Medicare Open Enrollment is here!

Medicare Open Enrollment is here!

It’s no secret that Medicare parts and plans are downright confusing.

So confusing, in fact, that many people unknowingly choose the wrong plan that ends up costing them thousands of dollars in surprise medical expenses from a doctor visit, a treatment, or simply filling a prescription.

Healthcare costs are one of the biggest expenses retirees face (but can be very manageable with the right knowledge!) which makes choosing the right plan even more important.

So whether you’re enrolling for the first time, or you’re already on Medicare, download our FREE Medicare Guide for help choosing the right plan that could save you thousands.

Inside, you’ll get the answers you need to these critical questions:

  • What do you need to decide before you enroll?
  • Already enrolled? Could you save money with a different plan?
  • Do you need supplemental coverage or Medigap?

This simple guide takes the confusion out of Medicare to help you confidently choose the plan that’s right for you.

If you have any questions about Medicare or would like personal help comparing options based on price and coverage, we’d be more than happy to help. Click here to schedule a call with a Merriman Wealth Advisor.

Merriman’s Guide to Social Security and Medicare

Merriman’s Guide to Social Security and Medicare

An important part of helping clients achieve their financial goals is helping them navigate questions and decisions around Social Security and Medicare. Whether it’s deciding when to start Social Security or applying for supplemental Medicare coverage, these decisions have a big impact on your financial situation and wellbeing.

This book is broken up into two parts, as Social Security and Medicare are complex topics. The first covers Social Security and strategies. The second part covers the ins and outs of Medicare and all its various plans.

We hope you discover strategies and new things that will help you make the best decisions for your situation. As always, we’re here to help and answer any questions you may have.

 

Medicare Basics

Medicare Basics

Turning 65 marks an important milestone. It’s the age you become eligible for Medicare – healthcare the federal government provides for retirees.

I. Medicare Part A, B, C and D

Part A – Also called Original Medicare, Medicare Part A covers your stays in hospitals and skilled nursing facilities, some health services and hospice care. Part A has no premiums as long as you have 40 qualifying quarters of contribution during your life, similar to qualifying for Social Security benefits. You may also qualify based on your spouse, even if you’re divorced or your spouse passed away. If you don’t meet any of these conditions, you have to pay monthly premiums.

Part B – Covers doctors’ services, outpatient care and medical equipment. There are monthly premiums for Part B.

Part C – Also called Medicare Advantage plans (or Medicare Health Plan), Medicare Part C allows private health insurers to provide Original Medicare benefits (Part A and Part B) through their networks (HMOs, PPOs and fee-for-service). The insurers must offer the same benefits as Original Medicare, but can have different coverage restrictions, costs, limits, etc. This coverage is optional.

Part D – Provides prescription drug coverage through private insurers. The government subsidizes the costs of prescription drugs and the cost of Part D insurance to reduce costs for retirees. If you have a Medicare Advantage plan, then you can bundle it with Part D. If you have Original Medicare, Part D is separate policy. This coverage is optional.

II. When to apply

Part A and B

Depending on your circumstances, you’re either enrolled automatically in Part A and B, or you must enroll yourself. You’re enrolled automatically if you are: (more…)

Key Benefits Decisions to Make When Joining a New Company

Key Benefits Decisions to Make When Joining a New Company

When switching jobs, it can seem overwhelming to review all of the documents related to your new company’s employee benefits. These plans include choices for medical, dental, vision, retirement, life and accidental death and dismemberment, short-term and long-term disability and many other additional benefits that may be useful.

With all of these options to navigate through, combined with the anxiety of starting a new job, it can help to focus on making a few key decisions.

Retirement plan

You don’t want to leave free money on the table, so enroll in your company’s 401(k) plan as soon as you are eligible, and set your contribution percent (deferral rate) to at least the minimum required to receive the full employer match. This may mean contributing 6% to receive the employer match of 3%.

If you don’t start out deferring at a rate above the matching percent, let’s say 3% to 6%, then try to increase your deferral rate by 1% every 6 months to increase your retirement savings. You can also make a plan to increase your contribution rate when you receive any raises.

If you’re given the option between a Traditional (pre-tax) and Roth (after-tax) 401(k), consider your age and income level, and whether you’re already contributing to an outside Roth IRA. The employer match will always be to the Traditional 401(k) portion, so you can decide whether your contributions are pre-tax or after-tax for your portion. If you think your tax rate will be much higher in retirement than it is now, Roth 401(k) contributions make sense. Sometimes splitting your contributions 50/50, where 50% goes into the Traditional portion and 50% goes into the Roth portion, is the perfect medium. This way, you receive a tax deduction for half of your contributions now, while the other half is contributed after taxes and can be withdrawn tax-free in retirement.

Health care plan

Some companies give you multiple health care plans to choose from, while others give you just one option. These options may include an HMO, PPO, POS, or high-deductible health plan (HDHP) paired with a health savings account (HSA). If you’re deciding between an HMO, PPO or POS, make sure you’re comfortable with the in-network doctors available to you and your family, as well as the level of deductibles and out-of-pocket maximums. It doesn’t make sense to choose the least expensive health plan if you can’t afford the deductible.

