Medicare: A short primer

Medicare: A short primer

Quick Summary:  The basic information you need to know about Medicare.

If you (like most) plan on using Medicare as your primary source of health care coverage during retirement, you should have a basic understanding of how it works.  Unfortunately, according to a recent study by the National Council of Aging and UnitedHealthcare, a majority of baby boomers don’t.  So here’s a short primer to bring you up to speed on the essentials.

What is Medicare?

Medicare is a government health insurance program that is typically available to people sixty-five and older, or those with certain disabilities or diseases.

How do I apply? 

If you are already receiving Social Security or Railroad Retirement benefits, you do not need to do anything to enroll in Medicare.  You will automatically become entitled to the benefits on the first day of the month you turn sixty-five.  The government will mail you your Medicare card about three months prior to your sixty-fifth birthday.

If you have not started claiming your Social Security or Railroad Retirement benefits by the time you turn sixty-five, you will need to apply for Medicare.  You can do this up to three months prior to the month you turn sixty-five, but not later than three months after the month you turn sixty-five.  If you miss this initial window, you will likely have to wait until the next general enrollment period, which runs from January 1 through March 31 of each year (Beware that penalties apply to those who sign up after their initial enrollment window.).  You can make certain changes to prior elections during the open enrollment period each year from October 15 through December 7.

You can enroll online at  You can also enroll by phone or in person at any local Social Security office.  If you don’t know the number to your local office, call the Social Security Administration directly at (800) 772-1213 or use the office locator at

What are the “parts” of Medicare that I have heard mentioned?

Medicare has four parts: A, B, C, and D.  Think of Part A as hospital insurance.  It covers all or a portion of the expenses associated with hospitals, critical access hospitals, skilled nursing facilities, inpatient psychiatric care, hospice care, and home health care.

Part B covers physician services like doctor fees, outpatient services, lab tests screenings, and ambulance services.

Part C is also referred to as Medicare Advantage and is a way to combine the benefits received under Parts A and B, as well as receive additional benefits.  To be eligible for Part C, you need to be eligible for Part A and enrolled in Part B.

Part D provides prescription drug coverage.  If you are eligible for Medicare, you are eligible for Part D.  There are two ways to get Medicare prescription drug coverage.  If you have Parts A and B you can sign up for a Medicare approved drug plan offered by an insurer in your area.  If you have Part C, drug coverage is probably included in your plan.

What are the costs for each part?

There are no premium costs for those eligible for Part A.  If you are 65 and not eligible, however, you can still purchase coverage by paying a monthly premium.  The 2011 monthly premium for Medicare Part A is $450 for someone with 29 or fewer Social Security credits, and $248 for someone with 30 to 39 credits.

Part B is optional for those eligible for Part A, but those buying (i.e. not eligible for) Part A must also buy Part B.  The 2011 premiums for Part B are $96.40 per month.   If your income exceeds certain amounts (currently $85,000 for single tax-filers and $170,000 for joint filers) your premiums will be $110.50 per month.

Part C is provided by private health insurance companies that contract with the government.  Because of that, the cost of Part C plans varies from state-to-state and insurer-to-insurer.  To enroll, you need to be enrolled in Parts A and B, which means you will need to pay your monthly premiums with Part B as well as any premiums charged by the private insurer for your Medicare Advantage Plan.

Costs for Part D will vary.  If you have Part C, chances are that prescription drug coverage is already a part of your plan.  If you have Parts A and B, you can sign up for a Medicare approved drug plan offered by an insurer in your area.  Premiums and medications covered will vary by plan.

What are the deductibles and or co-pays for each part?

Part A deductibles are based on the length of your hospital stay.  For 2011, the deductible for hospital stays is $1,132 for the first sixty days.  For days sixty-one through ninety you will be required to pay a co-pay of $283 per day.  After ninety days, you have a lifetime reserve of sixty days that you could choose to use.  If you decide to use the reserve days, your co-pay would increase to $566 per day.  You are responsible for all costs beyond 150 days.

Part B has a $162 annual deductible.  Once you reach your deductible, Part B covers 80 percent of the cost of covered services.  To help cover the remaining 20 percent, you may want to consider purchasing a Medigap policy (discussed below).

Part C co-pays and deductibles vary by plan.

