Medicare

Facts and Figures for Older Workers and Retirees in 2020

A new year always brings change, and this year is no exception. From Market Watch, the article “Numbers that older workers and retirees need to know in 2020” provides key information for this new year.

Retirement Plan Changes. Limits for how much can be saved in 401(k), 403(b), Thrift Savings Plan, and most 457 plans have increased by $500 to $19,500 for 2020. If you are 50 and older, the “catch-up” contribution has also increased by $500.

For those with SIMPLE retirement plans, which are usually from small businesses with 100 or fewer employees, you can increase savings by $500 to $13,500.

What hasn’t changed—if you have an individual traditional IRA, you can save $6,000, with a catch-up contribution of $1,000.

Social Security Changes. The Social Security Administration reports that the average monthly benefit in 2019 was $1,356.05. This will rise by 1.6% in 2020, which will mean an increase of $21.69 per month. Last year, some 63.8 million Americans took Social Security benefits. It was the first year since the program began in 1935 that spending topped $1 trillion.

Another change to Social Security in 2020 is the longer period of time to reach full retirement age. For people born in 1958, this now increases to 66 years and eight months. The longer period is also going to increase in 2021 and 2022—making the full retirement age 67 for anyone born in 1960 or later.

That doesn’t mean people can’t get Social Security benefits earlier—you can elect to take benefits as early as age 62—but you’ll receive less. If you take benefits at age 62, they’ll be 75% of the monthly benefits because you will have added 48 months. At age 65, you’ll receive 93.3% of full benefits because of adding an additional 12 months. If you are taking spousal benefits, there are more numbers to consider.

Medicare Changes. The good news was the increase from Social Security. The bad news? Standard monthly Part B premiums will increase 6.7%, from $135.50 in 2019 to $144.60. That’s the minimum premium. Depending upon your premium, they could go as high as $491.60 per month. Medicare officials blame higher drug prices on the increase.

Health care costs are part of a rising tide of costs facing retirees and older workers. Considering how few Americans have enough money saved for retirement, this is going to become more of a national issue as boomers and millennials age. It should serve as a reminder for all—save as much as you can for retirement, starting now.

Reference: Market Watch (Dec. 28, 2019) “Numbers that older workers and retirees need to know in 2020”

Turning 65 in 2020? Some Pointers for a Special Year

Many things change when celebrating your 65th birthday. For one thing, if you haven’t already retired, chances are good that you’ve set a retirement date and it’s not too far away. There are a number of things to be considered, advises the article “Points to ponder before turning 65” from Knox News.

The year you turn 65 is the year that you enroll in Medicare. Coverage begins at age 65, and the initial window to enroll opens three months before your 65th birthday and ends three months after. Miss that deadline, and there may be penalties when you do at last sign up for Medicare.

You can sign up for Medicare, whether you are working or not. If you are turning 65 and already collecting Social Security, you’ll automatically be enrolled in Medicare Parts A and B. You’ll need to sign up for Part D to avoid penalties, unless you have coverage through a spouse’s employer.

Here are some details:

  • Part A covers hospital care and is generally free for enrollees.
  • Part B covers diagnostic and preventive care. You pay for it with a monthly premium.
  • If you’re still working at age 66 and have health insurance through your employer, you may choose not to enroll in Part B. You can sign up for Part A, at no cost, and delay Parts B and D.
  • If you’re still working past 65 and have creditable coverage through your employer or your spouse’s employer, then you can defer Medicare.

Note that you may not get a full monthly benefit, if you claim Social Security right away. You can begin collecting Social Security at the young age of 62, but you won’t get the full monthly benefit that you otherwise would get unless you wait until you reach full retirement age. That date depends upon your date of birth. For most people turning 65 in 2020, that means full retirement age is 66 plus two months. Is it worth the wait? Your monthly benefit shrinks by 7.8%, if you file for benefits at age 65.

This is the time to check on your estate planning documents. If you don’t have these already, speak with an estate planning attorney to make sure that you and your family are protected by the following:

  • General Durable Power of Attorney for Finances
  • Durable Power of Attorney for Healthcare
  • HIPAA release
  • Revocable Living Trust
  • Advanced Health Care Directive
  • Last Will and Testament

It’s a great birthday to celebrate but be certain that you take care of the estate planning, Medicare and Social Security aspects of your life, as you prepare for this milestone.

