Tell me what I don't know about retirement?

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rob
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Tell me what I don't know about retirement?

Post by rob »

I was shocked to find out the other day that salary 2 years before retiring can determine your premium for medicare...

So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.

Time for some of the oldies to give a "less-old" person some direction.. you know you want to :-). Don't mind doing some research so just looking for topics, thoughts etc.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
Tracker968
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Re: Tell me what I don't know about retirement?

Post by Tracker968 »

Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
2020 ButClassic
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Re: Tell me what I don't know about retirement?

Post by 2020 ButClassic »

Is that salary 2 years before retirement or before applying?

What if you retire at age 60 and apply at 65?
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celia
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Re: Tell me what I don't know about retirement?

Post by celia »

Here's something you don't know, that:
rob wrote: Mon May 04, 2020 7:20 pm ... salary 2 years before retiring can determine your premium for medicare...
is NOT true.

You might be referring to IRMAA: https://www.cms.gov/newsroom/fact-sheet ... eductibles
And salary is not involved, but rather all your taxable income from 2 years previous. And it only affects 7% of Medicare recipients. So you likely don't have to worry.

What OTHER things do you think is true?
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Stinky
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Re: Tell me what I don't know about retirement?

Post by Stinky »

It took me most of a year to mostly unwind from my work routine.

And now, 18 months into retirement, I still wake up before 5am to exercise, just as I did when I was working. I just can’t seem to sleep in at all.
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JediMisty
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Re: Tell me what I don't know about retirement?

Post by JediMisty »

Stinky wrote: Mon May 04, 2020 8:07 pm It took me most of a year to mostly unwind from my work routine.

And now, 18 months into retirement, I still wake up before 5am to exercise, just as I did when I was working. I just can’t seem to sleep in at all.
I feel like you could lick this issue. Try drinking too much or wild parties. I know you can manage to sleep in if you really put your mind to it.
retired@50
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Re: Tell me what I don't know about retirement?

Post by retired@50 »

Did you know...???

Social Security benefit calculations use your best 35 years of work history. If you don't work for 35 years, they fill in with zeros.

Having a chunk of your fixed income portfolio in cash or cash equivalents comes in handy during a pandemic.

I could go on... But I don't want to bore you.

Regards,
This is one person's opinion. Nothing more.
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GerryL
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Re: Tell me what I don't know about retirement?

Post by GerryL »

celia wrote: Mon May 04, 2020 8:02 pm Here's something you don't know, that:
rob wrote: Mon May 04, 2020 7:20 pm ... salary 2 years before retiring can determine your premium for medicare...
is NOT true.

You might be referring to IRMAA: https://www.cms.gov/newsroom/fact-sheet ... eductibles
And salary is not involved, but rather all your taxable income from 2 years previous. And it only affects 7% of Medicare recipients. So you likely don't have to worry.

What OTHER things do you think is true?
And your income two years prior does not determine your premium for the rest of your life. Only for one year. Each year there is a (approx) two-year look back. Yes, it is a good idea to understand IRMAA as you make decisions that can impact your income.

Also, are you aware that social security benefits may be taxable? Up to 85% of your benefits could be taxed by the feds -- and whatever percentage is subject to taxation is included in your income for IRMAA calculations. Most states do not tax SS, but be sure to check out your state.
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CAsage
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Re: Tell me what I don't know about retirement?

Post by CAsage »

Personally, I was surprised to know you had to pay for Medicare! Shows what I know. There is a two-year lookback on the IRMAA surcharge, but they will let you petition to get it adjusted if you have a 'life change" aka retirement different income. Another big shock was the IRA tax bomb - I really regret having maxed out my 401k for so many years; I should have taken the matching and saved more after tax. The new 10-year withdrawal on inherited IRA can cost your heirs (in their prime earning years) dearly - I better hang on and try and spend it.
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Wannaretireearly
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Re: Tell me what I don't know about retirement?

Post by Wannaretireearly »

CAsage wrote: Mon May 04, 2020 8:36 pm Personally, I was surprised to know you had to pay for Medicare! Shows what I know. There is a two-year lookback on the IRMAA surcharge, but they will let you petition to get it adjusted if you have a 'life change" aka retirement different income. Another big shock was the IRA tax bomb - I really regret having maxed out my 401k for so many years; I should have taken the matching and saved more after tax. The new 10-year withdrawal on inherited IRA can cost your heirs (in their prime earning years) dearly - I better hang on and try and spend it.
Whats the IRA tax bomb? What specifically would you have done differently and when? I'm guessing this is driven by early retirement? Cheers...
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celia
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Re: Tell me what I don't know about retirement?