Part D co-pays and deductibles also vary by plan, but in general, the average premium is $30 and the annual deductible can be as much as $310.  Once you’ve reached your deductible, you typically need to cover 25 percent of the costs up to a certain threshold.  Once you reach that limit, which is about $2,840 in 2011, you become responsible for 100 percent of your costs up to another limit.  After that higher limit is reached ($4,550 out-of-pocket for 2011), your coverage kicks back in and Medicare picks up most of the additional cost.

What is Medigap?

As you can see, Medicare doesn’t cover everything.  To fill some of those gaps, there is Medigap.  Like Part C, Medigap is provided by private insurers.  There are twelve kinds of Medigap plans that cover a variety of different services.  This could include coinsurance, additional hospital days, deductibles, preventative care, skilled nursing, and hospice care.  If you have Medicare Advantage or qualify for Medicaid, you probably won’t need a Medigap plan.  Not every state offers all twelve plans, so call 1-800-MEDICARE or check to find out what is available in your area.

What is Medicaid?

Medicaid is a program administered by the states and is designed to assist those who can’t afford to pay for their medical care.  You can qualify for Medicaid if you belong to a certain category (disabled, elderly) and you are financially needy.

Other Resources:

Social Security website:

Medicare website:

Centers for Medicare and Medicaid Services:

“Medicare and You” handbook:

Medicare plan finder for your area:


The power of deciding (+ the 100 day challenge)

The power of deciding (+ the 100 day challenge)

Quick Summary: The things you want to do are only difficult until you really decide to do them.

One of the things I write about here at Intentional Retirement is pursuing big goals.  If you’re anything like me, sometimes staring a big goal in the face can be challenging, scary, complicated, and overwhelming.

Because of that, it’s sometimes tough to get started.  I’ve found that the easiest way to overcome this “beginner’s inertia” is this:

~Actually decide to do what it is you want to do.~

It sounds simple, but deciding is the hardest part.  I don’t mean hoping or dreaming that you’ll do it.  Those are vague and passive.  I mean actually deciding.  Deciding is specific and active.

Until you decide, you can’t plan; you can’t act.  Let me give you a small example.  I’ve written before about my goal to get our daughter to all 50 states before she graduates.  A few weeks ago we found out that she had a three day weekend coming up due to some teacher meetings.  We kicked around the idea of getting out of town, but nothing really came together.

Fast forward to Tuesday of last week.  I woke up that morning and said “We’re going to Colorado this weekend.”  That simple decision shifted me into tactical mode.  I looked at three different areas I had been talking with a friend about and decided on Colorado Springs.  I went to and rented a car (ours are a bit small for road trips).  I went to and rented a house for our stay.  I made reservations for several things that we wanted to do, like a train ride to the top of Pike’s Peak.  Wednesday night each of us packed a bag and when we picked up our daughter from school on Thursday we hit the road.

If you look at that sequence of events, the most important thing I did was decide that we were going.  After that, everything was logistics.  Most dreams die for lack of a decision.  Keep that in mind as you plan your adventures for retirement.  Dreaming is one thing.  Deciding is another.

Practical Application: The 100 Day Challenge

I’ll give you a practical application to test your new decision making powers.  As of today, there are exactly 100 days left in the year.  Think about the goals you had for the year.  Think about things you’ve dreamed about doing in the not so distant future.  Pick something off your “to do” list and make the decision to do it before year end.  If your goal is travel related say to yourself “I’m getting on Expedia today to buy a plane ticket to ____________.”  If your goal is to save more for retirement, call the human resource department today and increase your 401(k) contribution.  If your goal is to get in shape, decide that today is the day that you’re joining the gym.

Take the challenge and I think you’ll discover what I did.  Deciding is the hard part.  Once you do that, you’ll be amazed at how easily everything else falls into place.

Thanks for reading!  If you enjoyed this article, forward it to a friend.



10 essential documents for retirement

10 essential documents for retirement

Quick Summary:  Key documents everyone needs to successfully navigate retirement.

When planning for retirement, most people focus on saving, and rightly so.  Having enough money to fund your retirement dreams is a key element to any plan.  Often overlooked, however, is the importance of obtaining and organizing important documents.  Here are ten essential documents you will need to successfully navigate retirement.

