Author: Dan Hoelscher

Dan Hoelscher founded Seniormark in 2007 in an effort to help individuals make a successful transition into retirement. Dan is a Certified Financial Planner™ Practitioner and holds Certified Senior Advisor (CSA)© and Certified Kingdom Advisor™ certifications. Since founding Seniormark, Dan has helped thousands of retirees throughout Ohio.

5 Social Security Terms You Need to Know

5 Social Security Terms You Need to Know

As you approach the exciting (but often overwhelming) milestone of retirement, the topic of Social Security comes up much more often, and it is easy to see why. Nearly nine out of ten individuals age 65 and older receive Social Security benefits, and—as an average—these benefits comprise about 33% of the income of older Americans. As retirement age comes around the bend, you will have to make a decision that will affect these benefits for the rest of your life: when to start taking Social Security.

 

To help you reach a confident decision, you first need to understand the terms. That is why I have compiled a list of 5 terms that you are likely to hear thrown around on the news, in articles, or in conversations with friends or professional advisors. Let’s get started.

 

1.  Primary Insurance Amount (PIA)

Your PIA is your full retirement benefit based off 35 of the highest earning years of your career. So, that is why it often pays off to work a couple more years if you are making the most you’ve ever made: it could have a significant effect on your PIA!  You will receive this full retirement benefit if you wait to collect your benefits at your full retirement age (which I will discuss next).

 

2.  Full Retirement Age (FRA)

The FRA, as I previously said, is the age that you can receive your full, unreduced retirement benefit. If you take it early (for instance, at 62), your benefit will be reduced. And if you delay beyond your FRA, it will be greatly increased! This age used to be 65 for everyone, but it is gradually increasing each year. If you were born between 1943 and 1954, your FRA is 66. If not, you can find out your FRA here.

 

3.  Break-even Point/ Break-even Analysis

When I am discussing when to take Social Security, I always remind people that it is a tradeoff. You can have more, smaller checks now or fewer, bigger checks later. For example, if you claim at 62 right now rather than 66, you will receive 4 more years worth of checks (48 to be exact), but those checks will be 25% smaller.

 

The break-even point then, is the age when the decision to delay starts paying off. Depending on how you think about Social Security, this can be an important

determination if you have a much lower than average life expectancy. Why? Because you may not live long enough for the bigger checks to pay off.

 

For a more concrete, thorough explanation of the break-even point, click here.

 

4.  Survivor Benefits

If someone dies, they can pass on their full benefit to their spouse (or child or parent in special cases). This benefit, called a survivor benefit, can replace the spouse’s benefit if it is higher. This is important to consider, especially for the “breadwinner” of the family. If you are main income earner, it pays even more to wait to take Social Security because your benefit can outlive you, making your personal break-even point (see above) less important.

 

5.  Cost of Living Adjustment (COLA)

The government realizes that inflation can reduce the buying power of your benefit. Therefore, Social Security increases your benefit every year to keep up with inflation. This is called a COLA, which—although not a carbonated beverage—is also quite refreshing. (Please forgive my lame joke.)

 

Well, there you have it! If you read through this whole post, you have familiarized yourself with some of the most confusing acronyms and terms you will likely encounter as you explore Social Security. My hope is that this will aid your understanding as you look to make one of the most important decisions of your retirement: when to take Social Security.

 

Wondering When You Should Take Social Security?

 

Read our blog entitled “When to Take Social Security—4 Questions to Ask Yourself Before Making a Decision?” This is a great primer to get you started.

 

Or, you can call our office and we can answer your questions or direct you to someone who can.  Call us at 937-492-8800.

How to Foster Meaningful Friendships in Retirement

How to Foster Meaningful Friendships in Retirement

 

At Seniormark, we talk a lot about health insurance and other financial concerns, which makes a great deal of sense. Medicare, Social Security, and 401(k) planning are all essential parts of a successful retirement transition. But I also think it is beneficial to discuss cultivating meaningful relationships in retirement.

 

Because when you leave work, you aren’t just leaving behind an income stream and your employer health insurance. You are also leaving behind a day brimming with social interactions: chit-chat at the water cooler, lunch in the teacher’s lounge, everything from light office banter to the deep bond of team goals and shared achievement.

And if there is one thing we know about these kinds of social interactions, it is that they are vitally important to nearly every area of your life.  In fact, consider how low social interaction affects just one of your major life domains: your health. Cited by a Merrill Lynch Retirement Study, low social interaction is as bad for your health as

  • Smoking fifteen cigarettes a day
  • Being an alcoholic
  • Never exercising

And it is also twice as bad as obesity!

