Can I Avoid IRMAA Surcharges on Medicare Part B and Part D?

Contributed by: Nick Defenthaler, CFP®, RICP®

In 2023, Medicare Part B premiums for 95% of Americans will be $164.90/mo. However, the other 5% will have to face what’s known as the Income Related Monthly Adjustment Amount or IRMAA and pay higher Part B and D premiums. Each year, the chart below is updated, and in most cases, premiums increase gradually with inflation, as do the income parameters associated with each premium tier.

Source: Medicare.gov

Receiving communication that you’re subject to IRMAA and facing higher Medicare premiums is never a pleasant notification. With proper planning, however, there are strategies to potentially avoid IRMAA both now and in the future.

But first, let’s do a quick refresher on the basics

Medicare bases your premium on your latest tax return filed with the IRS. For example, when your 2023 Part B and D premiums were determined (likely occurred in October/November 2022), Medicare used your 2021 tax return to track income. If you are married and your Modified Adjusted Gross Income (MAGI) was over $194,000 in 2021 ($97,000 for single filers), you’re paying more for Part B and D premiums aka subject to IRMAA. Unlike how our tax brackets function, Medicare income thresholds are a true cliff. You could be $1 over the $194,000 threshold and that’s all it takes to increase your premiums for the year! As mentioned previously, your Part B and D premiums are based off of your Modified Adjusted Gross Income or MAGI. The calculation for MAGI is slightly different and unique from the typical Adjusted Gross Income (AGI) calculation as MAGI includes certain income “add back” items such as tax-free municipal bond interest. Simply put, while muni bond interest might function as tax-free income on your return, it does get factored into the equation when determining whether or not you’re subject to IRMAA.

Navigating IRMAA with Roth IRA conversion and portfolio income 

Given our historically low tax environment, Roth IRA conversions are as popular as ever. Current tax rates are set to expire in 2026, but this could occur sooner, depending on our political landscape. When a Roth conversion occurs, a client moves money from their Traditional IRA to a Roth IRA for future tax-free growth. When the funds are converted to the Roth, a taxable event occurs, and the funds converted are considered taxable in the year the conversion takes place. Because Roth IRA conversions add to your income for the year, it’s common for the conversion to be the root cause of an IRMAA if proper planning does not occur. What makes this even trickier is the two-year lookback period. So, for clients considering Roth conversions, the magic age to begin being cognizant of the Medicare income thresholds is not at age 65 when Medicare begins, but rather age 63 because it’s that year’s tax return that will ultimately determine your Medicare premiums at age 65! 

Now that there are no “do-overs” with Roth conversions (Roth conversion re-characterizations went away in 2018), our preference in most cases is to do Roth conversions in November or December for clients who are age 63 and older. By that time, we will have a clear picture of total income for the year. I can’t tell you how often we’ve seen situations where clients confidently believe their income will be a certain amount but ends up being much higher due to an unexpected income event.

Another way to navigate IRMAA is by being cognizant of income from after-tax investment/brokerage accounts. Things like capital gains, dividends, interest, etc., all factor into the MAGI calculation previously mentioned. Being intentional with the asset location of accounts can potentially help save thousands in Medicare premiums.

Ways to reduce income to potentially lower part B and D premiums

Qualified Charitable Distribution (QCD) 

• If you’re over 70 ½ and subject to Required Minimum Distributions (RMD), gifting funds from your IRA directly to a charity prevents income from hitting your tax return. This reduction in income could help shield you from IRMAA. 

Contributing to a tax-deductible retirement account such as a 401k, 403b, IRA, SEP-IRA, etc.

• Depositing funds into one of these retirement accounts reduces MAGI and could help prevent IRMAA.

Deferring income into another year 

• Whether it means drawing income from an after-tax investment account for cash flow needs or holding off on selling a stock that would create a capital gain towards year-end, being strategic with the timing of income generation could prove to be wise when navigating IRMAA. 

Accelerating business expenses to reduce income 

• Small business owners who could be facing higher Medicare premiums might consider accelerating expenses in certain years, which in turn drives taxable income lower if they’re flirting with IRMAA. 

Putting IRMAA into perspective 

Higher Medicare premiums are essentially a form of additional tax, which can help us put things into perspective. For example, if a couple decides to do aggressive Roth IRA conversions to maximize the 22% tax bracket and MAGI ends up being $200,000, their federal tax bill will be approximately $30,000. This translates into an effective/average tax rate of 15% ($30,000 / $200,000). However, if you factor in the IRMAA, it will end up being about $1,700 total for the couple between the higher Part B and D premiums. This additional "tax" ends up only pushing the effective tax rate to 15.85% - less than a 1% increase! I highlight this not to trivialize a $1,700 additional cost for the year, as this is real money we're talking about here. That said, I do feel it's appropriate to zoom out a bit and maintain perspective on the big picture. If we forgo savvy planning opportunities to save a bit on Medicare premiums, we could end up costing ourselves much more down the line. However, not taking IRMAA into consideration is also a miss in our opinion. Like anything in investment and financial planning, a balanced approach is prudent when navigating IRMAA – there is never a "one size fits all" solution. 

