Retirement Planning

Important Figures for 2012

November 30, 2011  |  by Rosanne Rogé (Managing Director, Client Services)  |  in Estate Planning, Financial Geriatrics, Financial Planning, Investment Strategies, Retirement Planning, Rogé Report, SavingsComments Off

An integral part of our planning for clients is our continuous monitoring of new thresholds that affect retirement plan contributions, Social Security taxation and Medicare premiums. Listed below are the figures for 2012. There have been a few changes in pension plan contributions for the 2012 tax year due to cost of living adjustments (COLA) announced by the IRS. These changes are noted in bold.

2012 Retirement Plan Contributions

401(k), 403(b) and 457 Plans

      Maximum annual contribution to 401(k), 403(b) and 457 plans           $17,000

      Catch-up contribution for those age 50 and over                                  $5,500

      Max total for those age 50 and over                                                $22,500

 IRAs – Roth and Contributory: No changes

      Maximum annual IRA contribution                                                       $5,000

      Catch-up contribution for those age 50 and over                                  $1,000

      Max total for those age 50 and over                                                    $6,000

 SIMPLE – Employee Deferral: No changes                                         $11,500

      Catch-up contribution                                                                         $2,500

      Max total for those age 50 and over                                                   $14,000

 SEP-IRA                                                                                              $50,000

If you participate in any of the above plans, and can maximize your contributions, we recommend that you visit with your Benefits Department and take advantage of these tax-deferred savings.

Social Security

The good news is there will be a 3.6% cost-of-living adjustment in Social Security benefits beginning in January 2012, the first such increase since 2009.  That reflects  a rise in the Consumer Price Index (CPI-W) from the third quarter of 2011, largely due to increases in energy costs. Just as a reminder: The age at which one can collect full benefits is also going up.  For those born in 1941, full retirement is age 65 years and 8 months; for those born in 1942, it is 65 years and 10 months. For those born between 1943 and 1954, full retirement age is 66. For those born in years 1955 to 1959 the basic retirement age is 66 plus additional months, contingent on your birth year. Full retirement age will gradually increase to 67 for those born in 1960 and later. 

Please note:  If you decide to delay the receipt of your Social Security benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait, you may pay more for your Medicare Part B (medical insurance) and Medicare Part D (prescription drug) coverage. We are planning a follow-up article entitled “Medicare Primer for the Baby Boomers” that will give you some helpful hints on what you will need to begin the process of applying for Medicare.

The Social Security Administration has raised the wage base (or the amount of income against which Social Security withholding tax is applied) to $110,100, up $3,300 from 2011.  It’s estimated the change will impact about 10 million taxpayers.

Retirement earnings tests are imposed on individuals who are working and collecting Social Security benefits. For 2012, there have been a few changes. The maximum amount of earnings to still receive full benefits is as follows:

  • Full retirement age: No limit on earnings
  • In the year full retirement age is reached, the maximum goes from $37,680 to $38,880. For every dollar earned over this limit, $1 in benefits for every $3 in earnings will be withheld (or taxed). 
  • If you are under full retirement age, your earnings limit is rising to $14,640 from $14,160.  For every dollar earned over this threshold, $1 in benefits will be withheld (or taxed) for every $2 in earnings.  

Medicare Premiums

Medicare Part B premiums (medical insurance) have been revised for 2012.  The standard Medicare Part B monthly premium will be $99.90 in 2012, a $15.50 decrease in the 2011 premium of $115.40.  Also the Part B deductible will drop to $140, a decrease of $22. There are also slight reductions in Part B costs for other earnings brackets, indicated accordingly.

MAGI Range                                MAGI Range

for single taxpayers                 for couples filing jointly       Part B Cost

$85,000 or less                               $170,000 or less                       $99.90 ($15.50 less)

$85,001 – $107,000                       $170,000 – $214,000               $139.90 ($21.60 less)

$107,001 – $160,000                     $214,000 – $320,000               $199.80 ($30.90 less)

$160,001 – $214,000                     $320,001 – $428,000               $259.70 ($40.20 less)

Over $214,000                              Over $428,000                        $319.70 ($49.40 less)

Similarly, average premiums for popular Medicare Advantage plans will dip slightly in 2012. Under the terms of the Affordable Care Act, Medicare recipients will also benefit from free preventive care services and a 50% discount for covered prescription drugs if they spend enough to put them in the “doughnut hole.”

As always, if you have any questions regarding your financial planning, please do not hesitate to give us a call.  We’ll be happy to help you.

