’t feel like their kids had it like they did when jobs were easier to find. Often grandparents want to take an active role in contributing. But if you do this, be sure that you’re not sacrificing your own lifestyle and retirement savings for their benefit. Helping out with family is terrific, but you don’t want to make a mistake that could end up costing you big time in the long run.

3: Inflation and Increases in Basic Costs of Living. The price of just about everything is rising, and we’re living longer on average. You need to think in terms of giving yourself “raises” and understand that retirement may cost double or triple what it does when you start to retire.

4: Home Expenses. We’re not talking about a new addition or a heated pool. Expenses could include the roof, the driveway, the furnace or the AC. All of these basics deteriorate over time and require money to repair or replace. One option may be to sell the home and move to a spot with less upkeep. If you decide to stay put, you need to save for basic house maintenance as the home ages.

Planning for a successful retirement is no small feat. Enjoy the retirement you deserve, but be aware of potential surprises that many arise as you near retirement. You will be in a better position to have the savings you need to address those surprises head-on and have the confidence you need to retire successfully.

Reference: Forbes (September 1, 2016) “Four Retirement Expenses That May Catch You By Surprise”

Come On, Do I Really Need a Will?

The answer to that question has always been an unequivocal “yes”—especially when there’s a spouse, children or stepchildren. However, there are some financial advisers that now say many Americans might not need a will. Forbes’ article, “Do You Really Need A Will?” says that a simpler life may mean you will need a less complex estate plan. However, few people’s lives are that simple. 10-19-2016

If you have minor children, you need a will to designate guardians for them. Also, a will or a trust will let you name someone to watch over assets for a disabled or elderly family member or a relative who may not be good with handling money.

Whether you have prized possessions or you want to bequeath some of your estate to the local animal rescue, a will is essential.

The state in which you live can make a big difference. In community property states, your surviving spouse will only inherit all your community property if all your children are also the children of that spouse. Otherwise, your one-half interest in your community estate will pass to your children. If there is any kind of animosity or resentment, they could make your spouse sell the house and send him or her packing because the kids own half the house.

Without a will, a pet can wind up in a shelter after you die if no one takes responsibility for it. A will can name a responsible person and make for a smoother transition for the animal.

A will can also help elderly parents avoid losing government benefits if you predecease them. If they are beneficiaries of your life insurance policy, a large payout may halt their government benefits unless you write a specific provision in your will.

Reference: Forbes (August 31, 2016) “Do You Really Need A Will?”

Create Your IRA Exit Plan

10-06-2016

IRAs, 401(k)s, 403(b)s and other qualified accounts are popular tools for building a retirement nest egg. But after investing and saving with one of these plans for the last 30 years, as retirement nears you may ask yourself, "What should I do with my retirement account?"

The most common advice given is to withdraw as little out of your IRA as possible while taking your Required Minimum Distributions (RMDs). MarketWatch, in its recent article, “IRAs are for retirement planning, not for retirement,” suggests that we should think a bit outside the box before simply following the masses, with regards to your IRA and its RMDs.

If your money manager is advising you to let your IRA sit and only withdraw the RMDs, remember that typically, money managers are making 1-2% in fees on the total amount of money under their management. As such, the money manager has a vested interest in you keeping most of your money under his or her care.

Here are few ideas:

If tax rates increase, qualified accounts don’t give you any protection from future tax liability. If you’re like most Americans who think that taxes will increase in the next decade, do you want to wait for your retirement savings to be taxed at a higher rate? If you're between the ages of 59 and 70½, you are at the perfect spot to start an IRA Exit Plan.

Another consideration is the way in which you’ve titled your IRA and the beneficiary designations. Talk with a qualified estate planning attorney when designating your primary, contingent, and tertiary beneficiaries, as well as when titling an IRA.

Remember that when you set up a trust, your IRA cannot be retitled to your trust. This inability to change ownership of your IRA can lead to gaps in planning for Medicaid and Veteran Benefits. The quick solution is to overcome this by simply changing the IRA's beneficiary to their trust. But beware—there can be dire consequences if your beneficiaries of your IRA are not done properly.

Talk with an estate planning attorney to be certain that the IRA's beneficiary is a trust that qualifies as "See Through Trust,” or else it can cost your families thousands of dollars in taxes by making it instantly taxable upon your death.

There’s no better time to start preparing yourself, as well as your investments, for retirement. Create your IRA Exit plan so that when you enter retirement your assets will be as ready for retirement as you are.

Reference: MarketWatch (August 17, 2016) “IRAs are for retirement planning, not for retirement”

Shop Around for Medigap Insurance

There’s quite a range of prices for Medicare supplement insurance (Medigap) policies, and there’s a good chance you can decrease the cost of your premiums by moving to another plan. However, the options might be limited based upon your health and the state where you reside, says Kiplinger’s recent article “How to Save on Medicare Supplement Insurance.”

Even though each Medigap plan with the same “letter designation” provides the same coverage, the price can fluctuate considerably by insurer. For example, a 65-year-old man could pay anywhere from $1,092 to $6,519 in 2016 for Plan F—which is the most popular plan—based on the insurer. 10-03-2016

Those are nationwide numbers, but prices can even vary within the same zip code. While everyone loves a bargain and a better rate, switching to another policy can be tough since insurers in most states can charge you more, hit you with a waiting period or deny you coverage based on your health if more than six months have passed since you signed up for Medicare Part B. However, you may be able to switch to a lower-cost plan after that initial enrollment period in some instances.

It’s best to apply for a new policy if you’re healthy because you may qualify for a new policy. Some folks who are healthy and around 65 can get a new Medigap plan, but other insurance companies won’t answer the phone if you’re over age 70.

See if your insurer will allow you to switch to a less expensive policy. Some will let you switch to a less comprehensive policy without medical underwriting. For example, if you have Medigap Plan F, your insurer may let you switch to a high-deductible Plan F without new underwriting. Look at the difference in price: the average premium for traditional Plan F is $2,293 for a 65-year-old man, and for the high-deductible version, it’s just $668.

Note: With the lower premium, you’ll have to pay the $2,180 deductible out of pocket before any benefits will begin. That might work if you have few medical expenses, but you may have larger out-of-pocket costs as you get older—when it’s tougher to switch to a different plan.

Prior to a switch, determine if the premium savings are worth the possible extra expenses—especially as you grow older and potentially have more health issues. Also, see if your state has any special rules to let you switch policies. You may be able to change plans at certain times, so review the state’s insurance department rules. You may also be able to purchase a Medigap policy without medical underwriting under some cases—like if your insurer leaves the business or when you’re switching from a Medicare Advantage plan.

Reference: Kiplinger’s (August 4, 2016) “How to Save on Medicare Supplement Insurance”