Fixed annuities are a popular option for individuals who are looking for a safe and secure way to save for retirement.
Unlike variable annuities, which are tied to the stock market and can fluctuate in value, fixed annuities offer a guaranteed rate of return.
They also provide stable tax-deferred growth and a predictable source of retirement income when needed.
How Fixed Annuities Work
A fixed annuity is a contract between an individual and an insurance company. The individual usually makes a lump-sum payment, and in exchange, the insurance company agrees to pay a fixed rate of return on the investment for a specified period of time, typically several years.
During the accumulation phase, the annuity earns interest on the investment, which is tax-deferred until it is withdrawn. At the end of the accumulation phase, the individual can choose to receive regular income payments from the annuity, either for a specified period of time or for the rest of their life.
In other cases, the annuity owner might roll their account over to a new policy for continued growth. This can be done through a 1035 tax-free exchange allowing for additional growth and flexibility.
Benefits of Fixed Annuities
Fixed annuities offer several benefits making them an attractive option for retirement savings, including:
- A Guaranteed Rate of Return: Fixed annuities offer a guaranteed rate of return, providing a stable and predictable source of retirement income. This is especially valuable for individuals who want to protect their savings from market fluctuations or who are risk-averse.
- Tax-deferred Growth: Fixed annuities offer tax-deferred growth, which means that the earnings on the investment are not taxed until they are withdrawn. This can provide significant tax benefits, especially for individuals in a higher tax bracket.
- Asset Protection: Depending on the state, fixed annuities may offer asset protection from creditors or lawsuits. This can provide additional peace of mind for individuals who are looking to protect their assets.
- Guaranteed Income: Fixed annuities can provide a guaranteed income stream in retirement, which can help to ensure that individuals have a steady source of income throughout their retirement years.
Choosing the Right Fixed Annuity
When choosing a fixed annuity, there are several factors to consider, including the interest rate, surrender period, and fees and charges associated with the investment.
It’s important to review the terms and conditions of the annuity contract carefully. It’s advisable to work with a financial professional who can help you to select the right annuity for your specific financial needs and goals.
Considering the turmoil in the stock and bond markets lately coupled with several major bank failures, our clients are looking for safe and predictable investments. Now that interest rates are competitive, a very compelling argument can be made for investing in fixed annuities.
Discuss Your Options With A Licensed Expert
In conclusion, fixed annuities are a valuable retirement savings option for individuals looking for a safe and secure way to save for retirement.
By providing a guaranteed rate of return, tax-deferred growth, and asset protection, fixed annuities offer a reliable source of growth and/or retirement income. Simply put, they help to ensure a comfortable and relaxed retirement.
Category: Annuities, Retirement Planning
Let’s face it, Medicare insurance can be expensive. Original Medicare Part A is free due to earned work credits, but Part B costs nearly $150 a month for most.
And Medicare Parts A & B only cover so much. There are still gaps like deductibles, coinsurance, prescriptions, dental, vision, hearing and so on.
So how do you fill these gaps, reduce your out-of-pocket, and not break the bank? Below we discuss six inexpensive ways to shore-up your Medicare coverage.
1) The Case For $0 Medicare Advantage Plans
Also referred to as Part C, Medicare Advantage plans offer an affordable way to strengthen your Medicare coverage with little or no premiums. There are some things to know first, however.
When choosing an Advantage plan, you’re turning your Medicare benefits over to a private insurance company like Aetna, Humana, UHC, or one of many others. This means you need to stay in their networks and use their doctors and hospitals. And these plans usually have more out of pocket exposure than staying on Original Medicare and purchasing a Medicare Supplement policy.
However, the good news is many Advantage plans have very low premiums. Several can be found for $0 a month. If your healthcare providers are in network, this coverage can be a good overall fit. And most policies also offer a wide array of ancillary benefits.
Most policies include prescription Part D drug coverage at no extra cost. It’s also common to see dental, vision and hearing benefits included as well. Still others include meals during recovery, quarterly stipends for medical supplies, and free transportation to doctor’s appointments.
All of these benefits can be found in many parts of the country for $0 a month. So that’s an all-in-one plan with nothing else to purchase. You may face more out of pocket exposure for major health issues, but the premiums and ancillary benefits are hard to beat.
2) Medicare Advantage With Part B Reimbursement
A new wrinkle to some Medicare Advantage plans (like the ones mentioned above) are those that offer Part B give back provision. We know government run Medicare is not free.
Most people are entitled to Part A at no cost, but almost everyone pays Part B premiums to the government each month.
However, when you enroll in certain Medicare Advantage plans (even those with $0 premiums), the insurance company will pay a portion (or all) of your monthly Part B premiums. The amount reimbursed varies, but it can be up to the full $148.50, however. This offers a tremendous savings to consumers.
You’ll of course want to make sure the plan is a good overall fit for your needs. Purchasing any Advantage plan on cost alone may be unwise, but reducing your premiums through Part B reimbursements is a great way to lower your monthly outlays.
These policies aren’t available everywhere, but they’re worth considering if you live in a county where one is offered.
3) Enroll In A Medicare Medical Savings Account
Another new gift to the over 65 market are Medicare Medical Savings Accounts. These are high deductible $0 Medicare Advantage plans that offer a separate tax-advantaged account funded by the insurance company.
The insurance company’s contributions always belong to you – even if you disenroll and choose different coverage later. You can spend your allocated funds on a tax-free basis for Qualified Medical Expenses. The coverage works much like a Health Savings Account for those under age 65.
Each year the insurance company contributes a couple thousand dollars to your account. These contributions could be used to meet the deductible, pay for prescriptions, vision & dental care, and a host of other items.
If you don’t utilize much healthcare, your savings account can grow significantly over time. The insurance company will continue to contribute each and every year. And by government rule, your premiums must remain at $0 a month.
The amount contributed depends on which policy you select and when during the year you sign-up. Contributions are prorated if you sign up in the middle of the year.
These no-network Advantage plans work well for savers in above average health who like to keep control of their finances. Medical Savings Accounts don’t include Part D drug coverage, so you will need to purchase that plan separately. Overall, there’s a lot to like about $0 MSA policies.
4) Inexpensive Medicare Supplement Coverage
If you’re worried about the network restrictions you can encounter with some Medicare Advantage plans, you might consider an inexpensive Medicare supplement plan. Depending on your age, gender and State of residence, you can often find Medigap plans for under $50 a month.
One such policy is High Deductible Plan G. It has a one-time, yearly deductible near $2,340 a year. Worst case scenario, that’s the most you would face in any given year. That’s much less out of pocket than several Medicare Advantage plans – and much less exposure than having nothing at all. All of that for a very reasonable price. We see a lot of interest in this particular policy.
And no matter which supplement you might choose, it’s wise to shop when your rates increase. Medical underwriting will likely be required, but it you pass, you can lower your rates dramatically. We help our clients shop whenever their rates increase significantly.
5) Keeping Tabs on Your Part D Drug Plan
If you own a Stand-Alone Part D Drug policy, then it can be advantageous to compare plans each Annual Election Period (AEP) in the fall. Failing to do so can cost you money. We see a lot of consumers with old Part D drug plans paying $50-$80 a month. Oftentimes a newer plan with much lower premiums would provide them with similar, if not better, coverage.
Insurance companies quietly change drug plans almost every year. Old policies are discontinued and you can get automatically mapped into a much more expensive plan if you’re not paying attention. This sometimes results in higher premiums, larger deductibles, and higher copays on your prescriptions.
If you have an older Stand-Alone Part D Drug plan, then it’s wise to shop for new coverage during the Medicare Annual Election Period. This window runs from October 15th thru December 7th each year. It’s usually the only time you can make this change and save money.
6) Low Income Subsidies & Extra Help
There are several programs available from Federal and State Governments for those below certain income thresholds. The Federal Government will send notification if you qualify for Low Income Subsidy – or LIS for short. This program works on a sliding scale and can reduce your Medicare premiums and/or out of pocket expenses.
Others may qualify for Medicaid. This is a state run program and consumers typically need to apply as this enrollment may not happen automatically. If you’re not sure about eligibility standards, call your State Medicaid office to discuss and apply.
Outside of Medicaid, there are other state-run programs that help with pharmaceutical costs. It’s wise to investigate those as well as any discounts you might receive from the drug manufacturers themselves. This information isn’t always volunteered, so you’ll need to inquire and apply. When and where provided, these programs can reduce costs significantly for those who qualify.
