Are you too old to open a Roth IRA?
July 1, 2023
Many people intend to rely on their 401(k) plans offered through employment, personal savings and collecting Social Security and Medicare benefits during retirement, but financial advisors recommend diversifying your retirement plan to include a Roth IRA. Plus, if you’re not offered a 401(k) plan through work, Social Security and savings alone may not be enough. The first step in determining whether it’s too late to open a Roth IRA is understanding the potential benefits and downsides of having one.
Understanding the Roth IRA
The difference between a Roth IRA and a Traditional IRA is that a Roth IRA allows for tax-free income during retirement, while a Traditional IRA taxes withdrawals. With a Roth IRA, contributions are taxed upfront, so all withdrawals of earnings are federal tax-free once the account has existed for five years, and the account holder is at least 59½. Contributions, though, can always be withdrawn at any age without taxes or penalties, which could be especially important during unexpected financial hardship. For anyone new to investing or planning for retirement, IRA expert and accountant Ed Slott recommends starting with a Roth IRA, saying, “There’s just no question that that is the better place,” to start.
Opening a Roth IRA
In order to contribute to a Roth IRA, you must earn an income, but there are income limits. In 2023, a single person may make $153,000 or less, while those who file jointly may make $228,000 or less. While there are no RMDs, there is a Maximum Contribution allowed of $6,500 under the age of 50 and $7,500 for those 50 and over. That means that if you have extra income to invest between the age of 50 and 70, the Roth IRA might be just right for you. Contributions are not tax deductible and all earnings grow tax-free. Because Roth IRAs do not have Required Minimum Distributions (or RMDs) after the age of 73, this is yet another reason that it might be the perfect account to consider for someone who is older and may be behind on their retirement planning.
The Benefits to Opening a Roth IRA at an Older Age
The earlier you start saving for retirement, the better. With a Roth IRA, the longer the account is open, the longer someone has to save and take advantage of compound interest. Winnie Sun, managing director of Sun Group Wealth Partners says she always points young investors to Roth IRAs, because not only can it get them started on long term investing, but it can “help them sock away money that can be accessed in an emergency.” There are still advantages to opening a Roth IRA even at an older age, as long as an individual falls within the income and contribution limits. If you’re over the age of 59½ or getting there, then once the account has been open for five years, there will be no penalty for withdrawing earnings tax-free, and if you plan to continue earning past 73 or don’t need to withdraw funds at that time, then there will be no harm in not withdrawing a certain amount per year as Roth IRAs do not have RMD restrictions. While some people view the inability to claim contributions as a tax deduction as the downside to Roth IRAs, others argue that not having to pay taxes on your distributions is the upside to that later on. Perhaps the best way of looking at this feature is that retirees may leave their heirs tax-free funds, which may be particularly important for some people. Income, though, may be the most important factor in opening a Roth IRA later in life, as some individuals don’t earn more until they are older. It may not be until an older age that an individual has the extra income that they can now invest, especially once the mortgage is paid or their children are independent. Many find themselves in the unfortunate position of not having saved up what they’ll need, and so they’ll want to make the most of their earnings while they can; that’s when a Roth IRA can help.
The best thing to do when it comes to retirement planning is to start early, but because of various situations, this isn’t always possible for everyone. Even if an individual has been saving or has a decent 401(k) plan through their job, opening a Roth IRA at a later time can help many people plan on having extra funds during their retirement years. Insureyouknow.org can help you store all your retirement plans in one place so that your retirement accounts and other finances are easy to access and can be updated regularly. This way, you can focus on earning and enjoying your funds both now and later in life.
Scammer on the Rise: How to Protect Yourself in Retirement
June 1, 2023
A change in your retirement savings balance could be the result of recent stock market volatility, or because your account has been accessed by someone else and compromised. The National Association of Plan Advisors reported that hackers have been targeting retirement accounts, either through large-scale attacks on financial institutions or by using stolen personal information. Bryce Austin with TCE Strategy said that a hacker can get into your 401(k) two ways, either by “retrieving your credentials with the financial institution” and pretending to be you or by convincing you to do it “on their behalf.” Scammers have been known to contact people posing as the police, claiming that their funds are at risk and convincing them to transfer their retirement money into a “safer” account. If someone does so, then there’s no legal recourse, because they are doing so deliberately; the savings are “just gone,” Austin said. It’s important that retirees are aware of this trend and make sure that their accounts are secure.
Set Up Online Access to Your Accounts
First, make sure that you have online access to all of your retirement accounts. This will allow you to monitor your own accounts regularly. If you ever notice any unusual activity or changes that you have not made yourself, contact the institution immediately. Some firms will not reimburse account holders for fraudulent transactions if they aren’t reported during a certain time frame. Establishing online access also prevents someone else from doing so before you can, since thieves have been known to use stolen information to access and retrieve funds. Create your own Social Security account at ssa.gov while you’re at it, so that hackers don’t divert your Social Security benefits to their own accounts. When out and about, do not use public WiFi connections to check your accounts. Unfortunately, hackers can access these networks and steal your personal information by viewing your online activity.
Access your Accounts Safely
Once you have access to your accounts online, make sure you use a strong password and change it regularly. Your password should be something that a hacker cannot easily guess, such as your or a loved one’s birthday. Next, use multi-factor authentication if your institutions offer this step. Requiring multiple verifications to access your account can stop thieves in their tracks, as well as alert you if someone else is trying to access your account. If you are able to, financial author Cameron Huddleston suggests naming a trusted contact. A trusted contact cannot access your account, but your institution can contact them and make sure that it is actually you who is trying to access your funds.