Post by celia »

1. Your early retirement years are usually the best time to do Roth conversions.

2. Many people retire and Woo-hoo! their taxes went away or are very small! Then when they are collecting SS AND taking RMDs, those with both can be very surprised that their taxes can be more than they were while working. (IRA Tax bomb: The RMDs increase each year as your tax-deferred grows and the % to be withdrawn increases, which increases your taxes.) In general, once you start retirement, it is best to "level your income from the first retirement years until the year you die so that taxes will be level every year instead of having a few years of low/no taxes followed by many more years of taxes in a high tax bracket. You can use those Roth conversions in the pre-SS years to bring up your Taxable income (and your taxes) instead of swinging between the 'extremes' tax-wise.

3. If you are married, one year you or your spouse will die, then the survivor will have to start paying taxes the following year as Single. The tax brackets for Singles hold half the space as the same tax bracket for MFJ, making it easy to be pushed up to a higher tax bracket(s) if your Taxable Income stays the same.
Last edited by celia on Mon May 04, 2020 8:56 pm, edited 2 times in total.
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JoMoney
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Re: Tell me what I don't know about retirement?

Post by JoMoney »

After next year, new social security recipients will have a much lower benefit.
People born before 1960 had the option of collecting at age 62 with 75% of the full-retirement age (65) payout
If they wait longer, past age 65, they could increase the payout up to 132% of the monthly payout at age 70
Going forward, the Full-Retirement-Age increases, which means a longer period between age 62, so a lower % early payout, but there's also fewer months between FRA and age 70 so the maximum potential payout is also reduced.
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Re: Tell me what I don't know about retirement?

Post by dru808 »

Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
60% SCHK | 25% VIGI | 15% ILTB
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Re: Tell me what I don't know about retirement?

Post by dru808 »

Wannaretireearly wrote: Mon May 04, 2020 8:42 pm
CAsage wrote: Mon May 04, 2020 8:36 pm Personally, I was surprised to know you had to pay for Medicare! Shows what I know. There is a two-year lookback on the IRMAA surcharge, but they will let you petition to get it adjusted if you have a 'life change" aka retirement different income. Another big shock was the IRA tax bomb - I really regret having maxed out my 401k for so many years; I should have taken the matching and saved more after tax. The new 10-year withdrawal on inherited IRA can cost your heirs (in their prime earning years) dearly - I better hang on and try and spend it.
Whats the IRA tax bomb? What specifically would you have done differently and when? I'm guessing this is driven by early retirement? Cheers...
Just a guess, with a Roth and traditional you can pull from traditional till you hit a tax or benefit hreshold then pull remaining money from Roth to keep your taxable income below threshold. some Roth keeps options open.
60% SCHK | 25% VIGI | 15% ILTB
Wannaretireearly
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Re: Tell me what I don't know about retirement?

Post by Wannaretireearly »

dru808 wrote: Mon May 04, 2020 8:52 pm
Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
Getting ready to setup mum with Medicare, and the whole deal is a complex, and expensive sham. Its amazing govt can't get their act together to at least simplify the current benefits. (Not necessarily increase or improve them...) Just make the whole process easier & simpler for folks who are closer to dementia...
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delamer
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Re: Tell me what I don't know about retirement?

Post by delamer »

Many people have a goal of paying off their mortgage before retirement, which can be a good idea for a number of reasons.

But doing so does NOT eliminate housing expenses. Even with no mortgage, there still are costs for:

1. Property taxes
2. Utilities
3. Homeowner’s insurance
4. Short- and long-term maintenance (gutter cleaning and roof replacement, to cite 2 examples)
5. HOA fees (if applicable)
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celia
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Re: Tell me what I don't know about retirement?

Post by celia »

dru808 wrote: Mon May 04, 2020 8:52 pm Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity.
Don't worry. There is somewhat of a limit to how much you have to spend on meds. On a Medicare Advantage plan, a drug plan might be included, but it might not cover all your drugs. But at least you will have the same co-pays for the same drug all year long.