It’s like all of the worst possible things you can do for your health are not nearly as bad as being friendless.

 

So, that leaves you with the challenge: how are you going to fill the gaping social hole left behind after you exit full-time employment? Well, to get you started making friends that last, here are some helpful pieces of advice:

 

  1. Recognize Other Retirees Want Strong Friendships, Too!

According to agingcare.com, 43% percent of seniors report feeling lonely. And I am not talking about once in a while, like when a spouse is gone on a fishing or shopping trip. I am talking about persistent loneliness that drags a person down week after week. The people who comprise that 43% figure are all around you. They’re the neighbor you see on his front porch on your daily walk, the woman behind you in the checkout line at the grocery store, the man who sits in the back pew at church.

Don’t you think they want to make a connection with you, perhaps even more than you want to make a connection with them?

Why is it then that we always think our company will bother, inconvenience, or disinterest others? The thoughts are pervasive and often keep us from taking that first step: She is probably too busy. Why would he want to go grab lunch with me? They’ve got plenty of friends; why would they take the time to make any more?

Luckily, those thoughts just aren’t true. Many retirees struggle to make friends and desire to develop close relationships. Others, although they may have lots of friends, have plenty of room in their life for more. After all, friendships aren’t like marriage; they aren’t exclusive!

 

  1. Reconnect With Old Friends or Distant Family Members.

Friends move away. Family members get busy with their own lives. And the next thing you know, the only time you see these people is at class reunions and for a brief moment at Christmas or Easter.

 

But in all of this lies an opportunity. One invitation to go get drinks or coffee could start up a thriving friendship once again. You must remember that these are people you have a history with. It isn’t like striking up a random chat with someone on the street. You have common ground, a place to reconnect.

 

Now, you might not be able to “pick up exactly where you left off” with everyone, but maybe that’s not always the goal. You can talk about old times to break the ice, but perhaps the relationships will start afresh, not from where you left off, but from where you are right now.

 

So what are you waiting for? You probably still have their contact information in an address book somewhere or in your phone. Think of the things you used to laugh about together, the things you may still have in common. They are only a call away.

 

  1. Reach Out to Others In Your Community

As I soon as I decided I was going to write a blog post about the topic of friendship, I knew I had to speak to my mother-in-law to get her two cents. As we discussed, she kept coming back to two simple words: reach out. I think it’s because those two words mean so much to her.

 

Although she lost her husband recently, she has managed to avoid the isolation and loneliness that often comes with that kind of deep grief. She is now in a small group of widowed women who share life together. They travel—to places like St. Louis and San Antonio. They see movies and visit fireworks shows. But aside from the flashy stuff, they often just sit around and talk.

 

How did she get so lucky?

 

Someone reached out to her. In her grief, the group decided to call her up, to comfort her, to invite her to join them on their adventures.

 

What made them think of her?

 

She reached out to someone else. When her neighbor, one of the ringleaders of their small gang, lost her husband months before, my mother-in-law decided to visit and comfort her. When the same thing happened to my mother-in-law, you can guess who was the first person on their minds and in their hearts.

 

The moral of the story is that showing yourself friendly is always the best way to make friends. So volunteer at a blood drive or soup kitchen. Serve in a women or men’s group at church. Go visit the widow across the street who needs your few words of comfort.

 

In other words, in the wise words of my mother-in-law, reach out.

 

Seniormark Wants to Reach Out to You During Your Retirement Transition!

Confused about Medicare? Unsure of when and how to take Social Security? Wondering what to do with your 401(k) at work? Seniormark’s staff handles all of these weighty concerns with patient and friendly guidance. Call Seniormark at 937-492-8800 for a free consultation and receive the help you need.

 

Get a Second Look Before Buying an Annuity or Your Money May Be Held For Ransom

Get a Second Look Before Buying an Annuity or Your Money May Be Held For Ransom

Two clients of mine, a couple, came into my office one morning, and they mentioned they were heading over to meet with a financial advisor about their Equity Indexed Annuity after their appointment with me. Just as a fair warning, I shared with them what I have learned about the dangers of some annuities, making it a point to mention that some have steep surrender penalties that can extend anywhere from 7-17 years. What I didn’t know then is that they can be even worse than that.

 

They seemed surprised. Why hadn’t their advisor mentioned those downsides? They would ask him, they concluded, and then come back to finish up some business with me.