Reference: Knox News (December 26, 2019) “Points to ponder before turning 65”Social Security, Medicare, Part A, Part B, Estate Planning Attorney, Power of Attorney, Revocable Living Trust, Health Care Directive, Last Will and Testament

Prior Planning is Always a Better Alternative

None of us knows what kind of unexpected surprises will occur in our lives. We’d like to believe they will all be happy events, like winning the big Power Ball jackpot. However, unpleasant things like illness or a flood or fire often occur. We never think it will happen to us, says The Dalles Chronicle’s article “Prepare now for emergencies.” Unfortunately, these things do happen, and when they do, being prepared can make all the difference between a stressful situation and a really awful situation that could have been made, well, less awful.

For starters, have you met with an estate planning attorney to create a comprehensive estate plan that includes a last will and testament, a financial power of attorney and a health care power of attorney? The will concerns distribution of your possessions and property, the power of attorney gives a trusted person the ability to take financial and legal actions on your behalf, in the event that you become incapacitated and the medical power of attorney allows someone to make health care decisions for you, also if you become incapacitated. There are also many other tools that an estate planning attorney can help you with, such as a Special Needs Trust, if your family includes a family member with special needs, or other trusts, if they are needed.

Next, your emergency preparations should include having important documents assembled in a notebook, on a memory stick and/or a safe location. Imagine there was an emergency evacuation and you had to leave your home immediately. What documents would you need? Here’s a checklist:

  • Contact information for family members, doctors, attorneys, dentist, insurance broker, financial advisor.
  • Cash, so if ATMs are not working, you will have cash on hand.
  • Identification documents, including originals of your birth certificate, marriage license, divorce papers, passport, Social Security card, health insurance cards (or Medicare or Medicaid cards).
  • A video of your home and all of your possessions on your mobile phone. Consider emailing it to a family member or friend who lives in a different location.
  • Insurance policies for home, auto, disability, long-term care, etc. Include contact information for either 800-numbers or your local agent, if you need to file a claim.
  • A copy of recent financial statements for credit cards, banks, brokerage firms, retirement accounts, car loans, mortgage and similar types of accounts.
  • Copies of the last three years of tax returns. If you work with a CPA, they should have them on a secure portal, but a hard copy will be useful to have.
  • Legal documents for your estate plan, including the will, power of attorney and health care power of attorney, as described above.
  • Other legal documents, including car registration, car title and property deed to your home.

These documents should all be organized in a folder that is placed in your home where you and your spouse know where it is and can grab it on your way out the door.

One more item that should be noted in this digital age: if you use a laptop or tablet that contains websites that you use frequently for personal finance, investments, etc., be mindful of its location in the house, so you can grab it and a charger cable quickly. If you have passwords for accounts—and most of us do—you should print them out and include them in your file folder for easy access. You can almost always re-set a password, but how much easier will rebuilding your life be if you have them on hand?

If you do ever face a catastrophic emergency, having these materials will save you hours of time and stress.

Reference: The Dalles Chronicle (July 16, 2019) “Prepare now for emergencies”

Countdown to Retirement with Three Simple Questions

To help plan for retirement, it helps to move from asking global questions, like “Can I afford to retire?” to more specific questions, like “What’s my monthly cost of living right now?”

Sometimes retirement planning is so overwhelming that people just shrug their shoulders and hope that things work out. That’s a terrible way to plan for the last two or even three decades of your life. Plus, says Motley Fool in a recent article titled “Don’t Even Think About Retiring Until You Can Answer These 3 Questions,” if you can’t answer three basic questions, maybe you’re not ready to start thinking about retirement.

Happy RetirementCan you believe that just 38% of Americans say they have a long-term financial plan, according to a recent survey? Let’s look at three important planning questions.

When to claim Social Security. Many people think that retirement and claiming Social Security benefits occur at the same time. However, they don’t have to. You could elect to retire at age 60 but wait to claim your benefits until you reach 65. Remember that the amount of money you get in benefits is linked to the age at which you start claiming them. Age 62 is the earliest you can claim Social Security. However, if you do, your benefits will be reduced by up to 30% of what they could be. For every month you wait, you’ll receive slightly more with each check up to age 70. Your full retirement age (FRA) is the age when you’ll get 100% of the benefits to which you’re entitled. Waiting can have its advantages, but there’s no single right answer for when you should start claiming. It all depends on your personal circumstances.

Will your retirement savings last? Take a look at how far your savings will last during retirement. To determine how far your money will go, calculate the amount you’ll need each year to get by during retirement. With a number in mind, you’ll be able to better determine how long your current savings will last. You might realize that you need more than you anticipated, especially if you’re going to be spending several decades in retirement.