Periodically Check Your Credit Reports
In addition to monitoring your own accounts, checking your credit reports regularly is one more easy thing you can do to catch any unusual activity on your accounts. A credit report shows all accounts that you have opened, balances, and can even find data breaches. A data breach can compromise your personal information and alert you to change your passwords or close a compromised account. A sudden fluctuation in your credit score can also be a sign that something isn’t right.
How to Recognize (and Avoid) a Scam
If you receive a suspicious phone call, text message, email, social media message, or letter that doesn’t seem right, then trust your gut. The caller or sender may not be who they say they are and it’s likely a scam. If you want to be sure, then you can call the company’s customer service line and verify that they meant to contact you. No matter how official the message may seem, that doesn’t mean it’s authentic. Many scammers pretend to be from the Social Security Administration, Medicare, IRS, or credit card companies. Lawyer and author Steve Weisman says, “The IRS and the SSA will never initiate contact with people through a phone call, so you can be sure that the person calling you is a scammer.” The same goes for Medicare. Your Medicare number is valuable and can enable a criminal to steal health benefits, so if anyone is asking you for your Medicare number, then this is a sure red flag that they are a scammer.
Perhaps the number one rule for protecting yourself against a scam is to never provide anyone with personal information without verifying their true identity. Again, this can be done by hanging up or ignoring the message and calling the company directly. Also, be mindful of your mail. Any documents with sensitive information should be shredded, and if anyone else is retrieving your mail, make sure they are someone you trust. Opting for paperless statements is another safeguard against anyone stealing personal information via your mail.
Anyone who is trying to rush you into making an important financial decision likely does not have your best interests at heart. It’s important to research any company that you plan to invest with. Before buying stocks, you can even check the SEC’s EDGAR database. Be especially skeptical of anyone who is pitching something in a time-sensitive manner, such as a “once in a lifetime opportunity.” A true financial advisor will respect your desire to think it over and even encourage you to do so. Before making any important financial decisions, it’s not a bad idea to refer to a trusted professional anyway. That being said, anyone telling you to “leave everything to me” may not deserve that much of your trust. At the end of the day, you should always be your own expert on your retirement and finances.
The best defense against retirement theft is your willingness to take a few extra steps to protect your accounts, such as using multi-factor authentication and monitoring your own accounts on a regular basis. Most of all, remain diligent about who you’re providing sensitive personal information to. These are simple ways to protect your nest egg and gain valuable peace of mind. Insureyouknow.org can help you store all of your financial information in one place so that your retirement accounts and other finances are easy to monitor. Then you can get back to worrying about what’s really important, such as how you’ll be enjoying your retirement.
The Lowdown on the Banking Crisis and What it Means for Retirees
May 15, 2023
In the midst of the Great Retirement, an excess of 2.6 million retirees left the workforce during the pandemic. “A lot of people had reasons to retire and the way markets evolved allowed them to,” says research economist Miguel Faria-E-Castro. While health and safety concerns were very real for many, others chose to leave early because of changing work environments or needing to become full time caregivers; others simply took advantage of rising asset values.
The pandemic isn’t solely to blame for the influx of retirees, though. The Employee Benefit Research Institute regularly finds that many Americans end up retiring earlier than planned. Whether you’ve already retired or intend to soon, it may be important to factor the recent banking crisis into your planning.
Understanding the Banking Crisis
In March 2023, the United States’ Silicon Valley Bank (SVB) suddenly collapsed, mainly in part due to a bank run, when their customers rushed to withdraw their funds over panic due to the bank’s loss of stocks. The failure of this California-based bank raised concerns for Americans about the financial health of their own assets, even though the Federal Reserve, Treasury department, and FDIC moved quickly to ensure that all depositors would have full access to their funds, a move meant to calm fears of a full market collapse. Financial experts believe that because of these unprecedented actions, the failure of SVB does not pose a threat to the financial market at this time.
While deposits of up to $250,000 are FDIC insured, many people are wondering if their 401(k) is protected, and the short answer is: It depends. If your 401(k) is uninsured and invested in “stocks, bonds, or mutual funds, you’re not covered against those investments losing value,” then your funds are not protected under the FDIC guarantee, according to finance professor Valentina Bruno. Retirement plans that the FDIC does cover include IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs, up to $250,000, but if you had more than one of these (each valued at over $250,000) at the same banking institution, then only one of them would be insured. This is why it may be a good idea to spread your assets out over different institutions.
Planning for Retirement
If you haven’t retired yet, hopefully you’ve begun planning and saving already, because the earlier you start, the more time your money has to grow. If you’re offered a 401(k) retirement plan through employment, it’s important to take advantage and get enrolled. Even better, if the plan allows you to make contributions, do so and you’ll be rewarded with lower taxes at the end of the year. The biggest mistake people make, according to financial expert Jim Yih, is starting too late. “All my clients, no matter how much they have saved, say they wish they’d started earlier.” Yih’s first recommendation is to put away 10 percent of your gross income, starting as soon as you can.
Become the Expert of Your Retirement
While learning all about retirement plans may be intimidating, many financial advisors actually recommend becoming an expert of your own retirement options. If you are not offered a 401(k) through employment, there are other options, including an IRA, which is a plan that you would open yourself through a broker or other provider. Since there are many types of IRA accounts, the most common being a Traditional or Roth IRA, it’s important to learn about the different conditions of each account before deciding which is the best fit for you. Financial author Liz Weston encourages everyone “to consult a fee-only financial planner or accredited financial counselor if at all possible before retiring, simply because there are so many decisions that have to be made.”
No matter the kind of account you choose, the first step is to determine how much money you’ll need when you retire. Experts advise replacing 70 to 90% of your annual pre-retirement income through Social Security and savings. The next step is to determine what your financial goals are now, such as paying off a mortgage or other debts and saving for your childrens’ college tuition. Factoring in these financial boundaries help put retirement budgets into perspective. Yih warns that, “It’s almost impossible [to do it all] unless you have a big income, and even then, things don’t always work out,” so he tells people to choose two or three focal areas that are most important to them.
