by Joe Hearn | Jun 3, 2015 | Medicare
Congress just passed a law that made some changes to Medicare so I wanted to give you a quick summary of those changes and how they might affect your retirement plans.
Positives
Doctor Pay. The law repeals the physicians payment cut that had many doctors seriously considering whether they should stop accepting Medicare patients altogether. The law also institutes annual payment increases to doctors for certain Medicare services. This is good for Medicare patients because it will increase the likelihood that they will continue to have access to their doctor of choice.
Health Care Quality. The law also instituted new quality measures for doctors and hospitals which reward them for providing high quality care. This is obviously another plus for those on Medicare.
Identity Theft. If you’re currently on Medicare, you probably raised an eyebrow when you first got your Medicare card and saw your Social Security number printed on it. This obviously opens the door to identity theft if your card is lost or stolen. The new law stipulates that all new cards must come without Social Security numbers printed on them by April 16, 2019 and existing cards must be reissued within four years after that.
Potential Negatives
Means Testing. As the financial difficulties of Medicare and Social Security become more acute, one of the first “fixes” that Congress will likely reach for will be some form of means testing. This is already starting to happen in Medicare. For example, the law increases the amount that high-income beneficiaries will pay for Part B (doctor’s insurance) and Part D (prescription drug coverage).
To understand how premiums will increase, we need to understand how the premiums are calculated. Basically, the government calculates an overall premium based on the cost of the program and then they pay part of that premium and individuals pay the other part. Your income level will determine how much of the premium you will be required to pay.
Most people currently pay a premium of $104.90 per month for Medicare Part B, which equates to about 25% of the premium cost. High earners, however, pay an Income Related Monthly Adjustment Amount (IRMAA). The higher your income, the more you pay. This has been the case for many years now, but the new law reduces the income limits, thereby subjecting many more people to higher premiums.
Here’s what people are paying currently:
| Income | Premium Percentage | Current Premium |
| Less than $85,000 | 25% | $105 |
| $85,001 to $107,000 | 35% | $147 |
| $107,001 to $160,000 | 50% | $210 |
| $160,001 to $214,000 | 65% | $273 |
| More than $214,000 | 80% | $336 |
And here is how the income limits will adjust:
| Income | Premium Percentage |
| Less than $85,000 | 25% |
| $85,001 to $107,000 | 35% |
| $107,001 to $133,500 | 50% |
| $133,501 to $160,000 | 65% |
| More than $160,000 | 80% |
Notice that many more people fall into the “high income” category and will thus be responsible for a larger percentage of the premiums. It’s difficult to put a specific dollar value on these increases, because we don’t yet know what the premium costs will be in 2018, but here are two things we do know: 1) the premiums will be higher than they are now, and 2) those with higher incomes will be required to pay a larger percentage of the premium. I have seen some estimates that a person in Tier 4 or 5 might pay around $3,500 more per year ($7,000 per couple) than they would if they were in Tier 1 or 2.
Are there ways to avoid these increases? Yes! The increases won’t happen until 2018, but they will be based on your Modified Adjusted Gross Income in 2016 and beyond. Those who are retired (or close to it), should keep that in mind. Your adjusted gross income is made up of things like wages, taxable interest, dividends and distributions from IRAs. During retirement, you can control several of those things. When deciding which accounts to pull from first, how much to pull from your IRAs or whether or not to work part time, consider how those decisions will affect your income and whether or not that income is enough to bump you up into a higher Medicare bracket. If so, it might be wise to forgo part-time work or delay distributions from IRAs until the following tax year.
I know Medicare discussions can be a little dry, so I’ll leave you with a fun photo from over on our Facebook Page:
Have a great day!
~ Joe
by Joe Hearn | May 22, 2015 | Lifestyle Design, Pursuits, Retirement
I think it’s fair to say that most of us believe we are rational beings and we make rational decisions. I just finished reading a book, however, that calls that premise into question.