Fighting back on IRMAA

If you've received notification that your Medicare Part B and D premiums are increasing due to IRMAA, there could be ways to reverse the decision. The most common situation is when a recent retiree starts Medicare and, in the latest tax return on file with the IRS, shows a much higher income level. Retirement is one example of what Medicare would consider a "life-changing event," in which case form SSA-44 can be completed, submitted with supporting documentation, and could lead to lower premiums. Other "life-changing events" would include:

• Marriage

• Divorce

• Death of a spouse 

• Work stoppage

• Work reduction

• Loss of income producing property 

• Loss of pension income 

• Employer settlement payment 

Medicare would not consider higher income in one given year due to a Roth IRA conversion or realizing a large capital gain a life-changing event that would warrant a reduction in premium. This highlights the importance of planning accordingly with these items.

If you disagree with Medicare's decision in determining your premiums, you have the ability to have a right to appeal by filing a "request for reconsideration" using form SSA-561-U2.

Conclusion

As you can see, the topic of IRMAA is enough to make anyone's head spin. To learn more, visit the Social Security Administration's website dedicated to this topic. Prudent planning around your Medicare premiums is just one example of much of the work we do for clients that extends well beyond managing investments that we believe add real value over time. 

If you or someone you care about is struggling with how to put all of these pieces together to achieve a favorable outcome, we are here to help. Our team of CERTIFIED FINANCIAL PLANNER™ professionals offers a complimentary "second opinion meeting" to address your most pressing financial questions and concerns. In many cases, by the end of this 30-45 minute discussion, it will make sense to continue the conversation of possibly working together. Other times, it will not, but our team can assure you that you will hang up the phone walking away with questions answered and a plan moving forward. We look forward to the conversation!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) I the U.S. which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Can I Avoid IRMAA Surcharges on Medicare Part B and Part D?

Contributed by: Nick Defenthaler, CFP®, RICP®

In 2023, Medicare Part B premiums for 95% of Americans will be $164.90/mo. However, the other 5% will have to face what’s known as the Income Related Monthly Adjustment Amount or IRMAA and pay higher Part B and D premiums. Each year, the chart below is updated, and in most cases, premiums increase gradually with inflation, as do the income parameters associated with each premium tier.

Source: Medicare.gov

Receiving communication that you’re subject to IRMAA and facing higher Medicare premiums is never a pleasant notification. With proper planning, however, there are strategies to potentially avoid IRMAA both now and in the future.

But first, let’s do a quick refresher on the basics

Medicare bases your premium on your latest tax return filed with the IRS. For example, when your 2023 Part B and D premiums were determined (likely occurred in October/November 2022), Medicare used your 2021 tax return to track income. If you are married and your Modified Adjusted Gross Income (MAGI) was over $194,000 in 2021 ($97,000 for single filers), you’re paying more for Part B and D premiums aka subject to IRMAA. Unlike how our tax brackets function, Medicare income thresholds are a true cliff. You could be $1 over the $194,000 threshold and that’s all it takes to increase your premiums for the year! As mentioned previously, your Part B and D premiums are based off of your Modified Adjusted Gross Income or MAGI. The calculation for MAGI is slightly different and unique from the typical Adjusted Gross Income (AGI) calculation as MAGI includes certain income “add back” items such as tax-free municipal bond interest. Simply put, while muni bond interest might function as tax-free income on your return, it does get factored into the equation when determining whether or not you’re subject to IRMAA.

Navigating IRMAA with Roth IRA conversion and portfolio income 

Given our historically low tax environment, Roth IRA conversions are as popular as ever. Current tax rates are set to expire in 2026, but this could occur sooner, depending on our political landscape. When a Roth conversion occurs, a client moves money from their Traditional IRA to a Roth IRA for future tax-free growth. When the funds are converted to the Roth, a taxable event occurs, and the funds converted are considered taxable in the year the conversion takes place. Because Roth IRA conversions add to your income for the year, it’s common for the conversion to be the root cause of an IRMAA if proper planning does not occur. What makes this even trickier is the two-year lookback period. So, for clients considering Roth conversions, the magic age to begin being cognizant of the Medicare income thresholds is not at age 65 when Medicare begins, but rather age 63 because it’s that year’s tax return that will ultimately determine your Medicare premiums at age 65! 

