Attorney Steven Samuel

What You Need to Know About Medicare

April 4, 2018 by Attorney Steven Samuel

Maureen Baxter, CLU®, ChFC ® and Steven Joshua Samuel JD MBA AIF ®

“Total projected lifetime health care premiums (Medicare Parts B and D, supplemental insurance, and dental insurance) for a healthy 65-year-old couple retiring this year are expected to be $321,994 in today’s dollars.” It’s more important than ever to understand health care costs and choices in planning for .

In this article, Maureen Baxter, a Commonwealth Financial Network Colleague (with some editing by Steven Joshua Samuel) will explain the basics of Medicare and how it coordinates payments with other plans.

Medicare Alphabet Soup

Familiarizing yourself with Medicare’s terminology is a great first step:

Part A: Generally covers inpatient hospital services
Part B: Usually covers doctor and outpatient services
Part C: Known as Medicare Advantage and is an alternative to original Medicare Parts A and B plus D (This plan is similar to a preferred provider or HMO coverage. It typically offers drug coverage, as well as vision and dental care. Your client must first enroll in original Medicare to be eligible for Part C Medicare Advantage coverage. The cost of the plan may be the same as that of original Medicare, but there could be additional charges depending on the plan selected.)
Part D: Prescription coverage

WHO MAY ENROLL IN MEDICARE AND WHEN

Individuals age 65 or older are eligible for Medicare. Medicare requires enrollment at triggering events, as well as at specific times throughout the year. If you are receiving retirement benefits under the social security program, you will be enrolled automatically in Medicare at age 65. If you are covered by a group health plan with 20 or more employees, you may opt out of Part B and Part D coverage without penalty.

A specific triggering event—for example, if you are Medicare-eligible and lose group employer coverage—requires that you enroll during the special enrollment period. Enrolling within eight months of a triggering event will avoid Part B penalties but may not prevent coverage gaps. It is best to start the enrollment process at least three to four months before a triggering event in order to avoid gaps in coverage or missing a penalty deadline.

A key factor in determining a Medicare penalty is whether an individual has “creditable coverage.” So, it’s worth taking a closer look at what this means and the potential financial costs.

Creditable Coverage and the Medicare Penalty

Individuals approaching age 65 should verify that their current insurance is considered creditable coverage for Medicare purposes to avoid permanent surcharges. For example, if you are 65 or older, COBRA coverage, group employer plans for businesses with fewer than 20 employees and retiree health plans are NOT considered creditable coverage for Medicare Part B. This means they do not avoid the Part B enrollment penalty. These plans, however, may qualify as creditable coverage to avoid the Part D enrollment penalty.

Here’s a breakdown of the permanent premium surcharges:

Part B. Individuals pay a surcharge of 10% of their Part B premium for each 12-month period they fail to enroll.
Part D. The penalty is 1% of the “national base beneficiary premium” per month. In 2018, the national base beneficiary premium will be $35.02 per month. This 1% penalty is applied to the total number of months an individual is without creditable coverage. This surcharge is added to the Part D premium.

Supplemental Coverage

Individuals who are covered under original Medicare Parts A and B plus D, might consider the purchase of Medigap coverage. Medigap, also known as Medicare Supplement Insurance, offers supplemental coverage for expenses that traditional Medicare does not cover. This includes vision care, dental care, medical coverage during international travel and copays.

Medigap plans are required to provide specific core coverage. In addition, they are regulated under state law to offer additional supplemental coverage. The coverages and costs vary between plans. There are multiple plans to choose from, each identified by a letter (e.g., Plan A through D or Plans F, G, K, L, M, and N). Unless there is a change in law, effective 2020, the popular Plan F, as well as Plan C, will no longer be available to new enrollees.

Who Pays First?

The coordination of claim payments between Medicare and other health insurance coverage is another factor that can directly affect a client’s health care costs. The Centers for Medicare & Medicaid Services brochure, Your Guide to Who Pays First (available at www.medicare.gov/Pubs/pdf/02179-Medicare-Coordnation-Benefits-Payer.pdf), outlines coordination of benefits for Medicare-eligible individuals. It indicates when Medicare is the primary or secondary payer for services under different retiree health plans.

Let’s look at some common scenarios and how Medicare coordinates payments.

Employer health plans. If an employer has fewer than 20 employees, Medicare is the primary payer and the employer coverage is the secondary payer. As such, individuals who are 65 and covered under a spouse’s employer plan or are still working and covered under an employer plan should enroll in Part B. If the plan is not considered creditable coverage for part D prescription coverage, those persons should enroll in Part D.

If an employer has 20 or more employees, the employer plan is the primary payer and Medicare is the secondary payer.

Keep in mind that there are special rules for persons with disabilities. You should contact Medicare to clarify coordination of benefits.

TRICARE Government Health Coverage for Military Members and Dependents. If you are 65 and covered under TRICARE, Medicare is the primary payer for Medicare-covered services and TRICARE is generally secondary, unless services are received in a military hospital.

There are specific rules for TRICARE-insured military members enrolled in specific plan types. Generally, if you are retired, you should enroll in Part B to remain eligible for TRICARE (including drug coverage). Speak with your benefits counselor for detailed information.

Federal employees health benefits (FEHB) plan. For a 65-year-old person covered under an FEHB plan and still an active employee, FEHB plan is primary payer and Medicare is secondary. Once you are no longer an active employee, the FEHB plan for Part B is not considered creditable coverage; then, Medicare is the primary payer. On the other hand, FEHB may be creditable coverage to avoid the Part D prescription plan penalty, as well as serve as the client’s supplemental gap plan. Again, it is important to check with a benefits counselor.

Retiree employer health plan. Medicare is the primary payer and the retiree health plan is secondary when a person is 65 and covered under a retiree employer health plan.

