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Medicare Open Enrollment

This year’s open enrollment for Medicare runs from Oct. 15 to Dec. 7. Any changes you make to your Medicare plan will begin on Jan. 1, 2022. Eligible Medicare beneficiaries can start receiving benefits once they turn age 65. Those who were already drawing Social Security benefits before that age are automatically enrolled in Original Medicare.

During the open enrollment season, you can switch from Original Medicare to a Medicare Advantage (MA) plan, or vice versa, or even change from one MA plan to another. You can enroll in a new Medicare Advantage plan or Medicare prescription drug plan or drop drug coverage altogether.1

It’s a good idea to use the open enrollment window to compare your current plan to other plans and shop for better benefits or greater value. Even if you’re not interested in making changes, this is a good time to review your current plan as some insurers change their benefits from year to year. But, perhaps, more importantly, comparison shopping enables you to see if there is another plan that offers better health and/or drug coverage at a more affordable price. Recent research found that nearly half of Medicare beneficiaries who shop for a new plan during open enrollment cut their premiums by at least 5%.2

We spend a lot of time discussing Social Security benefit strategies, such as when to begin drawing a payout. Because Medicare has a set age of 65, we don’t always take the time necessary to investigate what’s available — particularly after the first year. It’s often a “set and forget” proposition. However, it’s important to consider your Medicare benefits within the full context of your retirement income needs each year, particularly if you continue working past age 65. If you’d like a comprehensive review of how your health and insurance needs work with your retirement income plan, feel free to contact us.

If you are eligible for Medicare but receive health care coverage from an employer, see if your company requires you to enroll in Medicare upon eligibility. If not, you can wait for up to eight months after your employer coverage ends for a Medicare special enrollment period (Jan. 1 to March 31).3

Also, be aware that not all Americans are automatically enrolled in Medicare at age 65. Specifically, those who did not work 40 quarters (10 years of paying FICA payroll taxes) will not automatically be enrolled. Unless they qualify through a spouse’s work record, they may have to pay a premium of either $259 or $471 (2021 rates) a month for Medicare Part A. This is the hospital insurance plan that is free for those with the requisite earnings history.

Furthermore, note that if you don’t sign up for Medicare when you first become eligible for the program, your monthly premium could potentially increase by up to 10% — which you’ll have to pay for twice the number of years in which you delayed signing up.4

Medicare Part B pays for doctor visits, preventive care, screenings, treatments, and medical equipment. However, it does not cover dental, vision, or hearing care and only pays for procedures determined to be medically necessary. The premium in 2021 started at $148.50 a month (2022 premiums were not published as of this writing).

Medicare Part D covers prescription drugs. Premiums vary among insurers and typically include an annual deductible (no more than $445 in 2021), as well as an unusual coverage known as the “donut hole.” In other words, in 2022, once a Part D beneficiary spends/receives coverage totaling $4,430, he or she will begin sharing up to 25% of the cost for covered brand-name and generic prescription drugs until spending reaches $7,050. After that, full coverage kicks in again.5

Another option is to skip the alphabet soup and enroll in a comprehensive Medicare Advantage plan. Also known as Medicare Part C, MA combines Medicare Part A and Part B coverage, and in some cases, drug coverage as well. While MA plans generally do not include hospice care like Original Medicare, they typically do offer coverage for things like dental care and eyeglasses.6

1 Raymond James. Aug. 31, 2021. “Making the Most of Medicare’s Open Enrollment Period.” https://www.raymondjames.com/commentary-and-insights/retirement-longevity/2021/08/31/making-the-most-of-medicares-open-enrollment-period. Accessed Sept. 15, 2021.
2 ElderLawAnswers. Sept. 13, 2021. “It’s Medicare Open Enrollment Time: Is Your Plan Still Working for You?” https://www.elderlawanswers.com/its-medicare-open-enrollment-time-is-your-plan-still-working-for-you-18483. Accessed Sept. 15, 2021.
3 Raymond James. Aug. 30, 2021. “Navigating Medicare.” https://www.raymondjames.com/commentary-and-insights/retirement-longevity/2021/08/30/navigating-medicare-infographic. Accessed Sept. 15, 2021.
4 Alessandra Malito. MarketWatch. Sept. 10, 2021. “Avoid the 10%-per-year penalty for not enrolling in Medicare — know these rules.” https://www.marketwatch.com/story/avoid-the-10-per-year-penalty-for-not-enrolling-in-medicare-know-these-rules-11631301599. Accessed Sept. 15, 2021.
5 Andrea King Collier. MarketWatch. Aug. 18, 2021. “The twists, turns and myths of applying for Medicare: How we navigated the enrollment road.” https://www.marketwatch.com/story/the-twists-turns-and-myths-of-applying-for-medicare-how-we-navigated-the-enrollment-road-11628869916. Accessed Sept. 15, 2021.
6 Ibid.
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.
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How Inflation Risk Can Effect You