Now that there are no “do-overs” with Roth conversions (Roth conversion re-characterizations went away in 2018), our preference in most cases is to do Roth conversions in November or December for clients who are age 63 and older. By that time, we will have a clear picture of total income for the year. I can’t tell you how often we’ve seen situations where clients confidently believe their income will be a certain amount but ends up being much higher due to an unexpected income event.

Another way to navigate IRMAA is by being cognizant of income from after-tax investment/brokerage accounts. Things like capital gains, dividends, interest, etc., all factor into the MAGI calculation previously mentioned. Being intentional with the asset location of accounts can potentially help save thousands in Medicare premiums.

Ways to reduce income to potentially lower part B and D premiums

Qualified Charitable Distribution (QCD) 

• If you’re over 70 ½ and subject to Required Minimum Distributions (RMD), gifting funds from your IRA directly to a charity prevents income from hitting your tax return. This reduction in income could help shield you from IRMAA. 

Contributing to a tax-deductible retirement account such as a 401k, 403b, IRA, SEP-IRA, etc.

• Depositing funds into one of these retirement accounts reduces MAGI and could help prevent IRMAA.

Deferring income into another year 

• Whether it means drawing income from an after-tax investment account for cash flow needs or holding off on selling a stock that would create a capital gain towards year-end, being strategic with the timing of income generation could prove to be wise when navigating IRMAA. 

Accelerating business expenses to reduce income 

• Small business owners who could be facing higher Medicare premiums might consider accelerating expenses in certain years, which in turn drives taxable income lower if they’re flirting with IRMAA. 

Putting IRMAA into perspective 

Higher Medicare premiums are essentially a form of additional tax, which can help us put things into perspective. For example, if a couple decides to do aggressive Roth IRA conversions to maximize the 22% tax bracket and MAGI ends up being $200,000, their federal tax bill will be approximately $30,000. This translates into an effective/average tax rate of 15% ($30,000 / $200,000). However, if you factor in the IRMAA, it will end up being about $1,700 total for the couple between the higher Part B and D premiums. This additional "tax" ends up only pushing the effective tax rate to 15.85% - less than a 1% increase! I highlight this not to trivialize a $1,700 additional cost for the year, as this is real money we're talking about here. That said, I do feel it's appropriate to zoom out a bit and maintain perspective on the big picture. If we forgo savvy planning opportunities to save a bit on Medicare premiums, we could end up costing ourselves much more down the line. However, not taking IRMAA into consideration is also a miss in our opinion. Like anything in investment and financial planning, a balanced approach is prudent when navigating IRMAA – there is never a "one size fits all" solution. 

Fighting back on IRMAA

If you've received notification that your Medicare Part B and D premiums are increasing due to IRMAA, there could be ways to reverse the decision. The most common situation is when a recent retiree starts Medicare and, in the latest tax return on file with the IRS, shows a much higher income level. Retirement is one example of what Medicare would consider a "life-changing event," in which case form SSA-44 can be completed, submitted with supporting documentation, and could lead to lower premiums. Other "life-changing events" would include:

• Marriage

• Divorce

• Death of a spouse 

• Work stoppage

• Work reduction

• Loss of income producing property 

• Loss of pension income 

• Employer settlement payment 

Medicare would not consider higher income in one given year due to a Roth IRA conversion or realizing a large capital gain a life-changing event that would warrant a reduction in premium. This highlights the importance of planning accordingly with these items.

If you disagree with Medicare's decision in determining your premiums, you have the ability to have a right to appeal by filing a "request for reconsideration" using form SSA-561-U2.

Conclusion

As you can see, the topic of IRMAA is enough to make anyone's head spin. To learn more, visit the Social Security Administration's website dedicated to this topic. Prudent planning around your Medicare premiums is just one example of much of the work we do for clients that extends well beyond managing investments that we believe add real value over time. 

If you or someone you care about is struggling with how to put all of these pieces together to achieve a favorable outcome, we are here to help. Our team of CERTIFIED FINANCIAL PLANNER™ professionals offers a complimentary "second opinion meeting" to address your most pressing financial questions and concerns. In many cases, by the end of this 30-45 minute discussion, it will make sense to continue the conversation of possibly working together. Other times, it will not, but our team can assure you that you will hang up the phone walking away with questions answered and a plan moving forward. We look forward to the conversation!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) I the U.S. which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Planning for Medicare

Contributed by: Center for Financial Planning, Inc.®

Here it is again…time for changing leaves, cooler weather, and open enrollment for Medicare. Medicare coverage is an important decision, and we suggest reviewing your coverages on an annual basis.

Sign up today for our upcoming seminar on Monday, October 2nd hosted by Sandy Adams, CFP® of Center for Financial Planning, Inc., and presented by Cynthia Brown of Powers Financial Benefits, LLC, an independent agent, that provides details on Medicare, open enrollment, and what is important for 2023. And feel free to check out the replay from last year’s presentation below!

