Avoiding the Medicare Surcharge: What You Need to Know About IRMAA

Reaching Medicare eligibility solves one of the most expensive retirement problems for many retirees: healthcare. Once you’ve made the adjustment and selected all the various Parts and plans, the convenience and affordability of Medicare are one of the benefits of turning 65. However, Medicare is means-tested. If you make over a certain amount of income, surcharges on the Medicare Part B and Part B premiums kick in.

Making it a little more painful, it’s not a flat increase. The surcharges go up as incomes get higher and at the highest level can amount to hundreds of dollars a month in additional costs.

The key to avoiding or minimizing the surcharge is to control income levels. In early retirement, this may be reasonably easy to do. But if you’ve amassed a retirement nest egg in a traditional tax-deferred 401(k) or IRA account, once you hit 72 and required minimum distributions (RMDs) kick in, you can find yourself with a very hefty bill.

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Cash Flow Planning When You’re Thinking About Retirement

Pre-retirement planning is one of the most challenging stages of your financial journey. You’re still fully engaged in your career, but you’re also looking ahead to a not-distant future when your life and your source of income will radically change.

Retirement means you’ll be making choices about where you want to live, what your retired life will look like, if it will include work, travel, charity, a hobby – all the things you always wished you had time for will now be yours to choose from.

But you’re also going to need to ensure you have enough saved to fund the retirement you want, and that the income stream you’ll be able to generate from all your sources of income in retirement is tax-efficient.

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Planning for 2022: The IRS Has Increased Several Key Deductions and Exemptions

The spike in inflation we’ve seen this year has impacts beyond having to pay more for goods and services. The IRS uses consumer price inflation (CPI) to determine certain increases to exemptions and deductions for federal tax purposes. These are automatic and calculated from the rise in CPI. That means that the increased inflation this year may actually end up saving you money. While the changes are for 2022 and you won’t be paying the associated taxes until 2023, it’s a good idea to be aware of the new limits.

You may be able to make changes as you go that can help you maximize the benefit. For example, the amounts for Flexible Spending Accounts (FSAs) and the commuter benefit increased, so you may want to have more taken out of your paycheck. This saves you money by paying with pre-tax dollars.

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Small Business Retirement Plans — SIMPLE, SEP-IRA and SOLO 401(k)

Small companies shouldn’t forgo retirement savings just because a 401(k) plan can be expensive to set up and maintain. There are options specifically for smaller businesses: a Savings Incentive Match Plan for Employees (SIMPLE) plan, a Simplified Employee Pension (SEP) plan, and a SOLO 401 (k).

If your company has more employees than just you and your spouse, you may want to consider either a SIMPLE IRA or a SEP-IRA. The plans have similarities and a few differences that must be considered when deciding between the two. Knowing the details of each type can help you decide which is the best choice for you, or which to offer your employees if you own a small business.

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Retirement is About Income … and Taxes

You’ve figured out your budget, your retirement nest egg is substantial, and you’re ready to make the transition to living on income from savings instead of income from work. But have you thought through the tax implications? It’s very common for tax planning to be overlooked, under the assumption that you’ll be in a lower tax bracket and Social Security payments aren’t fully taxed. In fact, a recent study found that 57% of Americans rarely consider the taxes they will pay/are paying in retirement.1 This can be an expensive mistake, and it has implications for other retirement benefits.

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GMB Ep #120: A CFO’s Perspective on Managing Cash, M&A, ESOPs, & the Changing Business Environment

 

Have you ever heard the saying that revenue is vanity, profit is sanity, and cash is reality? Today’s guest, Robert E. Bendetti, is the CFO at Life Cycle Engineering. He holds a master’s degree in accounting and financial management and an MBA specializing in small business management and entrepreneurship, as well as being a certified public accountant. Throughout the episode, we cover several key concepts that help business owners grow their businesses and adapt to ever changing markets.

 

 

Show Notes

[03:21] Background – Robert shares his background and the company’s operations.

[05:20] Cash Flow Management – Robert emphasizes the importance of cash flow management and gives his perspective as a CFO on appropriate cash management for small enterprises.

[08:48] Cash Conversion Cycle – Robert discusses approaches to optimize the cash conversion cycle, emphasizing the importance of timely invoicing, collection challenges, and the smoothness of the payment process.