Paying for healthcare costs. Healthcare costs are one of the largest expenses in retirement. Know that the average retiree spends about $4,300 per year on out-of-pocket healthcare expenses. A total of two-thirds of that is spent on premiums. It’s important to understand that Medicare will help cover many healthcare expenses you’ll face, but it doesn’t cover everything.

Circumstances often dictate when people retire; they lose a job in their mid to late 60s or illness prevents them from working. However, even when that is the case, understanding where you are from a financial perspective can help make your retirement work in your favor.

Reference: Motley Fool (October 9, 2018) “Don’t Even Think About Retiring Until You Can Answer These 3 Questions”

Medicare Facts and Penalties You Need to Know

Make sure to review your coverage and plan in advance to avoid any penalties.

Start with the basics, to make sure you’re making informed decisions.

Bigstock-Senior-Couple-8161132Created in July 1965 as part of the Social Security Act, Medicare is how most adults over age 65 cover their healthcare costs. Medicare has four parts. They are Part A: Hospital, Part B: Outpatient Services, Part C: Medicare Replacement and Part D: Prescription Drugs. This useful article from Think Advisor, “Essential Medicare Facts & Penalties Advisors Should Know on One Page,” covers Medicare fundamentals.

As a general rule, if you are 65 and you or your spouse have paid Medicare taxes for at least 10 years, you may enroll in the program. Those under 65 may also enroll, if they are disabled or have end stage renal disease.

Let’s look at the different parts of Medicare:

Part A is free for most people. If you didn’t pay Medicare taxes, you may be able to enroll and pay for Part A. If you’re under 65 and didn’t pay into Medicare, you may be eligible if you have been entitled to Social Security or Railroad Retirement Board disability benefits for 24 months or you are a kidney dialysis or kidney transplant patient.

Everyone is required to pay a premium for Medicare Part B, which is deducted from your Social Security retirement payment. If you’re eligible but haven’t yet begun to receive a Social Security retirement benefit, Medicare will send you a bill.

Part C is also known as a Medicare Advantage plan. It’s issued by a Medicare-approved private insurer. Even if you choose Medicare Part C, you still are required to pay a Part B premium. Although these plans cover all services in Part A and Part B, they frequently have other benefits like vision, dental, hearing, and prescription drugs.

Part D covers prescription drugs. Each Medicare drug plan list its approved drugs and a “tier” for them. A lower tier drug will generally cost less, and a higher tier drug will cost more.

The window to enroll in Medicare starts on the first day of the third month prior to your birth month and ends on the last day of the third month following the month of your birth.

There is a separate “late enrollment” penalty, if you go 64 continuous days or more beyond the end of your initial enrollment period and did not have a Medicare Prescription Drug Plan, a Medicare Advantage Plan (Part C) and another Medicare plan that offers prescription drug coverage, including a plan through an employer or union.

Make sure to review your coverage and plan in advance to avoid any penalties. If you make a mistake, you may end up paying a premium for certain types of coverage, for as long as you have Medicare.

Reference: Think Advisor (July 31, 2018) “Essential Medicare Facts & Penalties Advisors Should Know on One Page”

Feeling Squeezed? You Might be in the “Sandwich” Generation

The term “sandwich generation” was added to Meriam Webster’s dictionary in 2006.

If you’re feeling pressure on two generational sides—caring for aging parents and taking care of children—you’re a member of the Sandwich Generation.

Bigstock-Extended-Family-Outside-Modern-13915094The term “sandwich generation” was added to Meriam Webster’s dictionary in 2006. However, twelve years later, the number of people it describes seems to be on the rise. Sandwich Generation members are raising their children and are responsible for their parents or taking responsibility for their grandchildren and grandparents. Whichever sandwich you’re in, it’s not an easy place to be. Even if your parents or grandparents are financially fine, your time for yourself, your career and your kids is squeezed.

ThePress-Enterprise’s article, “3 tips for anyone in the sandwich generation,”offers the following tips tomake the “sandwiching” easier on you and your family:

  1. Talk About Money Issues. Discuss finances with your children and parents. Perhaps you could go with them to meet with their estate planning attorney. He or she can make sure your parents have all the proper estate planning documents, such as a will, trust, living wills and powers of attorney.

This legal professional will create a plan to lessen or avoid estate taxes and work to ensure that your life's savings and assets are protected from your beneficiaries' creditors after your death, and that your legacy is assured.