If you have a supplemental plan and a drug plan in addition to Medicare, you exit the "donut hole" after you have spent $6350 out of pocket for meds (for 2020). After that, drugs are only 5% of the price the carrier negotiated with the manufacturer (which can vary each year).

https://eligibility.com/medicare/part-d ... donut-hole
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Watty
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Re: Tell me what I don't know about retirement?

Post by Watty »

Tell me what I don't know about retirement?
Here are a few things;

1) Many people don't understand how Social Security is taxed and are surprised.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

2) I would highly recommend the book Medicare for Dummies despite the title to help understand how Medicare works.

3) Your expenses will be a lot different in different phases of retirement. People often underestimate this, I am not just talking about when you need a nursing home. Many people who are in relatively good health will naturally slow down by their mid 70's and will spend a lot less on things like travel and "stuff" in general.

4) Dental bills will be high. Even if you are careful it is very easy to put a nice used car in your mouth, more than once.

5) Costco for hearing aids and eyeglasses.

6) It varies, but with a paid off house your core expenses don't need to be that high.
sport
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Re: Tell me what I don't know about retirement?

Post by sport »

dru808 wrote: Mon May 04, 2020 8:57 pm
Wannaretireearly wrote: Mon May 04, 2020 8:42 pm
CAsage wrote: Mon May 04, 2020 8:36 pm Personally, I was surprised to know you had to pay for Medicare! Shows what I know. There is a two-year lookback on the IRMAA surcharge, but they will let you petition to get it adjusted if you have a 'life change" aka retirement different income. Another big shock was the IRA tax bomb - I really regret having maxed out my 401k for so many years; I should have taken the matching and saved more after tax. The new 10-year withdrawal on inherited IRA can cost your heirs (in their prime earning years) dearly - I better hang on and try and spend it.
Whats the IRA tax bomb? What specifically would you have done differently and when? I'm guessing this is driven by early retirement? Cheers...
Just a guess, with a Roth and traditional you can pull from traditional till you hit a tax or benefit hreshold then pull remaining money from Roth to keep your taxable income below threshold. some Roth keeps options open.
Once you get to be 72 (under the new law) you have to take RMDs (required minimum distributions) from traditional IRAs. The percentage of the account that must be withdrawn increases each year. Only if you want to withdraw more than the RMD do you have the freedom to choose which type of IRA to distribute. Uncle Sam let you defer taxes all those years. When you get to 72, he wants to start taxing the IRA, whether or not you are happy about it. The penalty for not taking the RMD is 50% of the shortfall. :shock:
sleepwell
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Re: Tell me what I don't know about retirement?

Post by sleepwell »

You might find the book Medicare for Dummies to be helpful.

Also, if you are relatively healthy, don't forget to ask about high deductible plans for Part B and Part D. Sometimes it is hard to find information on them in all the literature.

Sleepwell
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tadamsmar
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Re: Tell me what I don't know about retirement?

Post by tadamsmar »

celia wrote: Mon May 04, 2020 8:02 pm Here's something you don't know, that:
rob wrote: Mon May 04, 2020 7:20 pm ... salary 2 years before retiring can determine your premium for medicare...
is NOT true.

You might be referring to IRMAA: https://www.cms.gov/newsroom/fact-sheet ... eductibles
And salary is not involved, but rather all your taxable income from 2 years previous.
It is based on your AGI or MAGI, not your taxable income. Taxable income is smaller, reduced by deductions.
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tadamsmar
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Re: Tell me what I don't know about retirement?

Post by tadamsmar »

rob wrote: Mon May 04, 2020 7:20 pm I was shocked to find out the other day that salary 2 years before retiring can determine your premium for medicare...
That is for Medicare Part B. I don't think basic medicare has any premium. But it only determines your premium for one year. It's based on your AGI, or to get technical, your MAGI, not your salary. But it can change the next year based on your MAGI from 2 years before. If you are in retirement and you Roth convert too much, then your premium goes up for a year two years later since Roth conversions increase your MAGI. If you sell something have a big enough capital gain then that can bump up you premium for a year two years later.
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tadamsmar
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Re: Tell me what I don't know about retirement?