 

They did come back, and with some very concerning news. “He made it sound like we could never take all our money out without penalties,” they said.

 

And now they surprised me. I asked for their disclosure document, researched the product, and—to my frustrated astonishment—found it to be true: this annuity was basically holding their money for ransom.

 

You see, according to the rules of this particular EIA, they can never take out their money as a lump sum. Even after they have passed away, their kids will not be able take out their money as a lump sum either. The only way the couple can is by taking it out 10% each year for ten years after a five-year deferral period.

If they refuse to play by those rules and take out their money as lump sum anyhow, the penalties would eat up all their returns, bonuses, and more. They would only get $164,555, which is $61,859 less than their account value of $226,414 and about 10,000 less than what they originally paid into the annuity five years ago! In other words, they would have lost 27% of their money after having been invested for five years.

 

This illiquidity might be tolerable if the returns were decent, but that is not the case with their annuity. It has a cap of 3%. This means that no matter how good the markets are, the most return they can get is 3%. Period. All in all, this is a terrible deal.

 

Now, this is not to say that all annuities are bad or that all of them will tie up your money like this one will. But this example does serve as a warning that you can hardly be too cautious around these complicated products. Why? Because annuity salesmen (even those who call themselves “financial advisors”) may not tell you about these downsides.

 

My clients were not told about these penalties. Instead, they were sold on the guarantees, the promises of market returns without market risk and an upfront 10% bonus. Then, with a skewed perception of what they were getting themselves into, they signed away full rights to their money forever.

 

So, before you sign anything, I always recommend getting a second opinion, just to make sure the annuity is being portrayed as it really is. I am convinced that if all the pros and cons were laid bare, significantly fewer people would purchase them.

 

Thinking about getting into an annuity? Call Seniormark at 937-492-8800 and a Certified Financial Planner will give you a second opinion on whether or not it is right for you!

 

Do I Need To Do Anything To Enroll in Medicare?

Do I Need To Do Anything To Enroll in Medicare?

This is a question I get quite frequently at my offices in Sidney and Vandalia, Ohio. When it comes to Medicare, soon-to-be retirees know that they’ve been paying for it since they started working through Social Security. However, they often don’t know how they collect the benefit they’ve worked so hard to earn.

 

Does it just happen automatically? Or do soon-to-be retirees like you need to do something?

 

Well, that depends on one thing…

 

Are You Already Receiving Your Social Security Benefit?

If you decided to claim your Social Security benefit before 65, then you don’t have to sign up. Your Medicare card will arrive in the mail around your 65th birthday and you will be automatically signed up for Medicare Parts A and B.

 

If Not, Make Sure You Sign Up!

But if you are not receiving your Social Security benefit, you need to sign up during your open enrollment period, the seven-month period surrounding your 65th birthday. You will be doing yourself a big favor by signing up on time because there are many late enrollment fees. For example, the Part B penalty is 10% for every year you are late. Unfortunately, this penalty will continue for the rest of your life.

 

So take the time amidst retirement planning and birthday celebrations to sign up. You can sign up online at ssa.gov or you can call or stop by your local Social Security office. If you live near Sidney, that office is in Piqua, 227 Looney Rd.  If you live somewhere else in Ohio, find your closest location here:  Ohio Social Security office locations.

 

Everyone’s Got a Lot More to Consider!

But whether or not you have to sign up for Medicare, you are far from done. It is a big misconception (see our blog on this here) to think that original Medicare alone is enough to cover all your health care expenses. There are two things you should do. Firstly, it is almost always a good idea to pick up a stand-alone prescription drug plan through Part D of Medicare. Otherwise, you will have no coverage for your medications. In addition, I also recommend finding some way to supplement Medicare with additional insurance. You can get a Medicare Supplement plan, or—for those who are more cost-conscious—a low to no cost Advantage plan.

 

As you can see, even though you may not have to do anything to sign up for Medicare, signing up is just the first step before you have your health insurance in order. I recommend seeing an advisor to help guide you through this complex process.

 

Need help navigating Medicare? Want personal help to find a plan that is right for your needs and pocketbook? Call Seniormark at 937-492-8800 for a free consultation!

 

Dental, Vision, and Hearing: 3 Medicare Coverage Gaps You Probably Shouldn’t Insure

Dental, Vision, and Hearing: 3 Medicare Coverage Gaps You Probably Shouldn’t Insure

Many soon-to-be retirees find themselves concerned about transitioning from their employer insurance to Medicare because of the numerous coverage gaps, and I truly get it. If you spend a good deal of your career in an all-inclusive employer plan, switching to Medicare will feel like going from a gourmet buffet of benefits to a fast food value meal.