Exercising Financial Resilience
In order to increase financial resilience, one must learn to anticipate the unexpected. While 60% of families faced a financial emergency last year, one third faced two. If any of your retirement accounts were affected by the banking crisis, then you may have experienced an unexpected loss firsthand. It’s best to prepare for this and diversify your retirement plan. A good rule is to make sure 80% of your savings are invested in methods that have stood the test of time, while 20% of your funds are involved in higher-risk investments.
Thanks to Social Security, whatever your retirement accounts are, you can still plan on collecting something after the age of 65. This also means that if you were affected by the banking crisis and are 65 or older, then you can still count on these benefits. If you intend to retire earlier than 65, then you want to include this factor in your planning. For instance, how much money will you need to carry health insurance before you’re eligible for Medicaid at 65? Since “Social Security is guaranteed income that is adjusted for inflation,” Weston advises delaying Social Security benefits for as long as you can.
Consider part-time work, not just for the supplementary income it will provide, but for the purpose it will likely bring to your life. The lifestyle component of your retirement is as important as having enough money to retire. “The most successful retirees are not the ones with the most money. The busiest retirees are the most successful ones,” says Yih.
Planning for retirement and financial resilience can provide peace of mind and allow you to focus on what really matters. The resolve you’ll feel after tackling financial planning is priceless. Insureyouknow.org can help you store all of your financial information in one place so that your retirement planning remains organized. Plus, when everything is easy to assess, periodically reassessing your finances when circumstances change becomes painless and straightforward.
5 Retirement Myths Busted
May 2, 2023
Once you retire you assume that you will finally have all the time in the world. You’ll travel the globe, spend your days without a care in the world, and have enough income to support yourself in your retirement. The truth is, all of the above information can be false.
The American College of Financial Services Center for Retirement Income conducted a Retirement Income Literacy Survey to test consumer knowledge about retirement income concepts. Four out of five older Americans failed the survey. The following myths have people getting the wrong idea about how they’re going to live out their golden years.
Myth 1: Your Taxes After Retirement Will be Lower
Many aging individuals assume that their taxes will be lower after they retire because they will have a reduced overall income. However, this isn’t always true. The savings accumulated for retirement may be higher than your earnings during your working years. Additionally, sales and property taxes could also be more as well as the cost of living, further increasing spending.
Myth 2: Social Security Covers Your Expenses
Typically seniors rely on Social Security to cover any expenses they may have in a post-retirement world. Despite this, Social Security is not intended to be an individual’s primary source of income support. “Payroll taxes are expected to cover about 78% of scheduled benefits,” said Cameron Huddleston of Go Banking Rates. “If the funding gap isn’t filled, retirees could get lower Social Security payments.”
Myth 3: Health Issues Don’t Affect You Until Later in Life
There are many seniors who believe that they can work as long as they need to past the age of 65. However, most aren’t able to work as long as they need to or want to in order to accumulate sufficient savings. Some are forced into retirement because of medical problems that may affect their ability to work including arthritis, limited mobility, and hearing issues.
Myth 4: Medicare Will Cover Health Care Costs
Medicare is a federal health insurance program designed for U.S. adults who are 65 years of age or older intended to help meet health costs. Some older Americans assume that Medicare will be able to cover all health costs well into retirement. However, this program doesn’t cover several deductibles, copayments, and the cost of care for dental, vision, and hearing conditions. “Medicare does not cover the cost of long-term care, including extended stays at nursing homes and assisted living facilities,” Rachel Christian of RetireGuide added.
Myth 5: Retirement Planning Can Wait
One of the biggest mistakes to make is waiting to create a retirement plan at a later age. It is most efficient to start investing money in retirement at an early age so compound interest can increase your retirement accounts throughout your time in the workforce. Saving money in your 20s and contributing 15%-20% of your paycheck is key for ideal retirement savings. However, every decade an individual delays in saving requires them to save a greater percentage of their paycheck.
It is important to know all the facts about retirement when starting to plan for your future. You need to take into account what is contributing to your retirement savings and what steps you need to take to ensure a comfortable living. With insureyouknow.org by your side, you can create an efficient retirement plan without misconceptions of retirement myths that may affect the process.
The 8 Best Places to Live & Retire
April 15, 2023
Imagine this: you’re sitting on a hammock at the beach with the sun on your face without any concern about getting back to work. You’ve entered your retirement, better known as the best phase of your life.
There are many high liveability indicators that help characterize the best place for retirement. Many of these factors include a prosperous economy to find work in case a retiree needs to reenter the workforce, mild weather, a relatively low crime rate, quality hospitals and assisted living facilities, and sufficient wellness opportunities that won’t have you missing the workforce.
There are several places around the United States that serve as ideal spots to retire that possess many of these factors when you say goodbye to the 9 to 5.
Top Places to Escape to for Retirement
According to U.S. News, the following locations have the most affordable housing options, low retiree taxes, and are ranked high for overall happiness and quality of health care.
- Lancaster, Pennsylvania
- Harrisburg, Pennsylvania
- Pensacola, Florida
- Tampa, Florida
- York, Pennsylvania
- Naples, Florida
- Daytona Beach, Florida
- Ann Arbor, Michigan
Lancaster is located near Philadelphia, Pennsylvania. In this city, there is plenty of Amish produce, local stores at the Lancaster Central Market, and a wide variety of cuisines and restaurants. It offers advanced health care for seniors and has high rates of happiness for its residents. Many of the residents also enjoy the diverse collection of cuisines and the art galleries and museums in the area including The Pennsylvania College of Art & Design and Franklin & Marshall College.
