Top Ten Things Everyone Should Plan On
The list I have prepared is based upon my life experience and not meant to be the “be all end all” of life’s decisions. It is meant to be a partial guideline that if one follows these basic principles, they will find that life’s other decisions come easier.
One – Center Your Life on Things Spiritual and be Charitable
This is not meant to be preachy because a relationship with the creator of the universe is and should be a very personal thing. If you choose to ignore things spiritual, then you are missing out on something very special. The creator of the physical wants to help you live a better life. Ignoring the advice of the one who made it all and understands it all seems silly and unwise. Listening for that guiding voice in every decision you make will help you make better decisions. When you listen to that voice you will hear the call to be charitable of your time and your blessings. You should have your Spiritual Luggage packed because you never know when you will be called to meet the Creator.
Two – Continually Educate Yourself and Keep Your Mind Active
As a child, we all hunger for knowledge. We explore, question, solve problems and approach every day with a certain awe and desire to learn something new. As we age, formal education becomes more of a burden than a desire for some. Some of us just want to get it over with and move on with our lives. The desire for independence is important for maturing, but we should never lose that desire to learn. Keeping the mind active with daily exercises. This can be done with brain teasers or memorization and recitation.
Three – Live Beneath Your Means
This one is probably the hardest for most of us. We all want to live comfortably and possess the same kinds of things that all our friends seem to have. Some people can find a way to do this to the extreme which I would have a hard time doing. One couple, both CPAs, chose to live in a tent and have a very minimal lifestyle while at the same time earning a good income. Another couple sold their home, purchased a semi-truck with a sleeper and lived on the road for many years while profiting from their modest lifestyle. We should all do everything we can to have a consistent portion of our income that is not needed for monthly expenses. Work out a budget that works and stick to it.
Four – Stay Healthy and Active
Diet and exercise, duh. When we are younger, we get used to not having to work too hard to stay healthy. As we age it seems that suddenly we find it harder and harder to be fit. A portion of every day should be devoted to physical activity. Find thirty minutes a day to do something that gets your heart rate up. Park in the spot farthest from the store. Take the stairs when you can. Find a way to eat only what you need to stay and maintain a healthy weight.
Five – Minimize Debt
If you could go through life never in debt, that would be very unusual in the USA. Remember the story of the CPAs that lived in a tent? They were never in debt, paid for the automobiles and other daily expenses without incurring debt. Once they had saved enough money to purchase a home, they did so. When they retired debt free, they lived comfortably off the interest from their savings. Most of us cannot imagine having to wait so long for things like homes and cars and choose to purchase them with credit. Then paying interest for the life of the loan, 5, 10, 15, 30+ years. You might be astonished to know how much interest charges we pay during our lifetime. The easiest way to get out of debt quickly is to focus on paying off the smallest outstanding debt first, then apply that monthly portion to the next largest debt. As you cancel out one debt and compound the payments with each eliminated account, soon all that will be left is the largest debt, and that one can be eliminated much sooner than the original payment contract. All it takes is making it a priority and sticking with the plan.
Six – Save For Unusual Expenses
Once you have your monthly budget in place, there will almost certainly be a time when unexpected expenses will occur. We should all have at least one month of normal family income in a liquid account like a checking or savings account. When you have one of these unusual expenses, pay for it out of this account and replenish the account as quickly as possible.
Seven – Save For Income Replacement
We never know if or when someone will lose their income. It can happen because of business reasons, health reasons, family needs, government interference, or something else. It is a good idea to have an account set aside that is reserved for this purpose. It should be a non-qualified investment account because it needs to be at least one year’s family income. Investment accounts can be liquidated quickly and can even be set up to allow them to be connected directly to a checking account. That can allow for direct transfers to and from the investment account. If you temporarily lose your income, you will draw from this account. Once you have reestablished your income, you would replenish this account.
Eight – Insure Wisely
There is an insurance policy for almost any kind of calamity you might face. Life, Auto, Health, Homeowner, Liability, Home Warranty, Accident, Cancer, Extended Warranty, Long-Term Care, Disability, Unemployment, just to name a few. Insurance needs change throughout your life. Don’t get over or under insured.
Nine – Share Your Wisdom
As you live these principles, you will start to notice how wise they are. You should not keep them to yourself but share your experience with others. Not in a braggadocio’s way, but in a helpful general informational way. Tell about your struggles and how you overcame them. Talk about how hard it was, not how easy it seemed afterwards. Encourage, don’t criticize. Love, don’t judge.
