2023 TAX GUIDE

How to Prepare for Tax Season

Presented by Marc Aarons

Understand Where Your Federal Tax Dollars Go

In this guide, we will explore where your tax dollars go, some of the ways tax filing may look different, and what you can do to prepare. Keep in mind, this guide is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your strategy.

Before we dive into the upcoming tax brackets and what you can do to prepare for the upcoming tax season, it can be helpful to understand precisely how the government allocates your federal tax dollars.

In 2022, the federal government spent $6.27 trillion, which equals 25% of the nation’s gross domestic product. Further examination reveals that three significant areas of spending made up the majority of
the budget.¹

Medicare

Medicare accounted for $755 billion, or 12% of the budget, in 2022.¹

Defense Spending

Another $767 billion, or 12% of the budget, was paid for defense and security-related international activities. The bulk of the spending in this category reflects the underlying costs of the Defense Department. This includes the cost of multiple defense initiatives and related activities,
described as Overseas Contingency Operations in the budget.¹

Social Security

Nineteen percent of the budget, or $1.22 trillion, was paid for Social Security, which provided monthly retirement benefits averaging $1,632 to over 48 million retired workers. Social Security also provided benefits to 3 million spouses and children of retired workers, 6 million surviving children and spouses of deceased workers, and 9 million disabled workers and their eligible dependents.^1,2

The Tax Brackets

The tax brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Here are the tax brackets and the corresponding income ranges.³

These modest changes to the tax brackets also mean that wage earners may fall into lower brackets.
Here is one example. A single filer at $88,000 in taxable income would fall into the 24% bracket for
tax year 2021. The filer would be in the 22% tax bracket in 2022. These new rates are scheduled to expire in 2025 unless Congress acts to make them permanent. Exemptions also changed under the new tax code.

Keep in mind that the tax brackets are representative of how much you will pay for each portion of your income. For example, if you make $100,000 for the 2022 tax year and are married filing jointly, you would pay 10% on the first $20,550, 12% on the next $63,000, and 22% on the final $16,450. You would not pay 22% for the entire $100,000 of your annual income.

Here is an overview of the standard deductions over the past two years:³

IMPORTANT DEADLINES*

JANUARY 17, 2023

If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, postmark this payment by January 17, 2023.

APRIL 18, 2023

FIRST QUARTER 2023 ESTIMATED TAX PAYMENT DUE

2022 INDIVIDUAL TAX RETURNS DUE

Most taxpayers have until April 18 to file tax returns. Email or postmark your returns by midnight on this date.

LAST DAY TO MAKE A 2022 IRA CONTRIBUTION

If you have not already contributed fully to your retirement account for 2022, April 18 is your last chance to fund a traditional IRA or a Roth IRA.

INDIVIDUAL TAX RETURN EXTENSION FORM DUE

If you cannot file your taxes on time, file your request for an extension by April 18 to push your deadline back to October 16, 2023.

JUNE 15, 2023

SECOND QUARTER 2023 ESTIMATED TAX PAYMENT DUE

SEPTEMBER 15, 2023

THIRD QUARTER 2023 ESTIMATED TAX PAYMENT DUE

OCTOBER 16, 2023

EXTENDED INDIVIDUAL TAX RETURNS DUE

If you received an extension, you have until October 16 to file your 2022 tax return.

*The IRS has the authority to adjust federal tax deadlines on short notice based on its assessment of financial or economic conditions. Also, please note that tax deadlines that fall on weekends or national holidays will be delayed until the following business day.

The Child Tax Credit

In 2021, the American Rescue Plan Act increased the child tax credit to up to $3,600 per child. Legislation to extend the 2021 child tax credit was not passed, so the credit reverted back to the 2020 credit of up to $2,000 per child for 2022. While the 2021 child tax credit was fully refundable, the 2022 tax credit is only partially refundable.

