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Posts Tagged ‘insurance’

No doubt about it.  This has been a very rough winter that we lived through here in the Boston area.

While the calendar has turned to spring, many of us are still trying to fix the damage left behind by snow and ice from so many winter storms.

As I write this it still seems like we have imported the weather that Seattle or Portland, Oregon might be know for (even if it is true that Seattle has more sunny days than Boston). It is cold, overcast and wet.  Not the best days for cycling (my other passion besides Spencer and Kristin hanging out on the side panel here).  Nor is it good weather to hang out on the back deck which is something that I like to do during my lunch breaks.

But even if the weather were cooperating, I would not be able to use my deck. Why?  Well, let’s just say that Mother Nature left me a souvenir and a reminder about her power.

With all the snow and ice that we got, it was hard to keep up and one too many snowstorms (coupled with a builder who decided to save money on lag bolts) finally collapsed the deck sometime in February.

I came home to a note from my neighbor – Don’t go out on your deck.  Not that I was planning to go out in the middle of a dark night. But that is where the gas grill was located and I guess if I was a grilling fool I might go out and it would have been a long way down after that first step.

Mother Nature is still flexing her muscles especially along the Mississippi River.  Now my deck is a small thing compared to the devastation left behind in the wake of multiple mega-tornadoes that crossed through the South sort of like General Sherman’s March to the Sea and swollen rivers now drowning hundreds of acres of farmland and threatening homes along the Mississippi.

But it is instructive.

A Teachable Moment

Let’s just say that you shouldn’t leave anything to chance.  Sure, you may have a homeowner’s policy and you renew it each year.  But don’t assume that the coverage that you had last year is going to help you this year.  And you really need to review your policies with a qualified agent (or a good financial adviser) regularly.

Do you really have the right coverage?  After you file a claim is not when you want to find out that you’re not covered.

I’m reminded of my neighbor – the same one who left me the note – who had his basement flooded after an ice storm and the power and his generator both went out.  He ended up with an indoor pool in his basement when the sump pump stopped working.  He didn’t know that he could have had a rider on his policy to cover sump pumps.  That was probably a $5,000 mistake for a $50 to $100 rider on his policy.

The Insurance Claims Process

So after my little incident, I called my agent to file a claim.  The insurance company had been very prompt in sending out paperwork and an adjuster.

Because it was tax season, I was unable to get way from the office to meet with the adjuster.  I described the damage to him including the generator located under the deck and the gas grill that was on it. He took his notes but pretty much did his thing when he inspected the property.

In the end, the insurance company adjuster filed his estimate with the insurer and I received a copy.  The insurer quickly cut a check for the amount shown on the estimate.

But I reviewed the estimate and noticed discrepancies.  The dimensions of the deck on his estimate were smaller than the actual size.  There was no note about the higher cost composite decking material that I had.  Instead the estimate covered replacement with regular wood. There was no notation about the damages to the generator and electrical work needed to reinstall it.  Nor was there any allowance for the damages to the items on the deck.

Now I understand that trying to inspect damage when snowbanks are four feet high around the deck and the deck itself is covered makes it really difficult to get a proper view of the damage. Nothing nefarious is going on here. And to their credit, the insurer did note that they would send out the adjuster again.

But there is no incentive on the part of the insurer or their adjuster to come back out.  As far as they are concerned the property damage claim is settled.

This is why it is all the more important for you as a homeowner and policyholder to protect yourself.

How?  Get professional help on your side.

Enter the Public Insurance Adjuster

OK.  You like your insurance company. I’ve seen the ads.  They offer great service and rates. The ads are cute sometimes. And in most cases, the insurance company estimate is more than fair.

But you owe it to yourself to get a second opinion. (Heck, that’s good advice on most things in life especially those concerning money).

This is where you call in the help of a Public Insurance Adjuster.

In my case, I called on the help of  Matthew Alphen of Lynnfield, Massachusetts.  I first met Matt years ago at a Kiwanis event and stay connected to him through BNI connections we shared.

Like other Public Insurance Adjusters, Matt is licensed by the state’s Division of Insurance. He represents consumers with claims.

