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Try It NOWCategory: Financial and taxes in retirement
Nov 30 Update: It is a little tricky to get the ebook for free, but you can do it. Use this link and find the link that says 0.00 to Buy. Click on that, not the Amazon/Kindle unlimited option (you have to be a subscriber for that). Then…
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Category: Financial and taxes in retirement
November 24, 2015 -- There are many classic examples of the kind of mistake made by your Topretirements.com editor. They include experts who don't listen to their own advice: the cobbler with holes in his soles, the doctor who still smokes, the plumber with a leaky faucet - you get the picture. We're sharing our mistake - the kind you would think someone who has a good grip on retirement matters wouldn't make - so you don't make the same one. Our mistake was not to sign up for Part D, prescription drug coverage, when we originally enrolled in Medicare. If you don't currently have prescription drug coverage, consider yourself forewarned: you still have time to take corrective action during the current Medicare enrollment period, which ends December 7, if that is what you decide after reading this article.
2 very serious consequences
Failing to sign up for Part D insurance when you first become eligible can have two serious, even disastrous consequences:
1. You pay a penalty of 1% a month for every month you do not have "creditable" prescription drug coverage. In our case, it means a 30% penalty on our monthly premiums - forever!
2. Inability to get coverage immediately. There is an open enrollment period every year from Oct. 15 - Dec. 7 where you have the option to sign up for Part D insurance (or change your Part B or C plans). But let's say you don't take that option, and next February you are diagnosed with a serious medical condition that requires $25,000 worth of drugs, taken immediately, to treat it. Even if you register for Part D on Oct. 15 you are out of luck until January 1 - that's the earliest your new plan can kick in. Although the odds are low of this (or something worse) happening - it is possible!
To Part D - Or Not
When you hit age 65 and sign up for Medicare you have many choices. Part A is the hospital component, Part B or C cover doctor and outpatient type claims, and then there is Part D - prescription drugs. Part C programs typically include prescription drug coverage, so you don't need Part D if it is included there. In our case, at age 65 we signed up for Part A, Part B, and an commercially available Medigap policy from Anthem. When it came to Part D, we were like a lot of people we know - we don't currently take any prescription drugs, and our insurance agent didn't
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Category: Financial and taxes in retirement
November 16, 2015 — The biggest change affecting Social Security benefits in at least 15 years is about to go into effect on April 30, 2016. It is a change that could cost certain beneficiaries $50,000 over a lifetime. As with any major change to a benefit program there has been a lot of confusion over who is affected and how - this article will explain how it will affect you.
We were fortunate to have Kurt Czarnowski, a 34 year veteran employee of the Social Security Administration and leading expert on the subject, explain the changes to us in practical terms. Here is what we learned from Kurt about how various groups are affected.
File and Suspend and Restricted Benefit
The Budget Bill passed by Congress and signed by the President in early November included changes to
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Category: Financial and taxes in retirement
November 12, 2015 -- The Centers for Medicare & Medicaid Services (CMS) has announced the 2016 premiums and deductibles for the Medicare inpatient hospital (Part A) and physician and outpatient hospital services (Part B) programs.
Part B Premiums/Deductibles
Most people with Medicare Part B will not see any increase in their premiums in 2016, which will remain at $104.90/month. Since there will be no Social Security cost of living increase for 2016, the law requires that most beneficiaries must be “held harmless” from premium increases.
Beneficiaries not subject to the “hold harmless” provision will pay $121.80,
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Category: Financial and taxes in retirement
Update 1. See our new File and Suspend article that explains how the law affects this and other claiming issues for people of different ages.
Update2 Nov, 3, 2015: The Budget Bill was approved by the Senate and then was signed by the President into law.
October 29, 2015 -- The budget bill just passed by the House, if approved by the Senate and signed by the President, might keep the country from entering a government shutdown and budget chaos. But one of its provisions would have a profound effect on anyone considering or currently taking advantage of the popular File and Suspend strategies. The bill is far from passing the Senate at this point, but if it does hundreds of thousands of retirees are going to have to rethink a claiming strategy that is worth about $50,000 for many who take advantage of it. According to the Center on Budget and Policy Priorities, about 100,000 people are now taking advantage of this strategy.
