Medicare with Steven Sitton

Show Notes A Medicare premium can rise because of a one-time property sale—and the increase may show up two years later. On More Living with Jim Brogan, Jim and Medicare specialist Steve Sitton explain how that income look-back works, when retirement qualifies you to appeal a higher premium, and why a capital gain usually doesn’t. They also unpack the HSA rule that can catch people off guard: Medicare Part A may be backdated six months, so contributions may need to stop earlier than expected. Plus, learn how to bridge the health-insurance gap before 65 and why switching from Medicare Advantage to a Medigap plan can require medical underwriting. Automatically Transcribed With Podsqueeze Speaker 1 00:00:02 You're tuned into more Living with Jim Brogan, broadcast live from the Brogan Financial studios at Newstalk 9087, where old fashioned values, expert knowledge and genuine understanding come together to give you the retirement straight talk you deserve. Jim's a former National Advisor of the year recipient and a financial educator, and he's here today to talk about how you can live out the best years of your life. Jim and the Brogan financial team have been helping retirees and retirees across the southeast for over 20 years in their pursuit of financial independence. You can reach them during the week at 865862 6800. So sit back, relax and get ready to learn because More living with Jim Brogan starts now. Jim Brogan 00:00:46 Hello East Tennessee, welcome to More Living with Jim Brogan, where it's all about living the best years of your life your way. As you listen to Newstalk 9087 and we're getting closer to the end of the year, Medicare becomes an especially important topic for many retirees and those approaching retirement. If you have ever tried to navigate Medicare on your own, you know there can be a lot to understand. Jim Brogan 00:01:11 There's different enrollment periods, different parts of Medicare to supplement coverage, prescription drug plans, and many of the decisions that can affect both your health care and your wallet. So that's why today we're bringing in an expert to help us make sense of it all. Joining me today is Steve Sitton with Tennessee Insurance Services. TIS he's been on the show with us before. He's been a great resource when it comes to Medicare and health insurance. And he's here to walk us through what you need to know, what changes to be aware of, and some of the common questions he hears from people as they make their Medicare decisions. Good morning, Steve, and welcome back to the show. Speaker 3 00:01:49 Good morning. Thank you for having me. Jim Brogan 00:01:51 It's great to have you. do we have your mic on? Try that again. Hey, there. There we go. There we go. All right. Great to have you. Let's start with the basics. Well, first let's talk about your background a little bit. You've been at TIS how long? Steve Sitton 00:02:06 I've just. Steve Sitton 00:02:07 Just started my 15th year with T's. Jim Brogan 00:02:10 And what led you to tis into specializing in health insurance, Medicare, these kinds of things. Steve Sitton 00:02:17 Well, I started with t s just as I was finishing my college degree and wanted to start a career where I could help people. And so, Medicare, I didn't start out with the intention of really doing Medicare. But as I began the world of insurance, there's a lot of questions. There's a lot of people who need help with Medicare and approaching that retirement age. And it really was just a perfect niche for me and for my personality to be able to help people navigate those things, help them to calm their fears and their anxieties related to how do I prepare for retirement and make sure that I have insurance that's going to help with the future needs as I get older. Jim Brogan 00:02:59 Yeah, and we'll get into all the challenges. I mean, we're certainly going to dive into Medicare. We'll also talk about those issues where, you know, people retire before they're 65 and there's a gap there in their health insurance. Jim Brogan 00:03:11 And what do they do. But let's start with the basics of Medicare 101. When someone first becomes eligible for Medicare, which typically would be 65 years old, right? Steve Sitton 00:03:21 That's correct. Yeah. Most people would become eligible at age 65. You do have some individuals who get Medicare early. If they were to have to go on Social Security disability after 24 payments of Social Security disability, they're going to automatically be enrolled in Medicare prior to age 65. There's some other health conditions that would make someone eligible for Medicare early, such as end stage renal disease. Jim Brogan 00:03:45 Okay. Of course, most people listening 65 is kind of what they think about unless there's a qualified disability. to talk about the different components of Medicare. Let's just let's just break it down very simply. There's a BDC. Just give us a little bit of a breakdown of the basic components of Medicare. Steve Sitton 00:04:07 Yeah. So when I think of the basics of Medicare I think of original Medicare. So this is Medicare Parts A and part B. So Medicare Part A is covering your inpatient hospitalization. Steve Sitton 00:04:19 It's covering inpatient skilled nursing services. It's your hospitalization coverages. for most individuals if they've been working, if you have ten years of service or 40 quarters cumulatively of work, then you have prepaid for your part, a premium. So Medicare Part A for most people is prepaid. A common misconception you hear is Medicare is free. It isn't free. We prepaid our Medicare Part A premiums. Medicare Part B is a totally different component. It covers your outpatient services. So medical benefits. Think your primary care physician and your specialists could. Jim Brogan 00:04:58 Diagnostic tests in outpatient services, things like. Steve Sitton 00:05:02 That. Exactly. Yes. And so Medicare