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File For Part B Medicare – COBRA Isn’t Enough

For most folks, when you reach age 65 and have ceased regular work, filing for Medicare Parts A & B is an automatic thing. If you don’t file during the 3 months before or after your 65th birthday, you may have penalties to pay. This applies even if you have recently been laid off of work and are covered for health insurance under a COBRA plan. Part A carries no cost if you’re fully covered (40 quarters of coverage), but Part B requires a monthly premium. When laid off from an employer who has provided health insurance coverage to you while employed, you have the option of continuing the health coverage for a period of time, up to two years. This continuation of coverage is called COBRA, named for the law that put it into place (Consolidated Omnibus Budget Reconciliation Act). You have to file in a timely manner for […]

Net Unrealized Appreciation is not subject to the 3.8% surtax

When you take advantage of the Net Unrealized Appreciation (NUA) treatment for stocks transferred from your employer retirement plan, you need to fully understand the tax treatment both when you transfer the stocks and when you eventually sell the stock. Stock that you’ve chosen to treat with NUA tax treatment has three potential tax components – The basis of the stock – this is the original purchase cost of the stock, which is subject to ordinary income tax the year when you transfer the stock from the employer’s plan into your brokerage account. The Net Unrealized Appreciation – this is the difference in the total value of the stock minus the basis (from #1 above) on the date that you transfer it from your employer’s plan. This amount is not taxable until you sell the stock, and then it is taxed at long-term capital gains rates, no matter how long […]

Medicare Part B and D Premiums for 2014

Even though other retirement-related items increased for 2014, such as the taxable income limit for Social Security tax ($117,000, up $3,300), the earnings limits for pre-Full Retirement Age Social Security benefits ($15,480 before FRA year, $41,400 during FRA year), and the COLA for Social Security benefits (+1.5%), the premium for Medicare Part B coverage remained the same for 2014, at $104.90 per month. However, if your income in 2012 was above $85,000 for single filers or $170,000 for married filers, you will have to pay more for your Medicare Part B insurance, but it’s the same increase as in 2013.  Medicare Part D coverage for upper income folks will rise slightly.  The maximum increase for both Part B and Part D tops out at $300.10 per month, for a total premium of $405 per month. This income amount is actually your Modified Adjusted Gross Income, which is equal to your […]

Medicare Part B

The next letter in our Medicare alphabet soup is Part B. Part B is essentially medical insurance that covers doctor’s services, outpatient care, home health services, and durable medical equipment. It will also cover some other services as well as well as many preventative services. As far as what doctors will and will not cover Part B depends on whether or not they have agreed to assignment. Assignment is simply your doctor or another health care provider agreeing to be paid directly by Medicare and be willing to accept the payment amount that Medicare decides is the value of the service. Agreement also means the doctor or health care provider cannot charge you any more than what the deductible and coinsurance amounts are. The basic cost for Medicare Part B for 2013 is $104.90 monthly. Individuals with higher AGI may end up paying more. The table below, courtesy of shows […]

Book Review: How to Retire Happy

“The 12 most important decisions you must make before you retire” Author Stan Hinden, who is the former syndicated Washington Post “Retirement Journal” columnist, has just released his Fourth Edition of this book.  The book is Hinden’s commentary and advice, as well as a sort of journal, as he and his wife Sara entered into and have been living in retirement over the past 17 years.  Hinden retired in 1996 at the age of 69, at which time he began writing the “Retirement Journal” column.  He was nominated for a Pulitzer Prize in Commentary in 1998 for his work. This book is an excellent read for folks who are planning toward retirement or have recently retired.  Hinden has organized the process into 12 decisions, some of which include: “Am I Ready to Retire?”, “What Should I Do with the Money in My Company Savings Plan?”, and “Where Do I Want […]

The ABC’s (and D’s) of Medicare

  With more and more baby boomers retiring, more and more people including the Boomers, and their children and families are going to have questions and concerns about Medicare. Questions can range from what Medicare is, what it does, what it doesn’t do, and the nuances that make up our nation’s health care for retirees. Medicare was created in 1965 by the Social Security Act and was signed into law by Lyndon Johnson. Currently, Medicare is funded via taxation and premiums paid by Medicare subscriber. Part A – which we will cover in a future article, is funded by a 2.9% tax on wages. Unlike Social Security tax that has a limit or cap on the amount of income that can be taxed ($110,100 in 2012 and $113,700 in 2013), Medicare has no such wage base. The 2.9% tax is on an unlimited amount of earnings. Eligibility for Medicare typically starts for […]