Once you are no longer an active employee, the retiree health plan for Part B is not considered creditable coverage; thus, Medicare is the primary payer. This plan may be creditable coverage to avoid the Part D prescription plan penalty and may serve as a supplemental gap plan. In any case, it is important to discuss your situation with a benefits counselor.

Health Savings Accounts

Once you enroll in Medicare Part A, you may no longer contribute to a health savings account. If you are considering collecting social security benefits, in general, they should stop making contributions six months before enrolling in Medicare Part A to avoid a potential health savings account contribution penalty.

What’s New for 2018?

Medicare premiums are means tested: the higher your modified adjusted gross income (MAGI), the higher your monthly premium. People with a higher MAGI pay a surcharge, known as the income-related monthly adjustment amount (IRMAA). In the case of IRMAA for Medicare, your MAGI generally includes all taxable income (e.g., retirement account distributions, capital gains and interest), plus dividends from tax-free bonds, interest from savings bonds used to pay higher education tuition and fees and foreign earned income excluded from gross income. For 2018, the premium cost will be based on your 2016 MAGI.

Hold harmless rule. The hold harmless rule protects current social security beneficiaries from increasing Medicare costs in a year where there is no or a very low cost-of-living adjustment. When this rule applies, any increase in premiums for Medicare is absorbed by a smaller group of recipients: new enrollees and current beneficiaries subject to IRMAA.

In 2018, the interaction between the annual cost-of-living increase for social security benefits and the hold harmless rule may result in a jump in premium costs for those already enrolled in Medicare. Social security recipients will receive a 2-percent increase in benefits for 2018. Therefore, the hold harmless rule will not apply, and the costs for Medicare increases will be spread across most current recipients. Those previously protected may see an average increase of $25 per month. Medicare beneficiaries who previously saw their costs spike will see a leveling of their premium costs.

MAGI threshold limits. There is a second change in 2018 that will affect higher-income recipients who fall under IRMAA. The top three MAGI threshold limits for IRMAA have been compressed (see Figure 1).

In 2017, the top Part B IRMAA threshold for a married couple filing jointly was a MAGI greater than $428,000. The monthly premium per person for a new enrollee was $428.60 per month. Compare this with 2018, where the top Part B IRMAA threshold for a married couple filing jointly will be a MAGI greater than $320,000. The monthly premium per person for a new enrollee will be $426.50 per month.

So, what does this mean? A new 2018 Medicare enrollee with a MAGI for tax year 2016 of $267,001 will be charged a higher premium due to the compression of the table: $348.30 per month versus $267.90 per month.

You may appeal the IRMAA surcharge amount for specific life-changing events. Specific life-changing events that qualify for appeal include death, divorce, loss of pension, loss of income-producing property, or an error in the determination records. Further information on the appeal process is available on the U.S. Department of Health & Human Services website (https://www.hs.bov/about/agencies/omha/the-appeals-process/part-b-premium-appeals/index.html).

Want to Know More?

There are a number of resources available for Medicare-eligible clients on the State Health Insurance Assistance Program (SHIP) website (www.shiptacenter.org). These programs offer free counseling from trained counselors who can guide you through your decision-making process for Medicare, as well as discuss specific coverage needs. Another useful resource is Medicare Interactive (www.medicareinteractive.org/), a free online tool that assists with Medicare decisions. The Medicare website also offers a comparison chart of basic options (https://medicare.com/medicare-suppliment/medigap-plan-benefits-chart/), as well as state-specific links for information on coverage, costs, and companies that offer plans in individual states.

We’ve Got You Covered!

Contact us for Medicare fact sheets outlining key components of the Medicare program. We’ll also do our best to answer your questions about this important topic.

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Fixed Insurance products and services offered through CES Insurance Agency.

AGING IN PLACE

December 19, 2017 by Attorney Steven Samuel

By Steven Joshua Samuel JD, MBA, AIF®

The Economist magazine recently published a story that summarizes some of the issues that all of us have to address to age in place well, meaning, live where and how we prefer to live:

“In 1965, ANDRÉ-FRANÇOIS RAFFRAY, a 47-year-old lawyer in southern France, made the deal of a lifetime. Charmed by an apartment in Arles, he persuaded the widow living there that if he paid her 2,500 francs (then about $500) a month until she died, she would leave it to him in her Will. Since she was already 90, it seemed like a safe bet. Thirty years later, Mr. Raffray was dead and the widow, Jeanne Louise Calment, was still going strong. When she eventually passed away at 122, having become the world’s oldest person, the Raffray family had paid her more than twice the value of the house.”

The widow Calment achieved a measure of security for her housing and income needs, both key requirements of aging in place well, according to the MIT AgeLab. Here are the rest of the issues the MIT AgeLab believes she needed to address and how technology can help:

Financial Security

The arrangement between Jeanne Louise and Andre-Francois made it possible for her to stay in her residence, assuming that $500 each month was enough at both the beginning and end of the 30 years she lived. Using a historically reasonable annual inflation rate of 3%, ten years after their deal, Jeanne Louise would have needed $750 monthly and at the 20^th year, $1000. So, either $500 more than met Jeanne Louise’s needs at the beginning, or her standard of living declined quite a bit, unless she had other sources of income. If she had investments to supplement what Andre-Francois paid her, she hopefully would have educated herself sufficiently to invest in both stocks and bonds, to keep up with inflation.

Housing

If Jeanne Louise hoped to live out her years in her own home, she would need more than money. Even routine home maintenance and repairs can be a challenge at any age. Hopefully, Jeanne Louise had friends and family to help her find qualified and trustworthy plumbers, electricians and other tradespeople. Today, this task can be helped by technology, like HomeAdvisor or similar software applications (apps) as well as trusted family, neighbors and friends.

Transportation

Staying mobile makes it possible and easier to age in place well. Mobility means everything from navigating without significant help from bedroom to breakfast and shower, to shopping and getting to appointments and social events. Losing the ability to drive a car does not have to feel like a catastrophic loss as it did in the past, with the availability of ride sharing companies such an Uber and Lyft and soon, self-driving vehicles. Being open and able to use these technologies can avoid loss of social contact and ability to live independently as personal health permits.

