Hi everyone. Below is a quick summary of the COVID-19 legislation that affects retirees. Before jumping into that, a quick apology. Sorry I haven’t written much lately. January and February are normally very busy months for me as I meet with clients for annual reviews. Just as that was wrapping up, the world (and markets) went haywire with the pandemic and I’m just now coming up for air.
New Rules That Affect Retirees
The coronavirus stimulus packages contain something for (almost) everyone: businesses, individuals, students and yes, retirees. I won’t bore you with a comprehensive list, but I’ll give you a quick overview of the elements that impact retirees.
Changes to Required Minimum Distribution (RMD) rules: The CARES Act allows you to suspend RMDs for 2020 from 401(k)s, 403(b)s and IRAs. If your IRA took a hit and you don’t need the money, it’s probably a good idea to skip your 2020 RMD. That will hopefully give your account time to recover from the recent downturn. If you have your RMD set to happen automatically each year, you’ll want to call your adviser or IRA custodian to stop it. If you’ve already taken it for the year, there is a provision that allows you to put it back. Certain restrictions apply, so check with your IRA custodian for details. Also keep in mind that Congress made another change to RMDs at the beginning of the year that pushed the required age from 70 ½ to 72.
Penalty waived for early retirement withdrawals: Normally, you have to pay a 10% penalty if you take a distribution from your IRA prior to age 59 ½. That penalty is waived for 2020 on amounts up to $100,000 for anyone affected by COVID-19 (e.g. sickness, job loss, reduced hours, etc.). You’ll still owe taxes on the distribution, but you can spread the taxes out over three years. And if you end up not needing some or all of the money, you can put it back into your IRA within three years and that contribution won’t count toward your annual contribution limit.
Stimulus checks: Even if you’re retired and not working, you may still be eligible for a stimulus check. The CARES act provides one-time payments of $1,200 for individuals and $2,400 for couples. The benefit begins to phase out at adjusted gross income of $75,000 for single filers and $150,000 for those married filing jointly. They phase out completely at $99,000 for singles and $198,000 for married filing jointly. Initially, people were required to file a 2018 or 2019 tax return in order to receive the benefit, but many retirees are not required to file a tax return, so the government now says it will look at SSA-1099 benefit statements. If you are receiving Social Security and are eligible for the benefit, the government will send out your stimulus check automatically in the same manner that you receive your regular benefits (likely via direct deposit).
Expanded loans from qualified plans: If you have a 401(k) or other qualified plan, you can now borrow 100% of your vested account balance, up to a maximum of $100,000. The deadline to initiate the loan is September 23, 2020. If you already have a loan outstanding, you can delay repayments for up to one year.
Delayed tax filing deadline: The due date for filing federal income tax returns (and paying any balance due) has been moved from April 15, 2020 to July 15, 2020. This extension applies automatically to all taxpayers and you don’t need to file any additional forms to qualify. The delay applies to 2019 returns as well as estimated tax payments for Q1 of 2020 that would otherwise have been due on April 15. If you’re still unable to file by July 15, you can file for a normal extension using Form 4868. Keep in mind that the regular rules still apply to that second extension (i.e. it extends the due date of your filing, but not the due date of any taxes due). Not all states extended their filing deadline, so be sure to check your state’s deadline to make sure you file on time.
Delayed mortgage payments: The CARES Act allows certain borrowers to delay their mortgage payments for up to a year. Be careful with this provision, however, because depending on who owns your mortgage (your bank or another servicer), you may be allowed to tack the payments onto the end of the loan or you may be required to pay all of your back payments in a lump sum at the end of the forbearance period. Check with your mortgage provider for details.
Medicare and COVID-19: Under earlier legislation (the Families First Coronavirus Response Act), health plans are required to cover COVID-19 testing at no cost to the patient. If you’re already on Medicare, it provides coverage as well. Medicare will cover COVID-19 testing and also covers hospitalization and treatment. In addition to these benefits, Medicare has expanded its coverage of telehealth benefits. For more information on all these things, visit https://www.medicare.gov/medicare-coronavirus.
These are definitely unprecedented times. Stay safe and touch base if you have any questions or if there’s anything I can do to help you.
Quick thought for today.
If you want to live an intentional life, you should focus primarily on
the present. Let me explain. We all spend part of our days—either mentally
or physically—in the past, present or future.
