Tips for Navigating Medicare Open Enrollment

Medicare’s annual open enrollment period closes on December 7 this year.  During open enrollment, Medicare enrollees can shop for new prescription drug (Part D) or Medicare Advantage coverage. Medicare enrollees may be able to save hundreds of dollars on premiums and out-of-pocket costs by doing a checkup on their coverage and making necessary changes during the open enrollment period. Surprisingly, few enrollees bother to take advantage of this opportunity to review their existing coverage or make changes.

Morningstar contributor Mark Miller sat down for an interview recently at to discuss the potential benefits of annually reviewing your Medicare coverage, and he offers several useful tips to help navigate through the open enrollment period.

If you haven’t yet reviewed your Medicare enrollment options, or you weren’t even planning on doing so, it might help you to take a few minutes (about 8, in fact) and watch the interview to see if there might be something you can do to save money on your health care next year.  You can watch the full interview here.  I hope it helps!

Do You Know These Social Security Rules for Retirees?

Social Security is the largest public benefits program in the United States, paying money to more than 59 million beneficiaries every year.  It’s also one of the most complicated.  So it helps to know how the system works. A good article at covers 5 rules about Social Security retirement benefits every retiree should know:

How to Qualify. You must have 40 retirement credits, which equals 10 years of employment, to qualify for retirement benefits. The years spent working do not have to be consecutive, but a failure to earn the 40 credits will keep you from collecting. Even if you were out of the workforce for a while, you may still qualify for benefits.

When to Claim. You may begin taking your retirement benefits between the ages of 62 and 70, but the age you may receive a full retirement benefit will vary between age 66 and 67 (full retirement age), depending on your birth date. Your monthly benefit will be less if you elect to begin taking it before your full retirement age.  Your monthly benefit will increase every year that you delay claiming beyond full retirement age.

Working During Retirement. Social Security will be the main source of income for many retirees, but it may not be enough to cover all of one’s monthly living expenses. For many retirees, working at least part-time in retirement is a necessity. If you take your benefits before full retirement age, but still work, you may face a reduction in your monthly benefit if you earn more than the applicable income limits. Once you reach full retirement age, you can earn as much as you like without a corresponding benefit reduction.

Benefit Maximum. The most a person can receive monthly in Social Security benefits this year is approximately $3,500, but only if the recipient qualified for the maximum benefit at full retirement age and then waited until age 70 to begin collecting.

Benefits Are Taxable. Depending upon your combined income from all sources, up to 85% of your Social Security benefits may be subject to income tax. And it doesn’t take a lot of income to get to that point.

If you are nearing retirement age and thinking about applying for your Social Security benefits, or are already receiving them, this article contains good information you need to know. Click this link to read the entire article.

Social Security Introduces Digital “My Social Security Account”

With the advent of new digital technology, you may now manage your Social Security account online using your own personal “my Social Security account.” Setting up a “my Social Security account” is quick, secure, and easy. Over 18 million Americans have already done so. A new account is opened approximately every 6 seconds.  A “my Social Security account” will give you the tools to manage the complex issues surrounding social security.

With a personalized “my Social Security account,” you can:

  • Get an instant, personalized estimate of your future Social Security benefits;
  • Verify the accuracy of your earnings record;
  • Apply for retirement, disability, spousal, and Medicare benefits;
  • Check the status of your benefit application;
  • Utilize one of Social Security’s benefits planners to help you better understand your options as you plan for retirement;

And much more.

The site is optimized to function on home computers, tablets, and smartphones so you can access your personalized account from anywhere.

You can sign up today at

3 Popular Retirement Planning Loopholes That May Be Closed

Advisers have plenty of tricks and techniques to help clients maximize retirement savings and income, and minimize taxes. Many are considered “loopholes” in existing laws that advisers and their clients exploit to great advantage. Unfortunately, when use of these loopholes becomes too widespread, the government steps in to close them. This may happen soon to 3 popular retirement planning techniques according to a recent Reuter’s article.

The “stretch” IRA. Beneficiaries of an IRA or other retirement accounts have the option of taking distributions from the inherited account over their remaining life expectancies. And in the case of Roth IRAs, this means a lifetime of tax free distributions. Lawmakers on both sides of the political isle don’t like this. They believe that retirement accounts should be for retirement – not a tax windfall for heirs.

Law changes have been proposed in Washington that would require the balance of an inherited retirement account to be paid out to beneficiaries within 5 years of the account owner’s death. In the case of a traditional IRA, the acceleration of distributions will increase the income taxes that beneficiaries will pay on the distributions.  People contemplating Roth conversions for the benefit of children or other heirs may need to rethink this strategy if the beneficiaries have to withdraw the funds within 5 years.

Back-door Roth IRA conversions. The law creating Roth IRAs contains restrictions that prohibit certain high-income individuals from contributing to a Roth IRA. However, the law contains a loophole that allows these high-income earners to make a non-deductible contribution to a traditional IRA, and then convert the funds to a Roth IRA. In a typical transaction of this type, zero income tax has to be paid on the conversion. Once converted, the funds grow income-tax free and no tax is due on distributions from the account, which lawmakers believe hands beneficiaries an unintended tax-free windfall.

