What is Medicare? Medicare is a form of health insurance designed for those with specific disabilities, those with End-Stage Renal Disease (ESRD), and those who are 65 and over. Medicare has four parts:

Part A—hospital insurance. Part A covers in-patient hospital care, hospice, some home health care, and skilled nursing facility care.

Part B—medical insurance. Part B pertains to doctors’ services, out-patient care, and some preventive services to help you maintain health.

Part C—Medicare Advantage Plans such as HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations). Part C refers to private company health coverage approved by the Medicare program.

Part D—Medicare prescription drug coverage. Part D covers prescription drug cost, helping lower the cost of prescription drugs as well as preventing costs from rising in the future.

Original Medicare, directed by the federal government, provides coverage for Parts A and B.  It also allows you to purchase Medicare Part C and D coverage which is provided by private insurance companies.

Medicare Advantage Plans relate to HMOs or PPOs, and are run by Medicare-approved private companies. You pay a monthly premium for these plans (Part C coverage).  When you visit the doctor, the plan pays an amount to the doctor.  If you have tests or procedures done by the doctor, the plan would pay various amounts for those services as well. Prescription drug coverage, Part D, can usually be added to one of these plans for an additional cost or it can be purchased as a stand alone policy from a different insurance company than the one being utilized for Part C coverage.

Costs for the Four Parts of Medicare.
Part A is typically free to people who are 65 or older and are U. S. citizens or residents.

Part B’s standard premium cost is $96.40, but may be higher if you are single, and your yearly modified adjusted gross income was more than $85,000; or if you are married, and your adjusted gross income was more than $170,000.

As for Part C, this will depend on the insurance company and plan that you choose.

Part D also depends on the insurance company and the plan (many companies offer multiple plans) that you choose.

How Do You  Enroll in Medicare? You should sign up for Medicare coverage (Part A) about three months prior to your 65 birthday. You can sign up for Medicare even if you do not plan to retire at age 65. Once you are eligible for Part A coverage, you have a seven-month period (your initial enrollment period) in which to sign up for Part B. A delay on your part will cause a delay in coverage and will result in higher premiums. Your initial enrollment period begins three months before your 65th birthday, includes the month in which you turn 65, and ends three months after that birthday. There is a substantial penalty for not enrolling in Part B within the initial enrollment period (a 10 percent increase in your premium for each 12-month period you were eligible for, but did not enroll in, Part B). For more information, or to enroll in Medicare, visit www.medicare.gov site, call your local Social Security center, or call 1-800-MEDICARE. Part C and D coverage can be obtained through private insurance companies.  Contact these companies directly for pricing information.

What Don’t Medicare Programs Cover? Medicare will not cover items such as hearing aids, eye exams, cosmetic surgery, and dental care/dentures. Medicare will not cover long term nursing home care or dementia care.

The 401(k) plan. The most common form of retirement planning is the 401(k) plan. Many employers offer a 401(k) plan to their employees. These plans allow employees to invest a certain portion of their income directly into a company-sponsored investment vehicle, before they pay taxes on that income. Taxes are deferred and are due only when employees later sell those investments and cash out from the plan (presumably in retirement when in a lower tax bracket). This is useful for retirement planning because it allows employees to invest more pre-tax money when earning higher wages and simultaneously cutting their tax bill in the current year. In 2009, investments into a 401(k) plans were limited to $16,500 for those 49 and younger, and $22,000 for those age 50 and older.

Estate Planning. Another important aspect of financial planning is estate planning. Currently, estate tax laws are in flux as Congress tries to agree on a more permanent set of regulations. Lifetime gift and estate transfer limits—the amount of money/property you are able to give away before having to pay taxes on further gifts—are set to rise through the end of the decade.

Wills. Though many of us procrastinate on thinking about, talking about, or drafting them, it’s vital to have a clearly written will. This document can save family-members from both legal and tax consequences when they try to settle estate issues. This is especially important for seniors who hope to establish trust funds or make charitable donations, because these wishes need to be outlined clearly in order to be carried out legally.

Trusts. One retirement planning strategy that has become very popular recently is establishing a trust. The foremost reason for establishment of a trust is to avoid the probate process. That is, when you die, the Beneficiaries of the Trusts receive what is due them—immediately—and no court has a say in the matter. Avoiding probate not only expedites the dispensation of your estate’s assets, but takes, in many instances, possible estate and gift taxes off the table. For example: If you had a Will stating only that your property was to be divided up equally among your surviving children, the IRS and state government would take what they were legally entitled to before any of your beneficiaries saw a dime. A legal Trust often legally circumvents taxes that would otherwise be owed.

Another advantage of setting up Trusts is preserving your family’s privacy. Probated matters become public record. But no court approval is needed for a Trust to become a legally recognized entity; the paperwork remains more private.

Next Steps.  If you have not yet retired, and want to find out if you’ve saved up enough money to do so safely, inventory your current investments. (Especially given the events of 2008.) At what age do you plan on retiring? How much annual income will you need, and for approximately how long? Next, estimate the average yield on your investments. With those figures and a financial calculator, it’s fairly easy to figure out how much money you need to save.  If you have concerns about your retirement planning strategies, do as much research as you can on your own. You may also want to consult a financial professional . . . but determine how possible candidates are trained, licensed, and compensated. You want someone who can offer appropriate resources and advice—based on your financial and retirement needs, not theirs.

