December 03, 2020
The Alphabet Soup Of Medicare
Medicare can be confusing, there are a lot of details and information to understand. As part of the 5 key areas that make up the retirement and legacy blueprint, it is important that you are guided correctly in making sure that this is covered.
Information about Medicare is all over the net and is hard to know which one is right for you. In this episode, Atty. Chris Berry will discuss the details of Medicare to help you better understand and use the tools that he will share to ensure that you get a sound plan and decision making.
In this episode, you’ll learn…
- Chris’ positive focus for the week
- How medicare can have an effect on your retirement?
- Where does Medicare fit in the overall retirement plan?
- Income tax planning
- How to structure income and retirement?
- Investment planning that you are comfortable with
- Death of the 60/40 portfolio idea
- Risks to take into account in tax planning
- How to manage taxes this year and on your retirement?
- Castle Trust that builds your protection
- The Alphabet Soup of Medicare
- Filling the gaps that Medicare part A and B cover
- What is the Medicare advantage route?
- Social Security as a source of income
- Medicare supplement that can close the gap
- 5 Key Areas that make up a retirement and legacy blueprint
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This is The Chris Berry Show, expert information on wealth, estate and tax planning for the second half of life, information that you can understand. Here’s your host, Chris Berry.
Welcome, everyone. This is Chris Berry, and we’re going to start with a positive focus just like we do every time we do the radio show. This week’s positive focus is that my kids have wrapped up a soccer season with everything going on and schools being in-person or virtual. My 10-year-old boy Ryan and my seven-year-old girl Madison, they rocked it during the soccer season. We were able to get in. I think each of them had about six or eight games. They had to wear masks, and we had to wear masks on the sidelines, which was … I won’t get into that, but it was fun to have soccer practice a couple of days a week with each of them and then had their games. So, a little bit of normal in this crazy, crazy time.
Speaking of crazy times, we just had an election. I’m not going to get into it this week, but maybe a future radio show we’ll talk about the effect the election will have on your retirement and legacy, but we’ll save that for next time. Let everything settle a little bit before we touch that one.
Today, what we’re going to do is we’re going to focus on Medicare. So, with open enrollment right now, I think it’s important to talk about how Medicare can have an effect in your retirement. We’ll get into that in our second and third segments of The Chris Berry Show.
Before we get in to that, I just want to talk about where Medicare fits into the overall plan. So, what we do at our firm, at Castle Wealth Group, is we focus on retirement an d legacy planning, where there’s really five key areas that anyone needs to think about as they move into retirement. The first part is income planning, so planning to replace your income in retirement. So, while you’re working, it’s all about the paychecks, and then when you retire, how do you go about replacing those paychecks?
We look at things like Social Security, and we’ve had a lot of conversations about Social Security in the past, when is the best time to take it, as well as the pension. Do you take a pension? Do you take the lump sum buyout? When do we draw on our assets? How do we structure that income in retirement, understanding that we’re living longer than ever? So, we need to have a plan for income and retirement.
Then the second piece of that is investment planning, making sure their investments are invested in such a way that we’re comfortable with, so that with the ups and downs, especially in this election year and everything that’s happened, and the drops in March, making sure that we’re investing in such a way that we’re comfortable, and the way that you invested while you’re working and accumulating wealth might be different than how you want to invest as you approach, get near retirement, and finally retire.
Maybe we should look at reanalyzing how much risk we’re willing to take on in our portfolios. I saw a recent article in Forbes talking about the death of the 60/40 portfolio, which was interesting because there’s always been this idea that, “Well, as you move near retirement, you have more bonds in your portfolios and maybe you have 60% in equities, 40% in bonds, and that’s going to get you through retirement,” but with the underperforming bonds caused by the interest rates, there’s some questions of whether that’s the best route to go. So, we tailor any investment plan to our individuals and families in terms of that retirement and legacy blueprint that we create for our clients.
Third piece is tax planning. So, tax, and I think this is one of the biggest risks that we need to take into account, is with the potential ending of the Tax Cuts in Jobs Act, with the Secure Act that just passed, with the $23 trillion in debt we had as a country coming in to 2020, and now we have the CARES Act 1 that add another 2.2 trillion, and maybe CARES Act 2, which might add another one to three trillion dollars, we might get out of 2020 with over 30,000 or $30 trillion worth of debt that this country needs to figure out a way to manage.