If it’s available, select the high-deductible health plan paired with an HSA. It can provide the best overall value of any health plan available. If the total of your and your employer’s contributions reach the maximum you can contribute, then you receive a unique tax advantage because payroll taxes, federal income taxes and most state income taxes won’t be deducted from these contributions. They grow tax free, and withdrawals can be made tax free for qualified out-of-pocket medical expenses, including dental and vision. And, unused funds in the account are not forfeited at the end of each year like with a flexible spending account, so you can invest and allow these funds to grow.

More information about the benefits of using an HSA can be found by reading my article, A New Perspective on Health Savings Accounts.

Life insurance and accidental death and dismemberment

It’s a good idea to have life insurance that’s 10 times your income, especially when you have young dependents to provide for. Group plans may not let you go higher than 5 times your income, so acquiring the remaining coverage through an individual term policy may make sense.

Be aware that group life insurance through work is contingent upon your employment at the company, so if you are no longer working there, you may experience a loss of coverage. An individual term policy would avoid this, but may be more expensive than group benefits.

Even though the chance of having an event where accidental death and dismemberment (AD&D) pays out is slim to none, it’s still a worthwhile benefit if it doesn’t cost more than a few dollars a month. Most benefits plans sign you up for it automatically.

Short-term and long-term disability

Usually you’re automatically enrolled in short-term and long-term disability benefits. However, if you’re given the choice, select the option where you can pay these premiums with after-tax dollars, versus pre-tax dollars from your paycheck. These premiums are often less than $25 to $30 each pay period, and are paid pre-tax, meaning not subject to tax. Paying for these premiums after tax permits you to receive benefits tax-free if you ever need to file a claim. Since these premiums are small and have minimal tax consequences, receiving tax-free benefits if you have a claimis substantially more favorable.

Employee stock purchase program

If your employer offers an employee stock purchase program (ESPP) where they allow you to buy their stock at a 10% to 15% discount during stated periods in the year, considering enrolling with up to 10% of your paycheck. To avoid concentrating too much risk in your company, i.e., human capital plus financial capital, it makes sense to sell this stock as soon as possible to pocket the after-tax gain from the discount and any appreciation to help diversify. That 10% to 15% discount is considered compensation and taxed as ordinary income. Additional profit is taxed as short-term or long-term capital gains depending on how long you end up holding the stock.

Other popular benefits like legal aid, group long-term care insurance and identity theft protection can also be valuable benefits, but make sure you aren’t already receiving these benefits through another source. Group long-term care insurance is becoming more common, but it’s worth shopping around to make sure you’re getting a favorable rate. Also, one caution about group long-term care is that the insurance provider doesn’t have to get permission from the state regulators to raise premiums like they do for individual policies.

When evaluating benefits, we recommend contacting an advisor to review your options.

A New Perspective on Health Savings Accounts

A New Perspective on Health Savings Accounts


iStock_71137267_XSmallEven though they first became available in 2003, health savings accounts (HSAs) paired with high-deductible health plans are becoming more popular and are being offered by more employers. These accounts receive a unique triple-tax advantage, whereby contributions are made pre-tax (federal, most states and payroll taxes), can grow tax free and can be withdrawn tax free for qualified medical expenses at any time. Unspent funds aren’t forfeited at the end of each year like a health flexible spending account, so they can be accumulated and invested during your working years and spent in retirement to cover healthcare expenses.

A recent Fidelity study estimated healthcare costs for couples in retirement is $245,000, and this figure doesn’t even include the cost of long-term care. Rather than drawing down cash reserves or taking retirement account distributions to cover healthcare costs in retirement, why not accumulate and invest the funds in an HSA to spend tax free later?

So what is a high-deductible health plan paired with an HSA?

Similar to other health care plans, where you have an annual deductible that can be anywhere from $250 to $10,000, a high-deductible health plan has an annual deductible of at least $1,300 for an individual and $2,600 for a family. Contributions limits to an HSA for 2016 are $3,350 for an individual and $6,650 for a family, and those 55 or older can contribute an extra $1,000. Many employers contribute the deductible on your behalf and permit you to make contributions to reach the contribution limits. And, maximum out of pocket expenses are $6,550 for individuals and $13,100 for families. Once you reach this maximum, your health insurance provider will cover all remaining costs for the year.

You can’t make contributions to an HSA once you enroll in Medicare. However, if you’re still employed after reaching age 65 and want to stay on your employer’s health plan, you can postpone enrolling in Medicare and continue to contribute to an HSA. Keep in mind that you must enroll in Medicare within eight months after you retire and/or lose group health coverage to avoid paying any penalties.

What can the account be spent on?

The account can be spent tax free on out-of-pocket qualified medical expenses. You can also use an HSA to pay for a portion of your long-term care insurance premiums (based on your age), continuation coverage through COBRA, and Medicare premiums, except Medigap. You can’t use an HSA to pay for regular medical premiums, though, unless you’re unemployed and receiving federal/state unemployment benefits.

Investing an HSA

HSAs often have investment options similar to a 401(k). Some of these plans may carry high expenses, so be mindful of fees when reviewing options.

If not needed for health care costs in retirement, HSA funds can be used after turning age 65 for non-medical expenses; however, withdrawals will be subject to ordinary income tax. Funds withdrawn for non-medical related use before 65 are subject to a 20% penalty plus ordinary income tax. They can also be rolled over to a new employer’s HSA.

A high-deductible health plan paired with an HSA can provide the best overall value of any health insurance option, especially if invested during your working years to cover medical costs in retirement tax free.