Contact Us For No Obligation & No Cost Insurance Assistance
The bottom line: The worst thing you can do is nothing. There are several no-cost and low premium plans that will reduce the gaps in your Medicare coverage. If you do nothing, you’ll likely be on the hook for much larger bills than if you had chosen one or more of the options above.
If you’re not sure which route might be best for you, contact us today. There is not cost whatsoever to use our services for guidance, advice and enrollment.
Category: Medicare Advantage, Medicare Supplements, Retirement Planning
Annuities serve many purposes, but you might want one to safely and efficiently transfer assets to your heirs. One popular annuity feature offers an increasing death benefit in order to guarantee growth each year.
This rider might be appropriate for someone who does not anticipate needing their funds. Perhaps they have ample liquidity and investments elsewhere. The annuity would only be accessed in an emergency, but would otherwise grow and increase in value.
Understanding Annuity Death Benefits
First, it’s important to understand almost all annuities offer a death benefit of some kind. Usually it’s the accumulated contract value – and usually surrender penalties are waived at death. That’s not the case 100% of the time, however. It’s a good idea to ask your agent just in case.
But in this low interest rate environment, some companies offer a rider that allows your death benefit to grow each year. Your account can grow for 10-15 years with some contracts. The growth would be locked in for the life of the rider. For example, one popular annuity policy is offering a 7% simple interest increase that’s guaranteed for 15 years.
This is a very smart way to lock-in growth and pass wealth to your beneficiaries. You’ll always know the value of your account and you don’t have to worry about market fluctuations.
Who Might Benefit From Guaranteed Annuity Growth?
With an account like this, it’s best to set it and forget it. You may not want to take regular withdrawals unless it’s absolutely necessary. That’s not to say you can’t, but any withdrawals would reduce your death benefit. That could defeat the purpose of the rider.
Thus, this policy might not work well for an IRA account. Why? Because IRAs have Required Minimum Distributions as you get older. Those forced withdrawals would decrease the death benefit.
It’s better to use post-tax money to fund this type of annuity. These are called non-qualified annuities. You are never forced to take any withdrawals from a non-qualified account.
Our clients who are most interested in this strategy usually already own a non-qualified annuity. In many cases, their existing contract hasn’t performed very well or it’s settled in at a low rate. They usually haven’t touched the investment – and don’t anticipate any regular withdrawals.
In this case, we would set up a 1035 tax-free exchange and transfer the old annuity to this new one. Any gains in the old annuity are deferred and no taxes are due. The account then rolls up at the established rate for the term of the rider.
Let’s take a look at an example using a $200K deposit with a 72 year old client.
Guaranteed Death Benefit:
| Age | Interest
Credits | Contract
Value | Death Benefit
Increase | Death
Benefit |
| 72 | $0 | $199,000 | 7.00% | $214,000 |
| 73 | $0 | $197,930 | 7.00% | $228,000 |
| 74 | $0 | $196,790 | 7.00% | $242,000 |
| 75 | $0
| $195,580 | 7.00% | $256,000 |
| 76 | $0 | $194,300 | 7.00% | $270,000 |
| 77 | $0 | $192,950 | 7.00% | $284,000 |
| 78 | $0 | $191,530 | 7.00% | $298,000 |
| 79 | $0 | $190,040 | 7.00% | $312,000 |
| 80 | $0 | $188,480 | 7.00% | $326,000 |
| 81 | $0 | $186,850 | 7.00% | $340,000 |
| 82 | $0 | $185,150 | 7.00% | $354,000 |
| 83 | $0 | $183,380 | 7.00% | $368,000 |
| 84 | $0 | $181,540 | 7.00% | $382,000 |
| 85 | $0 | $179,630 | 7.00% | $396,000 |
| 86 | $0 | $177,650 | 7.00% | $410,000 |
| 87 | $0 | $175,600 | 0.00% | $410,000 |
| 88 | $0 | $173,550 | 0.00% | $410,000 |
| 89 | $0 | $171,500 | 0.00% | $410,000 |
| 90 | $0 | $169,450 | 0.00% | $410,000 |
| 91 | $0 | $167,400 | 0.00% | $410,000 |
Non-Guaranteed Death Benefit:
| Age | Interest
Credits | Contract
Value | Death Benefit
Increase | Death
Benefit |
| 72 | $0 | $199,000 | 7.00% | $214,000 |
| 73 | $40,802 | $238,732 | 7.00% | $238,732 |
| 74 | $0 | $237,592 | 7.00% | $242,000 |
| 75 | $48,860
| $285,242 | 7.00% | $285,242 |
| 76 | $0 | $283,962 | 7.00% | $283,962 |
| 77 | $0 | $282,612 | 7.00% | $282,612 |
| 78 | $0 | $281,192 | 7.00% | $281,192 |
| 79 | $62,077 | $341,780 | 7.00% | $341,780 |
| 80 | $0 | $340,220 | 7.00% | $340,220 |
| 81 | $17,425 | $356,015 | 7.00% | $356,015 |
| 82 | $0 | $354,315 | 7.00% | $354,315 |
| 83 | $72,675 | $425,220 | 7.00% | $425,220 |
| 84 | $0 | $423,380 | 7.00% | $423,380 |
| 85 | $87,118 | $508,588 | 7.00% | $508,588 |
| 86 | $0 | $506,608 | 7.00% | $506,608 |
| 87 | $0 | $504,558 | 0% | $504,558 |
| 88 | $0 | $502,508 | 0% | $502,508 |
| 89 | $111,072 | $611,530 | 0% | $611,530 |
| 90 | $0 | $609,480 | 0% | $609,480 |
| 91 | $31,260 | $638,690 | 0% | $638,690 |
Outperforming The Guaranteed Value
In the above example, we used a $200K deposit for a 72 year old client and assumed no withdrawals. The annuity death benefit increases at a 7.00% simple interest rate guaranteed for 15 years. As of the writing of this post, these are real numbers with an existing product. None of this is made up.
You can see each year how the value of the death benefit increases. Should the owner pass away in any given year, the full listed death benefit would pass to their beneficiaries. After 15 years, you can see the annuity death benefit would be worth $410,000 on a guaranteed basis.
But this does not tell the whole story. There are guaranteed and non-guaranteed values at work here. The $410,000 assumes zero growth in the underlying investments in the annuity. In other words, this is the worst case scenario… and a highly unlikely outcome.
This particular indexed annuity offers several investment options. We used historically accurate data to show how the death benefit would increase assuming normal growth in a popular 2 year indexing account.
After 15 years the annuity death benefit (and contract value) would be worth much more. Assuming modest historical returns in the future, the death benefit would be over $500,000. But no matter what happens, the $410,000 is always guaranteed.
You always have the guarantees to fall back on, but if the annuity performs even reasonably well, your death benefit (and contract value) will be more than the guaranteed amounts. There is little risk in investing more aggressively. Most of our clients want to maximize growth using the indexing options available to them.
What Is The Cost? What About Taxes?
This particular death benefit rider has a .50% yearly cost to the policy. If you look at the contract values in the above example, you can see they decrease each year by 50 basis points. This fee does not decrease your guaranteed death benefit, however.
It’s important to note that this is not a life insurance policy. This means, yes, taxes are do on the gains when they are withdrawn. That occurs when the owner passes away.
Only life insurance passes income tax free to your beneficiaries. That’s why fixed and single premium life insurance policies are popular as a wealth transfer strategy. But not everyone can qualify health-wise for life insurance. An annuity policy like this one asks no health questions and has no medical underwriting.
At passing, your heirs (or the estate) would pay any income taxes due on the growth… same as all other annuities. So it’s only tax-deferred, but not tax-free. But that’s no reason not to try and grow the account as much as possible. Your beneficiaries might choose to withdraw the funds over 5 years to help reduce any income taxes owed.
Request Illustrations & Information
There’s a lot of creative ways to efficiently grow your money and transfer it to your loved ones. You could also use this to provide for a favorite charity. At Hyers and Associates, we specialize in annuity and life policies for wealth creation, tax mitigation, and asset transfer.
Contact us today to learn more about this guaranteed annuity strategy.
Category: Annuities, Retirement Planning
With increasing interest rates, you may want to know how your business can invest in an annuity account. In most cases corporations, partnerships, trusts, and other entities can own an annuity. This process works much like it would with individual ownership.
