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 Incorporated, a broker dealer, member FINRA, SIPC, Investment Advisor Representative, Cambridge Investment Research Advisors Incorporated. 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. Well, this is Nate Kreinbrink with today’s show. We have the last Wednesday in April. We had five Wednesdays in April this year, so had a few extra shows here, and April is moving right along. Hard to believe that it is the end of the month already. I know talking with some kids and friends that have been in college are getting closer to being done. And obviously high school, a lot of the senior proms for the area schools over the last couple weeks have happened and starting to see the grass greener, flowers up, mowing on a regular basis.
So again, it’s getting to that time of the year where again, things are starting to warm up a little bit and seeing that spring change, I guess you would say, with weather patterns, with temperatures and still having those swings, but we are getting closer to those warmer temps. And again, exciting time of the year. I know the spring sports schedule for the area schools is just kind of winding down and then transitioning into the summer schedules for those on the Iowa side and a lot of that different stuff. So again, fun time of the year, exciting time of the year. And hopefully you get to be able to get outside and enjoy that. Open up the windows, get some fresh air, because again, when we talk about it through the wintertime, this is a time we’re definitely excited about and anticipating.
So getting into today’s show, I wanted to talk a little bit. I know Mike Steigerwald and Andy Ferguson were on last week. Andy and I were on the week before that, kind of recapping the end of the tax season. Wanted to kind of switch gears a little bit and kind of talk a little health insurance, whether that’s while you’re working as you’re transitioning into retirement and what that means then when you hit that magical age of 65 or you have that separation of service.
For those individuals that are employed and have their health insurance through their employer plan, it’s usually pretty straightforward. You get kind of the list of your options there as far as which level you want to go with. Usually picking between a higher premium, lower deductible, or higher deductible, lower premium. And then wherever in between it is you may fall, vision, dental, whatever coverage you want with any of that. You pay a portion through every paycheck. Your employer pays a portion through your paycheck for each month that you have it. And that’s how you continuously go. You get the updates every so often, “Hey, do you want to change anything or we’re changing some of these plans?” But otherwise, it’s just basically on autopilot while you’re working.
Where we see the changes, and a lot of the questions come up is obviously when there is that change, when you have that life changing event, when you are changing from working and into retirement, what that means. And there’s a couple different options that you kind of need to be aware of and have a basic understanding to be able to make sure that you’re, for one, getting the coverage you need and getting it the most affordable way.
As you’re transitioning into retirement, it’s important to kind of remember what age it is that you are when you are retiring. If you’re prior to age 65, there’s going to have to be another step before you transition fully into Medicare. So say you retire at age 63, you’re going to need coverage from 63 till you turn 65. There’s a couple different options for you to look at. And again, there’s going to be different ones. I’m going to hit on kind of some of the top ones today, but where you’re kind of looking at is for one, you can stay on your company plan more than likely through the COBRA program.
This is a temporary fix. I mean, you’re only allowed to have that for so many months before then you would have to switch to something else. But again, when you’re looking at that, it’s usually keeping the same coverage that you had while usually keeping. The only caveat with it is that your employer is no longer paying any of that monthly bill. You are on the hook. You are responsible for paying 100% of what that coverage would cost. But again, you keep the same coverage. Anything that you had before usually continues on. Again, the difference is that you would want to understand that you are paying that full 100% amount of that premium. Nothing is coming from the employer, even though you are still on the employer plan. The other option that you would have would be transitioning over to a marketplace plan where you would buy a plan through that.
Usually those plans come in kind of tiers. You have a gold, a silver, and a bronze plan for a lot of the companies. And just the basic understanding of where those are. Usually the gold plans, you’re going to have a little bit lower deductible, but you’re going to have a higher premium. And then obviously switching down the line, you get to a bronze plan, usually a lower premium, but then a higher deductible. So again, it’s specific to different companies. It’s specific to where you live. It’s also specific to the amount of income that you’re going to have. So again, just because someone is on a plan in your area may not mean that you may be paying the same exact amount depending on some of the other variables. So there’s a little bit that goes into that.