 

Prompted by that feeling, people often question: should I fill the gaps with extra insurance?

 

Now, this is a tricky one. For some of these gaps, I can definitely recommend it:

  • 20% coinsurance on outpatient care.
  • Minimal coverage on extended hospital stays.
  • Limited coverage on skilled nursing care.

 

These are all viable reasons to seek extra coverage (usually in the form of a Medicare Supplement). And in the face of the fact that Medicare provides no out-of-pocket spending limit, I always recommend that every retiree have something to cap that off—whether it is a more expensive Supplement or a low to no cost Advantage Plan.

 

But then there are the strong three my clients consistently bring up: dental, vision, and hearing. As you may have heard, Medicare covers very little of these three. In fact, other than some complex dental surgeries received in a hospital and cataract removal, coverage for these three areas is basically non-existent.

 

But I have trouble recommending they get any insurance to cover them. I’m not saying there aren’t a few cases here and there (i.e. people who consistently need twice as much dental work as car repairs), but quite frankly it is just not worth it for the vast majority of retirees.

 

And here’s why…

 

Dental

You are likely going to spend about $400 per year for a stand-alone dental plan, which doesn’t sound like a lot until you hear what that money is really paying for. If it covered the entire cost of multi-thousand dollar oral surgery, then it might be worth it. But that’s exactly the problem: it doesn’t.

 

In fact, the maximum annual benefits for a dental plan is only $1000 in most cases. This is fine for the small stuff, the crowns or fillings that you could likely pay for on your own from a separate savings accounts. However, for the big-ticket items (the things you actually need insurance for), it doesn’t lighten the load all that much.

 

Vision

As far as vision goes, this is hardly ever bought as a stand alone, but is typically added on to the dental plan. And, like a dental plan, the benefits are equally lackluster.

 

Hearing

When retirees think of coverage for hearing, they are usually considering a big hearing aid expense with the testing and diagnoses and equipment. There is one Advantage Plan that offers up to $3,000 of coverage for hearing aids, but then you have to consider that you may be giving up your rights to purchase a Medicare Supplement in the future, which often provides more comprehensive coverage on all fronts.

 

Are you willing to give up full coverage for outpatient services (only provided through a Medicare Supplement) for help on a one-time hearing aid expense?

 

Not very many are.

 

The Bottom Line

In all of this, we must remember one thing: insurance is for those things in life that provide a huge risk. It is for those things that would cripple us financially. You can buy insurance for your appliances, your gerbil, your front door, and your potted plants, but that doesn’t mean it’s a good idea.

 

And when it comes to dental, vision, and hearing, (although I don’t think it is as ridiculous as potted plant insurance), it isn’t a high enough risk.

 

Believe me. If there were a magical plan that bundled hearing, vision, and dental into a $30-40 per month plan and then covered all of your needs in these areas 100%, then I would be the first to recommend it to my clients. But the truth is, insurance companies need to make money, and—therefore—these kinds of plans don’t exist. Insurance companies (at least the ones who don’t go bankrupt) will always win at the numbers game.

 

What I usually recommend to my clients (if they are still concerned) is a little bit of self-insurance. Take the money you would’ve paid for extra insurance and put it in an emergency savings account. In 2.5 years, you’ll already cover the maximum annual benefit of a dental plan.

 

And after a few more, you’ll have enough of a cushion to be sitting pretty, virtually unconcerned about your hearing, vision, and dental care needs.

 

Looking For a Helping Hand as You Transition to Medicare?

At Seniormark, we are here to guide you through the process, answering any and all of your questions along the way. We will help you find an insurance plan that fits your unique needs and pocketbook. Call us at 937-492-8800 for a free consultation!

 

4 Guidepost People You Need to See as You Approach 65

4 Guidepost People You Need to See as You Approach 65

The path to retirement is often difficult terrain, a rocky mountain path rather than a paved sidewalk. There are lots of ways to get lost in the forest of information coming in your mailbox, your email, and on the web.

 

Because, as you approach 65, it seems everyone is vying for your attention and for your pocketbook. But in the chaos of retirement planning, you don’t need more people screaming at you. What you need is guidance—something (or, in reality, someone) to give you a basic sense of direction.