Healthcare

For those able to adapt to advances in technology, healthcare is changing dramatically. Software applications enhance communication between patients and physicians and other health care providers. Apps can monitor and track health conditions, order prescriptions to be delivered to our homes and keep us motivated to continue fitness programs.

Social Connection

Maintaining social contacts is mentioned as a key factor in virtually every study of people who age in place well. Even when physical mobility or distance to friends and family are a challenge, Facebook and numerous other apps are a connecting bridge.

Putting it all Together

Successfully managing financial security, housing, transportation, healthcare and social connections requires finding trustworthy information and resources in a wide variety of fields. This is easier said than done and it is often hard to know where to find help. A good place to start is an estate planning or financial professional you have come to trust. Over years of helping families address personal and family issues, estate planning and financial professionals often develop knowledge or resources in all of these fields.

December 2017

What Surprises and Worries Retirees?

September 15, 2017 by Attorney Steven Samuel

If you’re old enough to be thinking about retirement, one way to get some insight is to ask individuals who have already retired. That’s what the Wall Street Journal (WSJ) did recently, and though many of the retirees’ reports do not seem all that surprising, they are worth attention if you are within 10 years of retirement or already retired. Here’s some of what WSJ reader retirees reported.

Money and Health

Worries about money (48%) and health concerns (42%) are at the top of the list for keeping retirees up at night. Of the 48% who worry most about money, more than half were concerned about not having saved enough to last their lifetime to accommodate their basic lifestyle needs. Almost a third were concerned they might not have enough even for emergencies and health care costs. For people worried about money, expenses for their cars, travel, healthcare and household exceeded what they had spent before retirement. A recent report of the Employee Benefit Research Institute cited in Financial Advisor, supports the view that travel and other household expenses are actually higher for at least the first two years of retirement than during work years, for close to half of newly retired persons. Many of the people who reported having money and health concerns said they were particularly surprised at how high their Medicare premiums were.

Relationships

Relationships were another area of concern, mainly the fear that leaving work will mean missing out on being part of the team or work “family.” Retirees who dealt successfully with relationship concerns said that willingness to take risks was key. An example of taking risks was learning something new, which often was rewarded by successful second careers and new relationships. First time exercise classes, volunteering or part-time work had similar results for many people. Some WSJ readers said they were surprised at how quickly they shed their work lives and began to enjoy “the luxury of time” …. an unhurried life and control over the day’s activity or inactivity. The most poignant comments about relationship concerns were the comments about mortality. For those whose spouses, partners or close friends passed away before they were able to enjoy each other in retirement, regret about time not well spent was profound.

Rewards of Planning

Careful retirement planning paid off for many retirees. Examples cited include researching decisions on when to file for Social Security, with a variety of different views given on the subject. Some favored waiting until age 70 to maximize social security payouts while others preferred taking it earlier to allow minimum use of savings. Understanding Medicaid choices and costs was another “careful planning” topic, as was reducing debt before retirement.

Some retirees did not plan well or perhaps at all. Although the WSJ reader report is not a scientific random sample survey, it offers a cautionary counterpoint to the suggestion that expenses during retirement are less than during work years. Putting together a solid estimate of current and expected expenses and understanding Medicare do not require a great deal of time or cost. If you haven’t done this research yet, spending an hour with your checkbook and credit card statements and the Medicare website (www.medicare.gov) and your trusted advisor is a good first step. Updating your conclusions each year as your retirement timing goal gets closer will allow you to avoid surprises.

Long-Term Care Insurance Update

June 9, 2017 by Attorney Steven Samuel

Long-term care is on people’s minds more and more these days. Most baby boomers, now between their 50s and their 70s, know families with someone who needs personal care. Directly knowing a friend or family whose financial life is upended by the bone crushing expense of long-term care is motivating boomers who have Long-Term Care Insurance (LTCi) to review their policies. Many baby boomers who haven’t acquired LTCi are reconsidering and looking for updated information. Fortunately, there is some good news for both groups.

Kudos if You Already Own LTCi

You made a smart decision if you acquired LTCi more than 10 years ago. This is especially true if your policy provides a significant reserve of money to cover care at home or in assisted or skilled nursing settings for an affordable premium. Because you got on board with LTCi early, the challenge that you may experience in the near future could be a premium increase.

Many LTCi companies recently asked the Massachusetts Insurance Department for permission to increase premiums on some LTCi policies, mostly those issued more than 10 years ago. Most of those premium increases have been approved. Policyholders will usually be notified by the LTCi company 60 days prior to the premium increase. Communication from the LTCi company will include a variety of options for policy owners willing to decrease their coverage to reduce the amount of the premium increase. Even if your policy’s premium increases, it will be considerably less than what a similar policy would cost you today. If you acquired LTCi in the last several years, you are less likely to face a premium increase now because insurance companies offering LTCi learned to price their offerings more accurately, meaning higher rates than in the past.

Stand Alone and Hybrid LTCi Is Still Affordable for Many Boomers

If your age is between 50 and 70-plus, you’ve likely seen an illness or injury derail a friend’s or couple’s retirement dream of living in their own home. If you don’t own LTCi and realize you don’t have a sound plan for how to be cared for in your own home if you or your spouse needs care, there is still time to consider LTCi. Most financial professionals qualified to provide LTCi advice will educate you about what is available at no cost.

LTCi premiums are higher than they were years ago. That should not deter you from spending time to understand whether there is an LTCi policy that makes sense for you. Higher premiums underscore the importance of designing a policy so that it provides benefits at a cost you can afford now and for the rest of your life. The good news about the higher LTCi premiums is that they are more realistic and LTCi companies are likely to request fewer, if any, increases in the future.