Harrisburg is the state capital of Pennsylvania with the Susquehanna River and several hiking trails including the Appalachian Trail. This ideal location has large metro areas nearby for visiting and the housing costs are very affordable for the residents. Many retirees enjoy traveling to New York City, Washington, Philadelphia, and Baltimore for day trips along the coast.
Pensacola is located near the border of Florida and serves as an accessible beach retirement spot for retirees. It features low taxes, high desirability, and affordable housing. It also has a very convenient location for access to the Gulf of Mexico and Pensacola Bay and a warm desirable climate. This area also has a small military presence that encourages several military families to settle in the area.
Tampa is a city with a combination of a beach and a metro for residents. Highlights of the city include many entertainment options including zoos, theme parks, and aquariums. Tampa also serves as a popular port spot for cruise ships for retirees to travel post-retirement. There are several active senior communities and neighborhoods in the area including Bayshore Beautiful, Bayshore Gardens, Beach Park, Oakford Park, and Sunset Park.
York is a city in Pennsylvania with preserved architecture from the 1700s that previously served as the nation’s capital. With a population of just under 500,000, it played an important role during the Revolutionary War and has a rich history for its residents. Retirees can enjoy a wide variety of places to explore in this city including galleries and theaters like the Agricultural and Industrial Museum and Colonial Complex, vendors at York’s Central Market, and parks and trails including Heritage Rail Trail County.
Naples is more expensive than other retirement spots in Florida but it allows for a high quality of life. Without an income tax for the state, retirees are able to keep more of their earnings if they obtain another job. Over half the existing population in the city is already over the age of 65. These residents are able to enjoy the warm weather, sunsets and beaches at the Naples Pier, several restaurants and shops, and private golf courses including the Hibiscus Golf Club and Naples Grande Golf Club.
Daytona Beach, Florida
Daytona Beach on the east coast of Florida has mild winter weather and is known for its prevalence of motor sports. Many retirees enjoy the low housing costs and views of the Atlantic Ocean. This area also has several 55-and-older communities already in place including Latitude Margaritaville which sells several single-family homes with resort-style amenities.
Ann Arbor, Michigan
Ann Arbor, a college town with the University of Michigan, has a vibrant economy and lifestyle with abundant health care options and job opportunities. Retirees enjoy a high quality of life with ample musical performances and sports events. Additionally, this area has one of the largest healthcare complexes in the world with high-quality treatment facilities through Michigan Medicine, which is especially appealing to retirees.
After leaving the workforce, it is important to find the best place for retirement. At the places mentioned in this post, many retirees enjoy the widespread opportunities and high liveability indicators. At insureyouknow.org, you can track your savings to see which retirement location is the best fit for you and your future.
Retiring Early: A Long Vacation or a Trap?
February 14, 2023
They say retirement is the start of your new life. No more 9 to 5 workdays, late nights, and missed holidays––retirement is just one never-ending vacation that you get to enjoy. However, there are certain obstacles a person may face if they decide to go down the road of early retirement.
The Covid-19 pandemic pushed many Americans to retire early as much of the job market closed down, causing individuals to lose their jobs. According to Bloomberg, more than 3 million Americans retired early because of the pandemic. This amount equals more than half the workers that are still missing from the labor force from before the pandemic.
This public-health crisis has caused many Americans to re-evaluate their life priorities, pushing them toward the solution of retirement. The Economist explains that 49.9% of Americans now expect to retire before the age of 62.
Many of these people are deciding to retire before accumulating the earnings they would need to live a comfortable life. “Almost two-thirds of people — between ages 57 and 66 — choose to retire early out of their own volition, despite having saved next to nothing,” said Laurence Kotlikoff, a contributor for CNBC. “And most of them are able-bodied, without disabilities that would prevent them from staying on the job.”
This growing trend towards early retirement has pros and several cons that will continue to affect these individuals throughout their lives.
What are the Pros?
After retiring, many people are given more freedom to explore new opportunities. These benefits can have a lasting effect on the body and mind of a person. They include the following:
An Increase in Health and Well-Being
Without a job to do every day, you are granted more time to improve your health through exercise, eating healthier foods, and taking time to work on your mental health without the constant stress of work. You can get more sleep and focus on improving the quality of your life while adopting healthier habits.
New Career Potential
Moving away from a high-stress job can allow you more part-time opportunities. Some people embark on new career ventures, try out a new job field, or work on a passion project, all on their own schedule.
More Time to Travel and Pursue New Passions
Without set timings, you can take spontaneous trips and visit new places. Many people take this additional time to enjoy new hobbies, volunteer in the community, and spend more time with their family and friends.
What are the Cons?
Despite the pros mentioned above, the current economy has caused several hurdles for those that decide to retire at a younger age. They include the following:
Smaller Social Security Benefits
If you decide to take Social Security earlier, you will have fewer benefits than you would at a later age. “If you were born in 1960 or later, for example, and you start taking benefits at age 62, the earliest age at which you’re eligible, your monthly benefits will be 30% less than if you wait until age 67,” said Greg Daugherty, a writer for Investopedia. This means losing potential benefits on a monthly basis.
You become eligible for receiving Medicare at the age of 65, but until then, you have to find your own source of health insurance. With high premiums, this can be a difficult task compared to the benefits you received with your workplace plan.
Lack of Income
Leaving the job at an earlier age means spending more years without a constant source of income. If plans change or you run out of savings, then it won’t be as easy to enter back into the job market after being out of it for so long. Furthermore, the U.S. News states that potential tax penalties can occur if a person takes money out of their retirement account before 59 ½ years old.
Mortgage expenses, home maintenance costs, and property taxes pile up after retiring early. In fact, “44% percent of retired homeowners between ages 60 and 70 still carry a mortgage,” said John Waggoner from the AARP while crediting an American Financing survey. These extra charges can take up a huge chunk of your savings.