Given the current economic environment, it’s no surprise that many people are beginning to wonder if they have saved enough money for retirement. Many are understandably confused by the complex tax rules that govern investments, retirement accounts, and estates, as well as recent events. Here are the basics of some of the more important aspects of retirement planning.

If you want to be absolutely certain your loved ones will be cared for, and in the ways that you deem appropriate, begin your estate planning now. You’ve earned your assets over a lifetime of hard work. Intelligent planning, based on your unique circumstances, enables you to legally codify your estate wishes and create a mechanism to see that they are heeded when the time comes. Depending on the size and nature of your various assets, conscientious estate planning can supply you with welcome peace of mind.

Trust Basics. As part of overall estate planning, you may choose to establish Trusts. A Trust creates a recognized legal entity that holds title of an asset or assets—such as property or money—for the future benefit of another person or several people. When you create a Trust, you are deemed the Creator or Trustor. The person—or an entity like a bank or law firm—who is empowered to manage the Trust’s assets is the Trustee. The intended and eventual receiver of the Trust is known as the Beneficiary.

Trustees. Depending on the exact nature of a Trust, Trustees are generally afforded some leeway in their administration. Trustees actually hold legal title to the Trusts which they manage, but this does not amount to full ownership. Trustees must scrupulously abide by the terms delineated in the original Trust agreements; they cannot run off with the Trust’s assets, or use the assets for personal enrichment. Trustees can only use the assets in the Trust agreements for the betterment of the designated Beneficiaries.

Why a Trust? There are numerous reasons why you might want to set up a Trust or a series of Trusts.

Foremost is avoiding the probate process. That is, when you die, the Beneficiaries of the Trusts receive what is due them—immediately—and no court has a say in the matter. Avoiding probate not only expedites the dispensation of your estate’s assets, but takes, in many instances, possible estate and gift taxes off the table. For example: If you had a Will stating only that your property was to be divided up equally among your surviving children, the IRS and state government would take what they were legally entitled to before any of your beneficiaries saw a dime. A legal Trust often legally circumvents taxes that would otherwise be owed.

Another advantage of setting up Trusts is preserving your family’s privacy. Probated matters become public record. But no court approval is needed for a Trust to become a legally recognized entity; the paperwork remains more private. A prime example of a simple Trust is a bank account in which you are both the Trustor and Trustee. You designate a beneficiary and put his or her name—“In Trust for”—on the account. During your lifetime, you maintain absolute control of the account. It passes to the stated beneficiary only upon your death—immediately and with no probate involvement.

Some Trusts are established for minors who cannot yet manage money or other assets. Some Trusts, too, are created for adults who are not believed responsible enough to receive an inheritance outright. For instance, a Trust agreement could contain stipulations that maintain a Trustee’s management and administration of the asset in perpetuity—for the life of the Beneficiary or until the asset is exhausted. Other Trusts contain provisos about exactly when the Beneficiaries receive what is in trust for them—or what they must do to receive it.

The prudent path is to see an estate planner as early as possible to help determine your next steps. You may be able to set up a very simple Trust yourself, using specialized software. More complicated estates may warrant assistance from a CPA or attorney. Many of us put off these estate planning basics, since it’s often a subject we’d rather not think about, but a little time invested now will ensure your need and decisions are respected later—efficiently, privately, and cost-effectively.

What is Social Security? Social Security is a government program established to provide economic assistance to individuals faced with disability or age.

History of Social Security. President Franklin D. Roosevelt established The Committee on Economic Security in 1934 to investigate the complex problem of economic security. The Social Security Act was signed into law on August 14, 1935. This Act provided for general welfare aid and an insurance program designed to provide aging, retired workers aged 65 or older a continuing income. Over the decades, the Act has been amended to provide stability of income for retirees and the disabled. Included in these additions and modifications was the development of Medicare, a health insurance program for seniors. Social Security and Medicare have become key aspects of modern life.

Who Gets Social Security? About one in six persons in the United States receives Social Security benefits. This number includes retirees, spouses and dependents of retirees, disabled workers and their dependents, and, finally, those disabled since childhood. Retirement is the most common reason for receiving Social Security.
 

You will need to supply a birth certificate, a Social Security card, and bank information for direct deposit. Other documents may be required.

How Much Will You Get? Many factors are used to determine the amount of Social Security benefit you receive. As mentioned before, a minimum of 40 work credits are required. Your highest 35 years of earnings are averaged, and that number and your age are used to determine your benefit. Early retirement reduces the opportunity to accumulate credits and higher wages. Your benefit is permanently reduced. If you can delay your retirement past age 65, you can earn credits and average in higher earnings which will increase the amount you receive when you do retire.

The application process for Social Security benefits and its accompanying Medicare benefits can seem daunting, or even overwhelming. But careful financial and personal planning will ease the transition into retirement and help provide a secure future.