That’s the good news, but there are subtle differences in how these accounts operate on a tax and operational basis. You’ll want to understand what to expect from this structural change to avoid issues later.
First There Must Be An Annuitant
Annuity accounts are annuitant-driven. This means even though a trust, partnership, or corporation can own an annuity, the investment must be based on a living person. The same is true with life insurance. Entities can own a life insurance policy, but it’s still based on someone’s life.
So there must always be an annuitant. While this person(s) may not own the policy outright, the contract is based on their life. In other words, the owner (corporation, trust, etc.) and the insured (person) are different.
Once the last annuitant passes away (some policies have joint annuitants), then the policy would end based on the contract terms.
A corporation, trust, or other entity cannot continue contracts indefinitely. There must be a living annuitant listed on the policy. Once one or both annuitants pass away, you cannot appoint a new insured. The policy would end at that time.
An entity can own an annuity contract so long as it’s based on a living person listed as the annuitant(s). This person might be an owner, president, or officer of the company.
Annuities Have Unique Tax Features
Annuities grow tax-deferred. Owners can defer taxes for their lifetime if they wish. The annuitant (or the annuitant’s estate) pays the taxes on that growth at passing. This setup takes advantage of compounding interest.
The taxation of annuities works differently when owned by an entity. A trust, partnership, business, or corporation that owns an annuity cannot defer taxes like a natural person.
All corporately owned annuity accounts are non-qualified. If the owner was a person, then yes, taxes can be deferred. However, IRS rules state when a business entity owns an annuity, it would be subject to normal yearly income taxes based on the policy gains. The tax ID of the corporation, partnership, etc. would receive the 1099 each year.
One advantage of annuities is tax-deferral. This feature is lost if a non-person is listed as the owner. When interest rates are high, however, investment growth might outweigh tax-deferral.
How Do Annuities Work With Trusts?
Most trusts are revocable and simply set up to avoid probate. Annuity accounts avoid probate by way of beneficiary designations. Thus, you may have a couple of choices on how to establish ownership.
Some consumers make their trust the owner of the annuity while others will make their trust the beneficiary. Your best way forward may depend on the type of trust you have and how your wish to bequeath the proceeds.
When working with trusts, it’s best to talk with your lawyer and tax advisor to confirm you’re taking advantage of all the benefits annuities offer. In some cases, you and/or your beneficiaries will unnecessarily lose tax advantages if your annuity is established improperly.
Are These Contracts Safe & Insured?
Other than tax implications, most other annuity features are the same when owned by an entity. Contracts are insured for up to $250,000 in most states. You’ll want to refer to your State Life & Health Guaranty Association to view their rules and requirements.
Distributions, liquidity, income withdrawals, and surrender charges would all be the same as listed in the contract.
Some annuities carry more risk than others. Variable accounts buy into the market and go up… and down. Fixed, indexed and deferred accounts do not own market instruments and do not lose value when the market drops.
Your best options depend on your risk tolerance. Most of our clients look for the reliable returns of indexed and fixed annuity quotes. We can help you compare your best options.
Contact Us To Learn More
Hyers and Associates is an independent insurance brokerage. We offer policies from several highly-rated companies. We’ll help you find the corporate annuity account that best suits your needs and risk tolerance.
Category: Annuities, Retirement Planning
If you are approaching your Medicare eligibility, you should be aware of the Medicare Income-Related Monthly Adjustment Amount – IRMAA for short. It applies to higher income earners and results in increased Part B and Part D premiums.
These increases might affect your decision to stay on your employer policy. If that’s not an option, then you may pay more for your Medicare premiums until your income decreases. View the charts below and read more to see what you can expect from your Medicare premiums in 2020.
How Does IRMAA Affect Part B Premiums?
This means-tested program operates on a sliding scale and is based on your income from two years ago. Even if your income was lower last year, your Part B premiums will be higher until you have two years of lower income behind you. You can expect to pay the adjusted amount so long as your income is above certain thresholds. The amount you pay is based on whether you file single or jointly.
The table below illustrates the Part B premiums for those with certain income levels. These amounts can, and usually do, change each year based on inflation metrics.
| Individual Filers | Joint Filers | Married - File Separately | Your 2024 Monthly Premiums |
| AGI Less Than Or Equal To $103,000 | AGI Less Than Or Equal To $206,000 | AGI Less Than Or Equal To $103,000 | $174.70 |
| AGI Greater Than $103,000 And Less Than Or Equal To $129,000 | AGI Greater Than $206,000 And Less Than or Equal To $258,000 | N/A | $244.60 |
| AGI Greater Than $129,000 And Less Than Or Equal To $161,000 | AGI Greater Than $258,000 And Less Than or Equal To $322,000 | N/A | $349.40 |
| AGI Greater Than $161,000 And Less Than Or Equal To $193,000 | AGI Greater Than $322,000 And Less Than or Equal To $386,000 | N/A | $454.20 |
| AGI Greater Than $193,000 And Less Than Or Equal To $500,000 | AGI Greater Than $386,000 And Less Than or Equal To $750,000 | AGI Greater Than $103,000 And Less Than or Equal To $397,000 | $559.00 |
| AGI Greater Than $500,000 | AGI Greater Than $750,000 | AGI Greater Than $397,000 | $594.00 |
Part B is a cornerstone of Medicare. You should only defer Part B enrollment if you have qualifying group coverage (more than 20 employees) through your employer. If not, then it’s wise to begin Part B along with your Part A. For most, that happens at age 65, but there are circumstances when it can begin before or after age 65.
The IRMAA fee is not assessed by insurance companies, but rather the government itself. You pay them. The government will send you a letter as you approach Medicare eligibility stating what your IRMAA costs will be. The only way to avoid IRMAA is by not enrolling in Part B.
That’s not usually an option unless you have creditable group health insurance through work or retirement. If you don’t enroll in Part B when you’re supposed to, you’ll be assessed a late enrollment penalty for life.
(It should be noted there are no IRMAA fees for Part A. This program is free for most as it is earned through work credits or via spousal benefits.)
IRMAA Costs & Medicare Part D Drug Premiums
The second (and only other piece) subject to Medicare IRMAA increases are your Medicare Part D Drug plan premiums. Most consumers opt for a drug plan in order to reduce their prescription costs.
Whether you enroll in a Stand Alone Part D Drug plan or one that is part of a Medicare advantage plan, IRMAA can increase your monthly premiums. Here are the amounts:
| Individual Filers | Joint Filers | Married - File Separately | Additional Monthly Amount Owed |
| AGI Less Than Or Equal To $103,000 | AGI Less Than Or Equal To $206,000 | AGI Less Than Or Equal To $103,000 | $0.00 |
| AGI Greater Than $103,000 And Less Than Or Equal To $129,000 | AGI Greater Than $206,000 And Less Than or Equal To $258,000 | N/A | $12.90 |
| AGI Greater Than $129,000 And Less Than Or Equal To $161,000 | AGI Greater Than $258,000 And Less Than or Equal To $322,000 | N/A | $33.30 |
| AGI Greater Than $161,000 And Less Than Or Equal To $193,000 | AGI Greater Than $322,000 And Less Than or Equal To $386,000 | N/A | $53.80 |
| AGI Greater Than $193,000 And Less Than Or Equal To $500,000 | AGI Greater Than $386,000 And Less Than or Equal To $750,000 | AGI Greater Than $103,000 And Less Than or Equal To $397,000 | $74.20 |
| AGI Greater Than $500,000 | AGI Greater Than $750,000 | AGI Greater Than $397,000 | $81.00 |
While it’s not mandatory to enroll in a drug plan, late enrollment penalties apply here as well. So if/when you do enroll later, Medicare will assess lifetime penalties – just like with Part B premiums.
Even if you don’t need drug coverage, it can be wise to purchase an inexpensive policy to stay compliant. These plans start around $13 a month in most areas of the country. The adjustments listed above would be in addition to the cost for your chosen plan. They are also collected by the government.
What About Medicare Advantage Plans?
Yes, IRMAA can affect the cost of your Medicare Advantage coverage. Many (not all) Medicare Advantage plans include a Part D prescription drug program. These are referred to as Medicare Advantage Prescription Drug plans – or MAPD for short. As mentioned above, it’s wise to have a Part D plan whether it’s on a stand-alone basis or one that’s part of an Advantage plan.
Even if you enroll in a $0 MAPD policy, you’ll still see the IRMAA charge tacked-on to the Part D piece of the policy. It’s unavoidable unless you enroll in a MA plan with no Part D coverage, but that could result in a lifetime of Part D penalties if you do enroll in one later.