So, the question is, are we going to cut spending or raise taxes? Well, I’ll let you answer that question. If you say raise taxes, then take a look at those pre-taxed retirement accounts, your traditional 401Ks, IRAs, 403(b)s. If taxes go up, guess what? Those go down. This is one of the biggest conversations we’ve been having, especially as we get near the end of the year is how are we going to manage taxes not just this year but for our retirement and what we leave as a legacy because understand that government is coming after those pre-taxed accounts. We saw that with the Secure Act, where they said that instead of that 10-year stretch or the lifetime stretch on inherited IRAs, all the taxes have to be paid within 10 years.
So, understand that government realizes that they have about $25 trillion in these pre-taxed accounts that they want to try to get their hands on to satisfy at least a portion of this $30 trillion debts that we have as a country.
So, tax risk I think is one of the biggest issues out there right now, and one of the biggest opportunities because we have this window of opportunity, thanks to the Tax Cuts in Jobs Act, where taxes are basically on sale. IRAs are on sale. We should be looking at strategies to minimalize taxes over not just in a particular year, but over your lifetime.
If you do want some information on that or start that process or have that conversation with us, give our office a call at 844-885-4200, 884-885-4200, and one of the things we can do is run a tax analysis for you looking at different scenarios based on where your pre-taxed accounts are and what income tax bracket you are in. That’s a deliverable. Just mention that you heard it on the radio show, and we’ll set up a phone call to start that process.
So, if you do want us to run that qualified tax analysis for you, looking to minimize those taxes not just in any specific year, looking at taxes through a micro lens, but minimizing taxes over your lifetime, give our office a call at 844-885-4200, and we can schedule a time to talk about it or send you some more information on that. I can even send you some sample reports, so you know what we’re looking at there.
Again, tax risk is one of the biggest risks out there right now, and it’s one of the biggest opportunities for families to take some proactive steps to protect yourself from taxes going up in the future.
Fourth, and this is what we’re going to focus on really the rest of the program today is healthcare planning. Really, we break healthcare planning into two aspects. First is longterm care planning. That’s another one of the big three risks I see right now, the big three being market risk, tax risk, and longterm care risk. People are living longer than ever. The cost of longterm care is skyrocketing. I had a family call in a week or two ago to our office, and they said that mom is in a nursing home paying $14,500 per month, $14,5000 per month.
The question is, how in the world are you going to go about paying for that? So, longterm care risk I think is really one of the top three risks along with tax risk and, of course, market risk, given the 12-year bull run that we’ve been on and the state of the economy post-pandemic.
The other part of healthcare planning is Medicare. This is where we’re going to spend some time talking about today in our segment, third segment, is understanding the alphabet soup, that is Medicare. I think it’s timely information given that we’re in an open enrollment period right now, which runs from October 15th to December 7th. So, we’ll spend some time talking about Medicare today, the alphabet soup, the part A and B and C and D, and which of those do you need, and which plan do you get, plan A or G or N. There’s a lot that goes into it. I don’t know why they created it in such a way, but it’s almost more confusing than taxes, I think sometimes, but we’ll talk about Medicare.
Then fifth is legacy planning. So, this is really where our firm started as an attorney and an investment adviser, helping clients put together an estate plan, an elder law plan, making sure that whatever they have moves as efficiently and effectively as possible to the next generation if they were to pass away, creating the legal structures of, “Do I need a will versus a trust, and which is right for my family, and what type of trust do I want? Do I want a revocable trust that just avoids probate and controls the distribution or do I want a Castle trust that avoids probate, controls the distribution, and then builds in protections from lawsuits in longterm care?”
So, understand there’s more than just that basic revocable trust that a lot of, I guess not to belittle, but let estate planning attorneys pedal these on clients when sometimes they don’t even need a trust because if your only goal is to avoid probate, you don’t always need a trust. You could rely on things like beneficiary designations and a lady bird deed to avoid probate, but a lot of my clients do have trusts because they want to protect their beneficiaries and protect against longterm care cost and lawsuits. So, not so much just that basic revocable trust, but we’re doing things like legacy inheritance trusts and Castle trusts.
So, those are the five key areas that we focus on as a firm, income planning, investment planning, tax planning, healthcare planning, and legacy planning. We can help you with just one aspect of that. Maybe you want a tax analysis. You want us to run that qualified accounts tax analysis, looking at how much tax you have in your pre-taxed accounts, what happens if you were to pay the tax now versus continue to defer.
What a lot of people don’t realize is that when you pay the tax sooner, a lot of times you pay less overall tax. We’ve had a lot of conversations about this. One thing I’d invite our listeners to attend is every Wednesday at 1:00, so we’re big in education at the firm here. My dad was a professor for, I think, 47 years teaching psychology. So, I’m a big believer in education. So, in addition to the radio show that we do every week, we also do a webinar every week. We call these Wisdom Webinars.