It is important to weigh all the pros and cons of early retirement before you make a decision. It is essential to come up with a plan that allows you to retire at a time that is right for you while having enough savings to ensure you live a satisfied life. At insureyouknow.org, you can track your accumulated savings and create the most ideal retirement plan.
Medicare Enrollment: Open Until December 7
October 28, 2021
Medicare is a national health insurance program administered by the federal government for people 65 or older. You’re first eligible to sign up for Medicare three months before you turn 65. You may be eligible to get Medicare earlier if you have a disability, End-Stage Renal Disease (ESRD), or Amyotrophic lateral sclerosis (ALS)—also known as Lou Gehrig’s disease.
From October 15 through December 7 every year, depending on your circumstances, you are allowed to enroll in or switch to another Medicare Advantage plan or Medicare Part D prescription drug plan, or to drop your plan and return to Original Medicare. View a complete list of Medicare enrollment dates.
If you qualify for Medicare coverage or know someone who may need your help to learn about Medicare, coverage options, and how to apply, keep reading for a quick course in Medicare Basics.
Medicare and Medicare-approved private insurance companies offer the following options for you to get health care coverage:
- Part A (Hospital Insurance): Helps cover inpatient care in hospitals, skilled nursing facility care, hospice care, and home health care.
- Part B (Medical Insurance): Helps cover:
- Services from doctors and other health care providers
- Outpatient care
- Home health care
- Durable medical equipment (like wheelchairs, walkers, hospital beds, and other equipment)
- Many preventive services (like screenings, shots, or vaccines, and yearly “wellness” visits)
- Part C (Medicare Advantage): Medicare-approved private insurance companies that provide all Part A and Part B services and may provide prescription drug coverage and other supplemental benefits.
- Part D (Prescription Drug Coverage): Medicare-approved private insurance companies that provide outpatient prescription drug coverage.
- Medicare Supplemental Insurance (Medigap): Extra insurance you can buy from a private company that helps pay your share of costs in Original Medicare. Policies are standardized, and in most states named by letters, like Plan G or Plan K. The benefits in each lettered plan are the same, no matter which insurance company sells it.
- You need both Part A and Part B to buy a Medigap policy.
- Some Medigap policies offer coverage when you travel outside the United States.
- Generally, Medigap policies don’t cover long-term care (like care in a nursing home), vision, dental, hearing aids, private-duty nursing, or prescription drugs.
- If you’re under 65, you might not be able to buy a Medigap policy, or you may have to pay more.
- Medigap policies are standardized, and in most states named by letters, like Plan G or Plan K. The benefits in each lettered plan are the same, no matter which insurance company sells it.
- Find a Medigap policy that works for you.
When you first sign up for Medicare and during open enrollment periods, you can choose one of the following two ways to get your Medicare coverage.
- Original Medicare (Includes Part A and Part B)
- With Original Medicare, you can go to any doctor or hospital that takes Medicare, anywhere in the United States. Find providers that work with Medicare.
- Join a separate Medicare drug plan (Part D) to get drug coverage. If you choose Original Medicare and want to add drug coverage, you can join a separate Medicare drug plan. Medicare drug coverage is optional. It’s available to everyone with Medicare.
- If you have other insurance you also may have other coverage, like employer or union, military, or veterans’ benefits, learn how Original Medicare works with your other coverage.
- Medicare Advantage (Part C)
- Medicare Advantage is a Medicare-approved plan from a private company that offers an alternative to Original Medicare for your health and drug coverage. These “bundled” plans include Part A, Part B, and usually Part D.
- In most cases, you’ll need to use doctors who are in the plan’s network.
- Plans may have lower out-of-pocket costs than Original Medicare.
- Plans may offer some extra benefits that Original Medicare doesn’t cover—like vision, hearing, and dental services.
- Most Medicare Advantage Plans include Part D coverage.
- Below are the most common types of Medicare Advantage Plans:
- Health Maintenance Organization (HMO) Plans
- Preferred Provider Organization (PPO) PlansPrivate Fee-for-Service (PFFS) PlansSpecial Needs Plans (SNPs)
- Find a Medicare Advantage Plan for 2022.
Generally, you pay a monthly premium for Medicare coverage and part of the costs each time you get a covered service. There’s no yearly limit on what you pay out-of-pocket, unless you have supplemental coverage, like a Medicare Supplement Insurance. Get Medicare costs for current premium rates.
Health Insurance Assistance
Contact your local State Health Insurance Assistance Program (SHIP) to get free personalized health insurance counseling. SHIPs aren’t connected to any insurance company or health plan.
Sign Up Process
When you’re ready, contact Social Security to sign up for Medicare coverage:
- Apply online (at Social Security): This is the easiest and fastest way to sign up and get any financial help you may need. You’ll need to create your secure my Social Security account to sign up for Medicare or apply for Social Security benefits online.
- Call 1-800-772-1213. TTY users can call 1-800-325-0778.
- Contact your local Social Security office.
- If you or your spouse worked for a railroad, call the Railroad Retirement Board at 1-877-772-5772.
Note: Medicare provides your coverage, but you’ll sign up through Social Security (or the Railroad Retirement Board) because they need to see if you’re eligible for Medicare, including whether you (or another qualifying person) paid Medicare taxes long enough to get Part A without having to pay a monthly premium. They also process requests to sign up for Part B for Medicare.
After you’ve met all the requirements to apply for Medicare coverage, have made your choices, and have signed up online, keep track of your decisions and copies of your Medicare, Medigap, and Medicare Advantage Plan membership information at insureyouknow.org.
Retirees Face the Rising Cost of Living
August 14, 2021
Have you noticed this year that your grocery bill has been rising and the price of gas is higher each time you fill up at the pump? You also may have been shocked by sticker prices on new and used cars and trucks resulting from inflation in recent months.