Pension paperwork

Defined benefit pensions have become less common over the years, but there are still many people covered by them.  If you have a pension at work, the details of the plan will be spelled out in the plan’s Summary Plan Description.  In addition, you should receive an Individual Benefit Statement that details the specific benefits that you have earned and are eligible for.  Make sure to review those documents as you approach retirement so that both you and your spouse have a good understanding of how much income you can expect from the plan and what will happen to that income if the primary pension holder dies.  Make sure to contact your employee benefit’s department with questions or concerns.  Also, the Department of Health and Human Services offers help and advice to pension holders through its Pension Counseling and Information Program.  Visit for more information.

Beneficiary designation forms

Many accounts, such as Individual Retirement Accounts (IRAs), 401(k)s, annuities, and insurance policies allow you to name a beneficiary who will receive those assets when you die.  Many people don’t realize that those designations take precedence over their will, even if the will is more accurate and up to date.  Because of this, it is important to review the beneficiary designations on all your accounts (as well as those of your aging parents if you are helping them with their finances) prior to retiring to make sure that they accurately reflect your wishes.  Meet with your financial adviser and estate planning attorney to ensure that your designations not only pass property to the correct people, but also minimize expense and taxes.

Documents needed when applying for Social Security

The Social Security Administration will need you to provide certain documents when filing for retirement or survivor benefits.  Documents they may request include your Social Security card, a certified copy of your birth certificate, proof of citizenship if you were not born in the U.S., military discharge papers, a copy of your marriage license or divorce papers, and a copy of your W-2 form (or self-employment tax return) for last year.  Having these documents readily available will help speed the process along.

Investment paperwork

Most people’s assets are divided into many different types of accounts.  Some may be tax-deferred, others may not.  Some might have restrictions or requirements on withdrawals.  Some, like annuities, might give you different options for turning the account into a guaranteed income stream.  When transitioning into retirement, it is important to have current copies of your account statements as well as options or restrictions associated with each account so you can craft a distribution strategy that meets your needs while minimizing expense, hassle and taxes.

Health care paperwork

Your health benefits during retirement will likely come from multiple sources.  Those could include a former employer, Medicare, Medicaid, a Medicare supplement policy, or a long-term care policy.  Be sure to retain benefit summaries, contact information, and policies associated with each.  If you have not filed for Social Security benefits by age 65, you will need to apply for Medicare.  You can do this up to three months prior to your 65th birthday.  When applying, you will likely need to provide them with the same documents mentioned earlier for Social Security applicants.

Home inventory

Many house fires or burglaries occur when the homeowner is away.  When you retire, you will likely spend more time traveling or at a second home than you did during your working years.  Because of that, it is important to inventory the contents of your home (either make a list or do a quick video walk through) so that you can more easily make insurance claims and rebuild your life if the unexpected happens.

Insurance policies

Many retirees have life insurance policies in order to replace income in the event of a death, as a vehicle to build cash value, or for estate planning purposes.  Make sure to have current copies of your policies as well as contact information for the insurance company so you can easily access cash value during life or so that your heirs can easily claim benefits if something happens to you.


Most people need a will, regardless of the size of their estate, to control the passing of property at death.  Another tool to accomplish this while at the same time avoiding probate is a Revocable Living Trust.  As you enter retirement, you should meet with your attorney to put a plan in place that passes your property to the correct people, designates the correct people to take charge, and minimizes expense, hassle and taxes.

Durable power of attorney for finance and health care

A durable power of attorney for finance is a simple and inexpensive legal document that authorizes a person you have chosen to step in and manage your day-to-day financial decisions if you become incapacitated.  Everyone needs this document to provide for the ongoing management of their financial affairs if they cannot make decisions for themselves.

Similar to the power of attorney for finance, the health care power of attorney is a legal document that authorizes a person you have chosen to step in and make health care decisions for you if you become incapacitated and can no longer speak for yourself.  You can also include a health care directive which provides written instructions to your agent that communicate your wishes regarding the withholding or withdrawal of certain life support equipment or medical procedures.

If you plan on moving to a different state when you retire, meet with your attorney to make sure that your will, trust, and powers of attorney will be valid in your new state of residence and make any necessary revisions.

Tax returns

In many ways life becomes easier after you retire.  Unfortunately, this is not the case with your taxes.  In fact, because your employer is no longer automatically withholding from your paycheck, tracking and paying your taxes may become more complicated.  To make matters worse, different states tax income and spending differently.  Will you owe tax on Social Security?  How about pension and annuity income?  How much should you withhold from IRA distributions?  The short answer is “It depends.”