IRA Distributions Are Not Subject to the New 3.8% Surtax

As you may be well aware, beginning in 2013 there will be a brand spanking new tax added to unearned income if your Modified Adjusted Gross Income is greater than $200,000 for Singles, and $250,000 for Married Filing Jointly.  Married folks filing separately are affected above a $125,000 threshold.  This surtax is to help bolster the Medicare system, and it applies specifically to unearned income. What’s important to know is that IRA distributions (among other things) are not included as impacted by this new surtax.  This means that when you make significant IRA distributions (beginning in 2013), such as to convert to a Roth IRA, this surtax will not be applied to your distribution. Other types of unearned income that are specifically exempted from this surtax includes tax-free interest and other payouts from retirement plans such as 401(k) plans, deferred compensation plans, and pension plans. Income that is subject to […]

An Unexpected Result From Roth Conversion – Increased Medicare Premiums

Many folks took advantage of the one-time opportunity in 2010 to convert funds from traditional IRAs to Roth IRAs and subsequently spread the tax over the following two years, 2011 and 2012.  This was a very good option for some folks who wanted to do the conversion and reduce future tax costs.  However (and there’s always a however in life!), with the coming of 2013, many of these same folks are experiencing an unexpected result of the conversions: a significant increase in Medicare Part B premiums. Beginning after 2003, Medicare Part B premiums have been partly determined by income – primarily higher income.  For 2013, the increased Part B premium begins for single folks with incomes above $85,000, married couples above $170,000.  The income used to calculate the Part B premium is always based on the most recent tax return, which in this case would be the 2011 tax return. […]

What Obamacare Will Do to Your Taxes

So, now that the Patient Protection and Affordable Care Act (PPACA, aka “Obamacare”) has been upheld by the Supreme Court, we need to face up to the tax changes that are inherent in this piece of law.  Like it or not, the IRS is going to have a large role in enforcing the provisions of this law.  Listed below are some of the major impacts that we as taxpayers will experience. Healthcare Deduction Limit Before PPACA, through the end of tax year 2012, healthcare expenses are deductible to the extent that they are greater than 7.5% of your Adjusted Gross Income (AGI).  AGI is the bottom line on the first page or the first line on the second page of your Form 1040. The change coming for tax year 2013 is that the limit is now going to be 10% of your AGI.  So, if you have an AGI of […]

The “Tax on Sale of Your Home” Email Myth

Image by Sean MacEntee via Flickr If you have an email address (and let’s face it, who doesn’t?), you’ve likely received this email.  In case you haven’t received it, there’s an email that is being forwarded around the internet about a new tax on selling your home – I get at least one of these a month it seems. I’ve copied the text of one of the emails below. This article is to help you understand why the email is a misguided myth, partly grounded in truth but not applicable for most folks. The email is usually forwarded at least a half-dozen times by the time you receive it, making it difficult to know where it started from.  In addition, the text of the email is often in large, bold, red font in places, such that you can almost feel the spittle coming off the page at you. Here’s the […]

Baby Boomers Start Medicare

As of 12:01am EST on January 1, 2011, the very first Baby Boomer reached age 65… and that means that the era of Baby Boomers receiving Medicare has officially commenced. It is estimated that, during the period when Boomers are reaching age 65, between now and roughly 2030, the number of folks on the Medicare rolls will double.  Presently there are approximately 40 million Medicare recipients, and that number is expected to be around 80 million in 20 years. These incredible numbers will cause major challenges in funding the system – along with serious challenges in controlling the overall costs of healthcare during this period.  The rate of increase in the over-65 population will cause dramatic changes in the healthcare system in terms of capacity, costs, and controls. The new healthcare law passed earlier this year created an Independent Payment Advisory Board, which is supposed to provide guidance on how […]

Again, No Social Security COLA for 2011

Not surprisingly, the Social Security Administration has announced that benefits will again not receive an increase for 2011.  This makes two years in a row that there has been no increase.  Since 2010 ushered in the first ever zero COLA (since it was first put in place in 1972), this is now the first time that there have been two years in a row with zero COLAs. Why? The Cost of Living Adjustment (COLA) is based upon the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.  If this factor increases year-over-year, then a COLA can be applied to Social Security benefits.  See How Social Security COLAs Are Calculated for details on the calculations. In 2009, when the COLA was being calculated for 2010 benefits, the CPI-W actually decreased -2.2%.  So naturally, there would be no increase for that year.  However, now in 2010, there has been […]