Raymond James is not affiliated with and does not endorse Cynthia Brown or Powers Financial Benefits, LLC. Center for Financial Planning, Inc.® is an Independent Registered Investment Advisor. Investment advisory services are offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC.

When to Use Your Emergency Fund

Contributed by: Sandra Adams, CFP®

Who actually has an emergency fund? “For those age 50 and up, it’s typically those who work with a financial advisor”, says Sandy Adams, CFP®. “The general population is bad at this. It’s particularly important to have an emergency fund as you get closer to retirement”, she says.

Read the full AARP article HERE!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Raymond James is not affiliated with AARP.

Term vs. Permanent Life Insurance

Contributed by: Kelsey Arvai, CFP®, MBA

Life insurance serves a crucial purpose for your family and heirs, as it ensures your beneficiaries will be cared for in the event of death or another tragic event. Finding the right life insurance can seem intimidating. However, the good news is that life insurance starts with two options, term (temporary) or permanent, each with unique benefits and features. 

Term Insurance:

Term life insurance provides affordable coverage that lasts for a period of time and is typically the least expensive insurance you can buy. Most policies are designed for premiums to remain at a level rate for a set number of years, but some premiums may increase annually. If the policyholder passes away when the policy is in force, the death benefit is paid to the beneficiaries of the policyholder, typically in a tax-free lump sum.

Length of Coverage – Common term lengths include an annual renewable term, 10-year-level premium term, 15-year-level-premium term, 20-year-level premium term, and 30-year-level-premium term.

Taxability - Death benefit is tax-free with very few exceptions (business planning and transfer for value rules are pretty much the only exceptions). 

Premiums – Based on a person’s age, health, and life expectancy. 

Cash Value - Term insurance doesn’t build equity, meaning there is no cash value accumulation. Premium pays for the cost of insurance and nothing more.

Option to convert – It may be possible to turn your term life into permanent life insurance without additional evidence of insurability, depending on the insurance company. This is usually only available for a specified amount of time. 

When to consider term life insurance policy?

Term life insurance is ideal for people who would like the maximum amount of life insurance for the lowest cost. Term helps to protect your spouse, your home, and your children. Other common reasons to purchase term life insurance are income replacement, mortgage or debt protection, college funding, funding a buy-sell agreement, and key person protection for a business.

Permanent Insurance:

Permanent life insurance often doesn’t have an expiration date; as long as premiums are paid, most permanent life insurance policies will remain in force as long as the policyholder is alive. Permanent life insurance is more expensive because this policy type typically offers coverage and a cash value.

Universal Life Insurance:

“Permanent Death Benefit” product; underwritten so that the death benefit will be in force until age 90, 95, or 100. The age depends on what product you choose at the onset; many products will have the age the policy will lapse in the product title.

Premiums – Flexible premium payments that may or may not guarantee death benefit and may or may not build a cash value. It’s ideal to slightly over-fund premiums in the early years of the policy to accumulate cash value to help pay the cost of insurance later.

Cash Value – The rate of return on your cash value and any investment options vary depending on the type of Universal Life Policy you buy (guaranteed, indexed, variable, etc.).

Death Benefit Types – Option A or “Level Death Benefit,” meaning when the insured dies, is when the beneficiaries don’t get the cash value and the death benefit; they just get the death benefit. Option B or “Accumulating” cash value, depends on the policy and insurer. When the insured dies, the beneficiaries receive the cash value PLUS the death benefit. 

Other forms of universal life insurance exist; variable universal life forgoes the guaranteed crediting rate that the carrier provides, and instead, the policyholder assumes the risk on their own shoulders. This is done by allocating excess premiums to sub-accounts; in order to come out ahead, the policyholder would need to consistently outperform the crediting rate provided by the insurance carrier. These policies allow you to invest your cash value across a choice of stocks, bonds, and money market funds. 

Whole Life Insurance:

Whole Life offers coverage for the rest of your life and includes a cash value component that lets you tap into it while alive. This is typically the most expensive form of life insurance due to the cash accumulation and having to front-load the insurance cost. Given that many people do not need insurance for their entire lives, it’s crucial to consider if whole life insurance is a good fit for you. 

Death Benefit – Guaranteed Death Benefit with guaranteed premiums and cash values. Underwritten to provide a permanent death benefit and accumulate cash value. Unlike Universal Life Insurance, this policy will be in force regardless of whether the insured dies at 80 or 120.

Premiums – Level premiums guarantee a death benefit when the insured dies. You’ll pay a fixed amount monthly, quarterly, semi-annually, or annually. Single premium, you’ll pay the entire policy cost upfront. Depending on the policy and carrier, you may pay limited or modified premiums. 