Because of this you should work closely with a trusted tax adviser and then maintain your tax returns and supporting documents for seven years.  The IRS can look back three years for basic errors and six if you underestimated income by more than 25 percent.

As you can see, obtaining, understanding, and organizing your key documents will not only help you to make informed decisions, but will also facilitate a smooth transition into a rewarding and meaningful retirement.

As always, thanks for reading!  Can you do me a quick favor?  Help me spread the ideas at Intentional Retirement by forwarding this email to a friend or family member who you think would benefit from it.  


Essential financial tips for empty nesters

Essential financial tips for empty nesters

If your kids are grown and moving on to the next stage of their lives, it’s time for you to begin thinking about the next stage of yours.  For many, the empty nest years fall in that decade or so just before retirement.  Because of that, it’s an ideal time to make adjustments to your finances and make sure you’re on track to meet your retirement goals.  Here are 7 financial tips for empty nesters.

Adjust your insurance coverage

With your kids out on their own, it’s time to review your insurance coverage.  If they’re no longer driving your cars, ask your insurance agent about removing them from your policy or getting a distant-student credit.  Similarly, if they have health coverage provided by their school or a new employer, removing them from your policy will likely reduce your premiums.  And don’t forget about life insurance.  If your kids are through school and the house is paid for, you probably don’t need as much life insurance, but you may want to consider adding long-term care insurance.  Meet with a trusted adviser to evaluate your circumstances and craft a plan that is appropriate for your current stage in life.

Re-focus your finances

Several studies have shown that the cost of raising a child from birth to age eighteen can run anywhere from $250,000 to $500,000.  That’s a big chunk of change and causes many people to neglect their planning for things like retirement.  With fewer mouths to feed and big expenses like college and braces out of the way, it’s time to re-focus your finances on you.

The good news is that you’re likely in your peak earnings years and retirement plan contribution limits are higher for people over age fifty.  Take advantage of those higher limits by putting away as much as possible. The maximum 401(k) contribution for 2019 is $19,000 plus an additional $6,000 if you’re over 50. IRA contribution limits are $6,000 plus an additional $1,000 if you’re over 50.  That means that a working, married couple could sock away an additional $320,000 in just five years simply by maximizing their 401(k) and IRA contributions.

Re-do your budget

A budget for a family of five looks drastically different than a budget for two.  Take a hard look at your expenses and re-design your budget with your new circumstances in mind.  I’ve already talked about insurance and savings, but don’t forget to consider things like cell phone plans, cable tv channels that only junior watched, the grocery bill, and memberships or subscriptions that you were covering for the kids.  Once you’ve freed up some extra money each month, see point two.

Go back to work

If you stayed home to raise your kids, consider going back to work at something you really enjoy.  Not only can a job replace some of the purpose you derived from raising the kids, but it can also increase the Social Security benefits you’ll be eligible for and provide extra money for savings or meaningful pursuits.

Consider downsizing

Selling the home you raised your family in can be difficult, but it might make sense if you don’t need the space or if you plan on moving when you retire.  Even if you don’t initially downsize your house, work at downsizing your stuff, especially those things that you no longer need now that the kids are gone.  Paring down your stuff will make the transition easier if you eventually decide to move to a smaller place or retire in a different state.

Downsizing can also help you unlock the value in your home.  For many, their home is their biggest asset.  If your house made sense for a growing family, but is overkill now that the kids are gone, moving to a smaller place could free up tens or hundreds of thousands of dollars for retirement.

Get out of debt

The typical empty-nester has about ten or fifteen years to go until retirement.  That’s plenty of time to make sure your debt retires when you do.  Retiring debt free can slash 20-40 percent off the amount you need to save for retirement.  For more information, read my earlier post on how (and why) to retire debt free.

Review your asset allocation and retirement plans

As you get closer to retirement, you will likely want to adjust your investments to make your portfolio more conservative.  Meet with a trusted financial adviser to make sure your asset allocation is appropriate and to track your progress towards retirement goals.  If married, it’s also a good idea to talk with your spouse about your retirement plans and dreams to make sure you’re both on the same page.

As you can see, sending the kids out on their own can be a major transition, both emotionally and financially.  By taking a few simple steps and being intentional with your planning, you can enter the next stage of life with confidence and purpose.

Be Intentional,