Simply put, here are financial traps with Medicare. The government forces participation in order to avoid late enrollment penalties and coverage delays.
What I If I Still have Insurance Through Work?
Your ability to defer Medicare enrollment beyond age 65 depends on a couple of factors. To defer Part B, your employer group must be more than 20 employees. If not, the government says you must enroll in Part B. From there, you can work with a knowledgeable agent as to your next steps.
To defer Part D enrollment, you must have creditable drug coverage elsewhere. This could also be through work, a union, or even the Veterans Administration.
Many consumers are able to defer one or both programs until retirement beyond age 65. If you’re not sure, then it’s a good idea to ask a professional. We’ve seen many mistakes made with enrollment deadlines and requirements. Those can be costly now and/or in the future.
What About Medicare Supplement Premiums?
The short answer is they are not affected by IRMAA. If you choose to enroll in an Medicare supplement insurance plan, then there will be no IRMAA fees based on your income.
Several different factors will determine your Medicare supplement premiums, but income is not one of them. Medicare has a lot of gaps, so it’s wise to fill them.
And there is usually only one time (your personal 7 month open enrollment window) when you can purchase a Medicare Supplement no questions asked. If you don’t take advantage of that opportunity, it might be difficult to qualify later due to medical underwriting qualifications.
Talk With An Independent Agent
Undoubtedly, Medicare can be confusing. There are many decisions to be made, but they must be made carefully. One wrong step at the wrong time can lead to delays, penalties and extra costs.
If you want to speak with a Medicare expert, contact us today and we’ll walk you through your options. Our independent agency specializes in Medicare enrollment and can guide you through the entire process.
Category: Medicare Advantage, Medicare Part D, Medicare Supplements, Retirement Planning
Our brokers at Hyers and Associates specialize in health insurance and can help you sort through what’s best when it comes to traditional long term care policies.
If we only knew what was in our future, decisions would be so much easier.
You don’t want to spend money on something you don’t need. And you don’t want to need it and then be unprepared. Let’s take a look at some of the pros & cons of LTC insurance.
The Pros
- Peace of mind is the main reasons most people are interested in a traditional long-term care policy. You don’t want to worry about what will happen to you and your loved ones with such a big expense lurking.
- No one wants to be a burden on their children, families, friends and loved ones. Many parents would prefer to have long term care insurance cover the costs (and time) associated with prolonger health care needs.
- Flexibility in coverage is an advantage for long-term care insurance policies. For example, you can choose how much coverage you want to have per month, or how long you’d like to be covered.
- Start coverage in your 50’s or 60’s. The earlier you start coverage on a long-term care policy, the more likely you’ll be able to pass the required medical underwriting. Once you have been approved the policies are “guaranteed renewable” and cannot be taken away unless you don’t pay your premiums.
- For lower rates apply for the insurance when you are younger. Rates can increase as the years go on, however. This is why some of our clients purchase fixed payment hybrid long term care annuity and life insurance plans.
- Leaving your spouse with the assets she or he might need and an inheritance to you families. There’s not much that eats up estate like prolonged LTC expenses. Insurance solves that problem and protects your life’s work for the ones you want to provide for.
- Most plans include inflation protection. We know that the future cost of care is only going to increase. Have a policy that compounds at 3-5% each year is almost a necessity.
The Cons
- Passing medical underwriting can be difficult, especially if you wait too long. Once pre-existing conditions show up, they may keep you from qualifying for the insurance. About 30% of the people that apply for the insurance fail the health assessment and/or receive much higher rates.
- There is a long list of health issues that insurance companies use to decline applicants. There’s an even longer list that will cause your rates to be more at onset. Sometimes it’s not just one thing, but the combination of several risk factors.
- The cost of long-term care insurance can be prohibitive, especially for those in the middle-income bracket. Rates have been increasing. Long-term care insurance is disappearing for middle-income people as rates are too high. The high risk is causing many insurance companies to stop offering long-term care insurance.
- If you qualify for long-term care benefits, there is frequently a period of time before your benefits can begin. This is called a “waiting period’ and it acts like a deductible. Most policies have a 90 day wait, but some are flexible and let you choose the time. Shorter durations usually increase the cost of the policy.
- Most policies are capped in how much they will pay out. You get to choose the duration and benefit pool of your policy, however. It is unusual to see plans that pay indefinitely due to cost and risk.
- If you do not use the policy, or if you cancel the policy, you and your family may not get any money back. This issue is difficult for many after paying premiums for many years. That’s why hybrid policies have really taken off in the marketplace.
For Other LTC Options and Strategies, Call Us!
If you are interested traditional long-term care insurance, we can help you. We can also show you hybrid insurance policies – both life and annuity driven coverage. Other strategies can include using your Health Savings Account (HSA) or Medicare Medical Savings Account (MSA) to cover your potential long-term needs.
If you are considering a traditional long-term policy or are interested in what other options are available, we’ll be happy to walk you through all your options. Contact us today to learn more.
Category: Long Term Care Insurance, Retirement Planning
Tags: insurance decisions, long-term care, senior care
Investors like annuity policies for a lot of reasons, but a new feature is adding even more certainty to these guaranteed products. Some companies are now offering a death benefit rider on their contracts to assure policy growth every year.
This optional feature allows your death benefit to grow each year by a guaranteed rate no matter how the contract performs. This is a great benefit for those who are most interested in leaving a legacy for their beneficiaries.
How Do Annuity Death Benefit Riders Work?
With this innovative rider, you will have a second annuity value at work. A sub-account is created that will increase for a guaranteed number of years – usually 10-15. At passing, this value is available to your beneficiaries in a lump-sum or over a longer period of time if desired. Most accounts are required to pay the full amount over 5 years, but a lump sum option will always be available
It’s common for these riders roll-up at a 5-7% rate each year. This could be a simple interest credit, while others will compound your interest. We help our clients compare all scenarios to see which plans offers the largest guaranteed death benefit.
Death benefit riders will have some stipulations. Most will only roll-up for a maximum of 15-20 years. And they are only available to annuitants/owners who are 80 years or younger. Ones missed at 80 years might only offer an annual step-up for ten years.
An in most cases, annuity contracts with and Enhanced Death Benefit can stack policy interest growth on top of the rider. This means your death benefit value can increase above and beyond what is offered by the guaranteed rider. This is allows for growth even after the rider term has ended.
Do I Pay Taxes On My Annuity Death Benefit?
The short answer is, yes. Almost all annuity growth in a non-qualified account is taxable as ordinary income. Annuities that are in an IRA or 403(b) (referred to as qualified accounts) are taxable in full. However non-qualified accounts only tax the growth of the principal – whether it’s through a death benefit rider or regular interest and/or investment growth.
Life insurance is the only product that pays out income tax-free at passing. This is why a lot of consumers use life insurance for wealth transfer and estate planning. However, you cannot exchange an annuity account for a life insurance policy through a 1035 tax-free exchange.
Thus, if you already own an annuity with sizable gains, a death benefit rider might be your next best option for capturing those gains and then guaranteeing future growth for several more years to come.
Many of our clients also ask about probate. We don’t give legal advice, but generally speaking, annuities are not subject to the probate process. So long as your beneficiary status is up to date and in good order, probate is not required.
What If I Surrender The Annuity Before Passing?
The other account with these types of annuities is what’s called, the walkaway value. It might be more or less than the death benefit value, but in many cases, it will be lower. If you surrender your annuity before passing, you’ll get the walkaway value and the death benefit will be void.
There is almost always a cost to add a death benefit rider to a contract. It’s usually close to 1% of the contract value each year. While this is deducted from your walkaway value, it does not decrease the value of your death benefit. Thus, it’s disadvantageous to surrender your contract before passing unless you simply have no other choice.
In other words, it’s unwise to spend 1% of your contract value each year for a rider that was not used. However, if the walkaway value outperformed the death benefit value, then it might be a good idea to exchange your annuity for a new one. This is something you should speak to an experienced agent about before making an exchange.
Many of our clients are using the 1035 exchange rule to transfer, on a tax-free basis, their underperforming fixed and indexed annuities. The death benefit roll-up is a great way to rescue an old policy that might only be paying 2-3% each year. Guaranteed growth for your beneficiaries makes good sense in many cases.
