Good planning, good luck and old-fashioned hard work should position you well for your retirement years.
Once that glorious day appears on the horizon, you still have work to do — perhaps the most important financial move you must make to ease your retirement life.
You must navigate the Medicare process, which, thankfully, is not as daunting as you might fear.
“If an individual is preparing for Medicare due to age, it is recommended they begin the process three months prior to the 65th birthday month. Important considerations must be made at that time,” said Ann Kroeger of the Nebraska Health Insurance Assistance Program, known as SHIP.
If an individual needs the insurance, typically Medicare Part A and B are elected, she said. Part B premiums are taken out of Social Security retirement payments if the individual is receiving benefits. Premiums also can be paid directly on a quarterly basis.
If an individual has Federal Marketplace insurance, typically they need to end that insurance and take both parts of Medicare when first eligible, Kroeger said.
Failure to enroll in a timely way can take a financial bite for the entirety of your retirement.
Kroeger said delaying Medicare Part A typically does not result in a penalty if the individual is entitled to Medicare Part A premium free. Delaying Medicare Part B will result in a lifetime penalty. For every full 12 months coverage is delayed without the individual having insurance through active work, the person will pay 10% more in the monthly premium. So, a five-year delay will result in the beneficiary paying 50% more each month for the rest of their life.
Someone nearing retirement is wise to carefully study current Medicare rules or consult with a knowledgeable person from SHIP or elsewhere.
Medical supplement plans
Once you are enrolled in Medicare, you will have options on the type of medical supplement plan (Medigap) you want. The coverage of the plans is controlled by law, but the premiums and deductibles will vary by company. Careful study pays off in this area as well.
“Medigap coverage is standardized so once a plan is purchased the coverage will not change and the plan is guaranteed renewable as long as the premium is being paid,” Kroeger said. “Basically, individuals can choose the coverage they want, then go shop the companies that offer that specific coverage.”
If a supplement premium is raised to a point you are uncomfortable with, you can sign up with a different provider during open enrollment each fall.
“We are not agents so we cannot write the policies, however, we can show individuals what companies sell which supplements and details about that plan and provide additional information about the company. This allows the individual to look at details about the company and plans without any sales pressure. This is a free service we offer,” Kroeger said.
Part D prescription plans and Medicare Advantage plans can and often do change annually.
“It is highly encouraged for individuals to review their Medicare Part D and/or Medicare Advantage (MA) Plans yearly. First, individual health care needs change and medications could change. Second, Part D and MA plans are one-year contracts, so from year to year they will change how they cover medications, items or services,” Kroeger said. “To be an informed consumer and to be able to plan into the new year knowing an idea of costs, the annual open enrollment period that runs from Oct. 15 through Dec. 7 is an opportunity to make changes for the following year.”
Nebraska SHIP assists with these comparisons confidentially, for free, without bias and with trained counselors. The SHIP website is doi.nebraska.gov/consumer/senior-health.
In the Grand Island area, SHIP counselors are located at the Grand Generation Center, 304 East Third St., 402-471-2841
Marc Werkmeister, a certified financial planner, has taught retirement classes through Central Community College and Mid-Plains Community College for the past 10 years. He is a managing partner and financial adviser with Professional Financial Advisors LLC of North Platte.
He also emphasizes the importance of navigating the Medicare sign-up process to ensure the best coverage at the best premium level. He notes that pharmacies are good places to get Medicare D advice and that insurance professionals also can serve as excellent guides.
“Be aware of taxes. The income you receive in retirement will more than likely still be taxable, but depending on the amount it could have a ripple effect,” Werkmeister said. “Going over certain income thresholds could cause your Social Security to be taxed, Medicare premiums to go up, or exclude you from the homestead exemption, which reduces your property taxes. Be strategic when withdrawing money from IRAs, Roth IRAs and taking capital gains from investments.”
Werkmeister advises people to have a written estate and long-term plan in place.
“Making sure your estate and long-term care wishes are written down will help the rest of your financial decisions fall into place,” he said. “It will make investment, insurance, and even spending decisions easier, as well as taking the burden off family members to make decisions later on. In most cases, a simple will and accompanying powers of attorney will accomplish this goal.”
His advice on investing is simple. Diversify. Diversify. Diversify.
“When looking at your nest egg, remember that diversification is still your biggest ally to reduce the various financial risks. No single investment can adequately guard against inflation, market crashes, interest rate movements, tax rate changes and health care concerns,” he said. “While the stock market may seem too risky when in retirement, remember that it should never be an all-or-nothing decision. Investing money into several different asset classes will help balance both the short- and long-term risks.”
Werkmeister urges people to remain proactive in their financial planning.
“As we’ve seen in the past year, things can change in a hurry. If you’re working with a professional, make sure it’s a good long-term fit and all of your needs will be taken care of through the duration of retirement,” he said.
His final piece of advice?
“If you’re doing the heavy lifting yourself, make sure someone else is aware of the plan to help carry out your wishes should something unexpected happen.”