He came out and did his inspection and his cost estimate is higher.

Granted the deck wasn’t covered in snow by that time so he didn’t have to trudge through the snowbanks that once surrounded it.

Granted he and other public adjusters have an incentive to provide an estimate that may be higher than the first because of the way that he gets compensated. Like most public adjusters he receives ten percent (10%) of the amount a homeowner collects from the insurance proceeds.

But that also means he has an incentive to do a thorough job when representing a homeowner.

Reasons for the higher estimate:

  • He used correct dimensions
  • He noted the materials used
  • He researched the city building code and noted changes that would require upgrades needed once the deck is rebuilt

What You Can Do to Protect Yourself

Like I said: This is a teachable moment.

So here is a short list of actionable items to consider when dealing with insurance for your home. It can also be applicable for other types of insurance claims as well such as autos, rental property and business.

  • Review your policies regularly with your agent.  (While I do not sell insurance, I do help clients review their policy terms and coverages as part of my financial planning services). This is especially important to make sure that the agent has a correct description of the property and any changes or additions made are properly covered.
  • Make sure your coverage includes a rider for inflation protection.  Without it you may out-of-pocket to cover more of the repair costs yourself.
  • Make sure your coverage also provides for updated building code protection so that any repairs that need to be done to meet the new rules are covered.  Otherwise, it’s going to be out of your pocket.
  • When you have a damage claim call a public insurance adjuster for a second opinion.
  • Get a financial plan in place.  A good fee-based or fee-only financial planner can provide a second set of eyes to help you review and find the right kinds of insurance coverage.
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I know that it’s been a while.  And for those who have been dropping by, I appreciate your continued support. Hopefully, others will find their way back and find the fresh perspective enlightening.  In a world of confusion, my mission continues to be to bring to light fresh ideas on how to plan better and wiser for college funding, divorce, retirement and investing.

As I noted in my last post, I became a registered tax preparer and member of the National Association of Tax Professionals.  Through my company Clear View Wealth Advisors, I had acquired the assets and client base of XtraRefunds, an income tax preparation service located in South Lawrence, Massachusetts.

I Survived

My last post was titled “adventures of a tax preparer” and I had hoped to provide some ongoing commentary on how things were going.

Unfortunately, getting the business relocated to new offices, organizing the IT and systems, learning the software and providing tax prep services to walk-in clients took up most of my time leaving me with very little brain power to provide any commentary here.

This has truly been a learning experience.  And I truly believe that it provides me with added tools and perspective to be a better financial adviser to individuals and business owners.

Bringing Financial Planning Services to the Masses

One thing that I had learned as a banker (I was a mortgage banker for more than 18 years you may recall) is the truism of the expression that a bank will gladly lend you money when you don’t really need it.

The same holds true for financial planning.  As a former representative of a wirehouse broker-dealer, I found that everyone wanted to give advice to the very rich and those who are well-off. But more often than not those who had less than some minimum amount of money were shunned and pretty much told “come back when you have more.”

That’s why I formed my financial planning practice as an independent registered investment adviser firm.  People need help at all stages and should not be left out in the cold just because their bank balances don’t have enough zeroes.

This is what I noted on my website and what I truly believe.

So I saw the integration of a tax preparation service as a way to help individuals by being there to offer financial planning tips and services.

Still Working Through the Growing Pains

Time will tell if my ideas in action make sense.

But from the stories that I heard I know that people of all income and education levels can benefit from having access to an objective financial professional who is not going to simply try selling them something.

Cost of Avoiding a Bad Mistake: Priceless

So I created financial plan program options for folks to use like the Advisor-On-Call program: pay one fee for the entire year and get access to me to answer any question on any issue during the year.

I know the need is there. Someone came in to see me and told me about her sister who lost everything when her apartment in Worcester burned down.  She didn’t have any renter’s insurance.  This was  a learning experience and I was able to teach the client why she needed the same type of coverage for herself.

Back in the Saddle

Now that tax season is over and the calendar has turned to spring (despite the weather I see outside my window), I am back on the bike saddle as well.   It’s usually on these long rides I do solo or with my cycling club that I get to clear my head and come up with new topics to write about here in the blog or in my newsletter.