So, every Wednesday at 1:00, we do an educational webinar that’s really led by the attendees, where each week I have people email me in some questions or even they just log in to the webinar and they ask questions live and it’s just me and my whiteboard, and there’s no PowerPoint or anything. It’s really just an educational, almost a conversation where I get input on the fly from individuals, which I wish we could do on the radio show, but every Wednesday at 1:00. You can register for these by going to wisdomwebinar.com, wisdomwebinar.com, W-I-S-D-O-M-W-E-B-I-N-A-R dot com, wisdomwebinar.com.
Really, it was created out of our need or my need to provide this education with the pandemic and the social distancing. We haven’t been able to do our workshops that we did on a regular basis. So, this was something that every Wednesday at 1:00 I just log in, greet everyone with a positive focus, and then we dig in to some of the questions and answers. Sometimes we would go 20 minutes. Last time, we actually filled up the whole hour. We had to hop off because I had another Zoom conference call with some clients.
Yeah. We also record all of them, too. So, they go up on our YouTube channel. It’s Castle Wealth Group Legal YouTube. If you just plug it in to you YouTube, you should be able to find us there. That’s where we take these radio shows, we take the Wisdom Webinars. Then also we have what we call Berry’s Bites, where we take snippets from the webinar, recut it, where it’s maybe five minutes of me talking about Social Security optimization strategies.
So, we’re big believers in education. Now, of course, with that is the disclaimer that it’s general information. Don’t rush out and apply it. It’s always important to sit down with a professional before you take action on these things because there’s a lot of exceptions to maybe some general rules out there like that rule of the 60/40 portfolio being the godsend, where you can just put together 60% equities, 40% bonds and take out the 40% for the rest of your life.
What we found is with underperforming bonds, maybe that general rule doesn’t apply all the time. So, again, I invite you to these Wisdom Webinars every Wednesday at 1:00. Again, even if you can’t attend, I recommend you register because we record all of them and you can watch the old versions on the YouTube. So, just submit a question there, and then within a day or so, the webinar will be up on YouTube and you can watch it.
So, again, we’re big believers in education. We take a very educational approach as we’re working with families. If something that I’ve said today in one of those areas piques your interest, feel free to give our office a call, 844-885-4200. We can help you with maybe just one aspect of retirement and legacy planning or we can put together a whole retirement and legacy blueprint, where we map out what is your income strategy, your investment strategy, your tax strategy, your healthcare strategy, including longterm care and Medicare, and your legacy strategy. Do you need a will? Do you need a trust? What type of trust should you be looking at? How can we maximize that legacy?
What a lot of families find is that it’s pretty eyeopening going through our process. For example, I had a family come in last week just to talk really estate planning as a starting point, but then we got into some of the tax consequences of certain decisions they were making or they had made in the past, and that they were concerned with. We talked about some of the issues of how we’re leaving things to the kids, what’s the best way to leverage their assets because leaving a legacy was important to them. It was pretty eyeopening for them.
The wife even commented, “Well, this was a lot. This was very helpful. This is exactly what we needed.”
So, if that’s something that’s of interest to you, give our office a call at 844-885-4200, and we can get started on that retirement and legacy blueprint. If you already have some things in place, that’s where we’re great at offering a second opinion from a very educational standpoint. For example, you might be saying, “Well, I already have a will or a trust.” Well, that’s where one of the things that me and my team can do for you is run what we call an estate planning audit, where we take a look at what you have, run it through this 10-point checklist, and then you can walk away with the knowledge of knowing, “You know what? You’re all set,” or maybe there’s some gaps and coverage or maybe some things are not as complete as you thought they were, and now is an opportunity to make a decision on whether it’s important to you to get that corrected.
So, again, give us a call, 844-885-4200. This has been Chris Berry, and join us as we begin the conversation talking about the alphabet soup of Medicare.
Hi. We’re Madison and Ryan Berry.
Our dad is Chris Berry from the Castle Wealth Group.
The Castle Wealth Group used to be the Elder Care Firm, but dad wanted the company to be broader in its scope of services.
To not only protect and preserve assets, but to help people grow their assets to prepare for retirement.
As a certified elder law attorney and fiduciary financial adviser, our dad and his team at Castle Wealth Group can help you with lots of important things.
To tell you more, here’s our dad, Chris Berry.
Thanks, Madi and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family and less for Uncle Sam and protect you against the devastating cost of longterm care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop, where you will learn the three steps to create a legal, financial, and tax plan for the second half of life. Call us today to register at 844-885-4200.
The Castle Wealth Group is formerly the Elder Care Firm.
Learn more at the castlewealthgroup.com today.