Post by tadamsmar »

rob wrote: Mon May 04, 2020 7:20 pm I was shocked to find out the other day that salary 2 years before retiring can determine your premium for medicare...

So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.

Time for some of the oldies to give a "less-old" person some direction.. you know you want to :-). Don't mind doing some research so just looking for topics, thoughts etc.
Plan out your Social Security strategy before you or your wife become eligible. Sometimes the best strategy is for one of you to start Social Security as early as as possible.

Don't overlook state taxes when calculating the tax on any taxable action or tax avoidance decision.
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tadamsmar
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Re: Tell me what I don't know about retirement?

Post by tadamsmar »

Before retirement, your taxable income is mostly based on your salary.

After retirement, particularly in early retirement, your taxable income is mostly based on your consumption.

Later, the RMDs can grow large and ramp up your taxable income. But earlier, you may want to up your taxable income by doing Roth conversions.
MathIsMyWayr
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Re: Tell me what I don't know about retirement?

Post by MathIsMyWayr »

For most of us, it will be a one way street not counting picking up any job to make ends meet if you have to. For the first time ever in life, it may be a critical decision without a second chance.
MJS
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Re: Tell me what I don't know about retirement?

Post by MJS »

Inflation is the evil twin of compounding. Play with https://smartasset.com/investing/inflation-calculator to get a sense of how much value your money loses over time.

Your IRA & 401's RMD's are sneaky. Play with https://www.schwab.com/ira/understand-i ... lators/rmd to get a sense of how much they'll add to your AGI & MAGI each year. Note that the numbers will be different next year when the Uniform Lifetime Table is updated.

Social Security planning is, like Medicare and doing your income tax, part of your government's benevolent attempts to keep you mentally active. Play with https://opensocialsecurity.com/ -- note the Advanced Options box on top.

Maybe you and your spouse will die before your money runs out! Did you know that that is a good thing? Play with https://engaging-data.com/will-money-last-retire-early/

Each state has different taxes and different social programs. Useful social programs for the aging include nursing home inspections, elder care ombudsmen, limitations on adult guardianship, and the challenging cost differences among property vs sales vs income tax.

Finally, assume these will all change before you retire and again after you retire. A Brillant Plan based on current laws & regulations will turn out to be a rathole of despair and financial loss for you and your family. (I miss the stretch IRA.) Any decision you make may turn out to be wrong 30 years from now.

Enjoy.
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Watty
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Re: Tell me what I don't know about retirement?

Post by Watty »

Watty wrote: Mon May 04, 2020 9:20 pm Here are a few things;
A few more;

7) The cost of long term care varies dramatically in different parts of the country.
https://www.genworth.com/aging-and-you/ ... -care.html

If you live in an area where costs are below average then it may be much less of a concern. Assisted living is dramatically less expensive than a nursing home level of care or a memory care facility.

8) Many of your other costs will stop when you go into long term care if you are single or only one spouse is surviving then. For LTC costs you need to focus on the gap between your normal budget and the cost of living in LTC. It might sound scary if you live in an area where it costs $100K a year but if you are single and your budget was $75K a year then you have a much smaller gap. For someone without a surviving spouse and an ample retirement budget their expenses could even go down if they need the less expensive assisted living level of care.

9) Many statistics about long term care are very misleading since they are used to sell long term care insurance. For example assisted living is much less expensive and it is lumped into "long term care" along with the much more expensive nursing home or an Alzheimer facilities. Long term care statistics may also include things like a week long stay at a recovery center after surgery or a limited stay in a hospice. When you hear some statistic like "52% of 65 year olds will need LTC in their lifetime" you need to dig into just what that means.

10) Some people who have had long term care insurance for decades get large unexpected premium increases that may make it unaffordable.
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cinghiale
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Re: Tell me what I don't know about retirement?

Post by cinghiale »

Watty mentioned:
I would highly recommend the book Medicare for Dummies despite the title to help understand how Medicare works.
Agreed, but note that the only version currently available is from 2017, and it does not include the changes and provisions of the 2018 Tax Reform Bill. The updated 2020 edition will not be available until November 3rd.
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Re: Tell me what I don't know about retirement?

Post by hudson »

rob wrote: Mon May 04, 2020 7:20 pm So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.
Once you retire, your new job is to figure everything out.
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Sandtrap
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Re: Tell me what I don't know about retirement?