Some of the wisdom that I expect to share with you over the coming weeks:

  • How to build a better retirement income plan using the bucket strategy
  • How to save on the cost of college even if your kid is a senior in high school
  • How to lower the cost of divorce in the long-run by selling the family home
  • How to get better yield outside of a bank money market

Thanks for stopping by and please keep on checking in.

And as always, your comments are greatly appreciated as are any questions or issues or story ideas that you want me to address.

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Lately, the media has been dominated by the compromise on US federal tax policy that has been brokered by President Obama that will lead to an extension of current income tax rates, lower estate and payroll tax rates and an extension of unemployment benefits.  It is very likely to pass almost intact and free up the logjam that has hampered this lame duck session of Congress.

Uneven Recovery

From the point of view of a resident of Main Street, the economy is still ailing.  Consumer demand is still off.  A stubbornly high unemployment rate persists.  Real estate values continue to drop in most markets and at best have settled in at levels not seen in nearly a decade. In general, it’s not a pretty picture.

On the other hand, business profits, productivity and cash (now sitting at about $2 Trillion) are up. And this has been reflected on Wall Street by a healthy rise in most major indices.

So the prescription for getting out of this funk is a familiar one: Low taxes leads to growth.  Sometimes, though, conventional thinking can be dangerous.

Economic Theory

From a purely economic theory point of view, there are really only three participants in the economy who can spur demand and ultimately growth: consumers, businesses or government (at all levels).

With consumer spending hampered by unemployment and nervousness about what assets, income and jobs that they may have, you can’t really expect consumers to be leading us to growth.

While businesses have the cash and the profits, they seem to be in wait-and-see mode “keeping their powder dry.”

So that leaves governments at the local, state and federal level. Unfortunately, most local and state governments don’t have the resources or the legal authority to continue deficit spending so that leaves us dependent on the federal purse to help spur the economy.

Tax Package as Stimulus

The tax package compromise as proposed is not perfect.  Like any piece of legislation, it is a mash-up (though the versions seen on Glee are usually much more fun to watch).  It certainly provides the potential for much-needed economic stimulus.

By putting cash in the pockets of the persistent unemployed, it will help keep households running and bolster their local economies when cash is circulated.  By reducing payroll taxes on those who are working, it will also lead to direct spending in much the same way that the under-reported stealth “middle class tax cut” of 2010 did.

By patching the Alternative Minimum Tax (AMT) for another year, more than 21 million households were protected from an unexpected hike in their personal tax burden (estimated at around $3,000 to $5,000 for each family) which might have choked off funds available to circulate in the rest of the economy for goods and services.

The big question will be whether the upper income brackets will use their tax breaks on income and estate taxes to pump up the economy.  Certainly, it could help with high-end consumer goods, vacation homes, and furnishings.  But as much as these purchases will help jewelers, real estate agents, car salesmen and clothing retailers, there’s only so many shoes, watches, cars and homes that someone can consume.

Good Politics May Make for A Bad Economy Long-Term

But will this create jobs?  How quickly can an expected $100,000 cut in income taxes for the richest 1% of Americans translate to business investment that creates jobs?  And at the end of the day, does this potential added economic activity keep us on track for growth?

These are the kinds of questions that probably prompted credit analysts at Moody’s Investor Service, a credit rating company, to put out a cautionary note about the possible negative impact on federal finances with its ultimate impact on consumers.

From a purely political point of view, this may be a good deal.  From a short-term economic stimulus point of view, it provides some benefits.  In the long-term, though, there is a real risk that the nation’s strained finances will take a hit to its credit rating leading to higher borrowing costs for the government directly and for all consumers seeking credit as well.

The Rich (And The Government) Are Different

Why?  Well, ask any mortgage borrower.  When you have pristine credit, it’s easier to borrow money at the most favorable rates.  Over the long-term, borrowing $200,000 at 6% will cost you more than borrowing the same amount at 4.5%.

On the other hand, when a borrower’s credit score is lower – even by a little – then the options available can dry up or cost more.