Part B. When we enroll in that, there is a premium that people would pay for Medicare Part B. Jim Brogan 00:05:10 Right. And we're going to get into that later. The the premium can depend on your income. It is means tested. But we'll get to that a little bit later. we hear terms like original Medicare. I think that was the term you actually said. And then you hear Medicare Advantage Medigap part D. Jim Brogan 00:05:26 Can you explain the differences. So original Medicare is part A and B, but I guess that leaves some holes right. That doesn't cover everything. And so talk about the other things that come in. Steve Sitton 00:05:36 It does. So original Medicare A and B that's really your starting point. So everyone needs if you're going to pick up those other coverages that you mentioned you start with Medicare A and B. From there there's essentially two options or two paths that people can choose to go down. And so you can choose to add on Medicare supplement coverage. A Medicare supplement, also commonly called a meta gap policy, is going to fill in the gaps of original Medicare. So original Medicare remains the primary insurance providers. Build Medicare your you're able to see any doctor or facility or provider that accepts original Medicare. Your supplement comes in and helps pick up the expenses that Medicare didn't cover 100%. Jim Brogan 00:06:23 And what is the difference in Medigap and Medicare Advantage? Steve Sitton 00:06:26 So when we enroll in a Medicare Advantage plan, we're purchasing insurance from a private insurance company who becomes the administrator of your hospital, your medical, and your drug coverage. Steve Sitton 00:06:38 So they're going to manage your Medicare coverage for you. So instead of Medicare processing your claims and then referring it out to a secondary insurance, when we enroll in an advantage plan, we enroll with a private insurance company. They are a network based product, and your providers are only going to build that Medicare Advantage plan. So it's a network based product that's going to handle everything for you. Jim Brogan 00:07:01 And then how does that contrast with the Medigap? Steve Sitton 00:07:03 With a medigap you're a it's a non network based product. So in a Medicare supplement you can see any doctor any hospital nationwide that takes Medicare where when we go with an advantage plan you're able to see the providers and the facilities that are in network with your facility or your excuse, not your facility, but your health insurance that you've picked. So they're network based products. So you have depending upon the plan you pick, you've got in and out of network benefits where some plans only offer in-network benefits. Jim Brogan 00:07:34 So Medicare Advantage or excuse me, the Medicare Advantage is a little more restrictive on the network. Jim Brogan 00:07:39 That's right. Probably less expensive. Steve Sitton 00:07:41 It is. Yeah. The monthly premiums are typically less expensive when you enroll in an advantage plan, but you're a little more restricted in how you can use that coverage. Jim Brogan 00:07:49 What about traveling? Steve Sitton 00:07:50 So with Medicare Advantage plans, you have coverage for the emergency room nationwide. So if you're on vacation and things like that, you've got you've got coverage for emergencies. But other than an emergency situation, you want to make sure you're using providers who are in network. And it depends upon the plan you pick whether or not that coverage would travel with you outside of your home, your home base, or your home location. Jim Brogan 00:08:14 Okay. And we're going to hopefully a little bit later, we'll get into when you want to switch back and forth. You have to be really careful, that you don't make a mistake on that kind of thing. And we'll get into that. And then there's part D that fills in the drug coverage. Right. Steve Sitton 00:08:29 That's right. So Medicare Part D is going to help people with their prescription drugs. Steve Sitton 00:08:34 And there's ways to get that coverage regardless of whether you choose a supplement or a Medicare advantage plan. So when we go with a Medicare supplement, the supplement only supplements original Medicare A and B, so hospital and outpatient medical. So Medicare beneficiaries would pick up a standalone Medicare Part D plan to help with medication cost. If you go Medicare Advantage, that prescription drug plan is typically if you if you pick a Medicare advantage plan that has it included, then you you have one plan that covers hospital medical and drug coverage. Jim Brogan 00:09:10 Now, for someone approaching age 65, how early should they really begin thinking about Medicare and what should they be doing before their eligibility date? Steve Sitton 00:09:19 So the initial enrollment period begins three months before the month of your birthday. So that's really, I would say, the starting point. You could really. Jim Brogan 00:09:28 Three months before 65th birthday. Steve Sitton 00:09:30 That's correct. Jim Brogan 00:09:32 And then they've got it. Till when it when does that. Steve Sitton 00:09:37 The initial election. It begins three months before it lasts the month of their birthday and it goes three months after. Steve Sitton 00:09:42 So it's a seven month window that allows individuals to review all of their plan options to figure out what makes the most sense for them. Jim Brogan 00:09:52 And I guess, so many different directions. We could go here, Steve, but there could be penalties if you don't come on when you're eligible at 65. Right. But now what if I'm still working and I have coverage through my employer? How does that coordinate with Medicare? Steve Sitton 00:10:07 Yes. So depending upon the coverage that you're offered through your employer, you do have options to possibly stay on that plan. But it's really important as you turn 65, especially if you're working and you think, I'm going