Medicare Primer for the “New Boomers”

November 10, 2011  |  by Rosanne Rogé (Managing Director, Client Services)  |  in Financial Geriatrics, Financial Planning, Investment Strategies, Misc, Retirement Planning, Rogé Report, SavingsComments Off

Medicare Primer for the “New Boomers”, by Rosanne Roge, CFP®, CSA®, RFGSM

Well, the Baby Boomers are beginning to enter the Medicare program and the momentum will be building rapidly. This is the crowd born between 1946 and 1964. As of 2011, that would make us between 47 and 65 years old. Currently, there are approximately 75 million “boomers” in the U.S. The Brits refer to their own version of the boomers as “the bulge, ” but I prefer boomers … there are more than enough bulges elsewhere!

Here is a brief primer on the four elements of Medicare and how they work.

Medicare Part A  Essentially, Part A is hospital insurance. Also called the Original Medicare Plan, it covers in-patient hospital stays, hospice care, home health care and stays at skilled nursing facilities. You’re eligible at age 65. Although most folks don’t pay a premium for Part A (because they already paid Medicare taxes during their working years), there are co-payments and a yearly deductible. Eligibility requirements are as follows:

  • You are receiving retirement benefits from Social Security or the Railroad Retirement Board
  • You are eligible to receive Social Security or Railroad benefits but you have not yet filed for them (i.e., if you are still working and your income exceeds the Social Security earnings limit, you’re better off waiting until full retirement age to collect your Social Security benefits, but DEFINITELY apply for Medicare)
  • You or your spouse had Medicare-covered government employment

Medicare Part B  This is the medical insurance component of Medicare. It covers doctors’ bills, outpatient care, physical and occupational therapies. It also helps cover some home health care and preventive services to help maintain a person’s health.  It generally pays 80% of the Medicare-approved amount for covered services. Part B is optional and there is a monthly premium and an annual deductible.  The monthly premium is based upon your modified adjusted gross income.  (Please see my article “Important Figures for 2012,” which contains these premium figures).

The Part B premium is deducted from your Social Security, Railroad Retirement or Civil Service Retirement check.  If you’re not collecting Social Security or other benefits, Medicare will send you a bill for the Part B premium every three months. 

If you did not sign up for Part B when you became eligible, you may be able to enroll during the General Enrollment period, which runs the first 45 days of every year. You can sign up at your local Social Security office or online at www.ssa.gov.

Medicare Part C  Starting in 1997, Medicare beneficiaries were offered the option of signing up for care provided by certain private insurers that are approved and under contract to Medicare. Best known as the Medicare Advantage Plan,  Part C is designed to close some of the “gaps” in Medicare coverage. By combining parts A and B (and possibly D) under a private wrapper, it effectively becomes Part C. It can include HMO, PPO, fee-for-service and special needs plans. These policies provide extra benefits, helping to pay certain fees such as co-pays and deductibles and a portion of your doctor bills that Medicare may not cover. Premiums for Medicare Advantage plans can vary considerably.

Note that Medigap insurance policies, which are provided directly by private companies, are not compatible with Medicare Advantage. If you have a Medigap policy, it won’t pay benefits should you elect to move into a Medicare Advantage plan.

Medicare Part D  This is the optional prescription coverage offered through private insurance companies approved by Medicare. There is a monthly premium, yearly deductible and a co-payment. As with Medicare Advantage, Part D plans can vary in cost and coverage so take the time to be sure that a specific plan meets your particular needs. To avoid paying a penalty cost later, individuals should enroll as soon as they become eligible.

                                                            *****

Below is a list of the information you will need to gather before you get in touch with the Social Security Administration to apply for your Medicare benefits. Try to remember to file your application approximately three months before you turn 65.  That’s important because, as noted previously, you run the risk of having to pay higher Medicare Part B and Part D premiums if you delay.

-  Date of birth

-  Social Security number

- Contact information, including emergency contacts

- List of prescription medications and dosages

- Contact information for your physicians and other care providers

- List of health conditions and treatments

- List of any medical equipment you may be using

- Key info: Details of the health care coverage you may have under your current or former employer, including policy, member and group ID numbers.

- Veterans information, if applicable

- Railroad retirement information, if applicable

- Bank account information, including bank routing number, if you would like to set up automatic Medicare payments from your bank if you are not collecting Social Security

This is just a brief outline of the Medicare program and its guidelines. Depending on your individual circumstances, you may be able to apply online. Additional information can be found on the Medicare website at www.medicare.gov.

Hope this information is helpful to the New Boomers!

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