This is what may happen as we move forward and digest the impact of this tax plan.  It ultimately is kicking the can down the road for others to deal with.  The estimated price tag on the plan is between $700-billion and $900-billion to be added on top of a trillion-dollar plus federal deficit. And the proposals for cutting the deficit prompted much gnashing of teeth and proclamations of lines in the sand indicating that there is no likely easy compromise on their recommendations especially in a grid-locked Congress next term.

US Credit Score on Watch List

Is there an immediate problem?  No.  As long as we still have investors who are confident that they will get paid back on the money that they lend us through their purchase of our government’s debt.  Unlike the mortgage borrower in my example, the government can vote to increase its credit limit and authorize the printing of cash. Not something that your typical consumer or state government can do.

And investor’s in the marketplace seem to be OK with that as seen by the cost of insuring against default through derivatives. An insurance contract to protect $13.-million worth of U.S. government debt currently costs €41,000 a year, according to data from credit-information firm Markit Group. That is down from €59,000 in February of this year, and far less than in early 2009, when it cost €100,000.

But this can turn on a dime.  Ask those folks in Greece.  They are painfully aware what can happen when investors and banks lose patience and pull the plug and the credit line.

Yes, Greece is not the US, which has the benefit of being the world’s reserve currency.  But that should not lead us to complacency and hubris.  We need more than conventional thinking and political party maneuvering.  We need the kind of shared sacrifice that the Greatest Generation exhibited which won the peace in a global conflict and pulled us out of the other greatest global economic calamity of the last century.

Either we need to make the tough choices now while we can or we will be forced to pretty much at gunpoint down the road.  That’s not a pretty picture nor a way to grow in the long-term.

Maybe we can get the folks from Glee to work on a musical mash-up of sorts that will make this happen.

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It’s easy to get tripped up in retirement.  I’m reminded of the expression by the octogenarian to the recent newlywed fretting about life but rejecting out of hand the advice of his experienced senior:

A long time ago I was where you are now.  And later you’ll be where I am now.  But just as you haven’t been your age before, I’ve never been old before.

So for new retirees who “not been there or done that” it’s a whole new world filled with possibility and pitfalls.

Transitioning

Most retirees have an imperfect vision of retirement at best.  And if it hasn’t been discussed or communicated, it could be vastly different from that of your spouse.

Finding meaning in a post-work world can be a real challenge.  If your identity has been wrapped up in what you do, then you might now feel lost.  Your social networks might change.  Your activities might change.

It’s important to reassess your values and envision how you want to live in this next chapter of your life.

Initially, there may be more travel to visit family, friends or places.  You may want to tackle that “bucket list.”

But to live a truly fulfilling and rewarding retirement may require you to take stock in yourself, your values and what gives you meaning.  You may benefit from working with a professional transition coach or group that can help guide you through this period of rediscovery.  One such resource can be found here at the Successful Transition Planning Institute.

Lifestyle Budget

Typically, most retirees may take the rule of thumb bandied about that you will need from 60% to 70% of your pre-retirement income to live on in a post-retirement world.  This is because it is assumed that many expenses will drop off:  business wardrobe, commuting to work, professional memberships, housing, new cars, etc.

The reality is far different.  According to research conducted by the Fidelity Research Institute 2007 Retirement Index, more than two-thirds of retirees spent the same or higher in retirement.  Only eight percent spend significantly lower and about 25% spend somewhat lower. The Employee Benefit Research Institute  reported in its 2010 Retirement Confidence Survey that while 60% of workers expected to more than half of retirees didn’t see a drop in retirement expenditures while 26% of this group reported that their spending actually rose.

It all depends on your goals, lifestyle and what curve balls life throws at you.  If you have adult children who end up in a financial crisis of their own caused by job loss, health issues or divorce, you may be spending more than you expected to help out. Maybe the home you live in will require higher outlays for maintenance or to upgrade the home so you can live there independently. In reality all of that travel and doing things on your bucket list will cost money, too.  So it’s more the rule than the exception to expect spending to increase while you’re still healthy to get up and go.

Over time, the travel bug and other activities will probably decline but even after that these may be replaced by other expenses.