New Hybrid LTCi policies offer some additional good news. Hybrid LTCi policies combine one kind of insurance with another kind of insurance. In most cases, LTCi is linked with life insurance. Though hybrid policies have been available for years, they have become increasingly popular because of three policy features that can include: (1) a guarantee that premiums will never increase; (2) the ability to get back a significant portion of the premium you’ve paid if you have not used the long-term care benefit; and (3) the hybrid policy guarantees* that if you die, your beneficiary will receive a death benefit in an amount that correlates with what benefits have not been used.

Some Examples of Standard and Hybrid Policy Benefit Amounts and Premiums

Table 1, below, gives you an idea of the approximate premiums for three levels of stand alone, traditional LTCi, for illustrative purposes only. To know how this applies to you, an application that includes a health evaluation is necessary:

* Guarantees extend to the claims-paying ability of the issuer

Table 1
*Level A*
$4,500 Monthly Benefit 2 Year Benefit Period $108,000 Pool of Money 3% Compound Inflation 90 Calendar Day Deductible	Female Monthly Premium	Male Monthly Premium
Age 50 applying with a Partner/Spouse	$125	$85
Age 60 applying with a Partner/Spouse	$166	$111
Age 70 applying with a Partner/Spouse	$268	$192

*Level B*
$6,000 Monthly Benefit 3 Year Benefit Period $216,000 Pool of Money 3% Compound Inflation 90 Calendar Day Deductible	Female Monthly Premium	Male Monthly Premium
Age 50 applying with a Partner/Spouse	$217	$136
Age 60 applying with a Partner/Spouse	$286	$175
Age 70 applying with a Partner/Spouse	$446	$287

*Level C*
$7,500 Monthly Benefit 5 Year Benefit Period $450,000 Pool of Money 3% Compound Inflation 90 Calendar Day Deductible	Female Monthly Premium	Male Monthly Premium
Age 50 applying with a Partner/Spouse	$379	$223
Age 60 applying with a Partner/Spouse	$500	$280
Age 70 applying with a Partner/Spouse	$770	$457

Level A shows the monthly premium of a policy that provides a benefit of up to $4,500 and a total reserve (pool of money) amount of $108,000. Although this is described as lasting two years (24 months), this is only for the purpose of describing that $4,500 for 24 months is $108,000. In fact, if you spend less than $4,500 in any month, the unspent money is still available until the entire $108,000 is used.*This is a hypothetical example and is for illustrative purposes only

Level A shows that a married couple, both aged 60, would pay $166 monthly for the woman and $111 monthly for the man and each would have $108,000 of total benefits.
Level B shows the monthly premium of a policy that provides a benefit of up to $6,000 monthly and a total reserve of $216,000. A married couple, man age 70 and woman age 60, would pay $287 monthly for the man and $286 monthly for the woman, for a total of $216,000 each of benefits.
Level C shows the monthly premium of a policy with a benefit of up to $7,500 monthly and a total reserve of $450,000. A married couple, both 60, would pay $500 monthly for the woman, $280 monthly for the man, for $450,000 each of benefits.
Premiums for single persons are about 40% higher than those shown in Table 1.

Hybrid policies require significant premiums to achieve the combined life and LTCi benefits and features described above. For example, a single man, paying a one-time premium of $50,000 might expect a monthly benefit of up to $2,942 monthly and a total reserve of $211,860, and the amounts would double for a premium of $100,000. Some companies permit the premium to be paid in annual installments from 2 to 10 years, though for an increased amount. The advantages of paying this significant premium include a guarantee that once the first premium is paid, there will not be any increase.

A married couple, both age 65, each purchasing a hybrid policy with a premium of $50,000 each might expect these approximate benefits: up to $4,199 monthly with a total reserve of $302,328 for the woman and $4,737 monthly and a total reserve of $341,064 for the man.

Conclusion

Financial upheaval and family heartache are inevitable when a family member needs long-term care and there is no plan in place to cover the costs. Planning for long-term care does not always require LTCi, nor are such insurance policies affordable for everyone. If you are considering what will happen if you need care — especially if your hope is to continue living in your own home for as long as possible, LTCi is worth considering. As always, when you make decision about complex issues involving finances, consult your trusted advisor.

Samuel Financial LLC is located at 858 Washington Street, Suite 202, Dedham, MA 02026 and can be reached at 781.461.6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency.

Employer Sponsored Retirement Plans: What You Need to Know

February 27, 2017 by Attorney Steven Samuel

While many employers offer retirement accounts as an employee benefit — even those that offer generous matching contributions — many do not offer adequate education on how to choose among the investments offered in the retirement plan. If you have engaged a financial professional to advise you, make sure that their advice about your overall investment strategy incorporates the money in your (and your spouse’s) retirement accounts. If you don’t have a financial advisor and don’t have the time to educate yourself about investments, Target Date Funds (TDFs) may be a reasonable alternative if you do a bit of research yourself. Here are the basics of what you need to know:

Employer Sponsored Retirement Account Basics

If you are employed and eligible to contribute to your employer sponsored retirement plan, congratulations! Your employer is giving you the opportunity to contribute much more than the IRS maximum allowable contribution amount for Individual Retirement Accounts (IRA). Maximum contribution to a company retirement account in 2017 is $18,000 ($6,000 more if you are over 50 years old) compared with $6,500 to an IRA. And, your employer may match some of your contribution. That’s free money and worth a conversation with your employer to find out if you are eligible to contribute, as well as determine if you are taking full advantage of this opportunity.

Contributing to an employer sponsored retirement plan also requires choosing among the several investments offered by most plans. Investment choices are typically mutual funds and there may be many dozens from which to choose. Unless you are an experienced investor or have help from someone who is, deciding what funds to invest in and when to make changes bewilders most employees. If your employer offers employee education, it will be time well spent; and, if you are an employee who has a financial advisor, make sure to ask for help with retirement plan investments — something many advisors overlook. If none of these options apply to you, consider TDFs.