Contact Us To Learn More About Your Annuity Options
Let’s face it: If you’ve ever shopped for annuities, you know there are many options. One size does not fit all. Some are designed for growth, others are for income, and still others can be used to account for long term care needs.
An annuity with a guaranteed death benefit is more designed for growth and wealth transfer. It might be more suitable for owners who do not intend on accessing their money but are most interested in passing on the largest amount possible to their beneficiaries. No matter your needs, we can help. Contact us today to review your best options.
Category: Annuities, Retirement Planning
We are all working toward a comfortable, financially stable retirement. We want to enjoy more time with our loved ones while immersing ourselves in the activities that bring us peace and joy. The Hyers & Associates team is here to help you achieve your retirement goals.
The fact is you need a plan to create a reliable income stream to support your lifestyle during your retirement years. You want to wake up each day knowing you have a solid foundation in place that provides regular income. One way to facilitate your dream is to buy an immediate annuity.
What is an Immediate Annuity?
An immediate annuity is a way of ensuring a regular income throughout your retirement years. An immediate annuity is usually purchased in a lump sum – and then an agreed upon amount is paid out when you’re ready. Essentially it acts like a pension plan, supplementing your other income.
Your investment grows while in deferral and with some accounts, your income can increase each year. There are several different ways to establish your personal income stream. One size does not fit all. We’ll help you find the plan that best accomplishes your financial goals.
The insurance is that you will have a set income guaranteed by the policy. The insurance company will look at the type of annuity policy being purchased, the term and the person’s life expectancy. Based on those factors and others, your chosen insurance company will issue you a check for the agreed upon amount for the agreed amount of time.
Things to Consider With An Immediate Annuity
There are several factors to consider when shopping for and purchasing an immediate annuity account. Are you looking for the highest payout immediately? Or would you rather have a lower payout for a longer period of time? Is the income just for you or for your spouse as well? Are survivorship benefits important beyond you and/or your spouse? Do you want the income to have the ability to grow or even double for long term care expenses? These products can be tailored in several ways.
With income annuities, you can choose to have an agreed upon fixed amount paid regularly, a guaranteed payout over the contract, or a payout based on certain stock market indexes. A policy that moves with inflation will generally pay out less initially than one with a guaranteed amount. Plans that pay income to spouses or have survivorship benefits will usually pay less up front as well.
When purchasing your policy, you will choose how long your income lasts. It can be a fixed number of years or for your entire life. Your income can begin after only one month or it can be postponed (deferred income annuity) for several years in order to grow your investment – and returns.
When considering an immediate annuity contract, most insurance companies show you the payout rate. The payout rate is not the same as the yield or rate of return. Your rate of return can vary depending on how long you live. That being said, it’s easy to compare the payout streams of several different companies at once. This will allow you to see who’s offering the best rates.
Making a Commitment
One important note: It can be difficult if you change your mind after purchasing an immediate annuity. You need to think of this as a commitment to gain a guaranteed income in your retirement years. There are few contingencies for a change of heart further down the road. You may be able to change when your payouts begin, but it’s often not possible to get a return of your initial premium back in a lump sum.
Several policies will provide flexibility in your income start date, but this is along term investment for your future. It’s a very smart way to supplement your other investments. If the market takes a turn for the worse, or interest rates drop further, you will still have a significant income stream to rely on to fund all the things you want to do in retirement.
Call Us For More Information
The Hyers & Associates team members are available to discuss annuities and which types might fit your needs best. Planning and considering your financial goals is the important part of making your retirement happen. Contact us today so we can get started on your future income quote.
Category: Annuities, Retirement Planning
We get older every day and as we do, we have our eye on retirement. However, along with retirement, there is also a concern over the possibility of getting sick and needing long-term care.
To rest assured you’ll be taken care of when that time comes, the team at Hyers & Associates can help you sort through long-term care insurance options. We’ll help you compare costs and benefits of the best plans available.
Who Needs an LTC Insurance Policy?
At age 65 one in four individuals will need up to 2 years of long-term health care. Some people may need up to 5 years of long-term care. Still others will need care for many years.
Nursing home rates continue to rise and can run up to $100,000 a year, so having a long-term care plan is a smart thing to have in place. These popular policies also pay for care in your own home or an assisted living facility.
What is a ‘Hybrid Policy?’
Hybrid insurance combines a long-term care policy as a part of another permanent insurance policy product, such as a whole life insurance policy or annuity.
With most hybrid policies, when long-term care is needed the policyholder would withdraw funds to cover the needs from the hybrid insurance policy. Once that money has been exhausted the insurance company would then take over the long-term care coverage.
Policies provide benefits until your pool of money runs out, but some plans available for purchase will pay benefits for a lifetime. You can also add inflation protection to most plans in order to keep pace with the rising cost of care in the U.S.
Advantages of a Hybrid Policy
If you decide to want to cancel your hybrid policy, there is usually an opportunity to recover some – or all – of your premiums paid. With most traditional LTC care policies, should the policyholder pass away before using the policy, the premiums paid would be lost.
The money would just be gone and that’s bothersome, but not so with hybrid LTC. These plans can provide monetary benefits to you, your heirs or your estate.
These are the benefits of a hybrid policy:
1) Receive Premiums Back
With a hybrid policy usually, you can get most – or all – of your premiums back after the surrender charge period.
2) Tied to Whole Life Insurance
Also, with a hybrid policy tied to a whole life insurance policy, in the event of an early death, the value of the policy will be left to the named beneficiary. Annuity plans work the same way.
If you are not in need of the care, you or your beneficiaries will benefit from the polcu and any growth it provides. This brings great peace of mind. And hybrid life plans can avoid income taxes as well.
3) Greater Chance of Being Accepted
Lastly, a hybrid policy can be advantageous in that underwriting ca be avoided. Someone having minor health problems may have a difficult time qualifying for a traditional long-term care policy – or their premiums may be increased.
If long-term care is made a part of another insurance policy there is a greater chance that the person will be accepted.
4) No Future Premiums
The best part about hybrid plans is you can pay for them in one lump sum – or just a few fixed premiums. You’ll know exactly what your total costs will be up front.
This is much different than traditional plans that can (and will) raise your rates in the future. Many consumers have had to later surrender their old, traditional plans because of cost increases.
When Should You Start Looking for LTC?
The best time for looking for a long-term care insurance policy is when you are in your 50’s or 60’s. You must be healthy enough to qualify for the insurance, however.
The older you get, the greater your chances are of being rejected for this type of insurance. You want to apply before any signs of poor chronic health conditions occur.
We Can Show You Several Options
The team at Hyers & Associates can show you many options that are available for long-term care hybrid insurance policies. Give us a call and we can help you to choose the best policy for your situation. Don’t wait until you have no options available.
The longer you wait to make a decision on your long-term care, the fewer options you’ll have. Call us today and we can help you find peace of mind knowing you’ll be taken care of.
Category: Long Term Care Insurance, Retirement Planning
After years of hard work, people want to retire and relax. To make this happen, people need to plan for their retirement years. There are many ways to save for your golden years. Often it becomes confusing and people wonder what choices to make. Find out the basics about a fixed annuity and reasons to invest in annuities for retirement.
What Is a Fixed Annuity?
People looking to save money and earn interest often opt for a bank CD rather than a savings account. A fixed annuity is much like a CD because it pays a guaranteed rate of interest. Often this interest is higher than banks CDs. There are two types of fixed annuities – immediate and deferred. An immediate policy makes fixed payments during retirement. A deferred annuity accumulates based on the rate of return. Because a fixed annuity makes a determined payout, it is a popular choice for retirees who want guaranteed retirement income.
The Benefit of Choosing Fixed Annuities
People on a budget are reluctant to risk their money on a unpredictable investments. While stocks can be part of a retirement portfolio, they are risky. There are winners and there are losers, depending on the amount of risk one takes on. However, a fixed annuity pays a guaranteed rate of interest. It also offers steady, guaranteed income.
Retirees who want to avoid the roller coaster of the stock market with their entire portfolio often choose fixed annuities. An added advantage is the low investment minimum for those on a fixed budget. Some are as minimal as $1,000. And this puts investment within reach for those who are younger and planning for retirement income in the future.
Tax Advantages
The interest accumulated on a fixed annuity is tax-deferred. This means owners (annuitants) do not have to pay taxes until they cash out. There are no 1099s to consider. If someone reinvests, no taxes are due, and compound growth is enjoyed. All of this is appealing to someone who prefers a streamlined portfolio for tax reasons.