Healthcare

There is an old saying that as you get older you have more doctors than friends.  This is a sad reality for many including my parents.

My father is on dialysis and has complications from diabetes.  His treatments probably cost Medicare (and ultimately the US taxpayer) more than $30,000 each quarter as I figure it.  He takes about 13 prescriptions each day and enters the dreaded “donut hole” about mid-year each year. At one time their former employers (a Fortune 500 company) provided medical insurance benefits to retirees but that became more and more cost prohibitive for their employer and for my parents as premiums, co-pays and deductibles rose.  So now they rely on a combination of Medicare and Blue Cross/Blue Shield and a state program called Prescription Advantage.

As private employers and cash-strapped state and municipal governments tackle the issue, you can expect to pay more for your health care in retirement.

Wealth Illusion

It’s not uncommon to feel really rich when you look at your retirement account statements.  (Sure, the balances are off where they may have been at the peak but it’s probably still a large pot of money). The big problem is that retirees may have no comprehension about how long that pot of money will last or how to turn it into a steady paycheck for retirement.

In reality the $500,000 in your 401k or IRA accounts may only provide $20,000 per year if you plan on withdrawing no more than 4% of the account’s balance each year. Then again if you take out more early on in retirement, you could be at risk of depleting your resources quickly.

Misplaced Risk Aversion & The Impact of Inflation

So as you get older, you’ll be tempted to follow the rule of thumb that more of your investments need to be in bonds. Although this may seem to be a conservative approach to investing, it is in fact risky.

Setting aside that this ignores the risks that bonds themselves carry, it is ignoring the simple fact that inflation eats away at your purchasing power.  Even in a tame inflationary world with 1% annual inflation, a couple spending about $80,000 a year when they are 65 will need over $88,000 a year just to buy the same level of goods and services when they turn 75.  Given the potential for higher inflation in the future that may result from a growing economy and/or current monetary policy, investments need to be positioned to hedge against inflation with a diverse allocation into stocks and not just bonds even when in retirement.

The other risk is trying to play catch up.  As a retiree sees the balances on his accounts get drawn down, he might even be tempted to “shoot for the moon” by investing in illiquid investments like stocks in small, thinly traded markets or in sectors that are very speculative.

Ball games are one by base hits and consistency on the field and at the plate.  Home runs are dramatic but not a sure thing.

Underestimating How Long You’ll Live

We all want a long and productive life.  Many will even say that they don’t want to live to be a burden to their families.  But here again the reality is that most folks do a bad job of guessing how long they’ll live.  A report by the Society of Actuaries notes that 29% of retirees and pre-retirees estimate that they’ll outline the averages but in fact there is a 50% chance of outliving them.

So while they may have enough resources to carry them through the average life expectancy, they will not have enough when they live longer than the averages. And if a couple attains the age of 65, there is a better than 50% chance that at least one of them will live into their 90s.

Given the fact that most women become widows at the age of 53 (Journal of Financial Planning, Nov. 2010), this has a big impact on the availability of resources for retirement.  Too often, a short-sighted approach to maximize current retirement income from a pension is to choose the option that pays the highest but stops when one spouse dies. All too often this puts the widow who may live longer without a reliable source of income to provide for her.

Conclusion

Too often people underestimate how long they will live in retirement, how much they will actually need for living in retirement and how to invest for a sustainable retirement paycheck using appropriate product, asset and tax diversification.

Many people do not save enough for their own retirement.  The social safety net providing support for old age income and healthcare may not be enough to maintain a desired lifestyle.  Women need to understand the risk of living long into retirement and manage resources accordingly.  And because more than 40% of Americans are at risk of retiring earlier than expected because of job loss, family care needs or personal health, there is a real need for proper planning to address these issues.

While retirees will benefit from having a good plan and road map before the final paycheck ends, it’s never too late to start. And for the newly retired with the time to address these issues, now’s as good a time as any to speak to a qualified professional who can help.

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Recent academic research by Gordon Pye on the impact of emergency withdrawals on retirement planning may put into question the rule of thumb used by many advisers to determine a safe, sustainable withdrawal rate.