Target Date Funds

TDFs automatically spread an employee’s contribution among a mix of mutual funds that hold stocks, bonds and cash in proportions targeting a specific year of retirement. About ten years ago, the U.S. Department of Labor began allowing the use of TDFs in retirement accounts. TDFs alter the mix of stocks, bonds and cash, by reducing the percentage held in stocks and shifting the allocation toward more conservative investments the closer you are to retirement.

TDFs aren’t managed by the investor, who may make panicked decisions during turbulent markets that they may later regret. But, not all TDFs are alike. Before investing in a TDF, it is important to understand how it invests and adjusts its mix of stock, bonds and cash over time as well as what the TDF costs.

TDF Glide Path, Costs and Other Investments

Glide path is the name TDFs give to the timing of changes in the mix of investments as the years pass toward the targeted retirement, analogous to an airplane moving through take off and voyage to landing. Some TDFs have a glide path that move entirely to cash at the target date, others continue to hold a significant amount of stock through the early retirement years or even through the entire retirement. Because the percentage of stock in an account is a major factor in how an account will perform during market up and down times, it is important to know and be comfortable with a TDF glide path before investing in it.

Some employees have not only an employer sponsored retirement account, but also a spouse’s employer retirement account and perhaps other investment accounts. If you choose a TDF, check whether its mix of stocks, bonds and cash is consistent with the investment strategy in your other accounts.

Investing in a TDF costs more than putting money in individual mutual fund choices offered through an employer sponsored retirement plan. TDFs offer the additional service of choosing the funds and adjusting the stocks, bonds and cash mix, so some additional charge is justifiable. However, some TDFs add more than 1 percent per year to the other costs of the retirement plan and can be a major drag on performance.

As always, when you have questions about important financial matters, consult your trusted financial advisor.

Investments in target date funds are subject to the risks of their underlying holdings. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative investments based on its respective target date. The performance of an investment in a target date fund is not guaranteed at any time, including on or after the target date, and investors may incur a loss. Target date and target retirement funds are based on an estimated retirement age of approximately 65. Investors who choose to retire earlier or later than the target date may wish to consider a fund with an asset allocation more appropriate to their time horizon and risk tolerance.

Financial Industry Trends and Updates

September 8, 2016 by Attorney Steven Samuel

With half of 2016 behind us, we can see a number of developments in the financial industry that will likely have an impact on investors for the rest of the year and beyond. Here are updates in two important areas: Socially Responsible Investing and the Fiduciary Standard for Investment Advisors.

Socially Responsible Investing

Socially responsible investing (SRI), is investing that attempts to evaluate an investment’s social, environmental, and governance policies in addition to its potential to provide returns. Investment dollars placed in SRI or similar strategies have grown 13.1 percent per year between 1995 and 2014 (http://www.cnbc.com/2015/09/24/doing-well-while-doing-good-socially-responsible-investing.html ). Although interest in SRI is widespread, it is most often mentioned by millennials (people born between the early 1980s and early 2000s) and women. (http://www.cnbc.com/2015/09/24/doing-well-while-doing-good-socially-responsible-investing.html). Four developments are making SRI more attractive to millennials, women, and all investors interested in SRI.

One of the primary developments contributing to the increase in socially responsible investing is the growing realization that including SRI factors in investment criteria does not always mean sacrificing returns, as it did in the past. A 2015 Duetsche Bank analysis of a large number of studies of investment strategies found that a large majority of studies indicated a positive return when SRI investments were added, and roughly 90 percent of studies showed at least a neutral relationship between adding SRI investments and returns. (http://www.tandfonline.com/doi/pdf/10.1080/20430795.2015.1118917).

A second development accounting for growing investment in SRI is that SRI index funds have become more broadly available. For many investors already interested in the low cost, passive strategy of index funds, the availability of low cost index SRI funds is very attractive. Third, companies are becoming more interested in making business and financial decisions based on the impact they will have on the environment and social outcomes, as companies with strong sustainability scores have been found to show better operational performance with lower risk (http://www.arabesque.com/index.php?tt_down=51e2de00a30f88872897824d3e211b11).

Absence of tools to evaluate and monitor SRI investments has hampered SRI investing in the past. Recently, Morningstar, one of the most popular resources for evaluating mutual funds and exchange traded funds, started evaluating all funds on their SRI impacts by assigning a “sustainability rating” to each investment. This allows fund investors to evaluate their investments not only on the basis of return and mathematical measures of risk, but also on the environmental, social, and corporate governance.

Fiduciary Standard for Investment Advisors

Many people assume that all financial advisors are required to act in their client’s best interest, known as the fiduciary standard. Unfortunately, the current law permits financial advisors to choose a lower standard: “suitability.” About two thirds of financial professionals choose this lower standard.

Imagine a waiter promoting a high priced but mediocre steak dinner and receiving a bonus or commission when you buy it – it may be suitable for your dinner, but it would be in your best interest to be informed about prime steak, fresh fish, vegetables and the price and commission, too. Under the current rule, the mediocre steak would be an approved suitable transaction even if the price had not been properly disclosed or compared with better and still affordable alternatives. Under the best interests or fiduciary rule, the waiter would have a responsibility to tell the whole truth about the quality of the meal and the price, as well as the alternative prime steak and fish and vegetables.

The Department of Labor (DOL) is responsible for regulating company retirement plans as well as all types of Individual Retirement Accounts ( IRA, Roth IRA, SEP IRA). Recently, the DOL changed its rules, requiring that all financial professionals act with the account owner’s best interest in mind. For the most part, it requires compensation by fee rather than by commissions that might motivate the financial professional to make recommendations based on the commission rather than on what is best for the public. The change to the fiduciary standard goes into effect April 10, 2017 and applies only to retirement accounts.

