Retirement Info

[RiverDog]

After seeing some of the ages of our participants, I thought it might be useful to share some information on retirement planning. My wife has been retired/disabled, drawing Social Security, and on Medicare for 6 years. I've been retired for 4 years, on Medicare for nearly 3 years, so I'm pretty familiar with it.

First of all, my best advice is not to go into this blind. No one is going to tell you how and when to draw your Social Security or what Medicare plan to join. Indeed, government paid employees of SS and Medicare are specifically instructed NOT to give advice. There are a lot of advocacy groups out there. The local hospital here, Kadlec Regional Medical Center, puts on monthly Medicare classes free of charge, and even offers one-on-one appointments with a Medicare specialist. They are non profit, supported by charitable donations and proceeds from the sales at the hospital gift shop, and as a major hospital, have plenty of experience with the ins and outs of Medicare. Some classes that are sponsored by financial agencies may give you a sales pitch and give you their business card, but all that I've attended offer good, solid advice. Some offer free lunch or dinner.

A word to the wise: Do not go into a website unless it ends in .gov. There are some websites that try to fool you by pretending to be an official government website (there's a Medicare.com, for example). Do not give your Medicare or SS number to anyone that asks for it.

Medicare. My biggest advice for Medicare is to stay away from Medicare Advantage! Don't listen to that old fossil Joe Namath. Medicare Advantage is a private option to Medicare Part B, or Original Medicare, and it's like a HMO. In other words, you have to see doctors within their network before they will pay, so you may not be able to see the doctor of your choice. If you fall ill or get hurt away from home, you could be limited in the doctors you choose to see. This is particularly true of specialists. Come down with cancer and your primary care provider recommends a specialist, they may not be in your MA's network. In contrast, although doctors and specialists aren't obligated to accept original Medicare, most do. The other problem with MA is that if you decide you don't like it and want to change, the original Medicare companies are not required to accept you.

What my wife and I have is a high deductible Plan F, which no longer exists, but is virtually identical to Plan G. It's the best plan available plan, covers international travel. It costs us roughly $50/month, vs. over $300/month for a low deductible option of Plan G. The plan seldom pays as it's basically catastrophic insurance, but the difference in monthly premium is so much that even if we were to run up medical expenses to cover the deductible, it would result on only a difference of a $200 or so. Medicare still pays for most of our medical expenses, but not always at 100%. Although you're buying insurance through a private, for profit company (mine is Globe Life) and they are free to set their own premiums, they are required to pay whatever Medicare tells them to pay for certain services.

If you're on Facebook, there is a group called Boomer Benefits that has some very good information from both Medicare specialists and common folk that will comment on questions and answers. It's where I saw a lot of horror stories about Medicare Advantage.

Social Security. My wife went on SS via disability when she was 61. Since my SS benefit is the greater of the two, we're deferring mine until I am age 70. Each year beyond my normal retirement age of 65/10 months, the monthly benefit increases by 8% to a maximum of 132% of my Full Retirement Amount, or that I would have gotten had I retired at my normal age. I also get the benefit of any cost of living increase. This year, the cost of living increase was 5.9%.

A lot of people do calculations to figure out how much total money they can receive out of Social Security if they start drawing their benefits early, perhaps investing it if they don't need the income, vs. waiting to age 70 and maximizing their benefit. That's not how I look at it. If I die before my wife, she gets my benefit, so it's a nice life insurance policy for her. In addition, I look at my SS benefit as insurance against running out of money, a fear that all seniors have. If you don't need your SS for basic income to pay the bills and put food on the table, my advice is to delay taking it.

IRA's/401K's The other advantage of delaying my Social Security benefit is that it keeps our earned income low, well under the lower limit of the 12% tax bracket. This allows me to transfer funds from my pre-tax traditional IRA (formerly my employer sponsored 401K) to my Roth account and only pay taxes at 12%. The next highest tax bracket is 22%, so it can make a huge difference. All transfers have to be done within the calendar year. About 60% of all our retirement funds are in the pre tax traditional IRA, meaning that we owe taxes on it. I'll estimate my income, easy to do when it's mostly fixed, and make the transfer in January so I can take advantage of any gains during the calendar year as you don't pay tax on the earnings in a Roth.

Try to avoid pulling money out of either IRA account, especially Roth accounts. The earnings in a Roth account are tax free, so if you have an account that is not tax exempt, it makes sense to draw on those accounts before tapping into a Roth.

Medicare Part D (prescription drugs). This is extremely confusing. The Medicare website has a good spreadsheet with a matrix where you enter your prescriptions, dosage, etc, and it spits out options of different plans offered by various private companies. However, change just one drug (my wife is on 11 prescription drugs) and it can dramatically change your options. It pays to shop around. For example, my wife had a drug that Walmart was selling for over $100, and when she checked with Costco, they had the same drug for less than $10. The reason for the variance is that pharmacies will negotiate their own contracts, so while one company may get a favorable deal, another one may have contracted several years earlier when the drug was in a different tier. Take advantage of the Good Rx coupons. They have an app you can use to search for the best prices.

I'm not an expert in this stuff, but I have had a lot of experience with it. If you have any questions, don't be afraid to ask on this thread or shoot me a PM and I'll try to help. Also, if I've posted something that is contrary to what you've heard, please challenge me on it. This stuff changes all the time.