to stay on my group health plan, there's still some options or some some boxes that you need to check. So you need to confirm that your group plan is credible by Medicare standards, meaning it offers coverages that are as good as what Medicare would offer you, because if they don't, there can be late enrollment penalties at the time that you do enroll. Jim Brogan 00:10:43 So I guess the best thing is to start with your employer and find out what they are plan Requires. Steve Sitton 00:10:48 That's right. Yeah. So you can you can follow up with your employer. They should be able to provide you with a, part of the legal disclosures that they give each year during open enrollment would be a document that indicates if their plan is credible with regards to Medicare, and that would give you that answer whether or not there's an issue. Jim Brogan 00:11:07 Now, if somebody has a credible plan through their employer and they turn 65, they don't have to come on Medicare, right? When they lose their job, that's a qualifying event, and they're not penalized for coming on late, right? Steve Sitton 00:11:19 That's it. That's absolutely right. Jim Brogan 00:11:20 So, now part A, as you discussed, it's not free, but it's prepaid. So it doesn't cost anybody to go on part. A lot of times people go on part A when they turn 65, since it doesn't cost them anything extra, even if they have credible coverage. But that could have some all that could have an impact on HSAs, right? Talk to us a little bit about how HSAs health savings account coordinate with Medicare? Steve Sitton 00:11:49 Yes. Steve Sitton 00:11:49 So at the time that you enroll in any part of Medicare, Medicare A or B, you're you're no longer able to put money into an HSA on your behalf. So if you have a spouse who's also enrolled in an HSA qualified plan and they're not Medicare eligible, they can continue to make their contribution. But at the time you enroll in any part of Medicare, those HSA contributions need to stop. Jim Brogan 00:12:18 So somebody wants to continue to contribute to their HSA. They may want to not enroll in part A. Steve Sitton 00:12:24 That's right. So if you have a credible group health plan, so your coverage is good enough to be able to delay your enrollment, you could delay Medicare A and B and continue putting money into your HSA. But you do want to be cautious about that, because when you enroll in Medicare Part A, at some point in the future, part A can be backdated up to six months when you enroll, so you want to make sure you stopped your HSA contributions six months prior to when you plan to apply for Medicare. Steve Sitton 00:12:57 If you're if you've delayed enrollment. Jim Brogan 00:13:00 Now, Steve, what are some of the the biggest misconceptions you hear from people who are enrolling in Medicare for the first time? Steve Sitton 00:13:06 I think the biggest I think the biggest surprise for people is oftentimes people think that it's there's not going to be a charge for Medicare. And so of course, there there there are premiums. And then of course, as you mentioned, the premiums are means tested. So if you've had if you've had higher income, it may actually be a pretty high premium in order to get your Medicare. Jim Brogan 00:13:28 So we're going to dive into all of that. This is Steve Sitton. He's with TIS specializes in Medicare health insurance and been a good resource for the show over the years. When we come back, we'll talk about getting the timing right and what all this means and what I when we say it's means tested. How does that many of you familiar with the phrase Irma, the income related Medicare adjustment amount where they can jack up your Medicare premium depending on prior income. Jim Brogan 00:13:56 So we'll have much more with Steve when we come back. You're listening to More Living with Jim Brogan here on Newstalk 987 Waukee. Speaker 1 00:14:05 Welcome back to Newstalk 98 Seven's Brogan Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Jim Brogan 00:14:19 Welcome back to More Living Here on Newstalk 987. I'm Jim Brogan, we're visiting with Steve Sitton. He's with Tennessee Insurance Services and we're talking about Medicare and health insurance. So let's talk about getting the timing right, Steve. it can be particularly confusing when to enroll. So, you know, you talked us through there's three months prior to 65, and then there's up to three months after. Plus the month you are due turn 65. So it's actually seven months. That's right. If you don't come on and you're supposed to pretty permanent penalty, right? Steve Sitton 00:14:58 Yeah. So if you if you fail to enroll during that initial enrollment period and you don't have coverage through an employer group health plan, then you're going to need to wait until the general enrollment period. Steve Sitton 00:15:10 And so that's January 1st through March 31st each year. And that's for individuals who can enroll in Medicare Part B without a special enrollment period. But when we do that, there are late enrollment penalties that you're subject to. So not only do you not have the coverage you need until it starts, but there's a 10% late enrollment penalty for every 12 month period that you delayed your part B enrollment when you should have been enrolled. Jim Brogan 00:15:39 Is that a one time penalty, or does that carry through. Steve Sitton 00:15:42 The lifetime penalty. Jim Brogan 00:15:43 For you. Yeah. So it's every premium payment for the rest of your life. That's right. That's a big penalty. Steve Sitton 00:15:47 A big penalty. Jim Brogan 00:15:49 The government wants people coming on Medicare when they are supposed to come on Medicare. If somebody's, got coverage through their employer and so they don't come on at 65, what's the, what's the what's the timeline that they need to be aware of when they're when they do retire? Steve Sitton 00:16:07 Yeah. So when an individual defers that Medicare