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Retirement Planning > Retirement Investing

So your client is reaching retirement age in 2012

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Turning 66 is an important age for Social Security eligibility. At 66, your client can claim the full amount of Social Security they have earned, and the penalty for working and claiming Social Security benefits at the same time.

Social Security eligibility. If your client was born in 1946 they will hit what the Social Security Administration considers the full retirement age, at which time they are eligible to claim the full amount of Social Security they are entitled to. If they claimed early they are receiving a reduced payout.

Delay and get more. Your client can further increase their monthly Social Security payments if they delay claiming their benefits up to age 70. It may make more sense to wait until later when they can get more money per year, especially if your clients are healthy and think they will live a long time. They could get more money per month and that money will continue at that higher level for the rest of their life.

Claim twice. Married individuals (or those who were married for at least 10 years) are eligible for Social Security payments based on their own work record or payments equal to up to 50 percent of the higher earner’s benefit, whichever is higher. If your clients have reached their full retirement age, they can even claim both of these types of payments at different times. A 66-year-old retiree may sign up to receive spousal payments and continue to delay receiving his or her own retirement benefit. A retired worker who uses this strategy between ages 66 and 70 will get higher monthly payments after age 70 due to delayed claiming plus four years of spousal payments.

Work without penalty. If your clients work and claim Social Security payments at the same time prior to age 66, part or all of their Social Security benefit will be temporarily withheld. Social Security recipients under age 66 who earn more than $14,640 in 2012 will have 50 cents of each dollar above that limit deducted from their Social Security payments. The year they turn 66, the earnings limit jumps to $38,880 and the amount withheld is reduced to 33 cents for each dollar earned. And the earnings limit disappears once your client turns age 66.

Don’t forget about Medicare. Retirees can sign up for Medicare beginning three months before the month they turn 65. It’s important to sign up for Medicare as soon as they are eligible because premiums may increase by 10 percent for each 12-month period that they delay enrollment. People who are still working and are covered by a group health insurance plan through their job must sign up within eight months of leaving the job to avoid the penalty. If your client elects to receive Medicare Part D prescription drug coverage, it’s important they shop around for a new policy annually during the open enrollment period because covered medications and cost-sharing requirements often change each year.

Picking a 2013 Medicare Part D Plan. You client can switch into a new Medicare Part D plan for 2013 during the open enrollment period from October 15 to December 7. Premium prices, deductibles and covered medications can change each year, so it’s a good idea to reevaluate whether your client’s current plan will still be a good fit for them in the coming year.

Here’s how to help your client can pick a prescription drug plan that best meets their medication needs in retirement:

Weigh their options. Medicare beneficiaries will have a choice between an average of 31 stand-alone Medicare Part D prescription drug plans (PDPs) in 2013, ranging from 23 plans in Alaska and Hawaii to 38 plans in Pennsylvania and West Virginia, according to a recent Kaiser Family Foundation analysis of 2013 plan offerings. Some 1,045 prescription drug plans will be offered nationwide in 2013, down from a peak of 1,875 plans in 2007. Your client can find and compare plans using the Medicare Plan Finder tool.

Consider monthly premiums. The projected average monthly Part D premium will be $40.18 in 2013, assuming beneficiaries remain in their current plans, KFF found. That’s up 7 percent from 2012. But there is a wide variation in annual premium changes. For example, the more than 4 million enrollees in UnitedHealth’s AARP Preferred MedicareRx prescription drug plan will see a slight increase of 1 percent in 2013, to $40.42, if they remain in this plan. By contrast, Humana’s low-premium Walmart-Preferred Rx Plan will increase premiums by 23 percent, to $18.50 in 2013.

KFF estimates that about two-thirds of enrollees will pay $1 more per month if they remain with their current plan. That includes 4 percent, or 767,000, who will experience a hike of more than $10.

Determine co-payments and coinsurance. Premiums aren’t the only cost your client should pay attention to when selecting Part D coverage. Many Part D plans require participants to pay a percentage of the cost of their drugs or a set amount for each prescription filled. Find out how much your client will need to pay out-of-pocket for medications they are likely to take next year.

Deduce the deductible. Over half of Part D plans (55 percent) will charge a deductible in 2013. Most plans with a deductible will charge the standard $325.

Find the pharmacy. Find out if the medications your client needs are covered by each plan they consider, and make sure that a pharmacy that is convenient for them is compatible with the plan. Some plans require prior authorization before a prescription will be covered, set quantity limits on how much medication they can get at one time, and may require them to try similar, lower-cost drugs before covering a more expensive prescribed drug.

Protect what your clients have. At this stage of your clients’ life, it is important to protect the nest egg they have built for retirement. While many retirees maintain some exposure to stocks, which provide continued growth and fight inflation, it’s important to keep a gradually increasing portion of their nest egg in safer products such as annuities that will allow then to meet their everyday spending needs. It may be less about return than it is about reducing their risk and avoiding losing money that they can’t afford to replace or they don’t have the time to replace.

Help your client plan their new life. Retirement planning isn’t just about meeting your clients’ financial needs. They also need a plan for how they will spend their days after they leave the workforce. There are 168 hours in a week. How do your clients see themself filling those hours? Familiarize yourself with groups, programs and services available in your clients’ local area, network with these organizations and be seen as the subject matter expert. Remember, people don’t care how much you know until they know how much you care.

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