However, a high-income earner might be concerned a fixed annuity is ultimately taxed at ordinary income rates as opposed to a long-term capital gains rate. Ultimately, your gains are taxed as income only when you decide to withdraw them. Otherwise they are deferred. Gains in a non-qualified annuity (post-tax accounts) can be deferred for life. In a qualified plan (like and IRA or 403b) they can only be deferred so long. Most qualified account owners have to begin Required Minimum distributions at age 70 1/2.
Most people maintain a diversified retirement portfolio in order to account for their taxable situation. And it makes sense to consult with an accountant who knows the facts about fixed annuities and tax rates based on the individual’s income and goals.
Concerns About Fixed Annuities
People investing in fixed annuities should inquire about the rates, what happens at maturity, and the cost of surrender charges for early withdrawal. However, another advantage is that many annuities permit you to access a percentage of the money each year with no penalty.
Annuity investors must also be aware of inflation. Some annuities offer fixed payouts while others offer increasing payouts based on inflation or other growth metrics. Owners need to consider future purchasing power and the value of the dollar in years to come. And this is much like any other retirement investment. Wise investors consult with an attorney, accountant, and reputable insurance agent to get more answers.
The Bottom Line About Fixed Annuities
Conservative investors like fixed annuities because they provide stability and peace of mind. While there are minor concerns, the bottom line is people will have reliable, safe money for retirement. The sum might be modest but it can still be used to cover expenses and provide money people need during their older years.
If you want to invest in annuities for retirement, consult with an experienced insurance agent. An educated agent can guide you through the process and explain how fixed annuities can help you in retirement.
Thank you for reading our blog! How can we help you? Contact us today.
Category: Annuities, Retirement Planning
If you’re nearing age 65 (or retiring and losing group insurance) you may need help with Medicare planning. It’s always best to get started early so that you fully understand all of your options. Choices you make now will affect your options in the future.
We help our clients through this progression. There is a natural order to Medicare enrollment and in this article, we will walk you through it step by step. We’ll help eliminate the confusion so you’re Medicare ready day one.
Step 1: Enroll In Medicare Parts A & B
The first step in Medicare planning is enrolling in Medicare Parts A & B. Most people are entitled to Part A automatically when turning age 65 because of work credits. Nothing usually needs to be done here. Medicare will mail out your red, white and blue card showing your Part A effective date as the first of the month when you turn age 65.
Medicare Part B is the gatekeeper, however. This is the one that requires your careful attention. Not everyone is automatically enrolled (or entitled to Part B) at age 65. In fact, some people defer Part B enrollment until they retire some months or years after turning 65. But it’s the part of the puzzle that allows you to move to the next step, so you’ll want to make sure you’re on top of it.
Failing to enroll in Medicare Part B when you are required can lead to enrollment delays and/or late enrollment penalties. These penalties can increase your Part B premiums (what you pay to the government) for your lifetime. It’s very important to get this enrollment timed correctly.
You’ll only want to defer Part B enrollment if you have creditable coverage elsewhere; maybe through your employer. If this is not the case and you’re turning 65, you need to start the enrollment process. There are several ways to enroll in Medicare Part B:
- Contact your local Social Security office and make an appointment
- Call 1-800-Medicare
- Visit www.medicare.gov and begin your application online
There are thousands of people turning 65 every day. The representatives at Medicare are usually pretty good at telling you how & when to enroll. Whether you defer Social Security beyond age 65 will also determine your path forward. If you are electing SS payments, then you may want to make an appointment at your local SSA office. Your Part B premiums will be deducted from your SS check when you begin payments.
If you are deferring Social Security beyond age 65, then you can try options 1 or 2 as they are more convenient. In this case, Medicare will bill you quarterly for your Part B amounts. Make sure you keep track of and pay those bills. We’ve seen cases where some people missed their Part B payments and that led to a coverage gap and a lifetime penalty.
Step 2: Supplement Your Medicare Parts A & B
Okay, so your Medicare Parts A and B are in the works – or finalized. What now? The next step in Medicare planning is deciding how best to supplement your coverage. You are now in your Open Enrollment window. This period of time lasts approximately 7 months. It includes the 3 months prior to your Part B effective date, the month of, and the three months following. The world is your oyster.
During your specific, one-time Open Enrollment window, you can purchase any Medicare Supplement, Part D or Advantage plan you want. It’s wise to explore all of your options. What you choose now can limit your choices down the road. Again, you usually only get one shot at this – and if your window expires and you’ve done nothing – you can face medical underwriting, insurance declines, late enrollment penalties and coverage delays.
There are several gaps in Medicare and to go it alone with only A & B will expose you to significant out of pocket costs. So you’re next decision is deciding whether you are a Medicare supplement or Medicare Advantage person. You cannot have both. Each has their own pros and cons. We compare Supplements to Advantage plans here if you would like some background.
This is a good time to speak with an independent agent, your friends & family, and also gather information online. There is not necessarily a right or wrong way to fill the gaps in your Medicare coverage. Once you’ve done your research and talked with those who understand both Supplements and Advantage plans well, your decision won’t be too difficult. Just remember, you cannot have both. It’s one or the other. And make sure to ask you agent about how your choice now will affect your options later.
Step 3: Purchase A Part D Prescription Drug Plan
If you’ve chosen a Medicare supplement plan over an Advantage plan, it’s wise to purchase a stand-alone Part D drug plan as well. (Most, but not all, Medicare Advantage plans include Part D drug coverage – so you don’t need to buy one separately. Advantage plans that do not include Part D coverage usually won’t allow you to buy a stand-alone drug plan without cancelling-out your Advantage coverage. Advantage plans without a Part D element are usually appropriate for veterans and those who have creditable drug coverage elsewhere. This is another good time to talk with your agent so that you don’t accidentally cancel any coverage you want.)
Failing to purchase a Part D drug plan during your Open Enrollment window will likely lead to delays and penalties when you do want to enroll. Medicare assesses a 1% penalty for each month that you were required to own a drug plan and did not. This Late Enrollment Penalty (LEP) accumulates over time and results in increased premiums for life. Even if you don’t have need for a Part D rx plan, it can be wise to buy the cheapest placeholder available simply yo avoid the penalty.
In a nutshell: If you choose a Medicare supplement, you may also want to purchase a stand-alone Part D drug plan as the two (by rule) are sold separately. If you purchase a Medicare Advantage plan, then chances are it already includes a drug plan and nothing more needs to be done. Any knowledgeable agent can walk you through this process quickly and easily so that you are compliant.
Step 4: What About Dental & Vision? Long Term Care?
We get these questions a lot. The answer is government run Medicare does not cover much in the way of dental, vision or long term care. If you want this insurance, then you will need to pay separately in most cases. Medicare only goes so far.
It’s important to note that some Medicare Advantage plans include basic dental, vision and hearing. Others offer more robust coverage at an additional cost. Conversely, Medicare supplement plans do not offer any ancillary coverage – basic or otherwise. It will need to be purchased separately if you choose a Medigap plan like F, G, or N.
And no combination of Medicare, Supplement and/or Advantage plan covers much in the way of long term care. The most you can hope for is 100 days of skilled care coverage. If you need the more common types of care (custodial and intermediate) then you won’t even be afforded 100 days.
Our clients who are concerned about estate protection will usually turn to a long term care insurance policy. Fortunately, there are several options to address these costs. There are traditional LTCi policies, hybrid LTC annuities and life insurance, short term care plans, hospital indemnity insurance as well as cancer, stroke and heart attack policies. One size does not fit all in such a broad category – so we help our clients find the options that suit them best.
Contact Us For Enrollment Advice & Insurance Rates
When you are Medicare planning and enrolling, you’re just marching down the cafeteria line. You get your meat and potatoes (Medicare A & B) from the government and then your vegetables and dessert (supplemental & Part D insurance) from a broker. We’re happy to guide you through all phases so you find the insurance plans that best meet your needs and budget.
Ready to get started? Contact us today!
Category: Medicare Supplements, Retirement Planning
If you own a Health Savings Account and you’re approaching Medicare eligibility, you likely want to know what you can and can’t do with your unused funds.
The good news is you can keep your HSA once on Medicare. This is helpful for those who have accumulated significant assets in their accounts. Furthermore, there are several Medicare specific expenses you for pay for tax-free using your HSA balance.
