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Today’s pre-retirees and retirees tend to have far more debt than those in years past. In addition to factors like credit card payments and medical expenses, this generation is seeing the effects of higher home prices and easily obtained low down-payment mortgages in the early 2000s.1 Between 2003 and 2016, Americans 60 and older nearly tripled their household debt — composed of mortgages, home equity loans, auto loans, student loans and credit cards.2 According to the Employee Benefit Research Institute, households headed by a person age 75 or older held an average debt load of $36,757 in 2016.3 If you’re still carrying a fair amount of debt and nearing retirement, we can help you review your household budget to help plan for a more confident retirement. Please give us a call if you’d like to schedule a meeting. One of the challenges in the new tax law is the interest-cap deduction on mortgage loan payments, meaning homeowners with high mortgage balances may be required under the new law to deduct less mortgage interest. The mortgage limit on new homes purchased is $750,000, while the limit on mortgages purchased before Dec. 15, 2017, remains $1 million. These numbers are important if downsizing is part of your debt-reduction strategy.4 Another major contributor to debt is the rising cost of sending children to college. Of the 3.5 million Americans who owe an average of $24,000 in Parent PLUS student loan debt, about half of them are parents older than age 50. Worse yet, the number of parents with student loans is rising at a faster rate than students.5 Unfortunately, all those debt payments could be used to save for retirement. The No. 1 reason individuals file for bankruptcy is medical debt.6 Whether nearing retirement or already there, unexpected health care costs can seriously curtail retirement funds. It’s a good idea to work with a financial professional to develop a strategy for paying potential health care costs down the road. Content created by Kara Stefan Communications. 1 Rebecca Moore. PlanAdvisor. Jan. 10, 2018. “Debt Causing Financial Vulnerability for Pre-Retirees.” https://www.planadviser.com/debt-causing-financial-vulnerability-pre-retirees/. Accessed May 11, 2018. 2 Michelle Singletary. The Washington Post. Feb. 26, 2018. “Should you retire your debt before retiring?” https://www.washingtonpost.com/news/get-there/wp/2018/02/26/should-you-retire-your-debt-before-retiring/?noredirect=on&utm_term=.d3d26dc8cda2. Accessed May 11, 2018. 3 Annie Nova. CNBC. May 9, 2018. “Almost half of Americans don’t expect to have enough money to retire comfortably — but there’s some good news.” https://www.cnbc.com/2018/05/09/almost-half-of-americans-dont-expect-to-have-enough-money-to-retire-comfortably–but-theres-some-good-news.html. Accessed May 11, 2018. 4 Anthony P. Curatola. MarketWatch. May 10, 2018. “Watch for these pitfalls if you want to deduct mortgage interest under the new tax law.” https://www.marketwatch.com/story/watch-out-for-these-pitfalls-if-you-want-to-deduct-mortgage-interest-under-the-new-tax-law-2018-05-09. Accessed May 11, 2018. 5 Kathy A. Bolten. Des Moines Register. April 2, 2018. “Thousands of Iowa parents are going into debt to pay for their kids’ college (and they probably shouldn’t).” https://features.desmoinesregister.com/news/parent-plus-student-loans-college-debt/. Accessed May 11, 2018. 6 Sharon Epperson. CNBC. Nov. 16, 2017. “Don’t let surprise medical bills drain your retirement.” https://www.cnbc.com/2017/11/15/dont-let-surprise-medical-bills-drain-your-retirement.html. Accessed May 11, 2018. We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
Earlier this year, Congress passed a last-minute budget deal that included provisions affecting Medicare benefits. Specifically, one provision will permit certain therapies to continue beyond the previous caps, subject to conditions. All therapy (physical, speech and occupational) must continue to be classified as “reasonable and necessary to treat the individual’s illness or injury.” 1 There had been ambiguity in the past as to whether Medicare would continue paying for sessions without measurable improvement. Now, however, therapy sessions may continue per the provider’s recommendation. Retroactive for this year, once therapy billing has reached $2,010 (about 20 sessions at $100 per visit), a provider must add an extra billing code to ensure payment. However, if total expenses subsequently pass a $3,000 threshold, they may be subject to medical reviews and audits.2 The federal budget agreement also accelerated the share-cost reduction during the so-called “doughnut hole” period in Medicare drug plans. Starting one year earlier — in 2019 — Medicare beneficiaries will pay 25 percent (instead of 35 percent) of drug expenses once they reach the stated annual limit (currently $3,750 in 2018).3 Medicare rules are always changing. It’s a lot like trying to make retirement planning decisions throughout your career — the bar is a moving target. One potential solution is to over-plan and overfund your share of expected health care expenses in retirement. If you’re looking for ways to help plan for possible increased health care expenses in the future, contact us. We’d be happy to discuss your options based on your unique situation. In April, the Centers for Medicare & Medicaid Services (CMS) issued a final ruling with updates for Medicare Advantage (MA) plans to provide more choices. Specifically, the rule expands the definition of “primarily health-related” benefits to cover products and services not considered direct medical treatments. Examples include air conditioners for people with asthma, healthy groceries, rides to medical appointments and home-delivered meals. Paid benefits also may include home modifications for mobility and balance, such as installing a wheelchair ramp or bathroom grab bars. Plans may offer benefits to help pay home aides who help with dressing, eating and other personal, daily-living care. MA plans must submit their bids for CMS approval by June 4 to begin offering these benefits in 2019.4 The new CMS rule also includes initiatives to address the national prescription opioid epidemic. Specifically, Medicare Part D plans now limit new opioid prescriptions for acute pain management to no more than a seven-day supply. The Overutilization Monitoring System (OMS) is expanding, increasing pharmacist accountability for patients already taking opioids.5 The CMS rule is part of a hardline approach to combating the opioid crisis. The White House has established a Safer Prescribing Plan initiative with specific goals that include cutting nationwide opioid prescription fills by one-third within three years.6 Content created by Kara Stefan Communications. 