Inflation is a steady rise in the price of goods and services over time and actually signals both good and bad economic conditions. On one hand, as prices rise, someone living on a fixed income cannot purchase the same amount of goods, so they tend to reduce spending or buy cheaper alternatives. On the other hand, when inflation rises, the Federal Reserve tends to reduce interest rates, making it cheaper to borrow money — so spending picks up.1

This cycle of inflation tends to go round and round. Many factors can cause inflation — including a growing economy — but there are monetary policies that help drop the inflation rate in time. Likewise, each of us needs to be able to manage how inflation affects our household finances throughout these cycles, and those management strategies differ based on your situation.

For example, someone working full time may be able to adjust spending based on fluctuating prices. However, many retirees live on a fixed income and have fixed expenses, so when prices increase that can squeeze the household budget. If you’d like to learn about ways to position assets so that you can increase income when needed without threatening your financial security, please give us a call.

Inflation can actually be positive for stock investments, as a company’s revenues and earnings tend to move in tandem with higher prices. Interestingly, the stock market has held remarkably well even in the low inflationary environment the U.S. has experienced throughout the past two decades. The fact that inflation is rising now isn’t necessarily a negative for investors; the traditional theory is that stock prices should increase alongside prices of consumer goods.2

At present, the Fed expects the economy to continue growing despite the ongoing coronavirus. In fact, the agency projects inflation-adjusted GDP growth of 7% for this year and 3.3% in 2022. If this projection holds, interest rates are likely to stay in their current low range until at least 2023.3

Investors worried about rising prices impacting their portfolio may want to consider one or more inflation-mitigation strategies. For example, allocate more assets to sectors that tend to increase along with inflation, such as the energy, materials, technology and financial sectors.4 Other asset classes that tend to move with accelerating inflation include commodities, real estate, and industrial and precious metals.5 Fixed income investors may want to take a look at Treasury Inflation-Protected Securities (TIPS), a type of U.S. Treasury security whose principal amount is adjusted to reflect the inflation rate.6

 1 David Floyd. Investopedia. May 17, 2021. “9 Common Effects of Inflation.” https://www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp. Accessed Aug. 26, 2021.
2 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.
3 Taylor Tepper. Forbes. Aug. 25, 2021. “Who Should Worry About Inflation—And Who Shouldn’t.” https://www.forbes.com/advisor/investing/inflation-worries-2021/. Accessed Aug. 26, 2021.
4 Scot Landborg. Kiplinger. Aug. 20, 2021. “8 Ways to Insulate Yourself from Inflation.” https://www.kiplinger.com/personal-finance/603306/8-ways-to-insulate-yourself-from-inflation. Accessed Aug. 26, 2021.
5 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.
6 Collin Martin. Charles Schwab. June 24, 2021. “Treasury Inflation-Protected Securities: FAQs about TIPS.” https://www.schwab.com/resource-center/insights/content/treasury-inflation-protected-securities-faqs-about-tips. Accessed Aug. 26, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 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.
 
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Living on a Prayer

As of Aug. 28, 2021, there were 2.8 million unemployment claims in the U.S. That’s considerably higher than the pre-pandemic level of 1.7 million, but much improved from the pandemic high of more than 23 million in May 2020.1

One of the more remarkable surprises to emerge from the pandemic is how many people are no longer willing to go back to their jobs or get a new one. Whether they’re getting higher pay from unemployment benefits or figure they’ll wing it on their own for a while, many Americans have decided not to go back to work during the jobs recovery.