Aggressive Social Security benefit claiming strategies. One of these likely to be ended is known as “file and suspend.” Married couples can claim benefits based on their own work record or on the work record of their spouse. A person who reaches full retirement age (currently 66) can apply for their own retirement benefit and then immediately “suspend” the application so that their monthly benefit continues to grow until they reach age 70, when they must begin collecting. If their spouse is also at full retirement age and hasn’t claimed their own retirement benefit yet, the spouse can apply for a spousal benefit, which can be as much as ½ of their partner’s monthly retirement benefit. He or she can collect the spousal benefit until age 70 and then switch to their own monthly retirement benefit.

Experts opine that people who are already receiving Social Security benefits or those close to retirement age probably don’t have to worry. The government isn’t likely to take back something that has already been given. Changes will likely have to be phased in to avoid political backlash. Government gridlock may also prevent anything from happening soon.

See Liz Weston, Three retirement loopholes seen likely to close, Reuters, June 29, 2015.

Court of Appeals Upholds Rejection of SSI Special Needs Trust

The 8th Circuit Court of Appeals recently upheld a decision by the Social Security Administration to reject a type of special needs trust, known as a “(d)(4)(A) trust” (a trust designed to hold the assets belonging to a disabled person). A (d)(4)(A) trust is commonly used in special needs planning to qualify a disabled individual for Social Security supplemental income (SSI) or Medicaid benefits. This type of trust must be created by a disabled individual’s parent, grandparent, guardian, or a court, to hold the disabled individual’s personal funds.  The disabled individual cannot establish this type of trust for themselves.

In Draper v Colvin, the parents of 18-year-old Stephany Draper, who had suffered a traumatic brain injury in an automobile accident, attempted to create a (d)(4)(A) special needs trust to hold and administer the proceeds of a personal injury settlement for her benefit. Stephany had granted power of attorney to her parents to settle her personal injury claim and transfer the settlement funds to a trust on her behalf. Her parents, acting individually, established the trust “pursuant to 42 U.S.C. § 1396p(d)(4)(A).” They then transferred the settlement proceeds (more than $400,000) into the trust by authority of the power of attorney.

In reviewing her claim for benefits, the Social Security Administration found that, despite the express language of the trust agreement to the contrary, Stephany’s parents were acting as her agents and not as her parents when they created the trust, and an agent is not a person authorized by the statute to create a (d)(4)(A) trust. Therefore, the settlement proceeds were countable assets in determining Stephany’s eligibility for SSI benefits. SSA rejected her claim because the settlement proceeds put her over the asset limit. The 8th Circuit Court of Appeals affirmed the SSA’s denial of benefits.

The case turned on a very technical interpretation of the Social Security rules in regards to the language of the trust agreement and the way in which the trust was created and funded. The case underscores how careful one must be when it comes to qualifying for governmental benefits such as Medicaid or SSI and how easy it can be to run afoul of the rules despite careful planning.

You may read the entire decision here.

Sad, Maddening, And Possibly the Longest of Long Waiting Lines.

The Social Security Administration judges who hear appeals for disability benefit claims are a staggering 990,399 cases behind.

According to a recent Washington Post story, the Social Security Administration first fell behind during the administration of President Ford – almost 40 years ago! The primary factors identified in the story as contributing to the backlog: A system that is too big to fix, outdated rules and procedures, and the “Dictionary of Occupational Titles,” last updated in 1991. Included among its list of jobs performed by working Americans are “telegram messenger,” “calculating machine operator,” and “switchboard operator”. The Dictionary does not mention the Internet at all.

At this point, an average disability claim takes over a year before a decision on benefits is rendered by an administrative law judge, during which applicants often wait without any source of income. It’s a long article, but one worth reading.

See: Washington Post. The Biggest Backlog in the Federal Government, October 18, 2014

New Social Security Booklet Released

The Social Security Administration has released a handy booklet entitled Fast Facts & Figures About Social Security, 2014.  From the Preface:

Fast Facts & Figures answers the most frequently asked questions about the programs administered by the Social Security Administration (SSA). It highlights basic program data for the Social Security (retirement, survivors, and disability) and Supplemental Security Income programs. Most of the data come from the Annual Statistical Supplement to the Social Security Bulletin, which contains more than 240 detailed tables. The information on the income of the aged is from the data series Income of the Population 55 or Older. Data on trust fund operations are from the 2014 Trustees Report.

The tables and charts illustrate the range of program beneficiaries, from the country’s oldest to its youngest citizens. In all, about 63.2 million people receive some type of benefit or assistance.

It’s definitely not a “how-to” booklet – it’s not going to help you if you have questions regarding your eligibility for benefits, for instance. But it will tell you pretty much anything you would want to know about the Social Security system itself, including: 55% of adult Social Security beneficiaries in 2013 were women; and a full 65% of aged beneficiaries received at least half of their income from Social Security in 2012. Access the booklet here, to read or download.