 

That is why I recommend seeing these four people. Each one will give you the little pieces of information you need to make the retirement transition. These individuals will serve as guideposts along your journey to your desired destination of a stable, carefree retirement.

 

Social Security Representative

Guidepost number one is a Social Security representative. This person will provide you with one vital document: your Social Security statement. This will detail how much money you can expect in your monthly benefit check.

This information will help you approach important Social Security questions such as

  • Should I take Social Security now or later?
  • How do I maximize my benefit?
  • How does my Social Security benefit fit into my retirement income plan as a whole?

Needless to say, it is a valuable piece of paper, which is why a Social Security representative is a valuable guidepost.

 

Employer and/ or Human Resource Department Employee

As you know, many employers offer benefits such as a pension or a 401(k). Some even offer health insurance benefits to their retirees. It all depends on the size and generosity of your employer. Therefore, it is necessary to meet with your boss or a human resource employee and just ask, quite simply, “What are my benefits? What do I have to work with?” Another important question to ask is how the benefits will interact with Medicare. For example, in the case of health insurance, who pays first—the employer or Medicare?

 

Your Doctor

What are your medications? What conditions are those medications treating? What about your diagnoses? You are going to want to get this information from your doctor in a list or other tangible format. You might very well need it when it comes to the Medicare planning process, especially when shopping a Part D Prescription Drug Plan.

 

A Retirement Advisor/ Planner

After the three other people have given you their input, it is time to bring all the pieces to a retirement advisor. A good advisor will assemble them all to create an overall retirement plan that is personalized to your unique needs and goals. Want to travel? They will help you figure out how it fits into your budget. Concerned about your 401(k)? They can help you decide whether it is a good idea to roll it over or leave it where it is. Regardless of the question or financial concern, they will take the time to make sure you understand your options and make informed decisions.

 

Click here for advice on how to find a good retirement planner.

 

As a final note, I would recommend seeing your friends and family, especially those who are hiking up this difficult mountain trail to retirement with you. You can share tips, warn each other about possible pitfalls, reminisce about old times, as well as look forward to memories yet to be made. Nothing makes a difficult journey more bearable than knowing you are not traveling it alone.

 

Looking for a retirement advisor ready to help you transition from work to play? Call Seniormark at 937-492-8800 for personal help at no cost to you!

 

3 Reasons Why Prescription Drugs Are So Expensive

 3 Reasons Why Prescription Drugs Are So Expensive

It is no secret that prescription drugs are outrageously expensive. After nineteen years of working with those transitioning into retirement and helping retirees shop Part D Drug Plans, I have come across some astronomic prices. To give you an idea, some of the prescriptions (without insurance, thank goodness) range from $40,000 per year all the way to $158,000 per year. And what’s more, the prescription that cost $158,000 was simply a small, white pill that my client took once a day. If you break that down to price per pill, the cost is $439 per pop. Talk about over-the-top!

 

The scary part is, I know this is a widespread issue. Its effects extend to burden millions of older and younger folks beyond my small office in Sidney, Ohio. I’m not naïve enough to believe that what I have witnessed is unique.

 

This raises the question: why? Are drug companies “getting away with murder” as Donald Trump proposed on his campaign trail? Is it a governmental failure to regulate a monstrous and out-of-control industry? Or are their prices ultimately justified? Well, I did a little digging, and it seems the general consensus centers around three main reasons:

 

Reason#1: The 20-Year Monopoly

If any of you have ever played the famous Parker Brother board game, you know that the game is over once one player has control of the board. It is the same with the drug industry, except their monopoly is not won through rolling doubles and buying properties, but by acquiring patents. Once a pharmaceutical company turns out a new drug, their patent grants them exclusive rights to the formula for 20 years. This prevents any generic drugs from being manufactured to provide competition. And no competition means unlimited control over price. Normally this excessive control wouldn’t be the case, but prescription drugs are not like new sneakers or television sets. Those who need them can’t live without them, and are, quite often, willing to pay anything to get them.

 

This wouldn’t be so bad if it were just for those first twenty years. After all, the pharmaceutical company does need some time to make profit back after dumping loads of resources into research and development to turn out the new drug. However, the companies often push their monopoly past the 20 years by changing their formula just enough to renew their patent. At that point, the monopoly can become a bit oppressive.

 

Reason #2: Can’t We Talk About This?

Many other countries negotiate heavily with drug companies to keep prices low. But the United States does not allow this. Medicare is not allowed to talk the price down, and others who might have a voice are silenced by the almighty dollar. Essentially, drug companies have full reign over what they charge for their prescriptions.