Consumer Price Index
On July 11, 2021, the Labor Department reported its consumer price index (CPI) rose 5.4 percent in July from a year earlier, in line with June’s figure and matching the largest jump since August 2008. White House officials are cautiously optimistic that the current increase in prices will be transitory, citing a continued drop in forward prices for lumber and other goods that experienced sharp increases because of supply chain bottlenecks. Steel capacity also had risen substantially over the past few months, they said.
The Federal Reserve has been keeping a close eye on inflation reports since it’s the central bank’s job to maximize employment and keep prices stable. Chairman Jerome Powell and other officials acknowledge the recent acceleration in prices but believe that the inflation is “transitory” and that prices won’t continue to increase at their current pace for too long.
As one of the most-cited inflation gauges, the CPI measures changes in how much American consumers pay for everyday goods and services including groceries, gasoline, clothes, restaurant meals, haircuts, concerts, and automobiles.
The CPI and other price measures have been on the rise in 2021 in large part because of a comeback in consumer spending and U.S. gross domestic product (GDP) as COVID restrictions eased.
Economic activity as measured by GDP rose at an annualized rate of 6.5 percent in the second quarter as Americans frequented restaurants, took summer vacations, and resumed other activities that COVID-19 had hindered.
Consumer spending, bolstered by the nationwide rollout of vaccines, jumped 11.8 percent during the three months ending June 30, the second-fastest rate since 1952.
At the same time, the pent-up demand for travel, retail, and restaurants has left many businesses scrambling to keep up and led to several setbacks on the supply side of the U.S. economy.
Employers who have struggled to find workers have hiked pay or offered signing bonuses to help fill the record 10.1 million job openings across the economy at the end of June. The leisure and hospitality sector, which includes restaurants, bars, and hotels, has one of the highest levels of job openings at more than 1.6 million.
But instead of absorbing higher labor and material costs, some businesses have begun to pass on the impact of higher wages to their consumers.
Inflation and Retirees
Higher prices take a significant toll on retirees. Social Security benefits rise only once a year. “Those with modest Social Security benefits are the ones who really have trouble,” reports Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, a non-partisan advocacy group. “Other retirees have had to tap more of their savings than they had planned because the Social Security benefit didn’t keep up with 2021’s hot inflation,” she says.
Inflation could prompt largest Social Security cost-of-living adjustment in decades. Retirees could see a 6.1 percent bump to their Social Security benefits in 2022. That would be the biggest increase since 1983, according to The Senior Citizens League, which calculated the figure.
The Social Security Administration typically announces the amount of the annual cost of living adjustment (COLA), if any, in October. The increase in benefits typically goes into effect in January.
You might not see all the increase in your benefit payment. If your Medicare Part B premiums are deducted from your Social Security (as is the case with 70 percent of Part B enrollees), a Medicare rate increase could offset all or part of the COLA.
The Social Security COLA for 2021 was 1.3 percent. For many retirees, that meant just $20 more per month. Over the years, the increases have led to a loss of buying power for seniors, according to research from The Senior Citizens League.
The amount your Social Security check will increase will be based on a combination of your underlying benefit and the Social Security COLA. Assuming the Social Security COLA is at the 6.1 percent level for 2022, and you are receiving the maximum Social Security benefit of $3,895, you would get an additional $237.60 per month. This would mean an increase of $2,851.14 per year.
The jump in benefits will be a bit more modest for those receiving the average Social Security benefit in 2021. Social Security benefits averaged just $1,543 per month in 2021. Again, assuming a 6.1 percent Social Security COLA, you could see your retirement benefits increase by $94.12 per month. When living on a fixed income, an additional $1,129.48 can go a long way.
If you are still working, make sure you have other retirement income to help maintain your standard of living. Even at the maximum Social Security benefit, you will have a tough time keeping your standard of living on Social Security alone. Work with a trusted financial planner to help determine the optimal time to claim your Social Security benefits and to set up a monthly payment schedule.
Currently, 69 million Americans are collecting Social Security benefits. So, a significant increase in the COLA to Social Security will be significant for the budgets of many retirees. Before the announcement is made in October, the Today show offers hints to help you save money at the grocery store, including keeping track of your grocery spending, taking inventory of what you already have and using it, and meal planning to reduce food waste and save on your food bill.
Smart shoppers will also watch for sales, comparison shop, and consider buying useful, non-perishable items in bulk and even making use of an extra freezer whenever possible. When it comes to saving money, cheap and healthy can go hand in hand.
If you currently collect Social Security benefits or plan to in 2022, you can track at insureyouknow.org your monthly spending patterns, file copies of your Social Security and Medicare statements, as well as savings accounts you may have set up for vacations, rainy days, or emergency contingency plans.
Planning to Retire? Find Answers to Social Security Questions
January 27, 2021
Social Security provides benefits to about one-fifth of the American population and serves as a vital protection for working men and women, children, people with disabilities, and the elderly. The Social Security Administration (SSA) will pay approximately one trillion dollars in Social Security benefits to roughly 70 million people in 2021. Almost eight million people will receive Supplemental Security Income (SSI), on average, each month during 2021. Beyond those who receive Social Security benefits, about 178 million people will pay Social Security taxes in 2021 and will benefit from the program in the future. That means nearly every American has an interest in Social Security, and SSA is committed to protecting their investment in these vital programs.
Social Security payments are adjusted each year to keep pace with inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. The 1.3 percent Social Security cost-of-living adjustment for 2021 is down from 1.6 percent in 2020. The average monthly Social Security benefit in January 2021 was $1,543. The maximum possible monthly Social Security benefit in 2021 for someone who retires at full retirement age is $3,148.