In Predictably Irrational, professor Dan Ariely uses cleverly designed experiments to show time and again that many of the daily decisions we make—from the mundane to the monumental—are completely irrational. His point is that these irrationalities are so systematic and predictable, that we can understand them and then compensate for them so we can make better decisions.
The section of the book that really caught my eye related to the concept of anchoring. Anchoring is our tendency to rely on the first piece of information we are presented with (the “anchor”) when making decisions. As the name implies, the anchor influences all of the related decisions that come after it. If you examine your life—how you spend your money, how you spend your day, where you buy coffee, who you hang out with, how much television you watch—you can likely trace those habits or repetitive behaviors back to some sort of anchor.
What does this have to do with making retirement decisions? Again, our first decisions on a particular matter tend to act as anchors for the subsequent decisions we make in that area. When you enter retirement you make a whole bunch of new decisions. Those decisions—the who, what, where, when and why of retirement—will resonate for years to come. You should be very intentional as you make them. Professor Ariely:
“We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions. When we face such a decision, it might seem to us that this is just one decision, without large consequences; but in fact the power of the first decision can have such a long-lasting effect that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention.”
In other words, the first weeks and months of retirement are critical. Many people enter retirement with the best of intentions, but because they don’t understand this concept of anchoring, one of two things happens. First, they are so deeply anchored to previous decisions that when they are confronted with the new paradigm of retirement, they talk themselves out of things, even if it is something that they have been dreaming about for years. For example, “I’d love to travel, but that’s just not me.”
Second, they transition into retirement without a lot of intention or urgency and they assume that they will have plenty of time to figure things out as they go. But while they’re waiting for the dust to settle, they make decisions early on—the first 30 days, 60 days, a year—that end up acting as anchors for years to come and that prevent them from pursuing their ideal retirement. So what are some ways that we can avoid this fate?
Stop. I’ve talked many times before about a “stop doing” list. Never is that list more critical than when you transition into retirement. By cutting out old obligations that are no longer relevant to your new phase of life, you allow yourself space and breathing room to focus on your new pursuits, activities, obligations and commitments and give them the time and attention they deserve.
Shake things up. If you find yourself in a rut and anchored to decades of old habits and routines, it’s helpful to have big, new plans—like moving, traveling, or volunteering—that will force you to steer off the well-worn path you’ve become accustomed to and proactively pursue your new goals. If you don’t have specific new plans, it’s easy to fall into a routine that doesn’t look much different from your working years, save for sleeping in a little bit and having more time to run errands.
Keep a journal. As you transition into retirement, spend a little time at the end of each day journaling. Write about the emotions, feelings, experiences and changes related to the transition. Most of all, write about the decisions you’re confronted with. If you take time at the end of each day to think and write about those decisions in the context of what you want the next 20 or 30 years of your life to look like, then you’ll likely make decisions that put you on the path to where you want to go.
Have a response ready. When you retire, you will be confronted with a number of people and organizations that will want a piece of your newfound time and freedom. Rather than hastily committing to something you might later regret, have a ready response that defers any decision. Here’s the one I suggest: “Thanks for asking. You know, I’m new to this whole retirement thing and I’m still trying to figure out what my schedule will look like, so let me think about it and then I’ll get back to you.” If it isn’t something that fits with your plans, follow up later with a quick call or email to decline.
Remember, the decisions you make in the first weeks and months of retirement will resonate for years. Therefore:
- Have specific plans.
- Be intentional.
- Have a sense of urgency.
- Understand the resistance you’ll feel if your new plans conflict with your old anchors and be prepared to push through it.
- Keep a journal to help you think through your daily decisions
- Cut old commitments that aren’t a fit for your new phase of life
- Be slow to make new commitments.