enrollment and they decide to come off of their group health plan, it could be due to retirement or it could be due to a change in those employee benefits. Steve Sitton 00:16:19 So you can choose to come off of your group health plan to move to Medicare at any time. That would be a special enrollment period for individuals, and we can start working on that as early as two months prior, because really what you want to do. You want to sync it up so that you're you're starting the process of enrollment into Medicare Part B prior to that group coverage ending so that you don't have a gap in your coverage. Jim Brogan 00:16:45 Yeah, definitely don't want that. you know, you mentioned the, when you enroll in Medicare Part A, they can go back six months. And we were talking about health savings accounts. so the general rule, you hear, you know, you have to stop funding Medicare, funding HSA six months prior to enrolling. I guess that's where that comes from. Steve Sitton 00:17:05 That's right. Yeah. So for individuals who delayed their enrollment so they won't backdate your part prior to your the month you were born turning 65. But if you've delayed you you continued to work for a few years. Steve Sitton 00:17:17 And then you decide that you're going to retire and you need your Medicare. That part A is going to be backdated by by six months. Yeah. And there's no way to avoid that. Jim Brogan 00:17:26 So if somebody retires suddenly and they've been putting money in their HSA, do they just have to reverse those premiums? Steve Sitton 00:17:35 That's right. So you would need to work with your HSA administrator and make sure that you get those excess deposit contributions pulled back out of there prior to filing your taxes on April the 15th. Jim Brogan 00:17:47 And, you know, I asked you there before the break about common misconceptions. I've had clients tell me that they were told they had to come on part 65. They didn't have a choice. And that's not true. Steve Sitton 00:18:00 That's right. Yeah. That is another common misconception. And so you do not if you have insurance through active employment. So you're you're still working your employers providing you insurance or your spouse is still working and you're covered as a dependent on their insurance. Then as long as that insurance meets the guidelines of being a creditable plan, you can defer both Medicare A and B. Jim Brogan 00:18:25 Yeah, I don't know. Anyway, so I've had people tell me that in my office, yes, I was told I had to do this. And the reason that's important is understanding HSAs. Now, if I'm not if I don't have an HSA eligible medical plan is a moot point. Steve Sitton 00:18:41 That's right. If you're not worried with HSA, there's really not a reason to enroll to not enroll in Medicare, but HSAs. Jim Brogan 00:18:49 I mean, it's like the best of a traditional IRA and a Roth IRA. All wrapped in one. Right? I put money in, I get I get the tax deduction on the money that goes in there. Steve Sitton 00:19:00 That's right. Jim Brogan 00:19:00 And then if it's if it's a qualified expense coming out, medical expense, it's tax free. So I get a tax deduction and it's tax free coming out. That's correct. Which is a tremendous tax advantage. what can people use their HSA dollars. Can people pay Medicare premium. What can they pay nursing home care. What can they use their HSA money to pay? Steve Sitton 00:19:22 So HSA funds, you can use for medical, dental and vision just like you could prior to going to Medicare. Steve Sitton 00:19:29 But that money that's in there then can also be used to pay your Medicare Part B and D premiums. So they're when you turn 65 or when you move on to Medicare, you can use it to pay for some of those premiums. You're not able to pay Medicare supplement premiums with it, but you can pay your Medicare Part B and D premiums and those part D Arma premiums as well. Jim Brogan 00:19:52 And then any out-of-pocket costs utilization costs. Steve Sitton 00:19:55 Correct? Yes, absolutely. Medical, dental and vision. Jim Brogan 00:20:01 it gives people a lot of options, opportunities and options. but let's move to spouses. If someone whose spouse is still working and is covering them through their employer health plan, how does that affect their Medicare decision? Steve Sitton 00:20:17 Well, the same as it would if they were the one providing the insurance. So as long as the coverage is through active employment, then you can delay that Medicare Part B enrollment. And we I stress the word active employment. So Cobra coverage a lot of people think well that's still my group plan. Steve Sitton 00:20:35 That isn't through active employment, so Cobra coverage isn't a good long term solution for someone who's Medicare eligible. But if your spouse is working and that group health plan makes more sense for your family as opposed to moving to Medicare. You can still delay that part B enrollment. Jim Brogan 00:20:53 Let's talk about, people who retire before 65. big challenge that people think, you know, and I hear a lot of people say, I can't retire too early because I won't have health insurance. And the reality is, there are options available when people retire early. And it's purely a cost that simply has to be budgeted for in their income plan. That's right. Is the way I look at that. It's here. Here's what it would cost. Or here's a here's a range. If somebody can afford to do that, they can retire early. But talk about the options. So let's say somebody's going to retire at 62 or 63 years old or whenever. But they're they're not 65 and they've got to get through that gap. Jim Brogan 00:21:43 What are the most common things you see people use to effectively get through that gap? Steve Sitton 00:21:48 So really, the marketplace or the health insurance exchange through healthcare.gov is a great solution for individuals who need to fill in that gap in coverage. So there are multiple insurance