Health Savings Account Rules Once Medicare Begins
Not everyone begins Medicare at age 65. If you have qualified group health insurance (over 20 members), you can defer Medicare enrollment. In this case, you can keep your HSA qualified health plan and contribute up to the allowable maximums each year.
But once you elect Medicare Part B and leave your group health plan, you can no longer contribute to your HSA. Those are the rules. You must have a HSA qualified, high deductible health insurance plan in order to make contributions each year. And if you leave your qualified group plan in the middle of the year? You will need to have already contributed the allowable amount before making Medicare your primary insurance.
Your HSA funds always belong to you – not the insurance company. You can move your account to any custodian that accepts HSA’s. Most owners use a savings account, but some with larger balances invest in mutual funds or other market sensitive instruments. It’s up to you where you’d like to keep your deposits once on Medicare.
I'm on Medicare. How Can I Spend My HSA Account?
HSA funds can only be put toward qualified medical expenses in order to be withdrawn income tax-free. As was before, you can continue to use your HSA to pay for expenses like dental work, eye exams, chiropractic and acupuncture visits, but Medicare eligibility opens up a few more doors.
The I.R.S. allows you to use your Health Savings Account to pay for:
- Medicare Part B premiums to the government
- Part D Drug premiums to an insurance company
- Medicare Advantage plan premiums to an insurance company
If your income is above certain thresholds, you will be charged more for your Medicare Part B and Part D premiums. You can use your HSA balance to pay these increased premiums as well. This can help to alleviate some of this financial burden until your income potentially decrease in retirement.
You can also pay for Medicare related deductibles, copays and coinsurance with your HSA. Even with a comprehensive Medicare Supplement plan, you may still have out of pocket costs. HSA plans can cover those – like your Part B deductible for insurance. You can also cover the cost sharing expenses associated with Medicare Advantage plans like deductibles and copays.
If you wish, you can use your Health Savings Account to pay for the care of a family member. The I.R.S allows for tax-free distributions from HSAs to cover health expenses for a spouse or a dependent. This is true even if you’re on Medicare and they are not.
What Costs Are Not Qualified Medical Expenses?
You cannot, however, pay for a Medicare supplement (Medigap) policy using your HSA funds. That is one rule we’d like to see changed. Most Medicare supplement insurance plans are usually over a $100 a month. Allowing consumers to cover those regular expenses with an HSA would be helpful. Maybe we should petition Congress for this change…
However, if your supplement has deductibles, coinsurance or copays, then you can cover those amounts income tax-free with your HSA dollars. Some of our clients choose Medigap plans with larger out-of-pocket costs so as to maximize their HSA spending. This can be even more beneficial as some of the lower tier plans offer great value. There are some very compelling arguments to purchase Plans G or N (over C or F) regardless of your HSA status.
It’s important to understand that if you withdraw HSA funds for anything other than a qualified medical expense, a taxable event will likely be created. And if you’re under age 65, the government can levy a 20% penalty on top of any income taxes you may owe.
Can HSA Funds Pay For Long Term Care Insurance?
Yes, assuming you are purchasing a tax-qualified long term care insurance plan. (The government deems which types of LTC plans are tax qualified and which are not.) The good news is almost all LTC plans sold today are tax-qualified. Plans that don’t meet this standard are easily identified. They usually involve increased income (from an annuity) or an accelerated death benefit (from life insurance). Ask your agent or the underwriting insurance company when in doubt.
Your age will determine how much you can withdraw from your HSA to pay from long term care insurance tax-free. Those age 65 and above can spend approximately $4,000 each year while those above age 70 are allowed to spend closer to $5,000. Using HSA dollars is a great way to fund some or all of a long term care insurance policy costs.
Contact Us For Quotes, Coverage & Enrollment
Hyers and Associates is an independent agency. We specialize in Ohio Medicare supplement plans as well as Advantage, Part D, life and long term care. We work in several states across the country and can help you learn more about your best insurance options and strategies. Contact us today!
Category: Medicare Supplements, Retirement Planning
It depends who you ask. For those selling annuities, the answer is usually yes. For those who only sell competing accounts like stocks, bonds and mutual funds – the answer is almost always no. Most everyone has some skin in the game and they’ll work hard to make the case for their products over others.
There is not a right or wrong answer to whether you should own an annuity. Investments are very subjective and what’s right for you may not be right for your neighbor. Your short and long term goals, risk tolerance and income needs are just a few of the many factors that might help to answer this question.
How Much Market Risk Can You Tolerate?
The markets have been on several wild swings over the last 15 years. Several economic, technological and political factors have increased market volatility and it’s unlikely that these startling ebbs and flows will disappear any time soon. In fact, they are becoming more frequent.
If you’re younger and don’t plan on accessing your funds for several years, maybe you can weather these unnerving downturns. But as you grow older and have accumulated a sizable nest egg, there are certainly safer places to protect and preserve your wealth than the stock market.
Fixed and indexed annuities (not variable) will decrease your overall market exposure and provide insurance against losses that can take several years to claw back. These accounts may not grow as quickly as some high-flying stocks, but the idea is to reduce your overall risk once you’ve accumulated the wealth to protect. You feel the losses much more than the gains when you are near or in retirement.
If you’re risk averse, then some annuity contracts can be a good fit. Annuities provide protection against losses and will safeguard a portion of your assets. Conversely, if the ups and downs of the market do not negatively impact your financial and mental well-being, then the markets might be more suitable. It’s subjective and it depends on your overall risk tolerance and state of mind.
In Need Of Guaranteed Income Now Or In The Future?
What are your short and long term investment goals? Is present or future income of great importance? Certainly, fixed annuities are some of the most reliable instruments in providing systematic monthly income. And indexed annuities with a deferred income rider can guarantee steady or increasing lifetime income streams in the future.
So why do some pundits argue so aggressively against these products? Most have a financial interest in competing investments, but in fairness there are some who feel there might be better ways to achieve your goals. This second group might have good intentions, but when they’re wrong – it’s your financial well-being at stake.
No one can predict how variable investments are going to perform over the long haul. This is not your grandfather’s stock market and anyone trumpeting gains from yesteryear is probably in denial about the extreme volatility of today. Investing a portion of your portfolio in an annuity suitable to your needs can guarantee systematic income now and in the future. That known income will add safety, security and diversity to an otherwise at-risk portfolio.
I Heard Annuities Have High Commissions
Yes, annuities offer commissions to the agents who sell them. We live in an incentivized world that compensates those selling financial and insurance products. The problem is that some investor-types incessantly rant about annuity commissions as a means to dissuade and distract consumers.
Almost all financial products pay commissions. Annuity commissions cover a wide range. Some are higher than others, but with a little research, you can certainly find accounts offering low compensation and high growth potential.
Fixed and indexed annuity commissions are paid to the agent by the insurance company; they never come out of your investment. If you send $100K to the annuity provider, your broker will be compensated, but your principal will not decrease. The insurance company pays the agent out of their reserves which they expect to recoup over time based on portfolio spreads.
Our advice: Don’t rule out annuities based on what the vocal minority are saying about commissions. Many pay 3% or less only one-time to the agent. This is far less than what a financial advisor would charge after only a few years of management. There are of course some that pay agents more – upwards of 7-8%. Those accounts with higher commissions tend to have longer surrender schedules. It’s important to be certain longer term annuities fit your goals and investment timeline.
Bottom line: There are very few commission-free investments. But let’s just remember that those selling stocks and bonds are not working for free – and over the course of just a few years will make far greater than the commissions mentioned above.
Do Annuity Accounts Offer Access To My Money?
“Annuities will tie-up your money and you don’t have access to your principal!” That’s a common refrain from those who would never recommend an annuity product no matter how beneficial it might be.
Yes, annuities have surrender terms and some are longer than others. Deferred income annuity accounts are usually established for the long haul in order to guarantee lifetime income for single and married investors.
The mistake some people make is putting too much money in annuities and not leaving enough liquidity in other accounts. This problem can be magnified by aggressive agents who sometimes give the industry a bad name. Annuities should be a part of a diversified, well-balanced portfolio, but not the only asset.
Annuity investments become more liquid over time which is why some investors will stagger their accounts to mature in different intervals. Before maturity however, you will almost always have access to a portion of your principal – usually a minimum of 10%. Some accounts will offer more than 10% or even a full return of premium surrender-free. If liquidity is a major concern, then a good agent should be able to find an suitable product.