Taxability - If a policyholder surrenders a contract for the cash value, they will pay ordinary income tax on the gains above their cost basis. Cost basis is defined as premiums paid minus loans or withdrawals.

There are many flexible options for the dividend or crediting rate. The most common option is to use the dividend to purchase “paid-up additions” to increase the death benefit or cash value over time without medical underwriting or increasing the premium payment. Some policies are non-participating, meaning that you won’t receive any dividends.

When to consider a permanent life insurance policy?

Permanent life policies are an expensive way to buy coverage. Depending on your goals, a different type of life insurance might better fit you. Permanent life insurance might be purchased for the following reasons: legacy planning for family or charity, estate tax planning, asset diversification, retirement income planning, and executive compensation. 

When deciding what’s right for you, it’s important to have your plan tailored to fit your and your family’s individual needs, making it crucial to consult with your financial advisor.

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Any opinions are those of Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

These policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. There are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Investors should carefully consider the investment objectives, risks, charges, and expenses of variable universal life sub-accounts before investing. The prospectus and summary prospectus contains this and other information about the sub-accounts. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.

Planning for End of Life Care with Hospice

Contributed by: Sandra Adams, CFP®

I watched recently as a good friend of mine struggled to arrange care for her mother at the end of her life. Her mother struggled with dementia, and after a fall, her health took a severe turn for the worse. It suddenly became clear that she was not going to recover. My friend wanted a quality and pain-free remainder of life for her mother, so she decided to call in Hospice care. Hospice care is a service for people with serious illnesses who choose not to get (or continue) treatment to cure or control their illness. Hospice care focuses on the care, comfort, and quality of life of a person with a serious illness approaching the end of life. It often also includes emotional and spiritual support for both the patient and their loved ones.

Many people hear about Hospice, but if you have never had experience with it, you may have some questions. You might be wondering:

When are you eligible for Hospice Care? Anyone with a serious illness who physicians think have less than six months to live usually qualifies for Hospice Care. For Medicare to pay for Hospice Care, patients must stop aggressive medical treatment intended to cure or control their illness.

When is the right time to start Hospice Care? This is a decision you make with your doctor about your illness and how it is progressing. Still, it is good to remember that the earlier you start Hospice services, the longer they may have to provide meaningful care, and the longer you may have to spend quality time with your loved ones.

Where does Hospice Care take place? It can take place in several settings, including your home, assisted living, nursing home, or hospital.

What services does Hospice provide? Depending on the needs of the patient and family and the patient's end-of-life wishes, Hospice can provide a wide range of services. Services can include emotional and spiritual support for the patient and the family, and relief of symptoms and pain (pain management, therapy services, and many more) personalized to the patient and family.

Before I worked for The Center, I worked for a Hospice. I regularly saw the value of the services provided both for the patients and the families when the end of life was certain. Several of my family members have also used Hospice services, and I don't know how our family would have dealt with the end of their lives without the empathy and compassion of the nurses, doctors, and social workers. If you or someone you know is facing the end of life and prefers to face it with pain management and a quality of life focus, search for a Hospice near you at www.mihospice.org if you are in Michigan or www.nationalhospicelocator.com if you are in other states. If you have other aging planning questions or issues that we can help with, don't hesitate to contact me at Sandy.Adams@CenterFinPlan.com

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.

Survival Tips for Caregivers

Contributed by: Sandra Adams, CFP®

It’s no surprise that our population is aging at a rapid pace. Currently, more than 46 million older adults, age 65 and above, live in the U.S.; and this number is expected to grow to more than 90 million by 2050! In any given year, there are more than 50 million people providing care in the U.S., many of whom claim they did not have a choice in taking on their caregiving responsibilities.

I had the privilege of attending the annual Alzheimer’s Association-Michigan Chapter/Wayne State University Institute of Gerontology – A Meaningful Life with Alzheimer’s Conference recently. Much of the conference focused on how to make sure that caregivers are being taken care of, so they can then provide the best care to others. Many caregivers are so focused on those they are caring for that they’ll skip their own doctor appointments (54%) or miss work (65%), which puts them in potential medical and financial harm, as well as risk for caregiver burnout for the sake of focusing on the person they are caring for.

