Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly.
Registered representative, securities offered through Cambridge Investment Research, Inc., a broker-dealer member of FINRA SIPC. Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus, brought to you each and every Wednesday morning right here on KROS. This is officially the fourth Wednesday of September, which we are going to talk Medicare today. We have Mike Steigerwald with the office. Hard to believe September is flying by. I think we are, what, officially into the season of fall now.
Mike Steigerwald:
It sure feels that way.
Nate Kreinbrink:
Temperatures have cooled off. You can start to see the leaves starting to change colors. Homecoming festivities for a lot of the area schools, either had them last week or I think a couple this weekend. White stuff hanging from trees. It’s that time of the year.
Mike Steigerwald:
It is. It is. Kids have been playing in the yard a lot, building leaf piles already with the minimal leaves we have on the ground.
Nate Kreinbrink:
They have coming down.
Mike Steigerwald:
So it’ll only continue here.
Nate Kreinbrink:
Football season is well underway. Baseball season. I know you’re talking White Sox.
Mike Steigerwald:
Trying to avoid the worst season of all time.
Nate Kreinbrink:
One of the records that you don’t want to have.
Mike Steigerwald:
Correct.
Nate Kreinbrink:
But if you’re going to do it, go all in, right? But again, with today’s show, I know, again, the third Wednesday of every month we talk taxes. We want to just keep things with that to get regularly scheduled with that. Fourth Wednesday, again, is going to focus on Medicare. And last month we had Mike Van Zuiden on just talk the basics of how to go about claiming Medicare and the different paths as far as which way to go to understand that.
And that’s one of the issues that, again, we always continue to hear those individuals getting close to turning age 65 or looking to retire, leaving a work plan, switching over to Medicare, is they don’t make it simple to follow, to understand, to figure out, to just pick which plan is best to it. And again, you talk all the plans, Part A, Part B, Part D, Part C, Plan A, B, C, D, E, F, G.
Mike Steigerwald:
Alphabet soup.
Nate Kreinbrink:
It’s the alphabet soup of what it is. And again, not the most easiest thing to follow, comprehend. And then it comes down to it, okay, what do you pay for this? And again, that’s not any easier when you start looking at what you are going to pay with it. And again, I think today we’re going to focus on that. And again, obviously every plan is specific, depending on which route you go is specific, depending on which coverage you have is specific.
But there’s a few general guidelines to get you going and have a decent understanding is what it is, and that’s understanding what it is you’re going to pay. Now, again, when you start looking at Medicare, you have Part A and Part B. Those two are original Medicare. So if you ever hear the term original Medicare, they are referring to Part A and Part B. Your Part A coverage is likely covered because of what you have paid in over your working career.
So for the majority of people when they transition to Medicare, they will not pay a single dime for Part A of their coverage. They’ve already paid that in. Your Part B premium, this is where, again, you start hearing numbers. For 2024, that coverage is 174. Everybody that’s within a certain tier of income will pay that same price for their Part B coverage. And that goes to everybody.
And again, you just heard me say, as long as you are in that first tier of income, well, that’s one of the complexities and it has to do with IRMAA. If you hear the term IRMAA, that is applying to your Part B premium and looking at what you make to determine what it is you pay. And I think that’s where, again, the first thing that people get confused with and where the questions start.
Mike Steigerwald:
Those income-related adjustments can come to a surprise, but to many. And one thing I would say to start off is anything that you’re getting via mail, they’re going to send letters about this stuff if it applies to you and/or your spouse. And that’s something that I think gets overlooked a lot is that these changes and increased charges in terms of the IRMAA related adjustments is not going to just apply to you.
It’s going to apply to your spouse if they’re also on Medicare. And these jumps can be pretty significant depending on where your income lies. And again, that’s a two-year look back. So it’s not going to be, what did I make this past year and what will my Medicare premium be adjusted to? It looks back two years ago. So we’ve seen it for a number of clients and there are questions that arise from it.
So just don’t want any surprises. Biggest thing I would say is make sure you’re opening up everything you get. I know there’s a lot of mailings and there’s a lot of things, but this is going to come from Social Security Administration. So if you get something from them, know that it’s important and definitely look at it.
Nate Kreinbrink:
Right. And I think that topic you just mentioned, the two year lookback, is something that people are definitely unaware of. And again, when you start looking at that, so your 2024 Part B premium will be based off of your 2022 income. And when you’re in 2025, your Part B premium will be based off of your 2023 income. So again, it keeps going with it and look back.
Why a two-year look back? Because that is the last year that the IRS has tax returns on file. That start January 1st of that year. So again, if you look at January 1st of this year, they don’t have last year’s tax return on file to be able to do that. So again, they have to go back to that two-year lookback because that is the last year that they have on file, which is why they use that strategy when they determine that outcome.