File and Suspend
This popular strategy goes something like this: A couple retires at full retirement age (66 for most baby boomers) and both file for Social Security. The higher earning member immediately suspends his or her benefits, planning to claim again at the age with the maximum benefit, 70. Meanwhile their spouse claims a spousal benefit, 50% of what
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Category: Financial and taxes in retirement
Note on Nov. 12: Final Medicare costs have been announced, which ended up slightly different than the preliminary predictions discussed in this article. See Final Medicare Part Premiums and Deductibles article. See also related article on how current Congressional bill ends the popular Social Security "File and Suspend" strategy for most people not already using this strategy.
October 28, 2015 - It hasn't happened many times, but it is coming in 2016: there will be no Cost of Living Adjustment (COLA) for those receiving Social Security. That is due to the fact that the cost of living in the U.S. went down, "fueled" by falling energy and commodity prices. This is only the 3rd time in history there has been no COLA. The COLA in 2015 was 1.7%.
This news will undoubtedly disappoint many folks who look forward to a small increase in their monthly Social Security deposit, something they might view as a pay raise every year, although it is really only an adjustment to keep on pace with inflation (which seems to be in check, at least for the present).
Most will dodge a Medicare increase
Meanwhile in the Medicare world, most people will escape a Medicare bullet. Had there been
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Category: Financial and taxes in retirement
September 29, 2015 -- Earlier this month we ran an article about starting your own business in retirement. This will continue the series, but this time we will concentrate on other ways to make extra money once you retire. With so many baby boomers concerned about their retirement finances (only 46% of members in our recent survey say that their expected retirement income will allow them to continue their pre-retirement lifestyles), we expect it is a topic many of you will be interested in.
There are generally 2 ways to put the extra money in your pocket that affords a worry-free retirement. You can either work for someone else, or you can be your own boss. Each of them has their particular advantages and disadvantages. Let's look at both.
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Category: Financial and taxes in retirement
September 21, 2015 -- We thought this topic would be easy. Do some basic research, then come up with a list of the worst states for taxes on retirement. But after looking at the research we had to say - not so fast! There are so many considerations depending on your individual circumstances that any cut and dried, one size fits all approach is not going to be useful. All of these factors, for example, will have a major effect on your tax bill from one state to another: your income, the value of your home, the type of retirement income you get (and where it comes from), and whether you file singly or jointly. Yet we will try to come up with such a list, thinking of a prototypical couple that might, or might not, be similar to your situation. In this case we are focusing on worst states for retirement income taxes, and ignoring other taxes like those on property.
Back in 2011 we ran a similar exercise. In that one we had a hypothetical retirement couple (both over 65) who derives their income from a roughly equal combination of social security, (non-government) pension, and investment income. At that time we arbitrarily computed income taxes for 2 income levels: $60,000 and $100,000. We then applied all the standard, personal, and over 65 exemptions we could find. These income levels are obviously
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Category: Financial and taxes in retirement
September 9, 2015 -- Have you been wondering how your retirement income stacks up to that of other retired people in your situation. Or whether it will be enough to provide your pre-retirement lifestyle? Well, thanks to the almost 1500 community-minded members who took the time to contribute their valuable data and insights to last week's "How Much Do You Expect to Receive in Retirement" survey, now you will know. If you didn't complete it you owe these folks a big thank you.
As promised, here is a detailed report on what the survey turned up. It includes links to hundreds of individual comments to various questions on the survey. Those include the one about your retirement budget preparations, and how confident you are that the income level you EXPECT to receive will be enough to maintain your pre-retirement standard of living. You will find a list of our previous survey reports at the end of the article.
Background
This is the first time we have asked you for data about your retirement income expectations, and how that agrees with what you think you will need. We were also intrigued with the question about whether you intend to move out of state, and if finances are related to that
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Category: Financial and taxes in retirement
August 31, 2015 — Charles, one of our members, recently asked an interesting question: “Is 5000/month enough to live on”? To help answer it we have prepared a Retirement Income Survey. We had a great response to this survey, with almost 1500 people taking it. You can see our detailed…
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