Action Steps to Help Caregivers Survive Burnout:

1. Acknowledge that you matter — take time for yourself!

2. Make a plan for your mind, body, and soul — take time to rest your mind, exercise your body, and feed your soul!

3. Don’t sweat the small stuff — don’t worry about things you cannot control!

4. Stay socially active — take time to do things with family and friends that are not in a caregiving capacity.

5. Find someone to talk to about your frustrations — whether it’s a friend, a caregiver support group, or a therapist.

As a caregiver, you can be overwhelmed with so many responsibilities. You may have a family of your own and care for older adult parents, or you may be caring for a spouse while holding down a job or other responsibilities. Whatever your caregiving role, it is never easy. It is important to remember that you are not in it alone; there are others to rely on and delegate to, whether in health care, financial, legal, or other roles. And it is most important to take care of yourself. It takes a happy, healthy caregiver to take care of others in the best way possible. If you or anyone you know is serving as a caregiver and are in need of support, please reach out. We are always happy to help.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Are Your Medications Covered? How to Choose the Right Medicare Plan

Contributed by: Josh Bitel, CFP®

Let’s take a look at an important aspect of Medicare coverage: Part D, which covers prescription medications (think “D” for drugs). Each Medicare Prescription Drug Plan has a unique list of covered drugs which is called a formulary.

Here are some important notes regarding Medicare Part D coverage:

• Drugs may be placed into different cost “tiers” within the specific formulary

• More common/generic drugs will often be in a lower tier costing you less

• You can choose your Part D plan based on your current list of medications to help you obtain the most appropriate plan for you

• Commercially available vaccines that are medically necessary to prevent illness must be covered by a Medicare drug plan (if not already covered under Medicare Part B)

• You should receive an “Evidence of Coverage” (EOC) each September from your plan which explains what your Medicare drug plan covers, how much you pay, etc.

  • You should review this notice each year to determine if your current plan will continue to meet your needs or if you need to consider another plan for the next calendar year

  • If you do not receive this important document, contact your plan representative

    • Your plan’s contact information should be available via “Personalized Search” on the Medicare website

    • You can also search by your plan name

Common Coverage Rules:

• Prior Authorization: Your prescriber may be required to show that the drug is medically necessary for the plan to authorize coverage

• Quantity Limits: Different medications may have limits on quantity fillable at one time (ex: 10 days, 14 days, 30 days, 60 days, etc.)

• Step Therapy: You must attempt treatment with one or more similar, lower cost drugs before the plan will cover the prescribed drug

If you or your prescriber believe one these coverage rules should be waived, you can contact your plan for an exception. Your plan’s contact information should be available via “Personalized Search” on the Medicare website.

• You can ask your prescriber or other health care provider if your plan has special coverage rules and if there are alternatives to an uncovered drug

  • It is not uncommon to be required to attempt treatment with other similar drugs (often less expensive, lower tier) on your formulary first

• You can obtain a written explanation from your plan which should include the following:

  • Whether a specific drug is covered

  • Whether you have met any requirements to be covered

  • How much you will be required to pay

  • If an exception to a plan rule may be made if requested

• You can request an exception if:

  • You or your prescriber believes you need a specific drug that is absent from your plan’s formulary

  • You or your prescriber believes a coverage rule should be waived

  • You believe you should pay less for a more expensive, higher tier drug since your prescriber believes you cannot take any of the less expensive, lower tier options for your condition

• If you disagree with your plan’s denial of coverage there are five additional levels in the appeals process

Additional Considerations:

• Your Medicare Part D plan is allowed to make changes to its formulary during the year

  • These changes must be made within existing Medicare guidelines

  • If a change is made to your formulary:

    • You must be provided written notice at least 60 days prior to the effective date of the formulary change

    • OR your plan will be required to provide the current drug for 60 days under the previous plan rules

• Many Medicare Advantage Plans (Part C) cover prescription medication coverage, and you cannot have concurrent coverage of prescriptions through both a Medicare Advantage Plan and a Medicare prescription drug plan. You’ll be unenrolled from your Advantage Plan and returned to Original Medicare if you have an Advantage plan with prescription coverage in addition to a Part D Prescription Drug Plan.

• Even if a desired medication is covered, it is important to note that some plans may require fulfillment via mail order services in lieu of local retail pharmacy pickup

• This may be very inconvenient for some (ex: people that travel often) and may be avoidable when comparing plans

If you have any questions, please contact your financial advisor at The Center. We are more than happy to help you or refer you to one of our professional resources.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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Sources: www.medicare.gov this information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Any opinions are those of the author and not necessarily those of Raymond James. Raymond James is not affiliated with Josh Bitel. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

Reducing Your Medicare Premium Surcharges

Contributed by: Robert Ingram, CFP®

For many clients with incomes above a certain level, Medicare premiums may be higher for Part B and Part D. As a Medicare recipient’s income exceeds specific thresholds, they may pay adjusted amounts in addition to the baseline Part B and/or Part D premiums.

Now, what if you have been paying these Medicare surcharges, but you experience a drop in your income? Can you also get your Medicare surcharge reduced? The answer is, possibly yes.