companies and multiple plans available in the Knoxville market through the marketplace to allow people to buy ACA qualified health insurance plans. Jim Brogan 00:22:15 And that's and if they want to check that out, tell us that website again. Steve Sitton 00:22:18 That's just healthcare.gov. Jim Brogan 00:22:20 HealthCare.gov. Now, you mentioned Cobra coverage. So most employers, you know, they have more than 420 employees working in that are participating in the plan. I think it's 20. They are mandated they that when you leave You can go on Cobra for 18 months. Steve Sitton 00:22:38 That's right. So it's a continuation of the exact benefits you have for up to 18 months. You just pay the 100% of the cost of the plan. Jim Brogan 00:22:47 Plus, that's a misconception. People think that they're getting penalized, but they're not right. They're just having to pay the entire cost. Jim Brogan 00:22:53 There's no employer contribution. Steve Sitton 00:22:54 There's not an employer contribution. So you're paying the full cost. There is a 2% administration fee to cover the costs of administering it through Cobra. But there's not a penalty for for enrolling in Cobra coverage. Jim Brogan 00:23:08 And with what I've seen, Steve and you see a lot more than I do. But from what I've seen, Cobra coverage usually is less expensive than the health care exchange. Is that a good. Is that a accurate statement? Steve Sitton 00:23:21 It can be. Yeah, absolutely. So depending upon your specific situation, specifically your retirement income. So the marketplace goes off of your modified adjusted gross income. So depending on what that number is, especially at ages. You know that gap we're talking about? Ages 62 to 64. Those are the most expensive years to buy health insurance as an individual. So if you have a higher income, it could be that Cobra is going to be a more cost effective solution. Jim Brogan 00:23:52 So if somebody is 60, 61 years old and they're wanting to retire early and they're planning ahead, what do they need to budget for health insurance? Steve Sitton 00:24:03 That is a hard number to pin. Jim Brogan 00:24:06 Would you say 1000 to 1500 a month? Steve Sitton 00:24:08 I think that's I think that would be the minimum of where you would start. Jim Brogan 00:24:11 The minimum. Could it be over 2000 a month? Steve Sitton 00:24:13 It could be, depending on the type of plan that you want to purchase. I think that when you, when you sit down and you look, you really have to analyze benefits and premium. Does it really make sense to pay for a plan that's 2000 or 20 5 or $3000 a month versus a $1,500 plan, and oftentimes you're better off to find a plan that has the most robust network of coverage that you can get. So you still have a broad access to care, but really go with a higher deductible and out of pocket for a lower monthly group. Jim Brogan 00:24:44 That makes sense, but Cobra is usually less than that. I mean, Cobra is not normally 2000 or 2500 a month. Steve Sitton 00:24:52 Typically it's less, but I've seen Cobra premiums be high or so heavy. Really, it just depends on it. Depends on the group. Jim Brogan 00:24:59 Wow. It seems like most single costs that I see in employer plans usually maybe pushing $1,000, but I guess. Steve Sitton 00:25:09 There can be better average. Jim Brogan 00:25:10 But there can be exceptions. So the bottom line is, if you're looking for if you're wanting to retire early, number one, I don't think from my vantage point you can chime in. I don't think people it's purely an income decision. It's simply what is the potential cost and can you afford to do it? Steve Sitton 00:25:30 That's right. Jim Brogan 00:25:30 It's don't don't just don't just assume you can't do it. That's right. Right. And then you've got to be researched and find out what what are the costs of my employer plan if I continue there? And then what does a health care exchange look like and how does my income affect all that? Steve Sitton 00:25:45 That's right. Jim Brogan 00:25:46 Is that a good way to say that? Steve Sitton 00:25:47 It is. And I think when you want to retire early, you want to start planning early. And so I always encourage people I'll meet with anybody as soon as they're contemplating. Steve Sitton 00:25:58 I want to retire. And I'm concerned about health insurance. Well, let's sit down and look at it so that you have an idea of what the numbers look like. That way you have the knowledge and the power to figure out what makes most sense for you. Jim Brogan 00:26:08 Yeah. And then my job is to build it into the income plan. That's right. It's a budget. That's all it is. And can you afford to do it? And, anyway, there's a lot of options out there, and it needs a full, careful analysis. we're going to get to our next break. And when we come back, we're going to dive into this sticky little premium situation, and how the more income you make can affect your Medicare premium. We'll also have our dollars and cents segment. How do you budget for healthcare expenses in retirement? Stay with us. This is more living with Jim Brogan here on Newstalk 987WO. Speaker 1 00:26:50 Welcome back to Newstalk 98 Seven's Brogan Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Speaker 1 00:26:59 Get ready to learn and live. Here's your host, Jim Brogan. Jim Brogan 00:27:04 Thanks for tuning in. This is more living with Jim Brogan where it's all about living the best years of your life your way. As we're visiting with Steve Sitton this morning here on Newstalk 987, Wookey, we're talking about Medicare and health insurance challenges. When you retire early before your Medicare age at 65. Before we get back to Steve, it is time for dollars and cents. Speaker 5 00:27:29 Want to be sure you are getting the most out of your retirement. For all the years of your retirement. That's the primary goal of more living with Jim Brogan and our dollars and Cents segment, where we