For many investors and their financial advisers, the accepted rule of thumb has been to withdraw no more than 4% of an investment portfolio in any given year to provide a sustainable income stream when in retirement.

Is this rule of thumb reasonable given the potential impact of personal emergencies?  And how can a withdrawal strategy be created to account for them and the impact of external forces like a market correction or longer bear market?

Cloudy Crystal Ball

Analytical tools and software have come a long way but even contemporary tools can’t account for everything.

I spoke with an estate attorney the other day.  We were talking about the many challenges for helping clients plan properly for contingencies in the face of so many internal and external variables.

What he said is worth keeping in mind when thinking about any sort of financial planning:  If you tell me when you’re going to die, I can prepare a perfect estate plan for you?

The same sentiment can be adapted for retirement income planning.  Sure, if you tell me how long you’ll live in retirement, how much it will cost each year and when you’re going to die, I can tell you how much you’ll need.

In reality, this is unlikely.  More often than not, the crystal ball is cloudy. So you have two choices here: Wing it or Plan.

Winging it is pretty simple. Nothing complicated.  Simply keep shuffling along. Sometimes you’ll scramble. Other times you’ll be “fat and happy” for lack of a better phrase.

Planning, on the other hand, is a lot like work.  It requires assumptions and conversations.  It may even require bringing in others to help create the framework.

While nobody wants another job to do given an already busy day, there is an upside to investing the time here: Peace of mind.

What the Doctor Says:

Here’s a summary of what Dr. Pye wrote recently in his article.

  • In retirement, you may never have an emergency or you may have one or more.
  • The timing and extent of these emergencies is unknown.
  • While a retiree may be able to reduce the damage caused by a bear market maybe through market growth, other emergencies may require withdrawals that siphon money away from the investment pot that can never again be used to help repair the hole left by that withdrawal.
  • The timing of these emergency withdrawals may cause a retiree to abandon a market strategy at an inopportune time.

The biggest unknown?  Health care is the biggest likely emergency on your retirement budget.  These can be related to your own health or even an adult son or daughter.  Other emergencies may be caused by catastrophic weather (mudslide, wind or flood damage to your home), the extended loss of a job by a son or daughter or a divorce compelling you to help out.

In other research by Dr. John Harris supports the notion that what matters most to all investors – and retirees in particular – is the sequence of returns not simply the average rate of return on a portfolio.

Intuitively, we understand this.  A bird in the hand is worth two in the bush.  Cash now is better than cash later (which may be a deterrent against planning now for a future need).  If you were to just retire and the market takes a nosedive as you are withdrawing funds, you would be in tough shape because you have a smaller base that is invested that has to do double (or triple) duty.  The amount of appreciation needed to make up for the hole left by the withdrawals combined with market losses would be near impossible or require an investor to take imprudent risks to try to regain lost ground.

So what’s an investor to do?

  1. Save more – easier said than done but this is really key or otherwise choose a different lifestyle budget.
  2. Reduce initial withdrawal rates from 4% to 3%.
  3. Follow an “endowment spending” policy instead of a simple rule of thumb.
  4. Invest for income from multiple sources (dividend-paying stocks as well as bonds).
  5. Stay invested in the stock market but change up the players.  Not even a championship ball club has the same line up from game to game.  As markets change, you need to add more tactical plays into the mix of asset types
  6. Separate your investments into different buckets:  short-term lifestyle budget, medium-term and longer-term.  Each of these can have different risk characteristics.
  7. Keep a safety net of near-cash to cover lifestyle needs for 1 to 2 years.
  8. Monitor the buckets so that one doesn’t get too low or start to overflow.  This will require moving funds from one to the other to maintain consistency with the targets.
  9. Don’t let your insurances lapse.  Insurance is there to fill in the gap so you don’t have to shell money out-of-pocket.  Here you want to regularly recheck your homeowner coverage for inflation protection riders, cost of replacement and liability.  Check your coverage and deductible limits for wind, sump pump and other damage.

 

 

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November is around the corner. Besides worrying about turkey dinners and seating arrangements for Thanksgiving, it’s that time of year again to review your health care options.