All right. So, today, what we’re going to do is we’re going to cover or discuss Medicare, different than Medicaid. Medicaid pays for longterm care. Medicare can be confusing. Some people call it an alphabet soup. Today, we’ll look at the basics of Medicare, where there are gaps on coverage, how Medicare supplements can fill in those gaps, and who can sign up for the coverage, and when you can sign up. So, we’ll cover Medicare basics, Medicare supplements, prescription drug coverage, and important dates and more.
So, why is this important is because healthcare costs are increasing. I think healthcare is one of the five key areas that you need to focus on when it comes to putting together a retirement and legacy plan. In 2017, the national spending in healthcare was $3.5 trillion, and it’s projected to grow at roughly 5.5%. So, it’s one of those things where you look at just normal inflation.
There’s two things that are just skyrocketing in terms of cost. One of those is healthcare costs, both health insurance premiums, as well as longterm care costs. Then the second thing, which affects me because my kids are 10 and seven, is college funding. It’s amazing just how much these increase each year and way more than just typical inflation.
Another important thing to take into account is that seniors spend more on healthcare than anyone else. In terms of spending, typically, seniors on average spend about 13.6% of their expenses are spent on healthcare. That’s more than food, more than clothes, more than entertainment, a little less than transportation and housing. So, it’s number three in terms of the spending for seniors in retirement versus people younger than 65, healthcare really only amounts to about 8% of their expenses. So, that’s why it’s so important in retirement.
This is where Medicare steps in to help cover some of this. So, what is Medicare? Well, Medicare is the largest insurance program offered by the US government, serving more than 55 million people. It’s run by the centers for Medicare and Medicaid. We call it the CMS, and it’s part of the US Department of Health and Human Services.
Really, now that you know who runs Medicare, what is Medicare? Well, Medicare is really divided into three key parts. I think this is the best framework to understand Medicare. So, you’re going to have what’s called original Medicare, which is Medicare’s part A and B. These are put together by the feds. Part C is called the Medicare advantage plan, and then part D is a prescription drug program.
So, really, Medicare is divided just into those three parts. So, think of it as you have original Medicare, which is part A and B, you have Medicare advantage, which is part C, and then you have part D, which is the prescription drug coverage. Now, we have to dive a little deeper into that, but keep that framework in mind as we’re talking about this.
So, original Medicare is offered by the federal government. Original Medicare is part A, and part A covers things like hospital stays, skilled nursing, hospice, home health. Now, there’s limitations on this. It doesn’t fully cover it, and we’ll talk more about that, and that’s where supplement plans come in to play.
So, Medicare part A covers hospital, skilled nursing, hospice, and home health to certain limits. Then Medicare part B, as in boy, helps cover doctor appointments, outpatient care, occupational and physical therapies. So, again, Medicare part A covers hospital, skilled nursing, hospice, home health. Medicare part B covers doctor appointments, outpatient care, occupational and physical therapies.
Then Medicare part C and D, we need to make a distinction because now these are offered by private companies. This is where Medicare is confusing and hard to understand for a lot of people because it’s this mess or conglomeration or mixture of both federal programs and private programs helping individuals with their healthcare.
So, Medicare part C and D, unlike part A and B, are offered through private companies. Now, the feds give them guidelines, and we’ll talk a little bit about that, but Medicare part C and D are offered by private companies. So, what does Medicare part C cover? Medicare part C helps cover everything that Medicare part A and B, and offering covers additional services like dental, vision, and wellness programs.
So, think of it like this. Most people are either going to choose original Medicare, A and B, or they’re going to choose part C, which is also called the Medicare advantage. Medicare part A and B is offered through the federal government. Medicare part C has to cover everything that Medicare part A and B does, but has some additional benefits that can be thrown in because it’s offered by private companies.
Then Medicare part D, I think this is the easiest to understand. When you hear part D, think drugs. So, Medicare part D helps cover prescription drugs. Now, again, typically, your Medicare options are going to be answered or covered through one of two routes. You’re either going to choose original Medicare or you’re going to choose the advantage plan.
Now, with original Medicare, you’re going to choose part A and B, and then typically, what most people do is they add on a Medicare supplement insurance policy from a private company. We’ll talk about why that’s important, and we’ll go into more detail about it, but think of that as filling in some of the gaps that Medicare part A and part B don’t cover.
Then on top of the Medicare part A and B, and that Medicare supplement plan, a lot of times you’ll also choose or almost always, you’ll choose a part D standalone prescription drug plan from a company. So, if you go with the original Medicare route, you don’t just stop with A and B, you still bring in some of the private companies with a supplement plan and part D or you might go the Medicare advantage route, which basically replaces Medicare part A and B, and often include prescription drug coverage as part of the plan or if not, you could get a standalone Medicare part D package as well.