To all of my readers in the U.S., have a great Memorial Day Weekend! And to those outside the U.S., just have a great weekend. 🙂
~ Joe
by Joe Hearn | May 8, 2015 | Mini-retirements, Pursuits, Uncategorized
Note: This post is part of a weekend series I’m doing throughout 2015 that is focused on fun things to do (or learn) during retirement (i.e. bucket list items). I hope you enjoy them and use them as inspiration for your own adventures. Congrats to Donna from our Facebook page who was the winner of this week’s giveaway. There’s a copy of my book The Bell Lap on the way to you Donna.
There’s just something about a good hike. Maybe it’s because modern life so often has us cooped up inside. Maybe it’s the fresh air and scenery. Maybe it’s just getting a chance to stretch our legs while we’re still healthy and active. Whatever the reason, I’ve noticed that retirees tend to front load their Bucket Lists with activities that include walking and hiking.
That’s why I jumped at the chance to share a story with you today from my friends over at One Road at a Time. Patti and Abi started their blog a few years ago and are writing about their adventures as they try to see the world (you guessed it) one road at a time.
When I saw that they were hiking the Camino de Santiago in Spain, I emailed Patti and asked her if I could interview her for an article on hiking the Camino. She graciously agreed and when they were taking a break to let their blisters heal (the hike takes more than a month), she took time to answer a few questions. Enjoy.
For those that aren’t familiar with it, tell us about the Camino de Santiago (e.g. What is it? How far? How long does it take? Etc.)
The Camino de Santiago – a UNESCO World Heritage site – is an ancient pilgrimage. It is believed the ashes of St. James are buried in the cathedral in Santiago de Compostela and pilgrims dating back centuries would travel the Camino to pay homage to St. James. It is a pilgrimage of faith, or dedication, or discovery, or a personal challenge. The distance from the French town of St. Jean Pied de Port, to Santiago, Spain is about 800 kms (500 miles) and most pilgrims walk it in about 35 days, although there are many pilgrims who walk just a section(s) and there are those who walk sections of the Camino on different visits. Every pilgrim walks his/her own pace on the Camino. We know and have talked to people who have done the entire walk multiple times. There are pilgrims who also bike the Camino.
Where are you right now? How many miles have you gone so far?
Right now, April 30, we are in Leon and we have walked about 150 miles. We walked from St. Jean Pied de Port, in France, to Burgos, Spain and from Burgos we took the train to Leon. We chose not to walk across the meseta (approx. 100 miles) because of my foot ailments.
Sometimes the “why” of these trips evolves over time or only comes months or years later once you’ve had time to process the experience, but what initially made you want to do it? Did it just sound like a fun challenge or was there some other reason?
We jokingly say we have no idea why we are walking. We love to walk and we wanted to see Spain. We have no deeply profound or spiritual reason. We are here, living it. But I can tell you it was important to us to do it now, while we are able.
What’s been the biggest challenge so far?
Blisters! I have been plagued with blisters on both feet. At home, we walk all the time, up to 20 – 25 miles per week and I have no memory of having a blister in the past decade or more. Here on the Camino, I refer to myself as a walking blister. Because of the blisters, we chose not to walk the Meseta, using the days instead to rest and heal in Leon before continuing on to Santiago.
Where do you stay on the route?
We stay in hotels, B&B’s, pensions, casa rurals, etc. because we want the privacy and because we want to ensure a reasonably good night’s sleep. And let’s face it, we want to be comfortable! Many pilgrims, of all ages, stay in albergues (hostels), which are either municipally or privately owned. Municipal albergues are usually free, asking for a donation and the private albergues charge anywhere from 5 to 10 euros for a bed in a dormitory or 30 to 40 euros for a private room. Albergue accommodations are most often co-ed dormitory style.
Have the people been nice so far?
Yes! Pilgrims have a comradery because they all understand what it means to be on the Camino. The locals are also incredibly nice. There is a phrase, “Buen Camino” and people passing by will just stop and say, “Buen Camino.” And the locals are so willing to help with directions or information if needed.
Are there any pros and cons to doing the trip with your spouse?