If you experience a change to your income because of certain life events, you can request that the Social Security Administration (SSA) review your situation and use your more recent income to determine what premium adjustment (if any) should apply. Examples of these life-changing events include:

• Work stoppage or work reduction

• Death of a spouse

• Marriage

• Loss of pension income

• Divorce or Annulment

• Loss of income-producing property

You might be asking yourself, “Why do I have to request this? Aren’t Medicare premiums automatically adjusted according to my income?”. A big reason for making the change request when you experience a qualifying change in income has to do with how and when the SSA measures your income.

Income-Related Monthly Adjustment Amount (IRMAA)

To determine whether your income makes you subject to an Income-Related Monthly Adjustment Amount (IRMAA) to the regular Medicare Part B or Part D premiums for the current year, the SSA looks at the income you reported to the IRS for the previous two years. This means that your Modified Adjusted Gross Income (Adjusted Gross Income with tax-exempt income added back) reported for 2017 determines your Medicare premiums for 2019. 

For individuals paying Part B premiums, for example, the standard premium in 2019 is $135.50 per month. However, the following table illustrates what you would pay in 2019 for Part B depending on your 2017 income.

For a couple who filed a joint return with income above $170,000 and up to $214,000 in 2017, each spouse paying for Medicare Part B may pay an additional $54.10 per month above the standard premium (a total of $189.60 monthly) in 2019. A couple with income that falls between $320,000 and $750,000 (or an individual filing single with income between $160,000 and $500,000) in 2017 could each pay an additional $297.90 above the standard premium, for a total of $433.40 per month in 2019.

If an individual (or couple) experienced a drop in income for 2019, it might normally take until 2021 for the Medicare premiums to reflect any reduction based on the 2019 income. Let’s say the couple who had reported income between $320,000 and $750,000 retires in 2019 and sees their income drop to an expected $165,000. The expected income falling within the $170,000 threshold could mean a difference of $297.90 per month (each!) in Medicare Part B premiums (from $433.40 to $135.50).

If a qualifying life event caused the drop in expected income, then filing a request with the SSA could mean a more immediate change in Medicare premiums, rather than waiting for the savings until 2021.

How do you request the premium surcharge reduction? 

If you think you have experienced a reduction in income due to one or more of the qualifying events, make your request to the Social Security Administration by submitting the Medicare Income-Related Monthly Adjustment Amount –Life-Changing Event form (form SSA-44).

Along with this form, you will also provide supporting documentation for your Modified Adjusted Gross Income and your life-changing event (see form SSA-44 instructions). Examples of supporting documentation may include items such as:

• Federal income tax return

• Signed statements from employers, pay stubs

• Certified documents for transfers of a business

• Marriage certificate

• Certified death certificates

• Letter or statement from pension administrator explaining a reduction/termination

For other disagreements with an IRMAA determination, you have the right to appeal. You can file an appeal online (socialsecurity.gov/disability/appeal) and select “Request Non-Medical Reconsideration”, file a Request for Reconsideration form, or contact your local Social Security office.

If you disagree with an IRMAA determination because your reported Modified Adjusted Gross Income is incorrect, you need to address the correction first with the IRS.

Because these Medicare surcharges are determined each year, you have opportunities to do more proactive income and tax planning leading up to and after Medicare enrollment. Employing different strategies that help control your Adjusted Gross Income could also help control potential Medicare premiums in future years. If you have questions about your particular situation, feel free to reach out to us!

• Want more information about Medicare? Check out The Center’s Medicare FAQ

• Looking for financial strategies and tax tips for year-end? Check out this webinar.

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Open Enrollment Season for Health Insurance and Medicare 2020

Contributed by: Robert Ingram, CFP®

It’s hard to believe we’re already down to the last official days of summer and about to begin another fall season. And along with the foliage, football games, and cider mills comes the health insurance open enrollment season for many employers and for Medicare.

Now, I know reading through benefits manuals may sound about as fun as cleaning out the gutters or raking those autumn leaves. But as our health care costs continue to rise (federal government actuaries estimate U.S. health care spending averaged $11,212 per person in 2018), making smart decisions is critical to keeping more money in your wallet.

Investing a little time to make sure your coverage meets your needs, and limits your financial risks, can really pay off.

Employer-sponsored health insurance plans

Many employers offer an annual open enrollment this time of year, giving employees an opportunity to select, or make changes to, benefits effective in the next calendar year.

Consider these points as you make your health insurance elections for 2020:

• Review and compare your available plan offerings (e.g. PPO vs. HMO). For some key differences among plan types, click here.

• Focus on more than just the premium costs. Compare the potential total out-of-pocket costs, including deductibles, copays, and the annual out-of-pocket maximums.  

• Consider your health history and the services you may use in the next year. Are you likely to hit the deductible or maximum out-of-pocket costs each year? The benefit of lower premiums for a high deductible plan may be outweighed by higher overall out-of-pocket costs. Are you less likely to hit the deductible, or do you have excess cash in savings to cover unexpected health care costs? A lower premium, high deductible plan may be a good choice.