provide you with an important financial tip that will help positively impact the quality of your life in retirement. And now, here's Jim with this week's dollars and cents tip. Jim Brogan 00:27:54 How do you budget for health care expenses in retirement? You know, you see these numbers come out. And and typically what I've seen is from the time you retire, if it's say 65, your total health care expenses, including your premiums and your Medicare premiums. Jim Brogan 00:28:11 So we're talking premiums and utilization costs are now pushing three $350,000. Those are kind of the numbers I've seen of late. and so that can be intimidating when I ask people what is their main concern about retirement. It's not number one on the list. Most, most people say they don't want to have life left at the end of the money, right? They don't want to run out. But certainly health care expense is one of those factors. And you hear these numbers like 340, $350,000. But here's the deal. It's not like the day you retire. You don't have to write a check for $340,000, right? It's an annual budget. So and you know, with what I've seen, you need to probably budget 6000 a year, for a typical person, for just one person early on when you're 65, if you don't have a lot of a lot of serious medical challenges, if you have more medical issues and utilization costs, it might be a little bit more, by the time you're in your 80s, that could be double that. Jim Brogan 00:29:14 So, it's just a part of building it into your budget. What what is it likely to look like? And make sure you allow for that in your income plan so you know, to do an income plan for retirement, you have to have a pretty good understanding of how much money you're spending. And that's not a real complicated exercise. You don't have to have a line out of budget where you sit there and spend hours and hours and hours going through every single line item. Just look at how much is hitting your checking account on a monthly basis. your salary has nothing to do with it. Your salary is not what hit your bank account. Your salary? You have tax withholding. You have to pay that sticky payroll tax 7.65% that comes out. You don't have any of that in retirement. You know, that's only for earned income. You've got deductions for for help, for benefits, including health insurance. So your salary is pretty meaningless. Look at what's hitting your bank account. And then are you spending all that money through the course of a year? Is your bank account growing or shrinking? And you can get a pretty good idea for how much money you're spending. Jim Brogan 00:30:23 But then be sure when you build your income plan that you allow for these health insurance and Medicare costs, because that's probably going to have to be added to your budget. Speaker 5 00:30:36 That's our dollars and cents segment for this week. You can find this week's dollars and cents segment and others by visiting Brogan Financial Comm. Jim Brogan 00:30:48 Do check us out at Brogan financial.com. We've got a wealth of information on there, so you can make informed and prudent decisions that can impact the quality of your life. Again that's Brogan Financial. Dot com. You can also you can also follow our our radio shows. We podcast them. we'll have today show up Tuesday. Usually in the afternoon is usually when we get those posted. But if you go to my website and click on radio, we've archived at least a couple of years worth of radio shows. So do check that out. We've also got resources, special reports you can subscribe to be updated with our educational materials on a on a regular basis. Again, check us out. Brogan financial comm. Jim Brogan 00:31:31 Today we're talking about Medicare. As I was just talking about health. And you know, how do you budget for these things? People sometimes assume Medicare means their health care will essentially be free once they retire. You mentioned people don't realize they have to pay for Medicare premium. Not everybody does. What cost should retirees actually expect once they're on Medicare? Steve Sitton 00:31:51 Well, if we're if we're talking about Medicare premiums, the Medicare Part B premium just standard rate for today for someone who's enrolled in 2026 is $202.90, that's a per month charge per person. Jim Brogan 00:32:06 And that's for part B. Steve Sitton 00:32:08 That's for part B, and that's not a complete all inclusive of what you need. You're going to need additional coverages. But the Medicare Part B premium is based upon income. So that would that number is for individuals who are two years prior. So in 2024 had an income of 218,000 if they filed jointly with a spouse or. Less or less. Or 109,000 for for individual tax filers. Then they would pay that base rate for Medicare Part B of 290. Jim Brogan 00:32:39 And one of the things people have to be aware of is Medicare premium is based more on what's called modified adjusted gross income. And the most important thing to realize is that is before you take your tax deductions. So our taxable income that we pay our income tax rates rates on is not based on adjusted gross income. It's based on taxable income which is after you take your tax deductions, which for many retired married couples over 65, it's pushing almost $50,000 as a standard deduction. But that doesn't help you with your Medicare premium, right? Steve Sitton 00:33:23 Correct. Jim Brogan 00:33:23 Yeah. Modified adjusted gross income is. That's a fancy way of saying it's your adjusted gross income. Plus, if you have any tax free municipal bond income. That's right. So is municipal bond income really tax free? Yeah, it's federal income tax free. But it could end up driving up your Medicare premiums now. So if people are under those numbers, you said 218,000 for a joint filer, 109,000 for a single filer. Then they don't have to pay the extra Medicare premium. Jim Brogan 00:33:54 you mentioned they look back