We’re coming up to a time too here when we’re in late October, sometimes into November, where again, if you are on Medicare or if you are on Social Security, you are going to get a notice in the mail. Physically in the mail telling you, okay, based off of any cost of living adjustment when it’s announced, this is what your social security benefit is going to be for 2025.
And are there any increases to that Part B premium that are going to go into effect January 1st, 2025. Again, you will get a copy of that in the mail that you will look at. Or if you’re signed up for ssa.gov and you have your own My Social Security, you can go on there and look at it at whenever time they get posted on there. But again, that will tell you where you fall in that starting January 1st.
If you want to appeal it, or you don’t agree with it, or you have a life-changing event where two years ago that income is not realistic to what it is today, you can appeal that. And I think that’s something that people don’t know as well.
Mike Steigerwald:
Yeah, definitely. I would say that, again, as you alluded to earlier, Nate, every situation’s different. I mean, this falls back into that same story that we tell on a number of fronts, which is, oh, not just going off of my neighbor said this, I had a cousin that told me this, my brother did this. All of those.
There’s so many variables that come into each individual situation. Really important to just get a grasp on what you have, what you’re entitled to, and try to get as much of an understanding as possible to know where you stand in terms of your premiums, what coverage you have, and what you need.
Nate Kreinbrink:
Right. And I think that’s the important thing is just trying to get the very complicated, very simple.
Mike Steigerwald:
Yes.
Nate Kreinbrink:
And being able to say, okay, let’s weed through all the garbage, weed through all the fluff. You mentioned, all that mailing that people are going to get. Again, when you get these mailings from these companies, they’re going to make it sound like they have the best coverage on the face of this earth and everybody should be with them. And if you’re not, then you’re missing out.
Well, that’s their job is to sell policies. But how does that really apply to you? When the rubber meets the road and that coverage is actually needed or you need to go see a doctor, you need to get a procedure done, whatever, how is this going to take care of that? And I think that’s what people need to know and that’s what they need to strip out as far as all that.
And just start looking at it, okay, how often do you go to the doctor? Where do you go to the doctor? How do I want to get coverage? And now you start going through that type of stuff where you can start narrowing it down a little bit based off of what your comfort level is and what your coverage needs are. So I think when you start looking at that, it’s important to sit down with somebody and really just go through it and just start trying to understand it.
And again, if you can take a… I had a lady that was in the other day and she just got this pamphlet on Medicare. It was probably an inch thick booklet. And I’m like, my job is to take that whole stuff and basically simplify that so you can understand that and what you need to know. And again, that’s the type of stuff that you want to start looking at when you get to that.
So again, we always talk as far as just knowing what your options are, knowing what you’re going to pay with those options. This IRMAA thing, again, depending on what you’re going to pay, is extremely important. So again, when you start looking at that, that also applies to how you’re going to get your other coverage as well.
We talked a little bit the last time when Mike Van Zuiden was on as far as the different ways to get it, whether you go Medicare Advantage or you go with a MedSupp and add a Drug Plan or you have an Advantage Plan with that. So again, you start looking at these prices and looking at what you were paying, if you were paying anything previously, and decide which route you want to go to.
Mike Steigerwald:
Yeah, there’s certainly options. Like you said, there’s multiple paths and multiple combinations of what fits your scenario. So the biggest thing is just knowing that you have… It’s not going to be one size fits all and figuring out what’s right for you. How do you want your coverage and what are you willing to pay for it?
Nate Kreinbrink:
Right. We talk all the time as far as retirement planning, tax planning, reducing taxes and that, and one of the big things is Roth conversions. Again, our stance on where we feel with Roth conversions when it makes sense obviously is not going to change. Paying tax wants to not have to pay tax again. But when we do those Roth conversions, that increases your income in the year that you do that.
Well, we just talked as far as your income is going to be dependent on what you’re going to pay for Medicare. So again, when we are doing this, we are not just looking at, again, what you’re going to pay for tax in the year that we are doing that. We are looking at where you fall in some of these other levels. We always say surprise taxes and all these taxes that, again, when one decision is going to impact five other things.
This is one of those things that is impacted when you make the decision that most people don’t even think of when they’re starting to do that. You take money out of a 401(k) that’s tax deferred. You take money out of an IRA. Those those distributions are going to raise your income, which again, is what is looking at when you pay for your Part B premium.
Mike Steigerwald:
Important to take a holistic approach to all of this. No doubt.
Nate Kreinbrink:
Again, got any questions? Give us a call. Did want to mention real quick here before we run out of time that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of September will be donated to the food pantry at Information, Referral and Assistance. Mike, appreciate you joining me.
Mike Steigerwald:
Thanks, Nate.
Nate Kreinbrink:
Medicare’s a fun world, isn’t it?
Mike Steigerwald:
It sure is.
Nate Kreinbrink:
Again, Nate and Mike with NelsonCorp Wealth Management bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative, securities offered through Cambridge Investment Research, Inc., a broker-dealer member of FINRA SIPC.
Investment advisor representative, Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.NelsonCorp.com.