Although the DOL’s rule is an important improvement for consumers, it isn’t perfect. First, there is an important exception to the rule, known as the “Best Interests Contract.” This exception allows financial professionals to be paid on commission if they provide a written statement to the consumer confirming that what is being recommended is in their best interest. Second, the new rule applies only to retirement accounts. Government agencies that regulate the investment accounts that are not retirement accounts have announced that they are considering eliminating the lower suitability standard, but they have not done so yet. Third, the new law is not in effect until April 10, 2017.

How might you find out if your current financial advisor is a fiduciary? The first way, of course, is to ask whether s/he is a fiduciary and whether that applies to your retirement and non-retirement accounts as well. As always, review these and other important financial issues with your trusted advisors.

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Estimating and Planning for Health Care Expenses During Retirement

May 6, 2016 by Attorney Steven Samuel

Steve_144px Health care expenses are among the largest and most difficult costs to estimate and control during retirement. Even those of us doing a good job saving, investing and estimating our retirement expenses may be underestimating the cost of our health care. In the years approaching retirement, it may seem that switching from a private health care plan to Medicare will result in big savings. However, HealthView Services’ 2015 Retirement Healthcare Data Report, drawing data from 50 million households, provides eye-popping projections of health care costs for people approaching or in retirement. The full report is available at www.hvsfinancial.com. Here are some key findings.

A healthy couple, both age 65, retiring this year and covered by Medicare Parts B (physician) , D (prescriptions) and a supplemental (Medigap) policy should expect an annual cost of about $7,000. This amount is expected to rise steadily — from $8,000 to $10,000 annually when the couple is in their 70s, and from $12,000 to $14,000 annually when the couple is in their 80s. The total cost from age 65 to 85 for this couple, is estimated to be about $267,000. Remember that Medicare, even with a supplemental Medigap insurance policy, does not cover all dental, vision, co-pays and other out-of-pocket costs. If these additional costs are included, the HealthView study estimates that a 65-year-old couple retiring in 2016 will have paid a total of nearly $400,000 for their healthcare by the time they reach age 85.

Some people assume that Social Security benefits will easily cover their Medicare costs with room to spare. This is unfortunately not the case. This year, the average Social Security benefit is about $1,341 per month, before deduction of the Medicare premiums. HealthView estimates that a 65-year-old couple retiring today will pay more than 40 percent of their Social Security benefits to cover Medicare when they reach their 70s and that will increase to more than 80 percent in their late 80s.

Even large expenses, like those estimated above, can be managed for individuals and couples who start planning before retirement and manage their expenses well over decades of retirement. A good goal for addressing these large expenses is trying to follow the financial services industry rule of thumb of saving 15 percent of income annually, including employer-matching contributions to company retirement plans. While a 15 percent savings rate is especially difficult for people in their 20s, 30s and 40s when there are many competing needs for housing, family and education goals, making some contributions in those years, even well short of 15 percent is important. The varying amounts saved each year can be enough if combined with 15 percent or more annual savings in a person’s peak earning years in their late 40s, 50s and 60s.

For people who haven’t saved enough for the lifestyle and spending levels they hoped for, finding the least painful ways to reduce spending will not be easy. They should make some lifestyle and/or financial planning changes as soon as they can. For help with understanding how these issues will impact your life and well- being, consult a trusted advisor.

Five Facts You Need to Know about the Social Security Website and Your Social Security Choices

September 1, 2015 by Attorney Steven Samuel

Social Security’s website (www.ssa.gov) has made great strides in communicating the overwhelming options when it comes time to choosing your Social Security strategy. Information is located in two places: on its public website and through a private portal accessible by personal login. It’s worth reviewing the website well in advance of age 65 as it will allow you to consider different options prior to making strategy decisions. Below are some tips to help you navigate through the website as you make benefit decisions that are right for you.

Your Work History

Social Security has your earning history available on the private side of the website; however, you’ll want to review it for accuracy. When logging into the website, it displays your earnings records from when you were first employed. Any changes you make will need to take place prior to filing for benefits. Often there are gaps in employment income where an employer may have sent incorrect earnings information to the Social Security office. Given that Social Security takes into account your top 35 years of earnings to calculate your benefit, you’ll want to verify the accuracy of that information. If it’s incorrect, Social Security may allow you to provide proof of your earnings with past tax returns. You can also request that the Social Security office review its documentation for errors.

Your earnings records can be found when looking at the home page through the private portal and by clicking on the “Earnings Record” tab at the top of the page.

Benefits at Different Ages

When logging into Social Security’s website, your personal retirement, disability, family, and survivor benefits are outlined. If you have enough credits to qualify for benefits, the retirement section provides an overview of what you would receive at:

a) your early retirement age (age 62),
b) your full retirement age (between ages 66-67), and
c) age 70

This information is displayed on the “Estimated Benefits” tab located on the home page.

The public site also offers calculators to assist in planning your future. These calculators include a Retirement Estimator (estimates monthly benefits), Life Expectancy Calculator, Quick Benefits Calculator (displayed in today’s and future dollars), and Full Retirement Age Calculator.

Rules for a Variety of Situations

On the public site, you can find detailed information on a specific situation by choosing “Benefits” on the top bar. Here you can learn detailed information about the kind of benefits offered. These include benefits based on a spouse’s or former spouse’s work record, survivor benefits for widows and widowers, benefits for children with parents who are disabled, retired, or deceased, coordination with disability benefits, and same sex-marriages.

Social Security‘s Not So Well Known Good Benefits

Most people file for Social Security benefits without looking into what is available. There are so many hidden benefits that are outlined in Laurence Kotlikoff’s book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” The book includes the chapter, “50 Good News Secrets to Higher Lifetime Benefits.” Here are two of those 50 good secrets that might apply to you, which you could lose if you leap into Social Security without looking first.