Post by Sandtrap »

1. Prior to age 65 and/or Medicare eligibility. If ACA coverage. The AVA Subsidy Cliff penalty can be brutal.

2. As stated earlier, Medicare + supplementals (vision, drug, etc) + different deductables and coverage limits, can add up.

3. Retirement does not automatically mean reduced lifestyle expenses, just "different" lifestyle expenses.

4. "Lifestyle Creep" is real.

5. "Cognitive Decline" is real.

j :happy
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BigJohn
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Re: Tell me what I don't know about retirement?

Post by BigJohn »

I’ll combine a couple of things from above into what I think is an important retirement planning issue. As you can tell, there are lots of complicated issues with a fair chance of having the rules change with some frequency. In addition, the fact is that even without something as significant as Alzheimer’s, cognitive decline is real and inevitable. So I’d place a very high value on simplifying of finances in retirement.

My personal actions as an example. I closed accounts and went to one of each type (ie one tIRA, Roth, taxable, checking, etc). I went to one brokerage (Vanguard) for investments and one local brick and mortar bank for checking, savings and safety deposit box. All my bills are on autopay with at least 6 - 12 months of funding readily available without action. I’ve nearly completed my transition to a much more simple portfolio that can be left on autopilot for as long as necessary. I updated all my legal paperwork with these things in mind, especially who holds my durable and healthcare POAs. Many of these things are not “optimal” if looking at the investment and return impacts but I’m willing to sacrifice some return for the benefit of simplicity.
pahkcah
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Re: Tell me what I don't know about retirement?

Post by pahkcah »

rob wrote: Mon May 04, 2020 7:20 pm I was shocked to find out the other day that salary 2 years before retiring can determine your premium for medicare...

So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.

Time for some of the oldies to give a "less-old" person some direction.. you know you want to :-). Don't mind doing some research so just looking for topics, thoughts etc.
If your MAGI drops between the year your Medicare payment is based on and the year you start on Medicare, you can submit a request for a reduction/elimination from IRMAA. This is done by submitting an SSA-44 Form (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event).

Per Social Security (SS): The life-changing event date must be in the same year or an earlier year than the tax year you ask us to use to decide your income-related premium adjustment. For example, if we used your 2015 tax information to determine your income-related monthly adjustment amount for 2017, you can request that we use your 2016 tax information instead if you experienced a reduction in your income in 2016 due to a life-changing event that occurred in 2016 or an earlier year.

I retired in 2018 and submitted the SSA-44 form for 2020 because my MAGI in 2020 was going to be much less than in 2018. You provide an estimate on the form of what you expect to earn in the coming year and, if SS approves, your monthly payment is based on that estimate. I checked the box for “Work Stoppage” to cover loss of income due to retirement. Still paying IRMAA, but not at the higher tier I would have without the request for an adjustment.

Other thing related to retirement is that every day is Saturday, at least that’s what it feels like. :happy
Chaconne
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Re: Tell me what I don't know about retirement?

Post by Chaconne »

Wannaretireearly wrote: Mon May 04, 2020 9:03 pmGetting ready to setup mum with Medicare, and the whole deal is a complex, and expensive sham. Its amazing govt can't get their act together to at least simplify the current benefits. (Not necessarily increase or improve them...) Just make the whole process easier & simpler for folks who are closer to dementia...
I second the danger of underestimating the complexity of Medicare. Start studying it closely as early as possible.

For instance, if you're thinking of getting a Medicare supplemental policy ("Medigap"), you must choose one within 6 months of signing up for Medicare for it to be guaranteed issue. If not, the company providing the policy can deny you enrollment or charge you extra because of preexisting conditions. Signing up on time also assures you the policy will be guaranteed renewable "forever."

Medicare is full of "gotchas" like this. It's a horrible thing to spring on us just when we may be past our prime intellectually or emotionally.
Dinosaur Dad
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Re: Tell me what I don't know about retirement?

Post by Dinosaur Dad »

One thing I've just heard about (I'm not retired just yet):

If you go to a medicare advantage plan, and later want to switch to "regular medicare" with a supplement plan, my understanding is that you are not necessarily going to be accepted e.g. if you have developed a health condition, etc. Worst case scenario: you develop a serious condition, decide that Medicare Advantage is somewhat restrictive or not satisfactory and you want the fewer restrictions of straight medicare, and you want to switch out for that reason.