So, those are the two routes that most people go is either original Medicare, which is part A and B and then add on a supplement policy and a part D or they choose an advantage plan.
So, understand with original Medicare you’re going to pay some of the costs. So, most people get their Medicare coverage in one of two ways. They choose the original Medicare or they choose the advantage plan. When choosing original Medicare, you enroll for parts A and B, and then most people, like I said, purchase a standalone drug plan. It is common for individuals to also purchase a Medicare supplement plan to help cover the gaps in original Medicare.
Original Medicare is the most widely chosen option because there’s no required networks to be a part of and it provides consistent fixed expenses each month. When choosing Medicare advantage, you get the coverage of parts A and B and often part D is included. There is generally a lower monthly expense in Medicare advantage than the Medicare supplement, and that’s key is that lower average or lower monthly expense, but the Medicare advantage requires you to select a network of providers and generally has higher out of pocket cost than original Medicare plus a supplement.
Today, we’re going to focus mostly on original Medicares part A and B, and we’ll also take a look at Medicare part D and Medicare supplements as well. Original Medicare was never intended to cover all of a retiree’s health expenses, similar to how Social Security was never intended to be a retiree’s sole form of income in retirement. In fact, talking about Social Security, when Social Security was created, the full retirement age, so when you get full Social Security was age 65. The average life expectancy at the time Social Security was started was 63. Let that sync in in terms of how Social Security program has really changed. Now, a lot of people depend on it for a source of income in retirement.
So, back to Medicare, the remaining portion of a cost can vary based on the service provided. We’ll get into more detail on that. Medicare part A is going to cover hospital stays up to a certain time period. It’s going to cover up to a certain time period, and then once you get past that 60 days, then you’re going to have copay, and this is where supplement plan sometimes kick in.
Likewise, they’re going to pay if you need skilled nursing care up to 20 days will be covered by original Medicare, but days 21 to 100, you’re going to have copay of $176 per day unless you have a supplement plan. I’ve seen this firsthand. I was working with an individual. He was power of attorney for a friend that didn’t really have much family. Somehow or another, the friend did not have a Medicare or supplement plan. Then he was hospitalized, and then needed a nursing home. His first 20 days, there’s nothing out of pocket, but then he continued to remain in the nursing. Normally, the supplement plan would step up and cover that up to the 100 days, but he didn’t have a supplement plan, and now he’s paying $176 per day for that nursing home care, and all he had to have done is just have that supplement plan in place in the first place, and that would have wiped out that $176 per day cost.
So, five days of that, that’s about $880. So, it’s about $1,000 a week almost if you don’t have that supplement plan in place. So, those supplement plans can really be very important for a lot of individuals, especially if you’re concerned about longterm care and concerned about nursing home care, things like that. Most people I see have supplement plans.
Now, most people don’t have a monthly premium for part A. As long as you have 40 tax quarters or paid 10 years of Medicare taxes, you get part A at no cost. You will however have a part A annual deductible. In 2020, it was roughly $1,400 total. You also have copays for hospital and skilled nursing stays. You can see those or we talked about those already.
Then for part B, your monthly premium is based on your modified adjusted gross income two years prior. We have a handy worksheet that shows these. We call it key data. So, we have a key data for 2020, and we’re putting together our key data for 2021 because the numbers change every year.
The interesting thing is, again, it’s two years lagging. So, your Medicare part B premium in 2020 is based on whatever your adjusted gross income was in 2018. That monthly premium can range anywhere from $144.60 to a $491.60 per month. So, there’s quite a wide range. One of the things that’s interesting to note, and as we’re talking about taxes and that type of thing, and the idea that taxes are probably going up in the future, and we’re pulling money out of these IRAs, understand that when you pull money from a 401K or IRA or 403(b) and it’s pre-taxed, well, that’s going to affect your adjusted gross income, and that could actually affect your Medicare premiums.
So, when we’re talking about maybe doing something like a Roth conversion or something like that, where we’re basically ripping the Bandaid off to remove the internal revenue service as a partner on these pre-taxed accounts, understand they can also have an effect on your Medicare premiums two years following, but then if you only did the conversion one year, understand your Medicare premiums will go back down.
So, a lot of times what happens is that, yeah, you’ll pay a little more in Medicare premiums when you’re doing the conversion, but you’ll save a ton on taxes in the long run. This is something we can help you with. If you’re interested to see the interplay of these things, give our office a call at 844-885-4200. Again, 844-885-4200. Happy to help you understand how Medicare and taxes all fit together.