two years. So walk us through like, let's say I'm going to retire the end of this year and my income is going to go down next year, and I retire and I enroll in Medicare. And then I get this notice based on my income in 2025. This is going into 2027, that my income in 2025 is going to cause me to have to pay extra premium. What can I do about that? Because I'm retiring. Steve Sitton 00:34:22 Right. So you've had a life change event. And so there is a there's a form that can be completed. It's an SSA 44 form. It's a life changing event form that is completed and submitted to your local social security office. And it just identifies that you've had a qualifying life event that has caused a reduction in your income. So work retirement or works work reduction. So if you've gone from a full time status to part time or you're completely retiring, those are qualifying reasons to ask for a reduction to that part B premium so that you don't have to wait the two years for the income to catch up. Jim Brogan 00:35:02 So basically, the law says we have a right to have our Medicare premium recalculated based on expected future income, correct. Steve Sitton 00:35:09 For those so that you would have to do those forms two years because they're looking at your income two years ago. So after you've completed that for two premium cycles, you're not going to need to continue to do that, because then it's going to be going off of that retirement income. So if your income is going to be above those numbers in retirement, you're going to there's nothing to appeal. But if you do have a reduction due to retirement, we're able to get a reduction in the part B. Jim Brogan 00:35:34 Yeah. And it's not a complicated form. You're basically recording your anticipated modified adjusted gross income moving. Steve Sitton 00:35:40 That's right. It's a very simple form. Jim Brogan 00:35:45 what if somebody sells a piece of property so they own some real estate? heck, at this point we're seeing this come into play more, more and more for people that are selling their main house, because if they, you know, they you're if you're a joint filer, they do exempt up to 500,000 a long term capital gain. Jim Brogan 00:36:07 But people now are selling houses and they're like, they're getting well over that or 250,000 for a single father. So but whatever it is, they sell a piece of property. They have a big capital gain. that means in two years there, Medicare premiums going to increase, right? Steve Sitton 00:36:25 That's right. Yeah. It is. That's. Absolutely. Jim Brogan 00:36:27 And can is that a life changing event? Can I appeal that. Steve Sitton 00:36:31 So the selling of a property or a long term capital gain is not going to be a qualifying event. Unfortunately to get that reduction in. Jim Brogan 00:36:40 So it's just something has to be planned for. That's correct. However, if I sell something in 2026, then I know my Medicare premium could go up in 2028. But it's only for the one year, right? Steve Sitton 00:36:53 Only for the one year you've got. You've got two years to plan for it and you've got. Jim Brogan 00:36:57 And it's only going to go up for the one year because I sold it in 2026. So then when I get to 2029, 2028, but but when I get to 2029, I'm no longer going to be penalized. Steve Sitton 00:37:09 Exactly. Jim Brogan 00:37:10 Because then they're looking at my income from 2027. Steve Sitton 00:37:13 That's right. Jim Brogan 00:37:13 So this is just you know, this is where I like to use the analogy of a pinball machine. your adjusted gross income is a very important number on your tax return. Again, your tax brackets, marginal rates and capital gains rates are driven by taxable income, which is after your deductions. But your adjusted gross income determines your Medicare premium and how much of your Social Security income is taxed. So I like to equate an adjusted gross income to a pinball machine. When I shoot the the pinball machine, the pinball out, the higher my adjusted gross income, the higher that pinball shoots out in the machine, and the more bumpers it's going to hit on the way down. And those bumpers are things like extra premium on Medicare phase outs of deductions and credits. You know, the the new senior deduction, of $6,000 a person can you know, it phases out for a married filer between 150 225,000. Single file or half that. Jim Brogan 00:38:19 That's just one example where you get phase outs. But the higher that adjusted gross income, the more bumpers it's going to hit on the way down that pinball machine. And you're not going to get all these goodies that may be available to you. So, you just have to be very conscientious. you know, I as I like to say, Steve, we want to go into those kinds of decisions, eyes wide open. So, you know, I don't think you hold on to a stock that has too much exposure in your portfolio because you don't want to pay the capital gain or get hit with a Medicare premium in two years. But at the same point, if you lose 30% on the stock in a significant downturn, you're going to wish you hadn't sold the stock. So we don't get the cart for the horse. We just want to be eyes wide open. Steve Sitton 00:39:04 Absolutely. Jim Brogan 00:39:05 We're going to go to our final break and we come back. We're going to talk about final things with Medicare adjustment or Medicare with the annual enrollment. Jim Brogan 00:39:13 And if you're already enrolled, what do you need to be doing? Do you just let things go on autopilot or not? Stay with us. This is more living here on Newstalk 987. Waqa. Speaker 1 00:39:25 Welcome back to Newstalk 98 Seven's Brogan Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Jim Brogan 00:39:40 Welcome back to More Living Here on Newstalk 987 woke. We're visiting with Steve sitting and talking about Medicare and health insurance in retirement. And Steve is with Tennessee Insurance Services. Tis and Steve, the annual enrollment