Advice on 2022 Employee Benefits In last week’s newsletter “Decision Time Part 1“, I discussed the first of two decisions employees are currently making regarding 2022 employer provided benefits. The article stressed the importance of making 2022 the year to start building wealth in the Roth 401(k).  The second decision is to choose a high deductible Health Savings Account (HSA) health insurance policy and to invest the HSA for retirement. HSAs became available in 2004. A married couple, age 50, who fully funded and fully invested (S&P500) their account each year would actually have accumulated $362,000! Hindsight is 20/20. Make 2022 the year you identify which of your clients owns an HSA. Educate them on: the potential for…

Advice on 2022 Employee Benefits October 1 marks the beginning of the fourth quarter when employees will make important decisions regarding employer provided benefits. Two choices in particular can make a profound difference in building an optimal retirement portfolio. The first decision is whether to choose a traditional pre-tax 401(k) plan or a Roth 401(k) for employee deferrals. Roths are one of the few remaining sources of tax free income in retirement. Record levels of national debt and looming fiscal challenges for the Medicare program lead many to believe that federal, state and Medicare taxation will have to increase. For more on IRMAA Medicare taxation, see my “Financial Planning Considerations” WealthWatch video. When the time…

Your aging client has a medical emergency. Decisions on hospitals, rehab, and overall health care coverage arise. Your client’s adult children call Medicare to obtain information, only to discover that Medicare will not release information to anyone but the insured individual. The problem is compounded by situations where the parent is hospitalized and visitation is not allowed. An important part of a financial plan is making sure essential legal documents are in place. The typical list includes a will, financial power of attorney, durable health care power of attorney and living will. An additional document you should add to this list is a Medicare Authorization to Disclose Personal Health Information form. This form…

“A nickel ain’t worth a dime anymore.”   Yogi Berra The trend continues. Each year retirees await an October announcement of the Social Security cost of living adjustment (COLA) specifying how much Social Security Retirement Benefits will increase in the coming year. On the heels of this announcement, in November, Medicare announces how much of that pay raise will be eaten up by cost increases for Medicare Part B premiums (B premiums are taken directly from one’s Social Security retirement benefit). The trend has seen health care inflation driving a significantly higher Medicare price increase than the Social Security COLA. 2021 will be no different. Social Security COLA will be 1.3% with…

Yes, it is a difficult time to earn your living speaking at conferences, financial advisor office meetings and client seminars at the country club. I am still helping advisors solve the health care portion of their financial planning process with phone consultations. Many of these calls center on the optimal time to transition from employer provided group health insurance onto Medicare as well as providing a clear understanding of Medicare costs and coverage selections. A few common misconceptions or myths about Medicare consistently surface during these calls. Debunking these myths can have a significant, positive impact on managing retirement health care costs.  Myth: Medicare will always look at my income from two years ago to determine my premiums.…

“If I get this wrong, it could cost us everything – including decent health coverage.” I began conducting phone consultations with clients in December to provide information on retirement health care. Many of these calls center on the optimal time to transition from employer provided group health insurance onto Medicare as well as providing a clear understanding of Medicare coverage selections. A few common misconceptions or myths about Medicare consistently surface during these calls. Debunking these myths can have a significant, positive impact on managing retirement health care costs. Myth 1. “I thought everyone had to enroll in Medicare at age 65” In many situations, Medicare in its entirety can be…

When you opened your year end Health Savings Account statement were you excited to see a balance of $344,000? HSAs became available in 2004. A married couple, age 50, who fully funded and fully invested (S&P500) their account each year would actually have accumulated $344,000! Hindsight is 20/20. Here are three (hat trick) resolutions for 2020:  New Year Resolution # 1. Make 2020 the year you identify which of your clients owns an HSA. Make sure they understand the importance of accumulating sources of tax-free wealth for retirement.  HSA contributions are pre-tax, earnings grow tax-free and distributions for qualified health care expenditures are tax-free. Stop spending the HSA and get the balance invested. For more information on the…

As we move into the fourth quarter it is important to track a few Medicare changes coming in 2020.  1. IRMAA brackets will be indexed for inflation. 2. Medigap plans C and F will no longer be available to new enrollees. 3. The Medicare Part D “donut hole” continues to phase out.  IRMAA (Income Related Monthly Adjustment Amount) brackets are used to determine the amount Medicare enrollees pay for Part B and Part D. As the name indicates, higher incomes trigger higher premiums. In 2020, the income thresholds will be indexed for inflation for the first time in 10 years. For the past decade, income growth plotted against the brackets pushed individuals into higher…

The timing of two events in life are almost always paired together:   Enrollment in Medicare and  The retirement plan rollover The two largest employee benefits are group health insurance and the retirement plan. As our clients retire and transition from the group health plan onto Medicare, it usually triggers consideration of a retirement plan rollover. If an advisor is disconnected from conversations about Medicare, retirement health care costs and the overall transition from the group plan onto Medicare, they run the risk of being disconnected from a client’s decision on how to best handle their largest financial asset. To put this in a positive frame, if your clients think of you as a resource regarding retirement…

Early Retirement   According to a recent Gallop Pole, as individuals grow older, plans for an early retirement tend to diminish. As we put pencil to paper to determine if financial resources will support expenses, the cost of living realities are striking. The largest expense in the center of this analysis is health care costs. For those pursuing early retirement, it is critical to get a realistic health care cost estimate. Medicare enrollment prior to age 65 is only available to those with end stage renal disease, Lou Gehrig’s disease or those on Social Security disability. This means that in the absence of employer provided health care, normally we turn to the private insurance market. These policies are usually purchased on the Affordable Care Act health care exchanges (federal or state). You can also shop them directly with insurance carriers.…