Estate planning attorneys are accustomed to working with families and navigating the issues between adult children and their aging parents. There is little chance that yours is a unique situation.  It does not mean it is easy, but a skilled attorney will be able to help you and your family deal with whatever situation you face, with dignity and compassion.

  1. Get (More) Help. You may get support or assistance to help your parents, your kids, or even yourself. Odds are good that your parents will be reluctant to accept help, so start the process yourself. This could involve hiring a housekeeper for yourself to free up some of your time for things that are more important.

 This will give you more time, and your parents won’t feel you are using your finances to assist them. If you have friends and relatives that offer help, take them up on it. Don’t try to do everything yourself.

If your children are old enough, you can also get them involved. Children are surprisingly capable, and sometimes grandparents are more comfortable having grandchildren help with minor chores around the house, where their children’s own actions may seem intrusive.

3.Get Rid of the Guilt. Even a dedicated husband and wife team can’t cover everything. Do the best you can and remember that you do have to set some time and energy aside for yourself.

Reference: (Riverside CA) Press-Enterprise(June 28, 2018)“3 tips for anyone in the sandwich generation”

When Children Grow Up and Parents Become the Children’s Responsibility

Let’s examine some of the things you can do, as your parents go through the aging cycle.

America is aging, and by 2050, there will be nearly 88 million seniors over age 65. With this huge demographic shift, adult children will find themselves with a new role.

It is not unusual in many families that as parents age, their children take on the role of caregivers. However, the sheer number of people who will be over age 65 in coming years, will make some big changes in our nation, as reported by Fox Businessin the recent article, “Aging parents are the new ‘children.’”

One concern is that aging parents can lose their mental abilities. The Alzheimer’s Association says that every 65 seconds, someone in the U.S. develops the disease. It’s now the sixth-leading cause of death. This can create additional long-term care needs for parents and result in an emotional and financial burden on adult children.

Parents with physical limitations may have difficulties living independently. Therefore, you should understand your parents’ long-term plans and how they will impact you. Let’s examine some of the things you can do, as your parents go through the aging cycle.

Family Conversations.While talking to your parents about these topics now may be uncomfortable, it will save you a lot of stress, time, and money in the future. Parents who want to preserve autonomy should express their wishes. Parents should discuss their healthcare wishes, the what ifs and finances now to discover what options they may have for care. It’s important that adult children understand details of their parents’ financial situations, before they’re unable to communicate due to incapacity or death.

Get the Family Affairs in Order.Create a system to help with gathering information. This should include medical histories and estate plans. Start to organize information with your parents as early as possible. Adult children should be sure that their parents have a will, a trust (or both), a durable power of attorney for property and a durable power of attorney for healthcare.

Determine Parents’ Long-Term Financial Needs.It’s extremely expensive to provide care for aging parents. Seek professional guidance to determine how much of your parent’s savings is currently allocated to pay for healthcare in retirement, not covered by Medicare. Look at long-term care insurance.

Have an Actively Involved Relationship.If you see your parents on a regular basis, keep your eyes open for any kind of change in their behavior or signs that things are not right: stacks of unopened mail, phone calls from people you don’t know, etc. If you do not live near your parents, ask an estate planning or elder care attorney for recommendations for social workers or elder care services to help your parents. They can do things like take parents to medical appointments, talk with care facilities on your behalf and keep you apprised of your parent’s well-being.

Your parents may or may not enjoy the “golden years” that we envision, but some preparation now, including having the tough discussions, will at the very least make it easier in the future.

Reference: Fox Business (May 25, 2018) “Aging parents are the new ‘children’”

What Should a Financial Plan Include?

You may need a guide—but how do you know who to choose?

Hit a spring pothole and you can lose a tire. But hit a pothole with your financial plan, and you may be in for a bigger problem than replacing a tire.

MP900398819Do you have an up-to-date roadmap to your retirement? Keeping your finances, investments and retirement plan on a smooth road has become more and more challenging. Every day seems to bring a new regulation, investment product, or app that claims to offer the best route. You may need a guide—but how do you know who to choose?