How to Apply for Social Security Benefits

There are three methods you can use to apply for Social Security retirement benefits – but just in case you’re overwhelmed and don’t know where to start, here’s how to do it: By Phone – call the Social Security Administration at 1-800-772-1213 between the hours of 7am and 7pm (they don’t say, but I’m assuming this is Eastern time) to set up an appointment to apply.  You can also call 1-800-325-0778 for TTY service, if you require it. In Person – just show up at your local Social Security Administration office.  You can find the closest office by clicking this link and entering your ZIP code.  From what I hear, visiting the local office can be a hit or miss experience, similar to visiting the DMV to get your driver’s license renewed.  You could get right in with little wait, but more likely you’ll spend quite a bit of time […]

ABC’s of Medigap Policies

Medigap policies come in many flavors.  If you’ve done any reading in this area at all, you’ve probably come to realize that the whole thing is a messy alphabet soup… and it’s really, really hard to figure it all out.  If you want more details on the choice between Medigap and Medicare Advantage plans, see the article Medicare Supplements versus Medicare Advantage Plans. What I’ve done here is to pull together a resource that may be helpful as you consider your options for a Medigap plan. The ABC’s Plan A covers: Medicare Part A coinsurance hospital costs up to an additional 365 days after Medicare benefits are used up Medicare Part B coinsurance or copayments Blood (well, the first 3 pints anyhow) Part A Hospice Care coinsurance or copayment Medicare Preventative Care Part B coinsurance Plan B covers: Everything covered by Plan A, plus: Medicare Part A deductible Plan C […]

Medicare supplements versus Medicare Advantage plans

Note from Jim:  I’m off on vacation this week, and so have recruited some help from my friends… today’s post is from Steven Young, CFP®.  Steven operates his Fee-Only Financial Planning practice out of Springfield, Missouri.  You can find out more about Steven at his website, Steven Young Financial Planning. As efforts to improve the Medicare insurance system progress, it seems that the confusion only gets worse.  In any given city across the U.S. there are literally dozens of insurance companies offering a hundreds of different policies to supplement, or replace the original Medicare plan. For most seniors, reaching the age of sixty five means having to confront this monster and make decisions that will greatly influence your wealth, your health and your well being.  One of the decisions to be made is; “Do you need a Medicare supplement or a Medicare Advantage Plan?” Let’s take a look at some […]

Medicare is Not Automatic

If you’re nearing age 65, there’s something you need to know:  unless you’re currently receiving Social Security benefits (having filed early), you need to take action to make sure you receive your Medicare benefits in a timely fashion. Timing What this means is that you need to sign up for Medicare three months prior to your 65th birthday – and if you’ve forgotten, you need to sign up within the period from three months before until four months after your 65th birthday.  By signing up during that seven month period, your coverage will begin during the first of the month in which you turn 65, and you’ll begin being billed for Medicare Part B. If you fail to sign up during that seven month window, you’ll have to wait until the next general enrollment period, which is January 1 through March 31, and your benefits won’t begin until the following […]

Medicare and Social Security Decoupled

Back in the olden days, when you had only the choice of age 65 to apply for Social Security retirement benefits, Medicare and Social Security went hand-in-hand.  At the same time that you applied for Social Security retirement benefits, you would also apply for Medicare – all at age 65. In the continuous evolution of the Social Security system, as we all know, the age for full retirement benefits has increased – up to age 67 for some folks now.  Plus you have the option of applying early for your retirement benefit, as early as age 62.  While all this was going on, Medicare… didn’t change.  For most folks, access to Medicare begins at age 65, which is now decoupled from the ages for Social Security benefits. So, with this decoupling, it is important to keep Medicare in mind as you reach age 65 – because applying late will cause […]

What’s Up With Medicare Premiums? How Increases Are Determined

If you are collecting Social Security and covered by Medicare, you may be wondering why your Medicare premium didn’t increase for 2010 or 2011… or if it did increase, why did it – since it didn’t increase for so many? To understand this quandry, we need to look at the system for determining increases to Social Security benefits first. Social Security – No COLA Increase for 2010 or 2011 For the year 2010 (and 2011), there is no Cost-Of-Living Adjustment (COLA) in Social Security benefits.  This is reflected by the fact that the Consumer Price Index (CPI) had not increased for the year (as of May, when the figures are determined).  While the COLA figures don’t parallel the CPI exactly, the CPI is a rough guide to follow when determining increases. This is the first time in over 30 years that there will not be a COLA – there has […]