Ten – Save For Retirement Years
A portion of your income should always be saved for later. Someday you may want to be in a position that you no longer must work. It is a great position in which to be. Some people love what they do and will work for as long as they can physically and mentally do it. Other people want to retire and spend time in leisure activity enjoying travel or other things they could not do while employed. This should typically be the last stockpile you save into unless your employer has a match. In that case, save whatever amount will be matched by your employer until all the other stockpiles are fully-funded. Once your emergency and income replacement stockpiles are fully-funded, focus on this retirement stockpile and fund it to the limit.
When do I have to register for Medicare?
Something special happens as we approach the age of 65. We have a responsibility to register for Part A of Medicare when we become 65 years old. We have a 7-month window around our birth month in which to register. Three months before, our birth month, and the three months after.
What if I am still working when I turn 65?
A growing percentage of people are working well past age 65. This can make the decision a little more complicated when it comes to registering for Medicare. There are rules that differ based upon the size of company that you work for and what type of insurance coverage is in place.
Can I still contribute to my HSA after I am on Medicare?
You cannot contribute to a Health Savings Account and be on Medicare at the same time. If your employer has less than 20 employees, you must sign up for Medicare parts A, B, & D or Part C and you will no longer be on your employer’s plan. The only exception to this would be if your spouse is on your company plan and you want to keep her covered as a dependent. There may be some less expensive options depending on several factors.
Can I still contribute to my HSA after I turn 65?
This is one of those complicated situations. If your employer has less than 20 employees, then no. If your employer has more than 20 employees and it is allowed within the contracts of the health insurance, you may be able to contribute to an HSA. You would have to arrange to delay registration in Medicare and remain in your employer plan. It must be well documented so that when you retire or lose your employment you can register for Medicare and avoid the late registration penalties.
Are there any penalties for registering late in Medicare?
There is a 10% penalty applied to your Part B Premium for every year you do not register. If you are still employed and covered by your employer’s plan, this late penalty is waived. The penalty is simple, not compounded. If you delay by 3 years, then the penalty is 30% instead of a compounded 33.1%. This penalty usually is assessed for the rest of your life.
Basic Process of Healthcare, Medicare and End of Life
Individual registers for Medicare at age 65
- Part A – Hospitalization (usually no cost)
- Part B – Doctor Visits and Specialists (Optional but if chosen the premium is deducted from Social Security)
- Part C – Medicare Advantage (This is a privatization of Part A & B and usually D. This can be chosen with several options and is either partially or fully covered by the standard Part B premium. Generally, Medicare Advantage Plans cover out-of-pocket expenses better than Standard Part A and Part B.)
- Part D – Prescription Drug Plans (These plans can be purchased individually or may be included in a comprehensive Part C Medicare Advantage Plan)
- Medicare Supplement Plans (These policies are designed to reduce or eliminate most out-of-pocket costs when used with Part A and B. There is an additional premium for these policies, and the premium is deducted from the Social Security payment)
Generally speaking, Medicare Options are best decided by a person’s financial situation.
- Part C should be chosen if you are a person of lower income, or for a person who prefers to cover out-of-pocket expenses and “self-ensure” for their expenses that are not covered by the insurance. Monthly premiums are usually lower.
- Parts A, B, and D with a Supplement Plan will be chosen by individuals who have plenty of retirement income or assets they don’t want at risk for health-related cost. There is little to no out-of-pocket expenses, but the monthly premium is significantly higher.
Scenario One – Low Income Person on Part C
- Admitted to Hospital because of serious illness
- Care is received
- After Hospital stay person leaves with a $4,000 bill
- Client pays hospital $20 a month
- Six months later, client passes
- Debt is most likely retired at death
Scenario Two – High Income Person on Parts A, B, D, with a comprehensive Supplement Plan
- Admitted to Hospital because of serious illness
- Care is received
- After Hospital stay person leaves most likely paid-in-full
- Six months later, client passes leaving assets to beneficiaries
Enrolling in Medicare is required when a person becomes 65 years old. A person has a 7-month window to enroll; three months before their birth month, their birth month, and up to three months after their birth month. In most cases, they must sign up for Parts A, B, and D or Part C with a drug plan included (or have other insurance in place). If a person does not sign up within that 7-month window, they will be assessed a monthly penalty for the rest of their lives once they do sign up. The longer the delay the higher the penalty.
Medicare does not cover costs associate with chronic illness (long-term care). Medicaid may cover costs of long-term-care if the person qualifies. Medicare covers most costs associated with Hospice Care.
Making Medicare choices should be thoughtfully made. There are a tremendous amount of options, lots of providers, lots of options within each provider, and rules about when you can make changes and when you cannot. Working with a Medicare Specialist that can guide you through the decision process is a wise choice. We will gladly help in anyway that we can.
Medicare decisions can feel like a maze of decisions. We will be glad to help navigate you to a well-informed decision.