Most people know that spouses married for ten years or more can apply for “spousal benefits” equal to one half the amount their spouse receives, without affecting their spouse’s benefits. But you might not know that if your spouse has filed for retirement benefits and you’ve reached full retirement age at 66 (for those born between the years 1943 — 1959) and age 67 (for those born after 1960), you can file for “spousal benefits” and collect them until age 70 and then switch to your own retirement benefit amount.
Some people start receiving Social Security after full retirement age and because of income from work or reduced expenses, realize they could have waited and had their benefit amount increase 8 percent per year. They might not know that after full retirement age, they can ask Social Security to stop payments and then restart any time up to age 70 at the higher rate.

Social Security’s Not So Well Known Traps for the Unwary

Even though the Social Security Administration has many resources available to help you make the right choices, they do not provide guidance on everything. This can lead people to make costly decisions. The Social Security Administration does not help you develop a strategy for taking your benefits so you receive the maximum dollar amount (there is third party software available for this). Kotlikoff’s book has “25 Bad News Gotchas” that can reduce Social Security benefits significantly and forever. For example, when filing for spousal benefits before full retirement age, Social Security considers you to be applying for both spousal and your own retirement benefits. You will receive the larger of the two benefits, and this cannot be changed – even after full retirement age. This will cause you to lose the option to switch to your own retirement benefits after full retirement age, which may at that time be higher than the spousal benefit.

August 14, 2015 was the 80^th anniversary of Social Security. It is one of America’s great social programs and a key part of retirement income for all but the super wealthy. It will serve you best if you take time to look into the details of your many choices carefully before you make decisions that will affect you for all your retirement years. Prior to making important financial decisions, visit socialsecurity.gov or a Social Security office and consider consulting a trusted financial professional during or near retirement.

Samuel Financial LLC is located at 858 Washington Street, Suite 202, Dedham, MA 02026 and can be reached at (781)461-6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. www.samuelfinancial.com

September 2015

Five Facts You Need to Know About Recent Changes in Long-Term Care Insurance

May 1, 2015 by Attorney Steven Samuel

By Steven Joshua Samuel JD, MBA, AIF®

Significant changes are occurring in the long-term care insurance (LTC) industry, according to a recent Barron’s article. Insurance companies are adjusting to mistakes they have made in the past few decades in setting insurance premium levels. Premiums are based on estimates of how many people will buy insurance, how many people drop policies after a few years or keep them for many years, and how many claims will be made and what those claims will cost the companies.

More people than expected are keeping their LTC insurance policies because they are placing higher value on them — knowing they likely are living longer and will be able to make more claims at higher expenses than expected. Insurance companies are making adjustments by increasing premiums for some existing policy holders as well as changing new offerings of LTC insurance. Here are five facts you need to know:

Many insurance companies no longer offer LTC insurance and are raising premiums for older policies

About 10 years ago, as many as 100 companies offered LTC insurance, according to the American Association of Long-Term Care Insurance. MetLife, Prudential, Allianz and many others no longer offer new policies. These and other companies that abandoned the business are required to honor the polices they sold, but they are permitted to request permission of state insurance departments to raise premiums. Barron’s reported on April 11, 2015 that premium increases, which were approved in 2014, range from MetLife’s 20.5 percent on some older polices in New Jersey, to Allianz’s 75 percent on some older polices in Texas. As a rule, company requests for premium increases are not automatically granted by state insurance departments. Genworth’s request to increase some older polices in Massachusetts has been denied, and in protest, the company announced it will not offer new policies in Massachusetts until it negotiates a compromise on the issue.

Several large insurance companies still offer coverage

John Hancock, Mutual of Omaha, MassMutual, Transamerica and Genworth continue to offer LTC insurance to residents in most states. The need for coverage remains as well, with national costs for long-term care rising and now averaging $91,250 per year for a private room in a nursing home. However, costs can be lower in some states and as high as $175,000 per year in San Francisco and New England. For most people, remaining at home with help is the preferred choice. Services for a home health aide averages $ 45,760 per year nationwide, according to a Genworth survey cited in Barron’s. And in the Boston and New York metropolitan areas, it is close to $30 per hour. Unfortunately, to cope with increased claims, the companies that still offer coverage require higher premiums for some of the more valuable policy benefits, such as annual increases in the daily amount the insurance pays. Some companies offer only 3 percent rather than the previous 5 percent annual increase in daily benefits. All companies make this a more expensive choice.

LTC insurance still makes sense for people with $500k or more in assets

People with low income and little or no savings are not likely to be able to afford LTC coverage. They can qualify for Medicaid, though in many states Medicaid pays for nursing home costs and does not pay for care at home. Being able to be cared for in your own home requires either paying with your own money or having a LTC insurance policy to pay for all or some of the care. Jeffrey Brown, professor of finance at the University of Illinois, supports the view of many financial professionals, saying in Barron’s, ” Long-term care is exactly the kind of low probability, high-cost risk that you want to insure against.” He points out that families having $500,000 or more in assets who pay for decades of care for an Alzheimer’s patient would leave a healthy spouse in a catastrophic situation, unable to meet his or her basic needs after burning through all the family assets. Affordable coverage is available to supplement family assets to mitigate these types of losses.

Many families can still purchase affordable, traditional LTC insurance by carefully designing policy benefits and getting quotes from more than one company

Age, health status and benefit choices determine the cost of LTC insurance. The age bracket of 50 to 60 is the sweet spot for purchasing a policy that is affordable. Purchase sooner and you’ll pay for a decade of coverage you don’t likely need at a time when money may be better applied to more pressing matters. Apply later, premiums will be higher and there is a greater possibly of poor health affecting the premium. A policy at age 65 will be about a 50 percent higher premium than at 55.