The most convenient way to get information and use online services from SSA is to visit www.ssa.gov or to call SSA at 800-772-1213 or at 800-325-0778 (TTY) if you’re deaf or hard of hearing. SSA staff answers phone calls from 8 a.m. to 7 p.m., weekdays. You can use SSA’s automated services via telephone, 24 hours a day.
What is the best age to start your benefits?
There is no one “best age” for everyone. Ultimately, it’s your choice. You should make an informed decision about when to apply for benefits based on your personal situation.
Your monthly benefit amount can differ greatly based on the age when you start receiving benefits.
- If you start receiving your benefits as early as age 62, before your full retirement age, your benefits will be reduced based on the number of months you receive benefits before you reach your full retirement age.
- At your full retirement age or later, you will receive a larger monthly benefit for a shorter period. If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.
- The amount you receive when you first get benefits sets the base for the amount you will receive for the rest of your life.
What should you consider before you start drawing benefits?
- Are you still working? If you plan to continue working while receiving benefits, there are limits on how much you can earn each year between age 62 and full retirement age and still get all of your benefits. Once you reach full retirement age, your earnings do not affect your benefits.
- What is your life expectancy? If you come from a long-lived family, you may need the extra money more in later years, particularly if you may outlive pensions or annuities with limits on how long they are paid. If you are not in good health, you may decide to start your benefits earlier.
- Will you still have health insurance? If you stop working, not only will you lose your paycheck, but you also may lose employer-provided health insurance. Although there are exceptions, most people will not be covered by Medicare until they reach age 65. Your employer should be able to tell you if you will have health insurance benefits after you retire or if you are eligible for temporary continuation of health coverage. If you have a spouse who is employed, you may be able to switch to their health insurance.
- Should you apply for Medicare? If you decide to delay starting your benefits past age 65, be sure to go online and file for Medicare. You will need to apply for Original Medicare (Part A and Part B) three months before you turn age 65. If you don’t sign up for Medicare Part B when you’re first eligible at age 65, you may have to pay a late enrollment penalty for as long as you have Medicare coverage. Even if you have health insurance through a current or former employer or as part of your severance package, you should find out if you need to sign up for Medicare. Some health insurance plans change automatically at age 65.
How can you get a personalized retirement benefit estimate?
Choosing when to retire is an important and personal decision. The best way to start planning for your future is by creating a my Social Security account. With your personal my Social Security account, you can verify your earnings and use SSA’s Retirement Calculator to get an estimate of your retirement benefits.
What happens to Social Security payments when a recipient dies?
- If a person who was receiving Social Security benefits dies, a payment is not due for the month of his death.
- In most cases, funeral homes notify SSA that a person has died by using a form available to report the death.
- The person serving as executor of the decedent’s estate or the surviving spouse also can report the death to SSA.
- Upon the death of a Social Security recipient, survivors are generally given a lump sum payment of $255.
- Survivor benefits may be available, depending on several factors, including the following:
- If the widow or widower has reached full retirement age, they can get the deceased spouse’s full benefit. The survivor can apply for reduced benefits as early as age 60, in contrast to the standard earliest claiming age of 62.
- If the survivor qualifies for Social Security on their own record, they can switch to their own benefit anytime between ages 62 and 70 if their own payment would be more.
- An ex-spouse of the decedent also might be able to claim benefits, as long as they meet some specific qualifications.
- For minor children of a person who died, benefits also may be available, as well as to surviving spouse who is caring for the children.
How can you start receiving Social Security benefits?
- To start your application, go to SSA’s Apply for Benefits page and submit your application online.
- After SSA makes a decision about your application, you’ll receive a confirmation letter in the mail. If you included information about other family members when you applied, SSA will let you know if they may be able to receive benefits from your application.
- You can check the status of your application online using your personal my Social Security account. If you are unable to check your status online, you can call SSA at 800-772-1213 (TTY 800-325-0778) from 8 a.m. to 7 p.m., weekdays.
- You can do most of your business with SSA online. If you cannot use these online services, your local Social Security office can help you apply. Although SSA offices are closed to the public during the COVID-19 pandemic, employees from those offices are assisting people by telephone. You can find the phone numbers for your local office by using the Field Office Locator and looking under Social Security Office Information.
What if you want to withdraw your application?
After you have submitted your application, you have up to 12 months to withdraw it. You will be required to repay any benefits you’ve already received. Learn more about Withdrawing Your Social Security Retirement Application.
At insureyouknow.org, you can keep track of applications you submit to SSA and responses you receive for Social Security benefits. You also can file statements and notices you get from SSA throughout the years ahead during your retirement.
CARES Acts in Action
January 14, 2021
In response to the economic fallout of the COVID-19 pandemic in the United States, the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, a $2.2 trillion economic stimulus bill, was passed by the U.S. Congress and signed into law by President Trump on March 27, 2020. The CARES Act made it easier for millions of U.S. workers to withdraw or borrow money from their retirement plans through December 30, 2020. People under the age of 59.5 affected by the coronavirus were allowed to take a distribution of up to $100,000 from an IRA, 401(k), or similar account without penalty. It also permitted loans of up to $100,000.
Usually, withdrawing funds from a tax-deferred account before age 59.5 would result in a 10 percent penalty on top of any income taxes incurred. But under the temporary rules part of the CARES Act, people with pandemic-related financial troubles could withdraw without penalty up to $100,000 from any combination of their tax-deferred plans, including 401(k), 403(b), 457(b) and traditional individual retirement accounts. The rules applied to plans only if the employee’s employer opted in.
Some plans already permitted hardship withdrawals under certain conditions, and the rules for those were loosened in 2019. But the CARES Act rules were even more lenient by allowing virus-related hardship withdrawals to be treated as taxable income, but the liability was automatically split over three years unless the account holder chose otherwise. The tax can be avoided if the money is put back into a tax-deferred account within three years.
