Sandra Reed: Life care planning for your 60s

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your life planning questions.

Part 1

The Age of Aquarius

Not all 60-something women can look as glamorous as these examples of today’s “Golden Girls”: Cheryl Tiegs (65), Sally Field (66), Goldie Hawn (67) or Susan Lucci (68). Not all 60-something men are as sexy as male hotties Pierce Brosnan (60), George Strait (62), Liam Neeson (63) or Richard Gere (64). But, with proper planning, over-60 males and females can enter their Age of Aquarius enjoying comfortable and productive post-retirement lives.

                  The Looming Question: When to Retire?

The $64,000 question (and only those over 60 remember the show that originated the phrase) upon turning 60 is when is the best time to retire? Retire at 62, the earliest age to begin receiving Social Security retirement benefits, and those benefits will be reduced from the maximum amount if retiring at the full retirement age. For those born from 1943 to 1954, the full retirement age is 66.

Your full retirement age can be determined by accessing the Social Security website, www.ssa.gov/retirement, and clicking on the Full Retirement Age Calculator.  The site also includes a chart showing the percentage of full benefits received if retiring between the earliest age eligible at 62 and the full retirement age.

Your Social Security benefit amount is based upon your earnings record. For 2014, the average worker will receive a monthly benefit of $1,294 and the worker with maximum benefits will retiring at full retirement age, will receive $2,642. With the cost of living being what it is, many retirees will need to consider continuing to work after beginning benefits.

During the period from age 62 to the first month of full retirement, the Social Security Administration (SSA) places a limit on the amount earned without incurring a penalty. In 2014, that limit is $15,480 annually until the year the individual reaches full retirement age. If you earn more than that amount, SSA will withhold $1 for every $2 earned over the limit. During the months before the month you reach full retirement the limit is increased to $41,400 and SSA withholds $1 for every $3 earned over that limit.  Once full retirement age is reached, a worker can earn an unlimited amount and continue to receive benefits without being subjected to a penalty.

To facilitate the decision whether to take early retirement at 62 or somewhere in between that age and full retirement age, first obtain an estimate of your Social Security benefits from SSA, based upon your expected retirement dates. Next multiply your monthly benefit from early retirement by the number of years of your life expectancy. Now calculate the amount you would earn in that number of years waiting until full retirement. Then compare the two.

Factor those figures from the benefits schedule into other income resources. Compare these with a budget of anticipated monthly expenses during retirement.

                  The Move To Medicare

Maintaining health insurance, either through a group or an individual policy remains a pressing issue during the first half of the 60s decade. For most, at age 65, eligibility for Medicare eases the pressure. Medicare does not present the one-click shopping experience of an Amazon account, however, so the switch requires analysis to make wise choices. The Medicare open enrollment period each year allows participants to switch from plans previously selected. During this participants may adopt alternative plans whose benefits better fit their present circumstances.

In general, Part A covers hospitalization, skilled nursing facility care, limited nursing home care, hospice and home health care and comes with no premium. Part B, which is optional, in general covers medical services to diagnose and treat a medical condition, medical equipment, mental health treatment and certain preventive care. In 2014 Medicare Part B costs most people $104.90 a month.

While providing significant coverage and low co-pays, Medicare, generally speaking, it will cover about 80 percent of medical costs.  This 20 percent gap creates a dilemma. Does one forego the premiums for a gap policy and pay the difference between the cost of care and what Medicare pays? The answer requires an assessment of an individual’s health and of the assets and income available to pay the non-covered costs.

Let’s say you conclude coverage for the non-covered 20 percent is warranted. Will it be best to take standard Medicare and opt for a supplemental policy provided by independent carriers such as Humana or United Health Care? Would it be more advantageous to enroll in a Medicare Advantage program? Medicare Advantage plans provide Medicare benefits through private companies who contract with Medicare to provide Part A and B coverage.  These plans may also provide drug benefits.

The rules for Medicare Advantage differ with each plan and may differ from standard Medicare. Certain Medicare Advantage plans may offer higher benefits and lower co-pay requirements from the insured. However, not all doctors will accept payment from all Medicare Advantage plans. Before signing up for a particular plan, it is crucial to know whether your current physicians accept the plan. If not, it will be necessary to change doctors or pay that doctor’s fees out-of-pocket.

At age 65, it is also necessary to decipher the alternatives for drug coverage. Drug coverage is provided through Part D through plans that are operated by private insurers. Each plan provides its own set of covered drugs. Many plans designate tiers of drugs with each successive tier exacting more of the cost from the insured.

Which plan best suits one’s needs depends upon what drugs one takes on a regular basis. If you do not acquire a Part D plan initially, you will pay a penalty for opting in after a period of non-coverage.

Medicare Advantage plans — so-called Part C — may include drug benefits equivalent to Part D plans. No penalty is assessed if you switch to Part D later.

Sandra W. Reed is an attorney practicing in Glen Rose, of counsel with the Fort Worth elder law firm of Katten & Benson. Phone: 254-797-0211;  email:  swreed2@yahoo.com.

 

 

 

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