Most LTC policies have four issues that require choices that influence premium: 1. Daily benefit, which is the amount per day the company will pay; 2. Term of the policy, meaning for how many days will the company pay the daily benefit; 3. Elimination period, which is a deductible in the form of how many days you pay for your own care before the company begins to pay; and, 4. Inflation protection, which increases the daily benefit each year by a specific amount or percentage. Choosing a daily benefit of $150 for three years would create a pool of $164,000 to pay for care before your family needs to use its own money. Adding an inflation adjustment of 3 percent per year to the $150 daily amount after 20 years increases the available money to $325,000. Help from a trusted financial professional is useful in determining what amount of premium a family can afford and what levels of benefits are worth the cost. Premiums for policies with similar coverage can vary widely so it is worth obtaining quotes from at least two or three insurance companies.

Newer, innovative LTC insurance policies

Recently, insurance companies have begun to offer polices that address consumer concerns about affordability. Shared policies for couples are becoming popular. For example, these polices at approximately a 15 percent more premium than single polices allow spouses to share the benefit years, equally or unequally. Six years of total coverage could be used all at once for one spouse, equally, or four years for one and two for the other. Newer policies combine life insurance with long-term care benefits. For example, universal life insurance policies are available with riders that allow 2 percent of the death benefit to cover long-term care needs until the death benefit is exhausted, so that a $500,000 policy will pay $10,000 monthly for about four years. For families that can afford large single premium insurance policies of $100,00 or more, the policy provides long-term care benefits as a multiple of three or more times the death benefit, paid monthly if long-term care is needed.

Most families with someone in need of long-term care want to keep their loved one at home for as long as possible. Though LTC insurance is becoming more expensive and the policies more complex, insurance is the only source of paying the cost of care at home besides family assets, in most states. If you are interested in looking into LTC coverage, be sure to consult a trusted professional who has specific and extensive experience in this area.

May 2015

Social Security Benefits Q&A: Five Facts You Need to Know

April 1, 2014 by Attorney Steven Samuel

By Steven Joshua Samuel JD, MBA, AIF®

For those of us in or near our 60s, thinking about retirement brings up positive images as well as some anxiety about how to make important financial decisions, especially about Social Security benefits.

Fortunately, there are two excellent sources of information that will provide guidance and answer many of your questions: www.socialsecurity.gov and your local Social Security office if you prefer to meet with an expert. Many offices, in fact, will permit you to make an appointment. No, I’m not kidding. This is one area in which our government does a reasonable job of providing information. But until you get a chance to visit the website or your local social security office, here are five answers to commonly asked questions about social security.

1. Is it best to apply for social security benefits at the earliest age, 62, or wait until 66 or even 70?

A person retiring at age 62 during 2013 could receive a maximum of $1,923 monthly. The maximum this year for a 66-year-old is $2,533 monthly and for a 70-year-old, $3,350 monthly. Generally, each year a person delays applying for benefits will increase the benefit amount by eight percent. You can find an estimate of what you would receive at various ages on the social security website by clicking on the social security benefits estimator tab.

About 75 percent of people who receive Social Security now started taking their benefits before age 66, according to the Wall Street Journal, probably because they needed the money for the basics of life expenses and did not have other savings. For a person with significant savings in an Individual Retirement (IRA) account, company 401k or other retirement account, waiting until age 66 or 67 is generally a better choice. Whether to wait even longer, to age 70, requires a more complex assessment. One consideration is that if a person is 66 and gives up four years of benefits to wait till 70 to get an increased benefit amount, the person would have to live as long as 20 years just to recover the amount she would have received in those four years. Another consideration is that while waiting the four years between 66 and 70, if the person needs to take big withdrawals from her retirement savings and the investment markets don’t do well, her retirement savings may not last her lifetime.

2. How do earnings affect Social Security retirement benefits?

What you earn from working does not affect Social Security benefits if you have reached “full retirement age.” Full retirement age is about 66 years old except for people born in 1960 or later; then it is 67. If you are not yet at full retirement age, earning up to about $15,000 a year does not affect your benefits but you’ll lose $1 of benefits for every $2 of income above $15,000. During the year you reach “full retirement age” you may earn about $40,000 with no reduction in Social Security, but you’ll lose $1 of Social Security benefits for every $3 over $40,000 of earned income.

3. What Social Security benefit does a spouse receive?

A person married for 10 years or longer and of “full retirement age” is entitled to receive 50 percent of his or her spouse’s benefit amount. For example, if both spouses are at full retirement age at 66 and one is entitled to $2,500 monthly of social security benefits after a lifetime of work, the other may collect $1,250 monthly even if he or she never worked. A spouse collecting on the basis of his or her spouse’s record of work does not have any impact on the other’s benefits. However, if a person begins collecting benefits before full retirement age, the amount the person can collect based on the record of his or her spouse is reduced. At age 62, he or she may collect only 35 percent of what her spouse collects; at 63 only 37.5 percent; at 64 only 42 percent; and at 65 only 46 percent.

4. Does a divorced spouse qualify for benefits?

A divorced person can receive benefits based on a former spouse’s Social Security record if he or she was married to the former spouse for at least 10 years, is at least 62, is unmarried and is not entitled to a higher Social Security benefit on his or her own record. The former spouse must be entitled to receive his or her own retirement or disability benefit. If the former spouse is eligible for a benefit but has not yet applied for it, the divorced spouse can still receive a benefit if he or she has been divorced from the former spouse for at least two years.

5. Does Social Security pay benefits to same-sex married couples and surviving spouses?

Social Security has begun processing some retirement, surviving spouse and lump-sum death payment claims for same-sex couples and paying benefits where they are due.

Of course there are many more than five things you need to know about Social Security and the many related health care and financial issues. Do pay a visit to www.socialsecurity.gov or your local Social Security office and also consider consulting a trusted financial professional before you make important financial decisions during or near retirement age.

Samuel Financial, LLC is located at 858 Washington Street, Suite 202, Dedham, MA 02026 and can be reached at (781)461-6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. www.samuelfinancial.com

April 2014