Contact Us To Discuss Your Investment Needs & Goals
In a nutshell, it’s time to cut through the manufactured hype created by those who have a financial interest placing your dollars in a turbulent market. There are safer, more calming asset classes that can be more appropriate for some investors.
A well diversified portfolio should likely include stable insurance products that are not subject to the whims of the markets. Contact us today to see if an annuity might be a suitable investment for you.
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Category: Annuities, Articles, Retirement Planning
If you are over 65 and leaving your group health insurance, you’ll need to plan carefully when considering COBRA as your semi-permanent insurance. If you do not enroll in Medicare Part B upon separation from employment, you can face late enrollment penalties including fines and delays.
Unfortunately, the transition from group health insurance to Medicare – and the role that COBRA may play – is poorly understood by many who advise on the subject. You may receive bad information by speaking with the consultants at Medicare.gov., your HR person at work, and those who work in the insurance industry. It’s wise to talk with several people before making a decision.
Enrolling In Medicare Part B When Eligible For COBRA
The mistake most often made is when you’re over age 65, do not enroll in Medicare Part B and choose to make COBRA your primary insurance. While the COBRA plan may satisfy your medical needs, delaying enrollment into Medicare Part B can create delays and fines down the road.
Enrollment into Medicare Part A is automatic and usually without cost at age 65, but Medicare Part B enrollment is not always automatic and monthly premiums must be paid. The important catch here is the expiration of your COBRA insurance does not allow for the automatic enrollment into Medicare Part B, but your original loss of group health insurance does.
In other words, you can enroll in Medicare Part B when losing your group insurance, but if you wait to do so until after your COBRA policy has expired you will face delays and permanent fines. You will have to wait until the General Enrollment Period (GEP) that occurs from January 1 to March 31 – and your Part B won’t take effect until July 1. When it does take effect, you will have an additional, permanent charge (late enrollment penalty) attached to your monthly premiums.
When To Enroll In A Medicare Supplement Plan
You will also need to be enrolled in Part B if you wish to purchase a Medicare supplement insurance plan, like Plans F, G, N, etc. You can always supplement your Medicare Parts A & B with your COBRA coverage, however.
It’s important to compare the cost of your COBRA plan with that of supplement and Part D rx coverages to see which option offers more value. Usually, the supplement and Part D combination are more affordable with less out of pocket than COBRA insurance, but every situation is different. (You may also want to investigate a Medicare Advantage plan as another alternative.)
If you do decide to supplement Medicare Parts A & B with COBRA, most insurance companies will allow you to enroll in a “Guaranteed Issue” Medicare supplement (Plan F, C, etc.) after your COBRA expired. You will have missed your chance to purchase non-guaranteed issue supplemental policies like Plan G and Plan N, however. Medical underwriting will be required to enroll in non-guaranteed issue plans, so there is a trade-off.
It’s important to note that in some cases enrolling in Medicare Part B once COBRA has already been selected may give your employer the right to cancel your COBRA policy whereas the opposite is not true. It depends on the order of enrollment. Enrolling in Medicare first (before selecting COBRA) gives you more options.
Understanding COBRA And Part D Drug Insurance
If you choose to supplement your Medicare A & B with COBRA, then you must make sure that the drug coverage associated with your COBRA policy is deemed “creditable.” In other words, it must be as good or better than what is offered by stand-alone Medicare Part D prescription drug policies.
If your COBRA drug coverage is creditable (your HR or insurance rep will know) then nothing more needs to be done until your COBRA policy expires. At that time, you can enroll in a Part D drug policy no questions asked. There will be no late enrollment penalties or fines to worry about.
If your drug coverage is not creditable, then you will likely want to enroll in a Part D policy – even if you choose COBRA over a Medicare supplement or Advantage plan. By waiting until after your non-creditable COBRA policy expires, you will face a permanent Part D premium penalty and likely have an enrollment delay as well. It’s a double whammy – just like the Part B enrollment penalties.
Contact Us For Quotes, Assistance And Enrollment Questions
When it comes to Medicare enrollment, there’s a lot to know. And there are traps that can cause difficulties – even when you try and do everything right. Permanent fines, delays and penalties can cause financial hardship and overall aggravation when mistakes are made.
At Hyers and Associates, we help our clients avoid such pitfalls while operating within the Medicare guidelines and timelines. Contact us today to talk more about your insurance options.
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Category: Medicare Supplements, Retirement Planning
Qualified longevity annuity contracts (QLACs) are popular retirement vehicles for those who want to create a deferred income stream later in life using pre-tax, qualified dollars.
Longevity contracts were approved by the IRS in June of 2014 and offer very attractive tax reduction strategies.
Many institutions offer these plans, but products like annuities from insurance companies are uniquely suited as they guarantee deferred future income payments.
With fewer employers offering pensions, the need for guaranteed retirement income using safe and insured investments has grown. A QLAC can be the answer for individuals and groups who wish to earmark qualified funds to create future income streams.
Longevity Annuities Grow & Lower Taxes
There are several advantages to deferred annuities including Required Minimum Distribution reductions, lower taxes, additional time for tax-deferred growth, future income streams, and simplicity.
Many investors like QLACs as they lower taxable income from RMDs at age 70 1/2 or 73 – depending on which applies to you. Your invested funds will postpone RMD withdrawals for years and allow for additional compounding tax-deferred growth. Distributions are then withdrawn later when needed or when taxable income is less.
Rules have recently changed for the amount you can contribute to a QLAC. In 2023, you are able to invest up to $200,000 so long as this amount is 25% or less of your total qualified accounts. Qualified money is from a source like an IRA, 401(k), or 403(b).
Income payments can then be deferred up to age 85. This reduces current RMD amounts while also deferring taxable income, compounding growth, and creating a much larger stream of income when it might be needed most.
Deferred income annuities are uniquely suited for QLAC as they establish a large (potentially increasing) income stream later in life.
More people are working past their 60’s and into their 70’s. It’s beneficial for some to postpone taxable RMDs until they are needed. This allows for additional time to grow your investment and a guaranteed income past your working years.
QLACs are popular as they have few moving parts. Only fixed annuities are used – no variable or indexing products are allowed. There are no ongoing fees for fixed annuity accounts and agent commissions don’t reduce your principal. (Typically agent commissions are much lower on fixed annuities when compared to variable and indexed products.)
QLAC Rules & Regulations For Tax-Deferral
A QLAC is a type of deferred income annuity, but not all deferred income annuities are QLACs. Many deferred annuities will not meet the specifications required by the IRS to be a Qualified Longevity Annuity Contract. The IRS says these parameters must be met for a policy to qualify:
- Only qualified, pre-tax money can be used – like IRA, 401(k) and 403(b) dollars
- Up to $200,000 (for 2023) – of your retirement account can be invested
- Contributions cannot exceed 25% of your total tax-qualified portfolio
- Income must be based on a single or joint life, but cannot include a period certain
- Payouts must begin at age 85 at the latest, but can begin earlier
- Variable and indexed annuities cannot be used – only fixed accounts
It’s important to know several insurance companies allow you to build in inflation protection to your annuity account. Yearly (or monthly) payments will increase by a predetermined value each year (usually 3-5%) or by changes in an inflation index like the CPI. This way, annuity owners know their payments will grow each year.
And if you established a QLAC when contributions amounts were lower, you can still invest the additional amounts in a new or existing QLAC. The IRS is allowing maximum amounts to increase most years.
What Happens To The Remaining Funds At Passing?
How your QLAC is set up will determine what happens at passing. If it’s established as a life-only plan, then all payouts will cease with no residual payouts at passing. Joint plans will continue to a living spouse at passing. And those with a cash refund would return any remaining funds to your named beneficiaries at passing.
Single-life annuities offer the largest payouts. If you’re concerned about your beneficiaries inheritance, then establishing a cash refund is prudent. If you pass away before your income stream has begun, the accumulated value (principal & growth) goes to your named beneficiaries.
To be clear: It is only when you set up a “life only” plan will the insurance company keep any residual funds at passing. Life-only plans are not very common and only used when an owner is more concerned with maximum income.
Contact Us For Quotes, Illustrations & Additional Information
Several large, well-known annuity carriers offer QLACs including: AIG, American General, Brighthouse, Lincoln Financial, Mass Mutual, Mutual of Omaha, New York Life, Pacific Life, Principal, Western Southern, and a few others.
We work with all of these carriers and can help you find the deferred income annuity that best suits your long term needs. Contact us today for more information.
Category: Annuities, Articles, Retirement Planning
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