[11:50] Tips – Robert shares an approach for reducing turnaround time and illustrates a simple mechanism to increase collection rates.

[20:29] Profitability – Robert points out how to convert cash to profit, describing what balance sheet and income statement items need to be monitored.

[23:25] Paying Yourself vs. Reinvesting – Robert outlines how to decide whether to invest additional funds to boost profitability and future growth or pay yourself.

[31:41] Transition – Robert addresses what individuals approaching retirement or transition should consider 18 months before leaving a firm.

[40:25] Employee Stock Ownership Plan – Robert dives deep into ESOP and related topics.

[51:31] Global CFO Council – As President and Founder of Global CFO Council, Robert mentions what he hopes to accomplish through the organization.

 

Resources

Value Your Business Like it’s Your Retirement Plan, Because it is.

Building a successful business can take decades. While working to grow, it’s common to use all available assets above the salary you pay yourself to fund future expansion. Where does that leave you on the retirement side of things? For most business owners, the retirement plan is some form of exit and monetization of your investment.

As you get close to a transition, valuing the business is paramount. The value comes first, and then the sale, and only then do many business owners think about how the sale proceeds will fund retirement.

There’s a better way. Start with the amount of money you need to live the retired life you want. That’s your benchmark of the value you want to get for your business. Then work from there to create the value you need.

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GMB Ep #117: A Top Economist’s Take on Personal Finance With Dr. Laurence Kotlikoff

 

Economics applies to every industry at the individual, national, and global level. In this week’s episode, we have a distinguished guest who is on a mission to make economics useful at all levels. Dr. Laurence Kotlikoff is an economics professor at Boston University. He is also the author of Money Magic, a personal finance book written from an economist’s standpoint. Today’s podcast examines his book and financial outlook, which frequently counters conventional economic theories. Throughout the podcast, he shares his experience in handling personal financial decisions while also discussing some insightful observations about the state of our country.

 

 

Show Notes

[03:38] Introduction – Laurence introduces himself and discusses his current career emphasis.

[06:22] Personal Financial Decision Making – We must see individual financial decisions through the prism of consumption smoothing. Laurence explains what this is and why it is essential.

[12:42] IRA and Mortgage – Laurence outlines why under certain circumstances, it makes sense to withdraw funds from the IRA to pay off the mortgage.

[18:43] Investments – Laurence discusses investments, stocks, and the importance of making sound investment decisions. Furthermore, he evaluates the risk associated with each sort of investment.

[32:06] Social Security – Laurence discusses how individuals can navigate the complex social security web.

[34:10] Viability – Laurence discusses the Social Security system’s viability and what individuals may do to prop it up.

[42:54] Massive Deficits – Whether it is the aggregate federal deficit, unfunded liabilities, or Social Security, taxing one’s way out of some deficits is politically unappealing. Laurence discusses his approach to enormous deficits.

[48:28] Politics and Economics – Laurence discusses the causes of present crises, relating them to a lack of synergy between politics and economics.

[51:33] Campaign Trail – Laurence reflects on his 2016 presidential campaign experience, and shares what he would do differently in 2024 if he was running with an unlimited campaign budget.

 

Resources

Connect with Laurence:

Website: kotlikoff.net/

LinkedIn: linkedin.com/in/laurencekotlikoff/

 

Mentioned in the episode:

Maxifi: maxifiplanner.com/

Economic Security Planning: economicsecurityplanning.com/

Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life: goodreads.com/book/show/56620849-money-magic

GMB EP #116: A Top M&A Advisor’s Perspective on Growing & Selling Your Business

 

An exit strategy is a key aspect in a business owner’s journey. However, the majority of business owners do not consider their exit strategy until it is too late. On today’s episode of Grow Money Business, our guest is Michelle Seiler Tucker, a mergers and acquisitions specialist. She has over two decades of experience in the industry, and in that time, has assisted in selling over 500 businesses. Michelle not only aids business owners in the sale of their companies but also helps entrepreneurs and investors in acquiring businesses. Throughout the episode, Michelle imparts some of her wisdom she has accumulated over the years on growing and selling businesses.

 

 

Show Notes

[02:34] Introduction – Michelle introduces herself and discusses her career.

[07:18] Exiting a Business – Michelle shares key points and considerations when exiting a business.

[19:34] EBIT – Michelle explains why technology trades on multiple sales rather than EBIT.