1 Judith Graham. Kaiser Health News. March 29, 2018. “Scrutinizing Medicare Coverage For Physical, Occupational And Speech Therapy.” https://khn.org/news/scrutinizing-medicare-coverage-for-physical-occupational-and-speech-therapy/. Accessed May 4, 2018. 2 Ibid. 3 Susan Jaffe. Kaiser Health News. March 14, 2018. “Lifting Therapy Caps Is A Load Off Medicare Patients’ Shoulders.” https://khn.org/news/lifting-therapy-caps-proves-a-load-off-medicare-patients-shoulders/. Accessed May 4, 2018. 4 Bruce Japsen. Forbes. April 5, 2018. “How Trump’s New Medicare Rules Boost Amazon And Walmart.” https://www.forbes.com/sites/brucejapsen/2018/04/05/how-trumps-new-medicare-rules-boost-amazon-and-walmart/#600a42d6786c. Accessed May 4, 2018. 5 CMS. Fact Sheets. April 2, 2018. “2019 Medicare Advantage and Part D Rate Announcement and Call Letter.” https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-02-2.html. Accessed May 4, 2018. 6 The White House. Fact Sheets. March 19, 2018. “President Donald J. Trump’s Initiative to Stop Opioid Abuse and Reduce Drug Supply and Demand.” https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-initiative-stop-opioid-abuse-reduce-drug-supply-demand/. Accessed May 4, 2018. We are able to provide you with information but not guidance or advice related to Medicare. Our firm is not affiliated with the U.S. government or any governmental agency. We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
When we talk about planning for retirement, we’re usually referring to financial objectives and income strategies. These things are important, but they’re not the only ways to adequately prepare for retirement. In addition to creating an income strategy, consider developing a specific plan for what you want to do — day in and day out — for a retirement that could last 20 to 30 years. After all, knowing what you want to do in retirement can help put a number on how much money you’ll need to save. For example, a retiree with big travel plans will likely need a larger nest egg than someone cultivating a vegetable garden. Give us a call; we’d love to meet with you to discuss your specific goals and begin drafting a detailed retirement income strategy. For many people, retirement is a time to do all the things they never had time to do before. Merrill Lynch found that people between ages 65 and 74 reported having more fun than any other age group. However, it’s easy to sink into daily routines that can lead to boredom and lethargy.1 To help maximize your enjoyment in retirement, plan to have a plan. For example, carve out time for your passions or develop a new interest. Get out of the house regularly to discover places you’ve always wanted to visit — a local museum or restaurant, a neighboring city or a far-flung exotic locale. The top criteria retirees use when seeking new adventures are the arts, fine dining, learning, volunteering, outdoor water activities, outdoor land activities and — in its own category — golf.2
1 William P. Barrett. Forbes. July 14, 2017. “25 Great Places To Follow Your Passions In Retirement In 2017.” https://www.forbes.com/sites/williampbarrett/2017/07/14/great-places-to-follow-your-passions-in-retirement-in-2017/#3d003f0c92df. Accessed May 10, 2018. 2 Ibid.
Reining in Impulse Purchases Try as we may to be responsible, almost all of us end up spending money frivolously at one point or another. It’s good to recognize this and perhaps set aside money in your budget for discretionary purchases. However, on a day-to-day basis, it’s important to remain vigilant about spending habits and be aware of when those purchase impulses are likely to hit. The following are some tips to help you stay on track.1
- Plan meals for the week, including what nights it would be most convenient for your schedule to dine out or pick up takeout. Break out your favorite slow cooker recipe and freeze the leftovers so you always have a meal on hand. Maintain a garden to grow fresh herbs and produce.
- Don’t buy more than you plan to eat — with no more than one additional meal of leftovers. Too often, we think a large dish will last us all week, but we forget that we’ll get tired of eating it. Be realistic, and don’t waste money on food you may end up throwing away.
- Don’t fool yourself into thinking that an impulse purchase is a reward. If you’re working toward a goal, budget a treat for yourself once you achieve it. That’s a reward. If you find something you suddenly can’t live without, don’t dream up some reason why you deserve to buy it. That’s a justification.
- Don’t wait until you’re living well within your means to start saving and/or investing in a retirement account. Saving a little today can yield far better results than waiting to save more, years down the road — for some people that day never comes. Just tighten the belt a little more and start saving today. You may even feel good enough about the move that you don’t miss the money in your daily budget.
- Don’t engage in “retail therapy” to make yourself feel better. A brisk walk in nature can yield the same results at far less cost.
- Review your bank and credit card statements. Check to make sure you don’t have any incorrect charges, fraudulent purchases or penalty fees. In today’s environment of computer hacking, these things are far more common and can happen to anyone.
- Don’t try to keep up with the Joneses. Establish your own goals and don’t let friends’ and neighbors’ new purchases distract you. When you try to keep up with others, you’re less likely to meet your own goals.