Now, in 2019, according to medicare.gov, the official website for Medicare, on average, a person in good health would average about $654 per month in expenses versus someone who has maybe diabetes. That could range anywhere from $800 to $900 per month. If you were to have a heart attack, it could easily be over $1,000 a month of out of pocket costs on top of your premiums.
This is where Medicare supplement plan comes into play, where the Medicare supplement plan can help offset some of these costs like the copay for skilled nursing from days 21 to 100. That’s something that a Medicare supplement plan could help cover, could help cover some of the copayments, coinsurance, yearly deductibles. That’s where Medicare supplement plan comes into play.
So, you pay nothing typically for Medicare part A with original Medicare. Part B, you’re going to have a premium. You put those together, now you have original Medicare, but there’s still those gaps that we talked about. Well, this is where Medicare supplement plan comes in and helps close some of those gaps.
If you have questions on Medicare or if you’re turning 65 or retiring, and it’s time for you, and we’ll talk about the dates for Medicare, to get started with this process, give our office a call at 844-885-4200. Happy to walk you through the process. Again, the phone number is 844-885-4200. We also have some handy guides on understanding Medicare, but if you give our office a call, leave your name and address, we can send you one of our Medicare guides, 844-885-4200.
Hi. Madison and Ryan Berry here from the Castle Wealth Group, formerly the Elder Care Firm.
Our dad is Chris Berry.
He’s an attorney and fiduciary financial adviser, which means he helps families plan, protect, and preserve their assets.
The entire team at the Castle Wealth Group can help you with lots of important things. To tell you more, here’s our dad, Chris Berry.
Thanks, Madi and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family and less for Uncle Sam, and protect you against the devastating cost of longterm care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop, where you will learn the three steps to create a legal, financial, and tax plan for the second half of life. Call us today to register at 844-885-4200. 844-885-4200 or visit us at castlewealthgroup.com.
The Castle Wealth Group is formerly the Elder Care Firm.
Learn more at the castlewealthgroup.com today.
All right. So, we’re talking Medicare and we’re talking about how Medicare part A and B cover some of the costs of healthcare in retirement but doesn’t fully cover all of them. So, that’s where we add in a Medicare supplement policy, which, again, doesn’t cover everything, but it helps ease some of that healthcare burden.
So, again, on average, in 2019, you’re looking available $7,850 per year of out of pocket expenses, even if you’re in good health. With the Medicare supplement plan, we can reduce the risk for these high out of pocket expenses by giving a more fixed monthly amount and limiting unexpected expenses, which, again, that’s one of the keys in retirement is trying to mitigate some of these risks, mitigate the tax risk like we talked about, mitigate healthcare risks, longterm care risks, et cetera, because you want to have peace of mind in retirement.
That’s what we try to do when we’re putting together retirement and legacy blueprint is create peace of mind, so that you have a blueprint for how the rest of your retirement is going to go, as well as what you’ll leave to the next generation. If you want help with that, give our office a call at 844-885-4200. We can start with a short phone call just trying to figure out where you at, and we can help you get to where you need to go.
So, this is where, again, Medicare supplement. What is a Medicare supplement? So, unlike original Medicare, a Medicare supplement plan is offered through private insurance companies. Again, this mismatch or putting the puzzle together of the federal government and private insurance companies. Insurance companies are required to offer the same basic benefits for each lettered plan that they do have the ability to charge different premiums. So, again, any plan G from a supplement policy, it’s going to be the same, other than maybe the cost might be different.
So, Medicare supplement plans help cover the gaps in original Medicare, things like copayments, coinsurance, and yearly deductibles. There’s a lot of different Medicare supplement plan options out there. Everything through A, through F, some of these are grandfathered in. Some are not available anymore, but I would say most people look at plan G and N are the most common plans selected by enrollees. They cover nearly all the potential costs and allow you to have a predictable out of pocket cost.
Plan G offers the second most comprehensive coverage other than plan F. Again, plan F isn’t available anymore. Then plan N is similar to plan G, but it requires a $20 copay when going to the doctor and a $50 copay when going to the emergency room, but I would say majority of people choose typically plan G. Some choose plan N.
So, let’s look at what an example if the individual was 65-year-old male with plan G coverage. So, plan G covers all the expenses, except the part B deductible of $198. It’s going to cover in some of the coinsurance and copays. Typically, on average, if you just have original Medicare, your average out of pocket cost, if you’re healthy, would be $655, and your total out of pocket with the Medicare supplement plan would only be $264.
So, again, having that supplement plan, specifically part G, helps cover some of the unexpected costs of retirement. So, some of the things will go away like the skilled nursing copay from days 21 to 100. A lot of those things end up going away with that Medicare supplement plan.
