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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GMB Ep #73: The Few Circumstances Where Variable Annuities Make a Lot of Sense

Variable annuities are a set of commonly offered insurance products that promise consumers a consistent income stream. In general, these products tend to become more beneficial to insurance companies and representatives who sell these products rather than consumers buying them. However, in recent years insurance companies have started to offer products that may be more consumer friendly. Throughout today’s episode, we dive deep into what variable annuities are, how they’re structured, and some of the scenarios where you might want to consider them.

Show Notes

[01:07] Background – How professionals in the financial planning and insurance industries view variable annuities and why there are different perspectives on the integrity of the insurance-based investment solutions.

[05:23] Annuities – Different configurations of annuities and how the returns vary according to the type of investment.

[11:23] Understanding Variable Annuities – Grant reviews what variable annuities are, how they work, and why Grant isn’t a big fan of variable annuities.

[16:45] Features and Fees – Over the years, Grant has reviewed lots of annuity policies. He dives into the most common types of fees insurance companies charge their customers in exchange for various features in the policies and some of the issues associated with the fees and commissions.

[22:13] New Developments – In recent years insurance companies have started making adjustments and improvements to their products. Grant talks about some of these updates and how they address the issues from older policies.

[25:36] Reasonable Options – Grant dives into some of the scenarios where obtaining a variable annuities policy may make sense to a consumer.

Resources:

How to Analyze a Variable Annuity

Episode #64: Where to Invest an Extra $50,000 Right Now

With the stock markets going straight up, equities being more expensive, and bonds offering extremely low interest rates, many people seem to be wondering what’s the best way to invest extra cash they have. In today’s episode, Grant dives into some of the best investments you can make at this point, the current status of the market, and whether it’s a good idea to invest in certain asset classes. Stay tuned until the end of the episode, where Grant talks about whether buying Bitcoin is a good idea right now.Continue reading→

Does the 4% Rule Still Work?

Recently I had a client come into my office who was concerned about his and wife’s and his retirement.

This client works at a company that sponsors a 401(k), but his wife works for the state and will receive a pension after retiring. My client was concerned that his 401(k) savings wouldn’t be enough to cover their annual living expenses, after accounting for their pension and social security benefits.

“Do we need to save more? I’m not sure we could. We’ve got Danny in college now and our daughter right behind him. I’m just worried we’ll zero out our savings and have to cut back on spending.”

We talked about how much he was saving in his 401(k), and how much that might amount to in 15 years when they planned to retire. But really, the crux of my client’s concern was that he’d spend through his savings too fast after they stopped working.

In his financial plan, we’d originally planned for withdrawals of 3.5% of his nest egg per year. Whatever was left over after he and his wife passed would go to the kids.

“I just think that 3.5% might be too much. I’ve been reading some pretty negative things about the 4% rule recently. 3.5% just seems too close for comfort. What’s your take on it?”

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