Kiplinger’srecent article, “5 Bases You Need Covered With Your Retirement Plan,”says there are plenty of financial professionals today who can get you started down the right path with investment advice. However, a professional who limits his or her professional life solely to investing advice, isn’t going to get you comfortably and confidently to your retirement goals. Be sure you have someone who will concentrate on these five key areas of your financial life:

Income Planning.Your retirement could last for decades. You must be certain that you’ll have reliable income streams to pay your monthly expenses. This area typically should cover things like Social Security maximization, income and expense analysis, inflation, a plan for the surviving spouse, longevity protection and investment planning. Once your income plan has been created, you need to analyze your remaining assets (those that you won’t have to draw from every month). This should cover your risk tolerance, adjusting your portfolio to reduce fees, volatility control, ways to reduce risk while still working toward your goals and comprehensive institutional money management.

Tax Planning. Your comprehensive retirement plan should include strategies to decrease tax liabilities, such as determining the taxable nature of your current portfolio, possible IRA planning, looking at ways to include tax-deferred or tax-free money in your plan, prioritizing tax categories from which to draw income initially to potentially reduce your tax burden and considering ways to leverage your qualified money to leave tax-free dollars to your beneficiaries.

Health Care Planning. Retirees today must have a plan to address rising health care costs with little expense. Strategies should include examining Medicare Parts A, B, and D, reviewing options for a long-term care plan and legacy planning.

It’s critical that your hard-earned assets go to heirs and loved ones in the most tax-efficient manner possible. Your financial adviser should work collaboratively with a qualified estate planning attorney to help with these tasks:

  • Maximize estate and income tax planning opportunities;
  • Protect any assets in trust and ensure that they’re distributed probate-free to beneficiaries and
  • Prevent your IRA and other qualified accounts from becoming fully taxable to beneficiaries upon death.

Your estate planning attorney should be able to give you some recommendations for trustworthy and respected professionals. You’ll also need to do your homework, and interview more than two or three to make sure that it’s a good fit. Ideally, this person will work with you, your estate planning attorney and your CPA, as part of a team, for many decades.

Reference: Kiplinger(May 4, 2018) “5 Bases You Need Covered With Your Retirement Plan”

Work Requirements from Medicaid May Harm Some Seniors

States that have opted to require Medicaid recipients to work, will put some seniors at risk of losing healthcare coverage.

States that have opted to require Medicaid recipients to work, will put some seniors at risk of losing healthcare coverage.

Bigstock-Senior-couple-standing-togethe-12052331A recent article from US News & World Report, “How Medicaid Work Requirements Could Hurt Older Americans,”explains how the new requirements for Medicaid recipients to work or meet “community engagement” requirements may create hardships for some seniors. Many lower income Americans depend on Medicaid for healthcare, including adults age 50 to 64, who often suffer from chronic health conditions.

The Centers for Medicare & Medicaid Services announced in January that states can apply for waivers to implement work requirements for people who receive Medicaid benefits. The waivers have been approved in three states and are pending approval in others. Age limits vary for who might have to fulfill work or "community engagement" requirements for up to 80 hours a month. In Kentucky, Medicaid recipients are exempt at 64. In Indiana, it’s 60, and in Arkansas, 50 is the threshold. Some other states are looking to implement work requirements. They include Arizona, Kansas, Maine, Mississippi, New Hampshire, Utah and Wisconsin.

Beth Kuhn, commissioner of the Kentucky Department of Workforce Investment, notes that most people on Medicaid also receive Supplemental Nutrition Assistance Program (SNAP) benefits—also known as food stamps. For those 80% of Medicaid recipients, she says, work requirements don't apply after age 49.

Community engagement is the prime focus of the new requirements, which entails four facets: volunteering, training and education, work, and caregiving of a family or community member in need.

There are many who are excluded from the requirement, and one group is the medically frail. Medical frailty would be determined by an eligibility specialist.  However, it’s not clear now how chronic medical conditions impacting many beneficiaries, like asthma, diabetes, heart disease, high cholesterol, and hypertension, will be considered.

A group of Kentucky residents receiving Medicaid, are now being represented in a federal class action lawsuit by The Southern Poverty Law Center, National Health Law Program, and Kentucky Equal Justice Center. A joint brief was filed by the National Academy of Elder Law Attorneys (NAELA), AARP, AARP Foundation, Justice in Aging and the Disability Rights Education and Defense Fund.

According to a spokesperson with Justice in Aging, the brief focuses on the elimination of pre-application coverage, elimination of non-emergency medical transportation and the imposition of lockout penalties for various transgressions. With no pre-application coverage, an individual could easily become liable for thousands of dollars of health care costs, if an illness or injury prevented them from filing a Medicaid application.

Reference: US News & World Report (April 20, 2018) “How Medicaid Work Requirements Could Hurt Older Americans”

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