So, again, original Medicare, typically, you’re going to have part A and part B. You’re going to add a supplement plan, and then you need to think about part D. So, question is, what is Medicare part D? Medicare part D is an optional, easy for me to say, optional prescription drug benefit program intended to help Medicare beneficiaries reduce out of pocket drug costs. It’s a federally enacted program, but it’s administered by private insurance companies.
Again, like I’ve been talking about, it’s this interplay between the federal government and private insurance companies. Medicare part D, pretty easy to remember. D stands for drugs. Part D is a prescription drug coverage. Part D plans are required by federal law to offer the basic benefits offered by Medicare. So, again, most part D plans are going to be similar.
You usually choose part D in one of two ways. It is optional, but if you decide to delay part D, you may incur late enrollment penalty, but most part D plans come one of two ways. A standalone coverage to cover your medicines, so this would be you choose original Medicare, which is Medicare part A and B and then you choose a standalone plan or part D might be part of your Medicare advantage plan. Again, that’s where part C Medicare advantage covers A, B, and D with maybe some additional benefits. You can learn more about this also at medicare.gov. There’s some great resource available at medicare.gov. I reference that quite a bit myself.
So, now, we’re going to talk about how to enroll in Medicare, some important dates, and just a couple of miscellaneous items here. So, let’s look at who is eligible. So, at age 65, you’re eligible for parts A and B, even if you still work. There’s a lot of confusion on this. This question comes up a lot is, “When am I eligible? Do I have to take it or will I receive a penalty?”
You may be eligible for Medicare through your spouse, although you still must qualify by age or disability. You may also qualify for Medicare parts A and B if you’re under 65 and you have a disability. Then automatic enrollment happens in part A and B quite frequently. Automatic enrollment for those receiving Social Security benefits happen at age 65 or railroad retirement benefits, and initial enrollment period package is mailed three months prior to turning 65, and typically will include your Medicare card.
Then there’s the Medicare initial enrollment period. So, in the three months prior to turning 65, the month in which you turn 65 and the three months after turning 65 are what’s known as the initial enrollment period or the IEP. If you retire after 65, enrollment depends when your employer-sponsored plan or coverage ends.
This is important to understand. So, most people will take Medicare part A and they have a question because it’s free, and then the question is, “What about taking Medicare part B? Do you have to take it right at 65 or will you face the penalty?” Because if you don’t take it at the right time and you enroll at a later date, you might be penalized on Medicare part B.
Now, the interesting thing is you do not have to take your Medicare part B if you’re enrolled in an employer-sponsored plan that meets the requirements. So, if you’re receiving insurance, health insurance through your employer, you may not have to also enroll in Medicare part B. In fact, it might not make sense to do so. In which case, when your employer-sponsored coverage ends, maybe that’s when you have to enroll in Medicare part B. I know it’s confusing. So, if you have questions, give our office a call at 844-885-4200, 844-885-4200.
Then you have Medicare supplements enrollment periods. Open enrollment period starts the month of your Medicare part B effective date and lasts for six months. The important part here is you’re a guaranteed issue regardless of any health status. If you were to enroll on a supplement plan outside of your enrollment period, you may have to pass medical underwriting, and there’s no guarantee to issue from the insurance company. So, that’s why it’s very important to think about when you’re first enrolling in Medicare which plan you want to go or which route you want to go.
Some important dates. October 15th through December 7th, this is the annual election period for Medicare advantage plans and prescription drug plans. So, that’s the part C and part D. Then for the next calendar year and effective date is January 1st. Then January 1st through March 31st, this is the annual disenrollment period, if choosing to return to original Medicare.
Some other helpful resources for you like I already mentioned. Medicare.gov, that’s where a lot of this information is housed. You can give our office a call. We have a Medicare guide to help walk you through understanding Medicare. You can give us a call at 844-885-4200.
Understand that Medicare can be confusing. There’s a lot of misinformation out there where you talk to your friend or your neighbor or someone at work. There’s a lot of details. That’s why it’s important to work with, make sure that you have someone holding your hand and going through the information that applies to you because you can go online and you can find whatever you’re looking for online. Whether it’s right or not, it really depends. I find that’s really one of … I would say that all the information is out there. We just have to find the right information that applies to you.
I have this mug in my office that your Google search doesn’t trump my law degree because understand that everything on the internet is not always accurate, which when you talk to friends, in the past, it used to be someone at this lawn or something like that, you might not have all the facts. Every situation is a little bit different. So, when you’re choosing your Medicare plan, there’s no hard and fast rule that everyone should choose the original Medicare or everyone should choose the Medicare advantage. It really is an individualized decision, and our approach is to make sure that you understand all the rules. We want to educate you on it, and then help you make the right choice moving forward.