Almost 60 percent of Americans withdrew or borrowed money from their IRA or 401(k) during the coronavirus pandemic, according to a survey from Kiplinger and digital wealth management company Personal Capital. Most U.S. retirement accounts were already underfunded and the pandemic caused a significant number of Americans to withdraw money, potentially setting them back even further. They will now have to work longer or delay retirement in order to rebuild their savings.
“The past year rocked the confidence of most Americans saving for retirement,” Mark Solheim, editor of Kiplinger Personal Finance, said in a release. “With many people dipping into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come.”
When it comes to drawing down savings, younger workers have been more willing to withdraw from retirement accounts during the pandemic. A Transamerica survey found that 43 percent of millennials have either taken out a loan or withdrawal from a retirement account or plan to do so in the near future, compared to 27 percent of Generation Xers and 11 percent of baby boomers.
Boomers were much more likely to completely rule out withdrawing from their retirement accounts, with nearly 3 in 4 (73 percent) saying such a move was out of the question. In contrast, 36 percent of millennials and 56 percent of Gen Xers say they won’t take money from their retirement accounts to deal with financial shortfalls attributed to the COVID-19 pandemic.
Retirement Savings Sacrifices
Many workers are sacrificing their retirement savings in order to keep afloat during the coronavirus pandemic. Now that the original CARES Act has expired, taking an early withdrawal from a retirement account can have far-reaching implications. You may not only have to pay a 10 percent penalty, but you’ll also lose out on having your money earn interest for a longer period of time.
As a result, you may likely have to work longer in order to have enough money for retirement if you withdraw funds from your account now. Nearly a third of Americans say the pandemic has already led to a change in their expected retirement age. Since the start of the coronavirus outbreak, the economy has risen to the top of survey respondents’ list of obstacles with 49 percent saying it is the top barrier to achieving a financially secure retirement. The economy was followed by 33 percent claiming a lack of savings and 32 percent blaming health care costs as reasons to delay retirement.
Emergency Savings Accounts
Effects of the pandemic on emergency savings accounts have brought to light how few households have set aside money inside a retirement plan or for education expenses and it has prompted more employers to start their own programs. For now, about 10 percent of large employers offer some type of support to encourage emergency savings accounts.
But the scope of the damage caused by the pandemic means that even the traditional emergency savings advice of putting aside roughly three to six months of basic living expenses hasn’t been enough to provide a secure provision for an emergency. During the coronavirus pandemic, millions of Americans have lost incomes and work. An employee who lost a job early in the pandemic could have easily used up all his savings while being unemployed.
But withdrawing funds from a 401(k) has consequences, such as increased tax bills and possibly sacrificing future retirement income. According to survey data of 1,902 U.S. workers by Edelman Financial Engines, one in five Americans is considering taking an early withdrawal. But the survey also found that many Americans who have done so regret it.
For most borrowers, doing so was for an essential reason—35 percent spent their funds on housing, and 7 percent took a loan due to a loss of income. Some did so for less pressing reasons, for example, about 20 percent borrowed to pay off credit card debt and 8 percent funded a car purchase.
Borrowers admit they didn’t understand the consequences or alternatives or not doing enough research on other options available. Many people say they regret their decision for this reason—about 41 percent of people who took hardship withdrawals and 42 percent who took a loan regret it because of a lack of understanding.
Others say they wish they’d understood the other options available. During the pandemic, many lenders have helped to ease the burden on Americans facing financial hardship. As part of the CARES Act, all federally-backed mortgages had the option of forbearance. Banks across the country offered help programs for loans ranging from mortgages to personal loans.
According to Edelman, some wish they’d turned to those programs before making a long-term commitment in reducing their retirement savings. Of people who took hardship withdrawals, 52 percent said they wish they’d explored other options first, while 44 percent of those who took a loan said the same.
Overall, most wish they’d consulted a professional before taking funds from their 401(k). Four out of five borrowers who regret the withdrawal or loan say that consulting a financial advisor would have helped their decision making.
CARES Act II
On December 27, 2020, President Trump signed H.R. 133, another stimulus bill that Congress passed on December 21. This legislation extends unemployment assistance not only for employees but also for independent contractors and other self-employed individuals for 11 weeks. The bill includes the “Continued Assistance for Unemployed Workers Act of 2020,” which provides for an extension from December 31, 2020 until March 14, 2021 of the CARES Act’s unemployment provisions, including a new form of benefits for all self-employed individuals: pandemic unemployment assistance (PUA).
The original CARES Act provided PUA benefits for up to $600 a week for as many as 39 weeks, retroactive to January 27, 2020. The new stimulus bill, CARES Act II, halves that amount and limits PUA to $300/week. Those eligible for PUA also will receive an additional $300/week through the end of the extension period, whereas CARES Act I had added $600/week in federal stimulus payments. Finally, the new stimulus bill provides independent contractors with paid sick and paid family leave benefits through March 14, 2021.
CARES Act II contains a new provision: unemployed or underemployed independent contractors who have an income mix from self-employment and wages paid by an employer are still eligible for PUA. Under CARES Act I, any such worker was typically eligible only for a state-issued benefit based on their wages. Under CARES Act II, the individual now is eligible for an additional weekly benefit of $100 if he earned at least $5,000 a year in self-employment income. The $100 weekly payment which would be added to the $300 weekly benefit, also will expire on March 14.
If the original CARES Act or CARES Act II applies to your personal financial situation, you may want to consult a financial advisor about decisions you made in 2020 or plan to make in 2021. Then, keep a record of all your financial decisions at InsureYouKnow.org so you’ll be prepared for additional financial challenges or government stimulus opportunities in the new year.