 

Imagine how much the United States could save if they allowed Medicare to have a say.  According to the Economist, Medicare is the drug companies’ “single biggest customer,” forking over $112 billion to purchase prescription medications for retirees. If they could use this buying power as leverage, AARP says that Medicare could save $16 billion annually. Then they could pass those savings over to you in the form of lower Part D premiums and fees.

 

Unfortunately, this is not the case as of now. Now, Medicare has to cover almost all drugs approved by the FDA, AARP says, “regardless of whether a cheaper, equally effective drug is available.”

 

Reason #3: Lack of Transparency in Drug Pricing

It is difficult to tell how much a drug is actually worth. Drug companies claim that research and development costs justify the high prices, but it is unclear as to how accurate this really is. Some sources, like Money Magazine dispute this explanation, citing that only 10-20% of revenue really goes to research and development.  Others, like AARP, point out that “9 out of 10 big pharmaceutical companies spend more on marketing than on research,” a statistic which shows a lot about where their priorities lie. And this all goes without saying that drug companies are rarely hurting for money anyhow. In recent years, it has proved to be a very lucrative industry.

 

Overall, it seems that drug companies have too much power in the United States economy. The question then turns to how can we lessen that power to make it fair for everyone involved without lessening the incentive for innovation. Because $439 for each measly pill is too much. I think everyone besides the drug companies can agree on that.

 

Until these issues are tackled, just do what is within your power. If you are approaching 65, get yourself on a Part D drug plan for your unique needs and situation.   Remember, at any given time there are 20+ drug plans to choose from, so don’t let company names drive you to the wrong plan.  Each person’s recommended drug plan is different based on their prescriptions.  Make sure and shop your drug plans!

You Can Save Hundreds on Your Supplement Without Changing Your Benefits!

You Can Save Hundreds on Your Supplement Without Changing Your Benefits!

And when I say, “without changing your benefit,” I really mean it. This isn’t about covering decreased benefits or numerous hassles under a cloak of a lower premium. You can get on an identical plan to the one you have now and still save hundreds.

 

How is this possible? Allow me to explain.

 

Standardization: Easier Comparison = Easier Savings

Before standardization, shopping Medicare Supplements was a lot more difficult. It was hard to see which one of any two plans was the better value because insurance companies provided diverse benefits at diverse premiums.

 

Then, in 1992, Medicare standardized 11 lettered plans (A-N). Now, although there are diverse benefits from plan to plan (each lettered plan is unique), the plans remain the same from company to company. In other words, a Plan F is a Plan F no matter who you shop with, no matter which company you purchase from. Similar to the apples and oranges saying, you are comparing all the fruits to their respective fruits.

 

But here’s where you can save money: even though the plans are standardized from company to company, the premiums are not. A Plan F at one company, although identical in coverage, can be over a hundred dollars more at another. To demonstrate this, I compared all the available plans for each of the three most popular Medicare Supplement plans at our agency. The difference between the most expensive company plan and the least expensive is

  • $196.43 for a Plan F
  • $212.71 for a Plan G
  • $141.65 for a Plan N

Note: These numbers are based off a woman living in Sidney, OH who does not use tobacco.

 

Imagine if you could shop like this for other items. It would be like walking onto a car dealership’s lot and, instead of being confronted with an onslaught of varying features; you just had a line up of identical cars, some of them thousands more than others. No discrepancies in gas mileage. No debating the value of seat warmers versus a little extra trunk space. Just easy comparison, making it easy to get the best deal.

 

What If I’ve Never Heard of Them? What About the Company Ratings?

This is a common fear when it comes to shopping Medicare Supplements. The Plan may be the same, but the company is different. How do you know when the company you plan to work with is qualified, trustworthy, and stable?

 

Firstly, I would say not to let the fact that you don’t recognize a company deter you. There are many qualified, trustworthy, and stable companies that are not as well known. It’s good to ask a professional or do a little research yourself, but this should not be a reason to write a company off. In our practice, we screen the companies we represent before we recommend their plans to our clients. This way we know for certain all of our clients will have a good experience in claims processing and general customer service.

 

On the other hand, when it comes to the company ratings, you should pay a little more attention. This evaluation is based on the company’s financial stability, so it is easy to see the importance. You want your insurance company to have the money to pay your claims when they are needed. However, I wouldn’t let this carry too much weight. Obviously going with a D or F rated company isn’t a good idea, but I’ve found that you can count on any company above a B+ rating. They are well established enough to deliver the promised benefits.