So would seem that's something to think about right off the bat.

As I said, I just heard about this, others may have further insight into that watch-out. Some states mandate that you have the ability to do the switch based on what I'm reading here:

https://www.medicareresources.org/faqs/ ... -medicare/
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David Jay
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Re: Tell me what I don't know about retirement?

Post by David Jay »

hudson wrote: Tue May 05, 2020 7:30 am
rob wrote: Mon May 04, 2020 7:20 pm So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.
Once you retire, your new job is to figure everything out.
This!

With early retirement:
1. Health Insurance pre-Medicare
2. Portfolio withdrawal strategy
3. When to claim SS benefits (spouse claimed @ 62)
4. Roth Conversions
5. Figure out Medicare (during year of 64, this is my project next year)

... and so on
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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LilyFleur
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Re: Tell me what I don't know about retirement?

Post by LilyFleur »

Wannaretireearly wrote: Mon May 04, 2020 9:03 pm
dru808 wrote: Mon May 04, 2020 8:52 pm
Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
Getting ready to setup mum with Medicare, and the whole deal is a complex, and expensive sham. Its amazing govt can't get their act together to at least simplify the current benefits. (Not necessarily increase or improve them...) Just make the whole process easier & simpler for folks who are closer to dementia...
There is a book called "Medicare for Dummies." I am planning on reading it!
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2pedals
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Re: Tell me what I don't know about retirement?

Post by 2pedals »

Listen to the podcasts from "The Retirement Answer Man". I have just started listening and just love his podcasts.

https://www.rogerwhitney.com/
Dottie57
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Re: Tell me what I don't know about retirement?

Post by Dottie57 »

Stinky wrote: Mon May 04, 2020 8:07 pm It took me most of a year to mostly unwind from my work routine.
A bit more time for me.
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Re: Tell me what I don't know about retirement?

Post by Dottie57 »

dru808 wrote: Mon May 04, 2020 8:52 pm
Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
You can get a prescription drug plan.
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CAsage
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Re: Tell me what I don't know about retirement?

Post by CAsage »

Wannaretireearly wrote: Mon May 04, 2020 8:42 pm
CAsage wrote: Mon May 04, 2020 8:36 pm Another big shock was the IRA tax bomb - I really regret having maxed out my 401k for so many years; I should have taken the matching and saved more after tax. The new 10-year withdrawal on inherited IRA can cost your heirs (in their prime earning years) dearly - I better hang on and try and spend it.
Whats the IRA tax bomb? What specifically would you have done differently and when? I'm guessing this is driven by early retirement? Cheers...
I had planned on leaving my IRA (should I expire prematurely) to my children to stretch out over their lives. If I die while they are in their prime earning years, which is likely, then they have to withdraw my IRA in 10 years on top of their salaries, which will push them into a much higher tax bracket than I saved when I put the money into the IRA. And pulling the money out now or doing Roth conversions to try and minimize future RMD plus SS taxable, pushes me up a bracket. Yes, a first world problem, but I still wish I had more money in after tax, tax-efficient long term capital gain type assets. Also, I wish Roth IRA had been invented when I was younger, sure would have saved more money in that! Not a bad problem, not related to early retirement, but more to tax management over retirement.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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rob
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Re: Tell me what I don't know about retirement?

Post by rob »

So you all know this is not a dead thread where OP disappears - Reading everything; appreciate all the replies... Will go thru in detail and respond more specifically.... Some stuff I knew, some not and clearly a lot more to come.... They don't make this easy - but what would life be without complex changing rules from the red tape types... Not like I can go lay on the beach right now anyways :shock:
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
Valuethinker
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Re: Tell me what I don't know about retirement?

Post by Valuethinker »

BigJohn wrote: Tue May 05, 2020 9:20 am I’ll combine a couple of things from above into what I think is an important retirement planning issue. As you can tell, there are lots of complicated issues with a fair chance of having the rules change with some frequency. In addition, the fact is that even without something as significant as Alzheimer’s, cognitive decline is real and inevitable. So I’d place a very high value on simplifying of finances in retirement.