I can’t imagine doing this with anyone other than my husband, Abi. There is nothing easy about making this journey and having the emotional support of my hubby is essential. Plus, we know what the other one needs, wants and likes. There is no second guessing.
I’ve heard two types of fun described. Type 1 fun is fun while you’re doing it. Type 2 fun is painful and challenging while you’re doing it, but fun once it’s over and you have a chance to reflect back on it. Does the Camino fall more into the second category?
Absolutely! About day 5 we asked each other, “Are we having fun yet?” The answer was a resounding, “No!” Fun is going to Disneyland or playing cards and drinking tequila with good friends. The Camino is damn hard, physically demanding. But it is also incredibly rewarding and if you want to get to know a country and its people, walk across it.
What is the typical daily cost (food, hotel, etc.)?
The cost is really determined by your journey. I know a young woman who walked the Camino solo and I believe she averaged about $33 per day because she stayed in albergues and ate pilgrim meals. I would guesstimate we average $100 per day for the two of us. Our average accommodation stay is $60. Pilgrim meals (a preset 3-course meal) average $11 – $13 and they can be found most anywhere. Incidentals such as snacks, toothpaste, sunscreen and band-aids, we purchase along the way.
Did you train for it at all?
We did. We did a lot of extra walking for a couple of months before we left home, but we traveled for 5 weeks in Europe and the Middle East before starting to walk, so it didn’t really pay off.
Do you meet a lot of people and/or participate in different traditions/gatherings associated with the walk or is everyone pretty focused on the hiking?
We’ve met and talked with people from all over the world but there aren’t any traditions/gatherings that I know of, although there is a large social media network. I believe there is more social interaction with those who stay in the albergues because after all you’re eating and sleeping with so many others. During the day we’re pretty much just focused on putting one foot in front of the other. We have however, come across groups of up to 20 that appear to be walking together and there are organized tours available also.
Any tips for people considering doing the walk?
Don’t do this on a whim! I researched for over 2 years. I believe the most critical component in preparing for this walk is your gear. The right shoes, the right socks, a pack that fits well and choosing wisely what you will carry with you because every ounce counts when you have to carry it. Do your homework.
Any short/fun stories or travel serendipity you’d like to share?
The owner of our hotel kidnapped us. It’s a long story. Those interested can read about it over here.
Do you have any major takeaways, life lessons, etc. from your walk so far?
Yes! Don’t jinx yourself by saying you never get blisters! Other than that not really, but ask me again at the end of our journey.
Anything else you’d like to mention about the experience that I didn’t ask about?
The terrain of the Camino tests the walker from beginning to end. On day 1 we climbed over the Pyrenees Mtn. with a summit elevation of 4,600’ and we had to slog through snow and mud. I’ve had an ongoing debate about which is the lesser of 2 evils, uphill or downhill? Loose rocky downhill grades to flat broad farm roads to asphalt to washed away sections of the trail; the Camino throws everything at you. Walking in the spring has gifted us with the most beautiful vistas anyone can imagine.
Tell us a bit about your blog “One Road at a Time.”
I launched One Road at a Time in October of 2012. It started as a creative outlet for me; I love to write and tell stories. I try to capture the human interest side of the story with details and photos. I designed every aspect of the site, with the support of my husband, Abi, and my wizard webmaster. To get to know me and Abi a bit better scroll through the archives and read a few of our posts. You’ll find a variety of content including classic road trips, hospitality intrigue and adventures abroad. We retired early and downsized our lifestyle and while we don’t live large, we have a home base and the resources to travel. By sharing our journey we hope to inspire others to redefine retirement…One Road at a Time.
Thanks Abi and Patti! Good luck with the rest of your walk.
by Joe Hearn | Apr 29, 2015 | Happiness, Health, Lifestyle Design
If you’re like me, you want to live a long, healthy life, filled with purpose and surrounded by those you love. What are some practical ways to make that dream a reality?