period gets a lot of attention every fall. We've talked about people that are becoming about to turn 65, but what about people that are already on Medicare? Should they actually who should be reviewing your coverage during this period? And what changes are people allowed to make? Maybe if they're already on it. Steve Sitton 00:40:12 So we are We are in what's called the pre enrollment period right now. Steve Sitton 00:40:17 So beginning on October 1st all of the new plan data and information is released for you to be able to review. What does my plan look like for next year. Jim Brogan 00:40:27 So this is a timely radio show. Steve Sitton 00:40:28 It is. It's the perfect like like maybe you had an idea about this, but the. Yeah. So the annual enrollment period begins October 15th. This is the very first date that someone could submit an application to change. If they if they do desire to change, you can do that between the 15th of October. And it has to be completed by December the 7th. Jim Brogan 00:40:51 Now, if you're changing, what are you changing? Steve Sitton 00:40:53 So there's a multitude of things that you could review. So Medicare Advantage plans, your prescription drug plans. Those plans can be reviewed during the annual election period. And if you need to make a change, this is the time when you need to make that change. Jim Brogan 00:41:09 And then what about, you know, there's you miss your Medicare Advantage. There's also supplements which are called Medigap. Jim Brogan 00:41:17 Can it get sticky moving back and forth between those plans? Steve Sitton 00:41:20 It can. So if you're moving from a supplemental plan to a Medicare Advantage plan, it's generally pretty easy. There's not really a lot of Medicare medical underwriting that goes from switching from a supplement to an advantage plan. But if you're if you find yourself on an advantage plan and a Medicare Part C plan and you want to move to the Medicare supplement plan, you need to do it during this time period. But you also are more than likely going to have to go through medical underwriting. So there's going to be a series of questions that you have to be able to answer to see if carriers would accept you into the Medicare supplement program. Jim Brogan 00:41:57 And we're talking people 65 years and old, old and older, and they're getting asked medical questions. I mean, that could be pretty sticky. It seems like. Steve Sitton 00:42:05 It could be. So when you first move on to Medicare at 65, or when you first activate that part B, you have a meta gap open enrollment window. Steve Sitton 00:42:16 So there's your guaranteed issue. There's no medical underwriting. But if you decide later that you want to change your Medicare supplement plan, or you want to switch from an advantage plan back to traditional Medicare with a supplement, that supplemental plan typically requires medical underwriting. Jim Brogan 00:42:34 Okay. And for those that maybe just joined in the difference in a supplement and a Medicare advantage, the Medicare advantage, I want to say it simply the way I think about it. And you tell me if this is right, Medicare Advantage probably going to be less expensive. I'm going to have less choices of where I can receive care. Could be a challenge if I travel a lot, but it's going to be less expensive. Medicare supplement. Don't give me more flexibility of seeing who I want to see, which helps with traveling, but is probably going to be more expensive. Steve Sitton 00:43:04 That's absolutely. Jim Brogan 00:43:05 Right. Okay, so that's a good way to look at that. if someone's been happy with their Medicare coverage, should they still review their plan every year? Steve Sitton 00:43:13 I always recommend that you review. Steve Sitton 00:43:15 So each carrier is going to send out their annual notice of change. It's a booklet, and it's going to give a side by side comparison of what you had in 26 and what is changing in 2027. And so if you look at that document and you say, I'm good with all of these changes, I really don't want to change. And everything in this document looks good to me, then it's going to renew automatically. You don't have to do anything, but if you're not looking at that, you should review to make sure there's not changes that you're not anticipating. Jim Brogan 00:43:45 So you should review it periodically. Really, don't just let it sit on autopilot. Well, Steve, the Steve sitting with this, great, great great information. How can people get more information from you or follow you? Steve Sitton 00:43:57 Absolutely. So you can reach us by just the our telephone number is (865) 691-4847. That's the number for tips you can ask for Steven Sitton. They will be happy to get you to me. Jim Brogan 00:44:11 Okay. That sounds great, Steve. Jim Brogan 00:44:12 Thank you. You're always great. Thanks for taking time out of your schedule. I see you're wearing your balls. Pull over. So you're pulling for the big orange today? Steve Sitton 00:44:21 Absolutely. Go balls. Jim Brogan 00:44:22 All right. Yes, sir. That's Steve sitting with us. We've been talking about health care and Medicare and health insurance, because greater care provides for more living. So you can live the best years of your life your way. Thank you to Wayne for engineering the show. Thank you, Mary Caroline, for helping produce the show. Have a very blessed weekend. You've been listening to More Living with Jim Brogan only on Newstalk 987. Speaker 6 00:44:44 Cokie, the views expressed by Jim Brogan and his guests are not that of Cumulus Media. Any discussion of financial, legal, and tax planning strategies is not intended to be individualized advice and is general in nature. Always consult with your advisor for advice specific to your needs. This program's content does not represent a recommendation of any particular security strategy or investment by Jim Brogan or Brogan Financial, Incorporated.