• Consider whether funding an available Flexible Spending Account (FSA) for health care or Health Savings Account (HSA) makes sense. Keep in mind some key differences:

  • HSA requires a high deductible health plan.

  • You generally must spend FSA dollars on eligible expenses by the end of each plan year or forfeit unspent amounts (use-or-lose provision).

  • HSA balances carryover (no use-or-lose provision).

• For working spouses, it is also important to review each of your employer-sponsored health plan options and consider any limitations on spousal coverage. It has become increasingly common for employers to add surcharges to the premium for spousal coverage, or to entirely exclude coverage for spouses who have access to their own employer-sponsored coverage.

Medicare Open Enrollment

The *Open Enrollment for Medicare Advantage and Medicare prescription drug coverage window opens each year for anyone currently enrolled in Medicare to make changes to their plan, add certain coverages, or enroll in a new plan. It also allows first-time enrollment for individuals who have qualified for Medicare but have not previously enrolled at age 65 or during a Special Enrollment Period.

 This window opens from October 15 through December 7. Changes you can make include: 

• Changing from Original Medicare (Part A/Part B) to a Medicare Advantage Plan

• Changing from a Medicare Advantage Plan back to Original Medicare

• Switching to another Medicare Advantage Plan

• Joining a Medicare Prescription Drug Plan (Part D)

• Switching from one Medicare drug plan to another Medicare drug plan

• Dropping your Medicare prescription drug coverage

*There is also a Medicare Advantage Open Enrollment from January 1 through March 31, but only for those currently enrolled in a Medicare Advantage Plan. It allows changing from one Medicare Advantage Plan to another, or changing from a Medicare Advantage Plan back to Original Medicare.

Unlike the fall open enrollment period, this window does NOT allow changes such as switching from Original Medicare to a Medicare Advantage Plan, joining a Medicare Prescription Drug Plan, or switching from one Medicare Prescription Drug Plan to another if enrolled in Original Medicare.

What if I am employed at age 65 or older?

For employees age 65 and older who are reviewing their health coverage options, the decisions can become more complicated due to Medicare eligibility. If such employees have access to great employer group health insurance coverage at very reasonable costs, it could make sense to continue this coverage even while Medicare eligible. This can lead to additional questions such as:

• Should I enroll in Medicare if I have other coverage?

• For which parts of Medicare should I apply?

With more than one potential payer (e.g. employer health insurance provider and Medicare), “coordination of benefits” rules determine which pays first. Understanding how your employer coverage coordinates with Medicare is an important factor in your decision-making process.

For employers with more than 20 employees, the group health plan generally pays first, and Medicare is secondary. This means that if the group plan does not pay all of the bill, Medicare would pay based on its coverage structure, what the group plan paid, and what the provider charged. Because the group health plan is the primary payer, you may have more flexibility to apply for portions of Medicare, such as selecting Part A (which is premium-free for most everyone) and deferring Part B (which has a monthly premium).

If an employer has fewer than 20 employees, Medicare generally pays first, and the group health plan becomes secondary. In this case, as an eligible employee, you should probably enroll in Medicare Parts A and B. (Medicare Advantage Plans also cover services under Parts A and B.) Failing to enroll in both parts of Medicare could leave you responsible out-of-pocket for anything that Medicare would have covered.

While many factors apply to your own unique circumstances, here are some additional tips for employees age 65+ who are making Medicare enrollment decisions:

• Get the details of your employer-provided coverage in writing to help you decide how to handle Medicare choices. Confirm with your employer plan how benefits coordinate with Medicare.

• Coordinate with your spouse when evaluating your coverage options (just as you would if you were under age). If you are both still working at age 65, you can compare employer health plans and how they work with Medicare, as well as understanding any available spousal/family coverage options. Doing a little homework can help you choose the optimal plan.

• Are you contributing to a Health Savings Account (HSA)? By enrolling in any part of Medicare, you lose the ability to continue HSA contributions. Determine which is most important to you, enrolling in Medicare or continuing the HSA contributions.

• If enrolling in Original Medicare Parts A and B, don’t forget to look at Medicare Supplement Insurance (Medigap), which literally helps fill certain coverage gaps in traditional Medicare. 

Health care costs may be one of your largest expenses over your lifetime, and the planning decisions are often complex. Take advantage of these other great resources available to you:

• Have a Medicare question? Check out The Center’s Medicare FAQ.

• Want to learn more about Medicare Open Enrollment? Check out our latest webinar.

• For enrollment details and other information visit medicare.gov.

As always, if we can be a resource for you or someone you know, please get in touch.

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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Source: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountshistorical.html Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Prior to making a decision to purchase an insurance product, please consult with a properly licensed insurance professional.