Best-selling author Dan Buettner, along with a team at National Geographic, think they have the answer. They scoured the world for communities of people that lived longer, healthier lives and then researched those people to determine what they were doing differently than the rest of us. His team came up with 9 key traits.
Move naturally. None of the people studied by Buettner exercised in the way that you and I have come to think of exercise. They didn’t run marathons, lift weights or do CrossFit. Instead they moved naturally. They walked, climbed stairs, gardened and/or road their bike for transportation. Movement was a regular, natural part of their day.
Have a purpose. Apparently, if you have a reason to get out of bed in the morning, you’re much more likely to be alive to get out of bed in the morning. Buettner points out that the people in the Blue Zone of Okinawa Japan have even given this a name. They call it Ikigai. It means “a reason for being” or “a reason for getting out of bed in the morning.” What is your Ikigai?
Find ways to relax and shed stress. Buettner’s researchers found that when you’re in a hurry and stressed, it triggers an inflammatory response in your body. That inflammatory response can lead to all sorts of health problems and diseases. By finding ways to relax and de-stress, Blue Zone people live longer.
Eat less. Those who live longer tend to eat less than the rest of us. Buettner points out that it takes your stomach about 30 minutes to tell your brain that you’re full. Blue Zone people naturally recognize that and stop eating before they’re full. The Japanese even have a name for it: Hara Hachi Bu. It’s a Confucian teaching to stop eating when your belly is 80% full.
Eat more plants and less meat. Blue Zone people aren’t typically vegetarians, but they tend to eat a more plant based diet, especially beans. They eat meat, but usually only 4-5 times per month.
Drink in moderation. Those who drink in moderation tend to outlive teetotalers. The antioxidants and resveratrol in red wine, for example, have been shown to improve artery health and increase good cholesterol (HDL). Consume too much, however, and the negatives outweigh the positives.
Have faith. Buettner and his team found that those who attend some sort of faith based service four times per month tended to live, on average, about 14 years longer than those who didn’t.
Live close to and be committed to loved ones. Blue Zone people tend to live close to their loved ones and they are committed to those relationships. They have a healthy marriage. They keep parents and grandparents close by and they help them as they age. They have their children nearby and have a good relationship with them.
Have a strong social network. Blue Zone people tend to have strong friendships. Not only that, but their friends tend to support healthy behaviors and they are a positive influence—both mentally and physically.
On the surface, Buettner’s research seems like common sense—eat right, get exercise, have friends—but I think that misses the main point. The power of those behaviors only shows up when they become lifestyle habits. The people in the Blue Zones do those things every day for a lifetime. So if you want to gain some of the same benefits (regardless of where you live), consider how you can design your lifestyle, environment and daily life to incorporate those 9 things regularly.
If you want to read more about Blue Zones, Buettner has two books based on his research:
~ Joe
Note: I periodically recommend books to readers and I belong to the Amazon Affiliate Program. That means that, at no additional cost to you, Amazon will pay me a few cents if you purchase a book through one of my links. Obviously I’m not doing that to get rich, but because I believe in the things I recommend. Please don’t buy anything unless it will help you accomplish your goals for a meaningful retirement.
by Joe Hearn | Apr 16, 2015 | Income, Lifestyle Design, Retirement
This week is National Retirement Planning Week, so I thought it would be good to give everyone a quick reminder of what it takes to get ready to retire. Sure, saving enough money is important, but retirement is more than just a math problem. There are plenty of other things involved as well. With that in mind, I made a handy retirement readiness flow chart that will give you an idea if you’re ready to retire or if you still have some work to do. To see the chart, just click on the image below.
If you find yourself on the “No” side of the chart and you’ve still got some work to do, visit the Archives Page where you’ll find dozens of articles on every topic mentioned in the flow chart. A few additional free resources you might find helpful are A Brief Guide to Retirement Bliss and the Financial Checkup Checklist.
Thanks for reading and touch base if I can ever help.
~ Joe
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