 

I thought I could only change during Annual Enrollment?

While this is a very common misconception, it is not true.  You can change your supplement any day of the year!  (The only items that can only be changed during Annual Enrollment are Prescription Drug Plans and Medicare Advantage plans.)  And, as an added bonus, any deductible you have already paid in a calendar year, travels with you to the next supplement if you switch.  It’s the gift that keeps on giving!

 

Concluding Thoughts

Overall, I’ve found that switching plans about every 4-5 years is beneficial. On a regular basis at Seniormark, we see people save $30-50 per month just by switching.  If you take the few minutes it takes to compare Supplement rates, you may be surprise by how much you can save!

 

Interested in Finding Out How Much You Can Save?

Use our Quoting Tool to compare Medicare Supplement rates in your area. It’s absolutely free, and we don’t ask for any personal information, so you can be sure you won’t get any annoying junk emails.   If you find a price you like, or would like us to run more quotes for you, give us a call at 937-492-8800. We would love to save you money!

Why the Guaranteed Income of an Annuity Isn’t Always Worth It For Retirees

Why the Guaranteed Income of an Annuity Isn’t Always Worth It For Retirees

Everyone likes a guarantee. It’s like a warm house that shelters us from the cold, unknown outside of diminishing returns and tragic losses. So, for the retiree, someone like you who has a lot to lose, the idea of your income being unaffected by market fluctuations sounds inviting. The assurance that you won’t ever outlive your assets wraps itself around you like your favorite blanket.

 

But sometimes a guarantee isn’t worth what it is costing you. And sometimes the world outside the guarantee is a little bit sunnier than you might think.

 

I have found this to be the case with retirement investments. Annuities in general—indexed, variable, and others— often do not live up the glory of their sales pitches, and the world of a conservative investment portfolio with a financial advisor is not nearly as cold and harsh as some might assume.

 

Let’s start by looking at some of what you are giving up by going with an annuity. Because I’ve found that my clients are less enamored by these products once they see beyond the warm and fuzzy sales tactics.

 

Access to Your Funds

No matter how you parse it, you are giving up liquidity by choosing an annuity.  When you invest your money in an annuity, you are giving up your rights to access your money as a lump sum as the annuity gives you your set dollar amount of income every month. They are kind of like a parent, giving you an allowance for monthly expenses, but scolding you with penalties for taking out too much too fast. Although they will allow you to take out up to 10% per year, more often than not, you will incur a 10-15% penalty for taking out any more than that.

 

This might not seem like a big deal if you aren’t planning on any big purchases anytime soon. However, this can change on a dime. What if you come across a real estate steal for a snowbird home in Florida? Or what if you find a promising investment and cannot take advantage of it because your “parent” company will slap you on the wrists for accessing your own money? Then you might start to feel a bit smothered.

 

But if the lack of freedom doesn’t drive you crazy, I think what I am going to explain next will.

 

Fees and Returns

This is where the rubber meets the road when it comes to investments. If you aren’t making money with your money, then it is hardly worth it to invest. And, unfortunately, the truth about annuities is that the return is not all that great. Sure, agents make it sound nice with the guaranteed 5% income or maybe a 10% bonus in some cases, but the return (how much money you are really making) is a lot less flashy. Why?

 

There are a lot of really complicated reasons, but the most drastic one is the draining fees. From the typical annuity options I have come across, the total comes to about 3-4% when you add up all the insurance, rider, and mutual fund fees. Now…that percentage does not sound like a lot when you see it printed on the contract. But the effect it can have on your nest egg over your life expectancy is shocking, especially when compared to the fees of other financial advisors, which are typically 1-2%.

 

For an example, Let’s say you are investing a  $100,000 portfolio, and let’s say this portfolio averages a hypothetical 5% return over twenty years (a typical life expectancy for those heading into retirement). The annuity with its fee of 3% will allow your nest egg to grow to $168,595. Not too bad, right?

 

But how does that figure sound when you compare it with $219,112, the dollar amount you would have with a financial advisor who charges 1% in fees? That is over a $70,000 difference, a difference based off only a couple measly percentage points.

 

It’s also the difference between the warm security of an annuity and the few brave steps out into the world of a conservative portfolio.

 

The Air is Fresher Outside

Although I understand the hesitation, it is really not that cold or scary outside of that guarantee as long as your portfolio is conservative and diversified sufficiently. It is easy to look at recessions and stock market crashes and worry about running out of money in retirement, but even then a conservative portfolio can save you from any devastating losses.