My personal actions as an example. I closed accounts and went to one of each type (ie one tIRA, Roth, taxable, checking, etc). I went to one brokerage (Vanguard) for investments and one local brick and mortar bank for checking, savings and safety deposit box. All my bills are on autopay with at least 6 - 12 months of funding readily available without action. I’ve nearly completed my transition to a much more simple portfolio that can be left on autopilot for as long as necessary. I updated all my legal paperwork with these things in mind, especially who holds my durable and healthcare POAs. Many of these things are not “optimal” if looking at the investment and return impacts but I’m willing to sacrifice some return for the benefit of simplicity.
+1

This is very real, and having been on the other side of it, your spouse and your children/ heirs will have great cause to thank you.
spreadsheetguy
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Re: Tell me what I don't know about retirement?

Post by spreadsheetguy »

There's a social security tax "cliff". Essentially if you make additional income over your SS check, such as RMD withdrawals from IRA or any other source, you could push yourself into a higher SS tax bracket and that means more taxes.

Single: Income between $25,000 and $34,000, 50% of your SS benefit is taxed, and if your income is more than $34,000, 85% of SS will be taxed.

Thus if you make 34000 in SS, you'll pay tax on $17k. However if you make $34001, you'll be taxed on $28.9k, which will lead to a large increase in the absolute amount of tax paid.
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Re: Tell me what I don't know about retirement?

Post by sport »

Dottie57 wrote: Tue May 05, 2020 12:15 pm
dru808 wrote: Mon May 04, 2020 8:52 pm
Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
You can get a prescription drug plan.
The Rx plan is called "Medicare Part D". If you have traditional medicare, it is a separate policy. If you have a medicare advantage plan, it may be included. My MA plan includes a Part D and optional vision and dental coverage. If you buy a Part D separately, I understand that the formulary (the specific drug coverage) can change every year. So, each year you have to investigate and choose the plan that works best for your specific medications. Since my MA plan includes Part D, I do not have to shop each year. Perhaps someone with experience in doing that will comment.
sport
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Re: Tell me what I don't know about retirement?

Post by sport »

spreadsheetguy wrote: Tue May 05, 2020 12:43 pm There's a social security tax "cliff". Essentially if you make additional income over your SS check, such as RMD withdrawals from IRA or any other source, you could push yourself into a higher SS tax bracket and that means more taxes.

Single: Income between $25,000 and $34,000, 50% of your SS benefit is taxed, and if your income is more than $34,000, 85% of SS will be taxed.

Thus if you make 34000 in SS, you'll pay tax on $17k. However if you make $34001, you'll be taxed on $28.9k, which will lead to a large increase in the absolute amount of tax paid.
I believe it does not work quite like that. Instead of a cliff, I believe the higher tax rate gets phased in.
MathWizard
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Re: Tell me what I don't know about retirement?

Post by MathWizard »

hudson wrote: Tue May 05, 2020 7:30 am
rob wrote: Mon May 04, 2020 7:20 pm So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.
Once you retire, your new job is to figure everything out.
I would respectfully disagree.

If you don't figure it out, and have contingencies for (reasonable) changes in your assumptions,
you are courting disaster.

I am close to retiring, and will never make as much as I do now if I retire, so there is no going back for a do-over.

If I do not make any room for contingencies, I would be planning on about $24K in discretionary spending beyond my current lifestyle,
so I should just retire now, but many things can happen in the next 30-40 years, that could disturb this plan.
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Re: Tell me what I don't know about retirement?

Post by Gnirk »

Retirement:

Have a plan for activities or hobbies to take up some of the time you've been spending at work. Make a budget for hobbies and travel, if you plan on doing more travel than before.

If you are 65, make sure you have a Medicare Part D plan to cover prescriptions. Personally, we have both Medicare and and a Medicare Advantage plan which includes Part D. Otherwise, be sure you have health care coverage.

Make sure you have a will, durable power of attorney, and health care directive if you don't already have them. Update them as necessary.

I have been retired for 13 years; 95% of my investments are in taxable. I recently simplified my investments, so that if I become unable to manage them, my DPOA will have an easier time of it.
!.I eliminated my SCV tilt, and changed to a three-fund portfolio at Vanguard. I plan to change to a two-fund portfolio in the future.
2.I have one local Credit Union for checking and safe deposit box.
3.I use an on-line bank for my savings and CD's.
4. I use autopay for all of my bills. Most are automatically charged to one of my two credit cards, the rest are automatically deducted from my checking account.