This has been especially profound for health care workers who’ve been quitting due to burnout from treating COVID patients.2 But there are other stories as well. When schools and daycare centers shut down, some working moms scaled back their hours or quit their jobs — in many cases because trying to work from home while simultaneously caring for young children proved impossible. With school starting back this fall, it remains to be seen whether many plan to get back into the workforce.3

Traditionally, the employment quit rate tends to decline as the unemployment rate rises, as most people feel lucky to still have a job. But that trend hasn’t borne out during this latest crisis. This time around the quit rate soared to 2.8% — the highest level on record — in April 2021, when the unemployment rate was still at 6.1%, which was well above pre-pandemic levels.4

It’s important to align household income with household needs. For example, some budgets require two working parents while, in other situations, it makes more sense for one parent to stay home. Feel free to contact us for a review to find out if your family has enough insurance to meet your household needs.

It’s difficult to understand why people would quit their job in the middle of a pandemic. After all, inflation is on the rise — especially housing rates. People who live alone have it the worst. According to a calculator developed by MIT, the following is a sample of how much a single person must earn to pay for basic living expenses (food, health care, housing, transportation, taxes and other necessities) in various states across the country.5 For reference, note that the annual income at $15.00 an hour = $31,200:

  • Alabama: $28,652
  • Alaska: $31,333
  • California: $38,823
  • Connecticut: $33,240
  • Hawaii: $40,412
  • Iowa: $28,327
  • Louisiana: $29,251
  • Nebraska: $28,234
  • New York (state): $38,719
  • Washington: $33,982

Some folks are quitting jobs because they want to find another way to make a living. That’s an interesting prospect because a recent Kelly survey found that most employers believe workers need to improve their skills. Today, about 80% of supervisors say employees need more education, credentials, or training — and 73% of workers say they’re willing to pursue upskilling opportunities offered by companies. This opens the door for many of the frustrated workforce, even those without a college degree if they are interested in learning new skills.6 Moving forward, filling those empty jobs currently available may require more “learn while you earn” effort and patience by employers.7

1 USA Facts. Aug. 28, 2021. “COVID-19 Recovery Indicators.” https://usafacts.org/covid-recovery-hub/. Accessed Sept. 15, 2021.
2 Madeline Holcombe, Erica Hill and Laura Dolan. CNN. Aug. 26, 2021. “’I think we already broke’: Mississippi’s nurses are resigning to protect themselves from Covid-19 burnout.” https://www.cnn.com/2021/08/25/us/mississippi-covid-nurse-strain/index.html. Accessed Aug. 26, 2021.
3 Megan Cassella. Politico. July 22, 2021. “The pandemic drove women out of the workforce. Will they come back?” https://www.politico.com/news/2021/07/22/coronavirus-pandemic-women-workforce-500329. Accessed Sept. 15, 2021.
4 USA Facts. Aug. 19, 2021. “More Americans are quitting their jobs. Here are the industries and states impacted.” https://usafacts.org/articles/more-americans-are-quitting-their-jobs-here-are-the-industries-and-states-impacted/. Accessed Aug. 26, 2021.
5 Francisco Velasquez. CNBC. Aug. 25, 2021. “How much money a single person needs to earn to get by in every U.S. state.” https://www.cnbc.com/2021/08/17/income-a-single-person-needs-to-get-by-in-every-us-state.html. Accessed Aug. 26, 2021.
Kelly Services Inc. April 9, 2021. “Work of the future: How upskilling charts the course.” https://pi.kellyservices.us/resource-center/business-resource-center/general/how-upskilling-charts-the-course/. Accessed Sept. 15, 2021.
7 Jamie Merisotis. Medium. Aug. 26, 2021. “Is America’s Workforce Ready for a Tsunami of Skilled Jobs?” https://medium.com/todays-students-tomorrow-s-talent/is-americas-workforce-ready-for-a-tsunami-of-skilled-jobs-67eaba1012c2. Accessed Aug. 26, 2021.
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.
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Savings Strategies

Some people have no trouble saving money — they stash away any cash they don’t need, and their account grows and grows. These people usually aren’t very materialistic and don’t have a lot of goals that require money to fulfill. That’s a wonderful trait, in some ways.

However, there’s nothing wrong with setting up specific goals and saving money to achieve them. First of all, many of those goals, such as buying a home or giving your children a college education, are actually investments that can deliver much higher returns. Those returns can be monetary while still being emotionally and intellectually rewarding.