If you’re retiring, already retired or have an elder parent in this category, you should get familiar with the options available for health coverage.  Since most health care dollars are used by seniors for doctors, medical services and prescriptions, it’s important to get this right to avoid burning a hole in your pocket.

Most seniors are familiar with Medicare.  For a small monthly premium, the government-managed plan will cover a range of medical and doctor services.  This is usually through Medicare Parts A and B.  Some seniors also enroll in Medicare Part D (for Drugs or for Donut hole) which covers the cost for prescriptions (at least those outside of the dreaded donut hole.

Medicare Advantage (MA) is Medicare Part C.   These are plans offered by private insurance companies and are approved with Medicare to provide consumers with all Medicare services. The government pays the insurer a set amount to provide the services of Medicare Parts A and B.  Many of these plans also offer drug coverage.  In this combination, you will not need to buy separate drug plans or a Medicare supplement known as MediGap.

Beginning now and going through December 31, you (or your parents) have an opportunity to enroll or change coverage.

Things to Consider

  • Medicare Advantage May Cost Less:  These plans must cover the same services that traditional Medicare offers.  In many cases, there are additional services offered in Medicare Advantage.  Usually this includes vision and dental coverage. The premium for many plans averages around $40 per month which is less than the $96.40 for standard Medicare Part B.
  • There are restrictions: Some plans offer extra services that you may never use (such as gym memberships).  These plans operate like HMOs or PPOs and require that you follow the rules about referrals from your Primary Care Physician (PCP) or using doctors, labs and hospitals that are within the network.  Otherwise, you could be responsible for higher out-of-pocket costs.
  • Compare plans: Use the services available at www.medicare.gov and click on “Compare Health Plans.” If you’re considering a plan that includes drug coverage, it’s helpful to have a list of your prescriptions and the formulary from your current Part D provider available to help with the comparison.
  • Health Care Reform: One of the ways that the government expects to pay for health care reform is by reducing the amounts that are paid out to Medicare Advantage plan sponsors which have typically been receiving an average of 14% more for each enrolled beneficiary than it costs using traditional Medicare.  While this may impact future services offered by some MA providers, your coverage cannot change in mid-year no matter what.  And you can always re-enroll with a traditional plan at the next annual enrollment period.
  • Restrictions for Those with Kidney Disease and Using Dialysis: If you have end-stage renal disease (ESRD), you typically cannot join a Medicare Advantage plan.  There are exceptions for those who have been enrolled in a MA before diagnosis.
  • Remember What’s Not Covered: Long-term care or “custodial care” is not covered by Medicare and most health insurance plans.  If you’re living abroad, Medicare will not cover you either. Under limited circumstances, it may pay for medical services while you are traveling.  You should check with the Medicare resources website at www.medicare.gov.

For more help on this topic, send me an email (steve@ClearViewWealthAdvisors.com) or call 617-398-7494.

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The entrepreneur was being interviewed after a long life.  He had made it through the Great Depression and was looking back.  As he warmly reflected, he straightened up and with a twinkle in his eye told the world the secret of his success.

“It was really quite simple.  I bought an apple for five cents, spent the evening polishing it, and sold it the next day for 10 cents. With this I bought two apples, spend the evening polishing them and sold them for 20 cents. And so it went until I had amassed $1.60.

It was then my wife’s father died and left us $1 million.”

Sudden wealth is certainly one way to make it.  And the lottery is another.

But in reality most of us will need to rely on the principles of growing your wealth slowly.

It may not be sexy and exciting to talk about but over time there are certain principles that will work:

  • Living beneath your means
  • Consistently saving
  • Responsibly using credit
  • Protecting your assets, life and income with appropriate insurance
  • Investing in a broad, diversified mix of assets

Of course there are lots of specifics that need to be tailored for each individual and to reflect what’s going on in the world around us.  From year to year specific investments may need to be changed just as you might change the drapes or the color of your house. But the overall process of building and preserving wealth depends on the foundation you build. And like your house, you want that foundation to be solid.

Over the next several posts I’ll continue to explore the most common mistakes that investors make and how you can avoid them.

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