Compile a list of all of your accounts: Pensions, Social Security, investments, savings, credit cards, bills, safe deposit boxes, etc. and include the name of the institution or business, their address, phone number, contact person, and how each bill is paid. Provide this information to whomever will be your Durable Power of Attorney.

Finally, enjoy your retirement!
Last edited by Gnirk on Tue May 05, 2020 1:04 pm, edited 1 time in total.
MathWizard
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Re: Tell me what I don't know about retirement?

Post by MathWizard »

sport wrote: Tue May 05, 2020 12:46 pm
spreadsheetguy wrote: Tue May 05, 2020 12:43 pm There's a social security tax "cliff". Essentially if you make additional income over your SS check, such as RMD withdrawals from IRA or any other source, you could push yourself into a higher SS tax bracket and that means more taxes.

Single: Income between $25,000 and $34,000, 50% of your SS benefit is taxed, and if your income is more than $34,000, 85% of SS will be taxed.

Thus if you make 34000 in SS, you'll pay tax on $17k. However if you make $34001, you'll be taxed on $28.9k, which will lead to a large increase in the absolute amount of tax paid.
I believe it does not work quite like that. Instead of a cliff, I believe the higher tax rate gets phased in.
Ys, you are quite correct. The cliff is a cliff in the marginal rate. That which the last dollar is taxed at.

The wiki page:

Code: Select all

https://www.bogleheads.org/wiki/Taxation_of_Social_Security_benefits
does a good job of explaining this.
hudson
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Re: Tell me what I don't know about retirement?

Post by hudson »

MathWizard wrote: Tue May 05, 2020 12:59 pm
hudson wrote: Tue May 05, 2020 7:30 am
rob wrote: Mon May 04, 2020 7:20 pm So what else do I NOT know about the couple of years before retirement? What worked for you? What was a fail for you? I know all situations are somewhat different.
Once you retire, your new job is to figure everything out.
I would respectfully disagree.

If you don't figure it out, and have contingencies for (reasonable) changes in your assumptions,
you are courting disaster.

I am close to retiring, and will never make as much as I do now if I retire, so there is no going back for a do-over.

If I do not make any room for contingencies, I would be planning on about $24K in discretionary spending beyond my current lifestyle,
so I should just retire now, but many things can happen in the next 30-40 years, that could disturb this plan.
MathWizard, I agree with you, you can't retire until you've got the money figured out. You shouldn't do anything without doing the math first!
Many other things can wait.
pennywise
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Re: Tell me what I don't know about retirement?

Post by pennywise »

sport wrote: Tue May 05, 2020 12:44 pm
Dottie57 wrote: Tue May 05, 2020 12:15 pm
dru808 wrote: Mon May 04, 2020 8:52 pm
Tracker968 wrote: Mon May 04, 2020 7:54 pm Here's one thing: Medicare doesn't cover dental, vision, prescription drugs and there is no limit to out of pocket expense. After adding a supplement, part D, and IRMAA it really isn't that much less expensive than what I was paying for an individual plan.
Really, prescription drugs? I figured dental would be excluded but prescriptions are a necessity. I’m even kind of surprised vision isn’t covered. Hmm, better think about this a bit more.
You can get a prescription drug plan.
The Rx plan is called "Medicare Part D". If you have traditional medicare, it is a separate policy. If you have a medicare advantage plan, it may be included. My MA plan includes a Part D and optional vision and dental coverage. If you buy a Part D separately, I understand that the formulary (the specific drug coverage) can change every year. So, each year you have to investigate and choose the plan that works best for your specific medications. Since my MA plan includes Part D, I do not have to shop each year. Perhaps someone with experience in doing that will comment.
Also I didn't know that once you start Medicare, if you don't purchase a Part D plan at that time, if you choose to do it later you will be assessed a monthly penalty for the rest of your life.

This happened to us with my MIL who is now 96(!). We enrolled her in a Medicare Advantage plan last year and in Part D. She incurred the maximum penalty and although it's not exorbitant,
at ~$50/month that's literally throwing away $600 each year.

Still, it was a surprise to me. When my husband enrolled in Medicare although he takes no prescription meds at this time I signed him up for a cheap monthly Part D plan just to avoid later unnecessary costs.
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