Again, Medicare is just one of the areas that we help people. Medicare fits into healthcare planning, which is one of the five areas that we focus on as a firm as it relates to creating a retirement and legacy blueprint, something that will guide you through your retirement years, and guide your beneficiaries upon death. That’s what we focus on at our firm.
There’s five key areas that make up a retirement and legacy blueprint. First is having an income plan in retirement. So, when are you going to draw Social Security? How are you going to draw on your assets? Should you take a pension? Should you take a lump sum buyout? Understanding that when you retire all of a sudden that income, the income you had from your wages goes away.
Second is having an investment plan, making sure that your assets are invested in such a way that you’re comfortable with. Understanding that approaching retirement is like climbing a mountain. Once you retire, you’re at the top of the mountain, and the skills you used to get to the top of the mountain might be different than the skills you use to get back down. So, the portfolio manager use to accumulate that wealth, maybe you should look at a different one as it relates to getting back down the mountain. Retirement planning is different than investing for growth. It’s a different skillset. We need to take into account different things. The amount of risk maybe should be different in your portfolio as you approach and move into retirement.
Third would be tax planning. This is one of the big three risks of market volatility or market risk, longterm care risk, and tax risk. Understanding that with the current laws of the Tax Cuts in Jobs Act, the Secure Act that’s passed, the CARES Act that’s passed, the $30 trillion in debt we have as a country, understand that may have an effect on your retirement. So, there’s some things that we should look at doing to minimize taxes not in a specific year, but minimize taxes over your lifetime, having that tax plan in retirement, as well as what you leave to the next generation.
Fourth, healthcare planning. That’s where we focused on today is looking at how are we going to handle healthcare costs, which Medicare options should we choose of that alphabet soup of part A and B or C or part A and B and D or C, which supplement plan should we choose. Is it G? Do we stay with F if we have it? A lot of questions there.
Along with that is also longterm care risk. How do we cover longterm care cost because Medicare really only pays for short-term rehab. It doesn’t pay for longterm care. If you have a loved one that has a stroke or has dementia and now needs nursing home care for the rest of their life, and the average stay in nursing home is about two and a half years. Medicare, even if you have a supplement plan, only covers up to 100. How are you going to cover the rest? So, having that plan for longterm care.
Then fifth, the legacy plan. Okay? How do we make sure that whatever you have goes efficiently and effectively as possible to the next generation? Do you have an estate plan? Is it a will-based estate plan? Is it a trust-based estate plan? If it is a trust, do you have the right type of trust? Is it a revocable trust or is it a Castle trust, an asset protection trust? Have you covered your final expenses so that your loved ones aren’t holding the bag when you pass away? Because understand that it takes a couple of weeks for those death certificates to come in.
So, how are your loved ones going to handle the funeral? How are they going to handle taking time off or traveling to get there? That’s where you should have that estate bridge, something to cover those final expenses that’s available immediately? That’s all part of legacy planning.
So, we can help you with just one of those area. Maybe you want to review that estate plan or you need help with Medicare or you have questions about taxes or you’re concerned about where the market is going to go or you don’t know how to claim Social Security. We’re here for you. Give us a call at 844-885-4200 or if you want us to put together a full retirement and legacy blueprint, that’s really what we focus on, helping you put together a legal, financial, and tax plan that’s best for you, not best for some adviser who only has a suitability standard, but a plan that’s best for you. Well, give our office a call at 844-885-4200 or you can visit us online at castlewealthgroup.com.
So, with that, I hope you learned about the alphabet soup of Medicare. Really, breaking it down, it’s three different things. It’s original Medicare, which is Medicare part A and B. Again, you’re going to have premiums for part B or you might choose the advantage plan, which is Medicare part C that can cover A and B, as well as third part is Medicare part D, which is the prescription drug coverage. So, most people choose either original Medicare or the part D and then you add in that drug program.
So, with that, it’s been great. Make it a great week. Take care.
Learn more about Chris Berry and how he can help your family by visiting online at thechrisberryshow.com. That’s thechrisberryshow.com. You can also call Chris Berry at 810-355-2584. That’s 810-355-2584.
This program content reflects the opinions of Chris Berry and his guests, not Castle Wealth Group of Advisors Excel, and is subject to change in any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment or legal advice or a recommendation regarding the purchase or sale of any security or to follow any legal or tax strategy. There’s no guarantee that the strategy statements, opinions or forecasts provided herein will prove to be correct.
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