You’re sitting there right now in the present, but maybe you’re thinking
about something you did this past weekend or dreaming about something you hope
to be doing 5 years from now. Past, present
and future. We all spend our time
inhabiting each of those spaces.
Unfortunately, most of us mess up the proportions. We spend too
much time and energy on the past and the future and not enough on the
present. We look back and worry about the
things we did or didn’t do. We look
forward and dream about the things we hope to eventually do. That only leaves a small amount of our time
where we’re honest to goodness living in and making the most out of the
I’m not saying that you should ignore the past and the
future, but the present should be your priority. Anything else means you’re focusing on things
you can’t change (the past) or things that might not happen (the future). Here are a few suggestions on how to get the
How to use your past:
Don’t obsess over it. Don’t
waste your time thinking about regrets or wishing you had done or said things
differently. Don’t cling to
bitterness. Don’t hold grudges. Instead,
think fondly of the good times and be grateful for the wisdom earned and lessons
learned from the challenging times. Use
it as a foundation to build on. Remember
the people, places and things that made you who you are.
How to prepare for your future: Don’t push everything to the future. Don’t treat it as some magical time where you’ll finally start living. Delayed gratification is great if it’s allowing you to work toward something, but it becomes a problem if it becomes an excuse for life avoidance. Use the runway between the present and the future for planning and preparation. Use it to set the proper direction for your life and to get any necessary prerequisites out of the way. Use it to set goals, dream, plan, save and even to experiment. All of those things will help you hit the ground running and make the most out of your future years.
How to live in the present: Don’t get bogged down in the routine of
life. Don’t focus all your time on the
maintenance of living. Don’t live a life
that is frantic and unintentional. Be
present in your days, with your friends and during experiences like vacations
rather than worrying about how to make it look a certain way on social
media. Decide what you really want out
of life and start doing that. Today. Even if you have to start small, start. Have intentional action in your relationships,
activities, health, hobbies, pursuits and every other area of your life. Be proactive.
Learn. Do. Go. Experiment. Take risks.
In other words, live.
A good balance of past/present/future is something like
10/60/30. If yours looks more like
30/20/50, you’re not really living life.
You’re worrying about the life you’ve already lived and dreaming about a
life you hope to someday live.
At Intentional Retirement, we believe that retirement is an
intentional way of living that prioritizes freedom, fulfillment, purpose and
relationships. It starts today and is an
incremental process of aligning your lifestyle and actions with your highest
priorities. To do that, you need to
focus on the present. Stop fretting over
what is past or dreaming about what is to come.
Today is a new day. Start doing.
Happy New Year! Just a quick thought today on doing (i.e. taking more at bats). One of the biggest retirement mistakes I see people make has nothing to do with money. It’s that they constantly defer their dreams. They just don’t do stuff. Everything is “someday” this and “someday” that. And I totally get it. It’s hard to decide what you really want out of life. It feels risky to put yourself out there to try stuff. But you absolutely have to do it.
The best advice I can give you for 2020 and beyond is to start
taking some at bats. Right now. Even if you’re not retired. Especially if you’re not retired. The worst that can happen is that things
don’t work out, you get rolled a little bit, so you dust yourself off and try
something different. Ironically, that’s
also one of the best things that can happen.
Because that failure is feedback.
It turns out we’re pretty terrible at knowing what’s going to make us
happy. The more stuff you try, even if
you don’t end up liking it, the better idea you’ll have of what’s important to
you, who’s important to you, what you like, what you dislike, what makes you
happy and what you’re passionate about.
All of those things help you understand yourself and they make
you more self-aware so you can design a life that takes you where you want to
go. Finding out that you actually hate
to travel or you stink at gardening or golf is awesome. That means you won’t waste any time or money
on those things during the prime of your retirement. Instead you can triple down on the things
that you do care about.
So start taking some at bats today. Get out there and try stuff. Take a trip.
Pick up a new hobby. Learn
something new. Meet new people. Challenge yourself. Get outside your comfort zone. Sure, you might strike out a few times. But you’ll get better. You’ll figure out what you really want out of
life and you’ll be doing something about it.
And that’s what living an intentional retirement and an intentional life
is all about.
How healthy are your friendships? The answer will have a huge impact on your retirement. Research shows that friends (or lack thereof) can affect your health, happiness and even your habits. Let’s look at the findings, examine some of the challenges your friendships will face as you age and discuss a few ways to make and maintain friendships during retirement.