When you’re looking at it, I mean, we talk a lot of times about tax planning, Roth conversions, especially if we’re going to continue to add income, if we’re going to continue to take distributions from our tax deferred retirement accounts, that’s going to increase your income, which may then change the amount that you would pay for your marketplace insurance.
So again, there’s a lot of things that kind of go into that. Again, it’s not like anything else we do. It’s not a one size fits all kind of answer that we’re going to look at, but again, there are different options for you to look at. And again, lastly, if it does fall into play, are you able to transition over to a spouse’s employer plan? Maybe through the working career, you and your spouse each had your own plan or your spouse was on your plan because it was better at the time, but maybe it’s again, something to look at. Can you transition to a spouse’s employer plan and join theirs? And if so, what is that going to look like? What is the coverage? What is the cost? What is actually included with it all? So again, three kind of main options that you’re going to want to look at as you transition if you retire prior to age 65.
Now, if you retire at age 65 and after, again, now we’re starting to look at the Medicare options. You won’t necessarily have to go through the marketplace, but you will go directly through the Medicare program. And again, signing up for that, you will have through your ssa.gov site directly through Social Security Administration to be able to sign up for your Medicare Parts A and B. This is considered original Medicare. Your part A, if you had employment for a considerable amount of time, you’ve been paying into that the whole time. So there’s normally no cost with your part A. Your part B premium is set each year. That is again, based off of income. Those get set usually at the end of October. You’ll know what that’s going to be costing for the following year. But again, you have your part A, your part B, original Medicare. It covers your doctor and your hospital visits. So that’s where that kind of comes into play.
And then you’d want to look at, again, where you’re going to get any coverage to kind of fill in the gaps. And we’ve talked at length that shows the differences between a supplement and a standalone drug plan, or if you go the advantage route where your drug plan is kind of lumped in with that advantage plan. So again, when you’re transitioning to those areas, that’s your main option. It is important to understand too, that if you are age 65 or older and you do retire, you don’t have to go on Medicare. You still have the option if your spouse has a creditable plan to be able to switch over to their plan and not necessarily go directly to Medicare. So again, that still is an option that you may want to look at.
And again, what we’re doing with all these is we’re comparing costs, we’re comparing coverages, we’re comparing networks if there are any, if it applies and kind of getting where we want to get that best coverage to. But again, it’s important to understand that you’d have to get coverage somewhere, whether it’s through Medicare or whether it’s through joining a spouse’s plan per se, or maybe you go, you retire from your longtime job, you go work part-time somewhere else and you’re able to get coverage through them. You work enough hours. Again, you can get coverage through there. You just have to have coverage during that time period because whenever it comes to time when you do apply for Medicare, they’re going to ask you, “Have you had coverage?” And if the answer is no, there may be a penalty that may be applied because of you not having coverage when you should have had that coverage.
So again, as you’re going through this, there’s a couple different time periods. There’s a couple different options with each one, but again, understanding that there are options and each option has, again, everything else. It has its pros, it has its cons, but again, understanding what those are and choosing what the best route is. So again, if you’ve got questions with any of this, feel free to give us a call. We’d be happy to sit down. It’s usually something that maybe isn’t quite on the top of mind when people are discussing or thinking about retirement. Insurance is out there, but again, they’re looking at it from different options and maybe not quite aware of what the actual price is for some of these different options.
And sometimes it has been a game changer as far as what the actual cost is and if it is affordable and makes sense to continue with the plans that they’re looking at. So again, as you’re going into it, like I said, give us a call. We’d be happy to kind of sit down, go over that with you. Again, understanding your options, understanding what it is that is best for you, kind of makes that decision and that transition into that next phase of your life a lot easier.
Before I do run out of time here, I do want to mention that every month NelsonCorp is featuring a charity of the month. For April, we are focusing on the Clinton Area Substance Abuse Council. Again, this is Nate Kreinbrink with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks again 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 Incorporated, a broker dealer, member FINRA, SIPC, Investment Advisor Representative, Cambridge Investment Research Advisors Incorporated, 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.