 

For a solid example, I like to point to the recession surrounding the stock market crash of 2008, often called the lost decade (January 1st, 2000—December 31, 2009). Even during this severe downturn, when the market was consistently in the negative, the conservative funds we manage were still averaging 6.23% per year after managing fees. Even the most aggressive funds we manage were still making almost over 2% per year on average. Of course, that isn’t a good return by any means, but it sure isn’t doomsday. It’s more like a chilly breeze than a devastating snowstorm.

 

So, when it comes to retirement investing options, I recommend stepping out into the sunshine. Your nest egg needs some vitamin D to grow up big and strong.

 

Want a Certified Financial Planner to analyze your portfolio at no cost to you? Call Seniormark at 937-492-8800 for a free consultation.

I’m Retiring Soon: Will Social Security Be There For Me?

I’m Retiring Soon: Will Social Security Be There For Me?

Over recent years, there’s been a lot of chatter about Social Security’s financial future. And let’s just say that the discourse has been a little, well, over-the-top. Politicians have been ranting about Social Security going broke, acting like—if we don’t overhaul the system in the next 20 minutes—it’s as good as gone. Jeesh. They’re practically the doomsday preppers of retirement finances.

 

My advice to you: Don’t let their sensationalism bother you too much. This just isn’t the truth. There’s some truth in there for sure, but—for the most part—it is just causing a lot of unfounded fear.

 

To begin debunking those unfounded fears, I need to start with a quick explanation of how Social Security works.

 

How Social Security Works

Founded during the aftermath of the Great Depression, Social Security started to keep elderly people out of poverty in their retirement. It was set up as a “pay-as-you-go” program in which the workforce surrenders a portion of their income in payroll taxes to fund Social Security benefits for the current retirees. Then—when that workforce retires—the next generation of workers bears the burden to fund their benefits.  This cycle continues indefinitely, a constant influx of funding coming from the payroll taxes of the working American in order to pay for their elder’s retirement.

 

Do you see the implications? This means that Social Security can never run out of money completely. In fact, the only way this would happen is if the workforce decided that making money isn’t worth it anymore and paying taxes is optional. In other words, it’s not likely.

 

Of course, just because it can’t go broke, doesn’t mean it doesn’t need to be fixed in some respects.

 

The doomsday preppers aren’t completely off their rockers. Social Security isn’t perfect. Sometimes the funding from taxpayers is not enough to fulfill the promised benefits.

 

This is what is happening now. Although the government built up a surplus in a trust fund to prepare for the retirement of the baby boomer generation, the sheer number of retirees has proved too much. The trust fund is set to run out in 2034 (according to the S.S. Trustee report of 2017), leaving Social Security unable to pay the full benefit.

 

But please note, I didn’t say that it won’t be there at all. The trust fund might be going broke, but Social Security is not! By payroll taxes alone, 77% of benefits can still be delivered.

 

Now that’s still not fun. No one wants a reduced check. But this is considering that the government does nothing. They can increase the full retirement age, and they can increase payroll taxes a little bit.

 

Slowly But Surely

But whatever they do, it very likely won’t be all at once. It is not like you will get slammed out of nowhere with a 23% decrease in Social Security benefits.

 

Just take a look at how the government handled changing the full retirement age to keep Social Security solvent. Starting in 1983, congress set legislation in motion that was designed to increase the full retirement age from 65 to 67 in tiny increments. It is now 33 years later and—for the people retiring soon (like you)—the full retirement age is still only 66 and 2 months. After all that time, we are only half way there! In my opinion, it will be the same thing with any decrease in benefits or payroll tax hike.

 

The point is—for the people currently collecting Social Security and for those who are considering taking benefits soon—you’ve got very little to worry about it. Social Security may need a few tweaks, but it is not nearly as ruined as what the doomsday-ers are saying.

 

Will You Be There For Yourself?

In fact, what you should be more concerned about is where the rest of your retirement income is coming from. Social Security was never meant to cover all of the expenses of your retired life. You need extra funds, extra income to ensure that you can retire comfortably for your entire life expectancy. In other words, you have some planning to do as you approach retirement…some advisors to see, some decisions to make.

 

It seems that the question is not as much whether or nor Social Security will be there for you, but rather…will you be there for yourself?

 

Need a Certified Financial Planner to help you transition from employment to retirement? Call Seniormark at 937-492-8800 for a free consultation!