How Friends Affect Us
According to the Mayo Clinic, friendships can affect your
health and happiness in a number of important ways:
- They provide support in tough times.
- They help you find belonging and purpose
- They reduce your stress and increase happiness
- They give self-confidence and self-worth
- They can help you through difficult times like
death, divorce, illness or job loss
- They provide accountability and positive peer
- They help reduce the risk of things like
depression, high blood pressure and unhealthy BMI.
In addition to the benefits above, friendships can help keep
your mind sharp. Several studies have found
that there is a strong connection between loneliness and cognitive
decline. For example, a 2018 study in
the Journals of Gerontology found that loneliness was associated with a 40%
increase in dementia among study participants.
In another study, researchers in the Netherlands found that people who
feel lonely are about 1.6 times more likely to get dementia.
There’s also evidence that the importance of friendships
increases as we age. Dr. William Chopik
at Michigan State University conducted a study on how our relationships affect
our health and happiness as we age. The results
showed that the benefits we get from healthy family relationships stays level
throughout life, but the value of good friendships has a greater impact on our
health and happiness as we age. According
to Dr. Chopik:
“Friendship quality often predicts health more so than the quality of other relationships.”
The Problem + The Solution
So the benefits of friends are huge, but there’s a
problem. Making and maintaining quality
friendships gets harder as you age. In
mid-life you have competing priorities like kids and work. As you age, caring for your parents often
gets added to the list. And life isn’t
static. Circumstances change and
friendships ebb and flow. Major life
events—death, divorce, job loss, moving and retirement—can derail even the best
of friendships. So if you want to enter
retirement with good friends that have a positive impact on your health,
happiness and cognitive function, you need to be intentional.
That means investing time, effort and often money into your friendships. It means being kind, likeable and trustworthy. It means listening and being transparent. It means being reliable and available. It means celebrating victories and being there when life is challenging. It means being loyal and avoiding drama. It means being proactive about spending time together. All those things have a compounding effect over time. They deepen friendships and give them a solid foundation. And as we saw earlier, those deep friendships take on added meaning as you age.
A Few Practical Applications
The primary takeaway is this: Don’t underestimate the power of friends. They can make or break your retirement. Start working on them now. If you’re looking for a good place to begin, forward this article to one or two of your friends and start a conversation. Ask how you can be a better friend. Plan an adventure or fun outing. Start a new tradition. Discuss ways to deepen your friendship. Compare retirement plans and make sure they overlap in ways that will allow you to maintain your friendship. All of this takes effort, but it’s worth it. The payoff is a healthier, happier life for both you and those you care about.
Most people rely on Medicare to cover their health expenses during retirement, but it won’t pay for everything. Here are 5 things that Medicare doesn’t cover.
Deductibles, coinsurance and copayments: Depending on the type of Medicare you choose, you’ll still be responsible for certain premiums, deductibles, coinsurance and copayments. For example, Medicare Part A is usually free, but you’ll pay a $1,364 deductible for each benefit period and if you’re in the hospital for more than 60 days you’ll pay a coinsurance amount for each day. Beyond a certain number of days, you are responsible for all costs. Part B has premium costs, a $185 annual deductible and 20% coinsurance on most services. Parts C and D have costs as well.
Prescription drugs: Original Medicare (Parts A and B) doesn’t cover prescription drug costs. To get that coverage you need to purchase a Part D plan.
Routine vision care, dental care and hearing aids: Original Medicare (Parts A and B) doesn’t cover things like eye exams, most dental care, dentures, hearing aids, acupuncture or routine foot care. Medicare Advantage (Part C) may cover some of those things, but you need to pay extra for Medicare Advantage.
Long-Term care: As people age, they often need help with daily activities like eating, dressing, bathing and using the restroom. You can get help with these types of things by moving into an assisted living facility, but Medicare typically will not cover any of those costs.
Medical care overseas: Medicare will typically not cover medical costs you incur while traveling outside the U.S. and its territories. There are a few exceptions, such as when you’re on a cruise ship in U.S. territorial waters or if you’re traveling to or from Alaska via Canada and the closest hospital that can treat you is in Canada.
These uncovered costs can add up to hundreds of thousands of dollars over the course of your retirement, so you’ll want to plan accordingly. Earmark a portion of your nest egg for health expenses and then seriously consider purchasing additional insurance, such as long-term care insurance or a Medicare supplement plan, to cover anything not covered by Medicare. For more information on Medicare, visit www.medicare.gov.