One way to reach those goals is to adapt the mindset of that first saver — the one who doesn’t really want much or feel the need to spend money precipitously. For many of us, that’s an elusive trait. However, those of us who aren’t like that can still reach savings goals by being organized, disciplined and vigilant.

To be organized, you should differentiate between long and short-term goals and determine which type of savings vehicle is most appropriate for each goal. To be disciplined, it’s a good idea to set up an automatic savings plan so that a fixed amount of money is transferred from your checking account to those individual savings accounts on a regular basis, much like paying a monthly bill. And to be vigilant, you should closely monitor both ongoing expenses and ad hoc spending to ensure that you have the assets available to fund those specific goals. These are all financial practices we can help you with, so don’t hesitate to call us.

When saving for a home, car or other short-term goal, consider a high-yield savings account separate from where you do your regular banking. This way, it’s not that quick or easy to transfer funds back to your checking account on a whim. Set it and forget it with automatic transfers so that your account balance continues to grow in the savings account, even if you start small.1 If this is your primary goal, think about putting at least half of any unexpected cash — such as work bonuses, tax refunds, inheritances or other windfalls toward this savings account.

If your next goal is saving for college, it’s good to start young, and it’s fine to start small. One of the strongest components of saving is the simple discipline of the strategy — always be saving, even if you start with just $25 a month. There are a lot of scary articles and news reports about how much it costs to send a child to college (2020–2021 average: $26,820 in-state; $54,880 private), but the key to remember is that you don’t have to save enough to cover 100% of that cost. You will likely be able to combine current household income, scholarships, grants and student and parent loans. For your savings efforts, a 529 plan offers both a tax-deferred investment option and a prepaid plan, depending on your circumstances. The savings portion is good for building an investment balance throughout time, while prepaid is a good option for windfalls — like an inheritance or proceeds from the sale of property.2

Retirement savings are best achieved throughout the long haul. The earlier you start, the more the power of interest compounding works its magic. Most employers offer a 401(k) or similar plan to help you defer income from your paycheck to a retirement account each month. If your employer offers a match, be sure to defer at least enough to take full advantage of the match. This is a strategy even young adults can engage in with their first job. Remember, incorporate monthly saving as a discipline, and you’ll always be able to live on less than you earn.

If you are self-employed or your employer doesn’t offer a retirement plan, consider opening an IRA (or a solo 401(k) plan if/when you earn a substantial income because contribution limits are much higher). A traditional IRA offers a current income tax deduction, while a Roth IRA eliminates taxes when you withdraw assets. If you max out contributions with an employer plan, a Roth IRA is a good option to reduce your tax obligation during retirement. However, you can only contribute to a Roth if your modified adjusted gross income (MAGI) is less than $140,000 (single) or under $208,000 (married couples filing jointly) in 2021.3

Another aspect of retirement that many people do not plan for is retiree health care. Some studies report that a 65-year-old couple may need up to $400,000 to cover this cost in retirement. However, this goal is best treated like saving for college — save some now, but budget for some of that cost from your retirement income. According to an analysis from T. Rowe Price, about 50% of retirees with traditional Medicare (Parts A and B), a prescription drug plan (Part D) and Medigap will spend less than $1,200 a year on out-of-pocket expenses. In contrast, only 10% will spend more than $4,700 a year.4 If you fall into the former category, that $100 a month may be easily covered by your household retirement income. But it’s good to save for the latter scenario over time through some form of liquid savings account to meet those annual out-of-pocket costs.

Kendall Little and Raina He. Time. April 29, 2021. “How to Save For a Down Payment for a House.” https://time.com/nextadvisor/banking/savings/how-to-save-for-a-house/. Accessed Sept. 13, 2021.
2 T. Rowe Price. Fall 2021. “How to Save for College in Uncertain Times.” Page 4. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.
3 T. Rowe Price. Fall 2021. “What’s Your Best Contribution Order?” Page 3. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.
4 T. Rowe Price. Fall 2021. “The True Cost of Health Care in Retirement.” Page 6. https://www.troweprice.com/content/dam/iinvestor/planning-and-research/Insights/investor-magazine-fall.pdf. Accessed Sept. 13, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 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.
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