[20:51] Additional Key Points – Michelle continues to provide her perspectives on a number of crucial elements that influence the sale of a business.

[31:48] Databases – Michelle describes the challenges and concerns regarding databases.

[34:08] Exit Rich – Michelle presents an overview of why she wrote her book, what it is about, and its target demographic.

[37:20] Interest Rates – Michelle shares her views on how interest rates affect the market for business acquisitions and sales.

[43:11] Biggest Mistakes – Michelle covers several of the most common errors she sees sellers make throughout the process.

[45:01] Confidentiality – Michelle emphasizes the importance of maintaining confidentiality when selling your business.

[50:19] Private Equity – Michelle outlines when it makes sense to start a private equity firm.

[56:15] Network of The Professional – Michelle describes the value of a professional network and how that impacts locating future opportunities.

[56:55] More on Mistakes – Michelle shares more insight on common mistakes people make when selling their business.

 

Resources

Connect with Michelle: 

Website: seilertucker.com/

LinkedIn: linkedin.com/in/michelleseiler/

 

Mentioned in the episode: 

Exit Rich – Website: exitrichbook.com/

Exit Rich: The 6 P Method to Sell Your Business for Huge Profit:

amazon.com/Exit-Rich-Method-Business-Profit/dp/1732510288

The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results: goodreads.com/book/show/the-one-thing

Behavioral Economics With Professor John Howe:

growmoneybusiness.com/podcast/behavioral-economics-with-professor-john-howe

GMB Ep #98: Everything You Need to Know About Medicare With Danielle Roberts

 

With the open enrollment period set to start on October 15th 2021, this is a great time to dive deep into the vital facts related to Medicare. In today’s episode, we have a distinguished guest, Danielle Roberts, joining us. Danielle is a co-owner of Boomer Benefits, a firm dedicated to helping senior citizens make confident decisions when enrolling into Medicare, as well as the author of the best-selling book “10 Costly Medicare Mistakes You Can’t Afford to Make”. Throughout this episode, Danielle shares her wisdom on all the crucial points you need to know if you intend to enroll in Medicare.

 

 

Show Notes

[02:25] Danielle’s Background – Danielle introduces herself and explains what they do at Boomer Benefits.

[04:00] Common Mistakes – Danielle shares some of the most common mistakes she sees people make when enrolling for Medicare, and what you can do to avoid them.

[08:01] Parts of Medicare – Parts A, B, C, and D of Medicare and the differences between them.

[10:49] Medigap Plan and Medicare Advantage Plan – Danielle broadly describes the role of Medicare Advantage policy and the Medigap plans while highlighting their differences.

[16:59] Most Suitable Plan for You – Though 34% of beneficiaries choose Medicare advantage plans, Danielle explains how to be mindful when making the best decision for you.

[21:47] Subsequent Changes to the Plan – Danielle’s suggestions on how beneficiaries can change their enrolled plans in subsequent years.

[26:48] Switching Between Medigap Policies – Possible ways to switch between different Medigap policies and the procedures you’ll need to follow.

[28:59] Eligibly Criteria for Medicare – Danielle outlines the eligibility criteria for enrolling in Medicare.

[32:23] Medicare Fund – The correlation between the reserves in the Medicare fund and the benefits Medicare offers.

[38:08] Single-payer System – Danielle shares her insights on the rising health care costs and the viability of a single-payer system.

[42:23] Pharmaceuticals and Drugs – Grant and Danielle discuss some of the current trends in the pharmaceuticals industry and the business interests that may affect Medicare.

[47:09] Boomer Benefits – Danielle talks about how Boomer Benefits helps people with Medicare basics, benefits, and coverage.

 

 

Resources

Connect with Danielle Roberts:

Website: boomerbenefits.com/

YouTube: youtube.com/c/BoomerBenefits

Facebook Page: facebook.com/BoomerBenefits

Facebook Group: facebook.com/groups/BoomerBenefits

LinkedIn: linkedin.com/in/daniellekunkle/

 

Mentioned in the episode:

10 Costly Medicare Mistakes You Can’t Afford to Make:

goodreads.com/book/show/55204934-10-costly-medicare-mistakes-you-can-t-afford-to-make?from_search=true&from_srp=true&qid=1Wia7eTzTY&rank=1

 

The United States Social Security Website: ssa.gov/

Official U.S. government site for Medicare: medicare.gov/