The 2022 credits phase out at income thresholds of $200,000 (or $400,000 for married taxpayers filing jointly).⁴

Preparing for the Tax Season

Planning well in advance of the tax season may help better prepare you for the unexpected. Here are several reasons to begin early:

• Your home, job, or relationships changed
• You need to start saving money if you may owe taxes
• You want to ensure you qualify for tax deductions

You can make changes throughout the year to ensure that your tax preparations go smoothly.

In particular, you can make periodic assessments of your paycheck withholdings so that you will get a refund or can reduce or eliminate your tax burden.

You should keep track of and store your tax and other financial records to avoid delays or frantic preparations as the filing deadline approaches. Records may include W-2 forms, canceled checks,
certain receipts, and previous years’ returns.

Here is a list of other items to start gathering:

• Pay stubs
• Mortgage payment records
• Closing paperwork on home purchases
• Receipts for items or services you may want to claim as itemized deductions
• Records on charity giving and donations
• Mileage logs on cars used for business
• Business travel receipts
• Credit card and bank statements to verify deductions
• Medical bills
• 1099-G forms for state and local taxes
• 1099 forms for dividends or other income

During the first few months of 2023, make sure you receive your W-2 and 1099 forms as well as other tax documents. Leave adequate time to collect documents and prepare to file your taxes prior to the April 18, 2023 deadline.

Tightening the Nuts and Bolts

Here are some ways to prepare this year for next year’s tax season:

Look at last year: Take one more look at last year’s return. In the months ahead, you may still have the opportunity to contribute more to your retirement plan, which may lower your taxable income.

Donate to charity: How about “bunching” your charitable donations?

Bunching provides you with the ability to optimize your deduction allowances by making two or more years’ worth of charity donations in one year.

Let us say you are married, you expect to itemize your deductions, and you anticipate making $15,000 in annual donations. By donating $30,000 in one year and skipping the next, you may be able to qualify for a higher deduction.⁵

Review Capital Losses: If you are investing in the financial markets, you may want to consider deducting capital losses; you have the opportunity to claim deductions if you experienced losses.

You can claim losses only if they exceed capital gains. You are allowed to claim the difference of up to $3,000 per year if you are married filing jointly or $1,500 if you are filing separate returns. Net losses that exceed $3,000 can be carried over into future years.⁶

Deductions for capital losses can only be applied to investment property sales but not to the sale of investment property that was held for personal use.

Get organized: Find a place to store your tax documents until it is time to prepare to file. A good record-keeping system may alleviate concerns later as the deadline gets closer.

If you have your documents or prior-year returns stored on your computer, make sure you back them up on a thumb drive or other device or system in case your computer is hacked or stolen.

Consider other taxes: Keep an eye on local and state government requirements that may affect your specific tax situation.

How Long?

The IRS provides recommended timelines for retaining financial documents:⁷

1. You should keep your tax records for three years if #4 and #5 below do not apply to you.
2. You should keep records for three years from the original filing date of your return or two years from the date you paid your taxes. Select whichever is the later date. This is if you claimed a credit or refund after you filed your return.
3. You should keep your records for seven years if you claimed a loss from worthless securities or a bad debt deduction.
4. You should keep your records for six years if you failed to report income that you should have, and the income was more than 25% of the gross income listed on your return.
5. Keep records indefinitely if you do not file a return.
6. You should keep employment tax records for at least four years after the due date on the taxes or after you paid the taxes. Select whichever is later.

MMI Disclosure: This material was prepared by MarketingPro, Inc. for use by Marc Aarons.  This Special Report is not intended as a guide for the preparation of tax returns. The information contained herein is general in nature and is not intended to be, and should not be construed as, legal, accounting or tax advice or opinion. No information herein was intended or written to be used by readers for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Readers are cautioned that this material may not be applicable to, or suitable for, their specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. Readers are encouraged to consult with professional advisors for advice concerning specific matters before making any decision. BothMarc Aarons and MarketingPro, Inc. disclaim any responsibility for positions taken by taxpayers in their individual cases or for any misunderstanding on the part of readers. Neither Marc Aarons nor MarketingPro, Inc. assume any obligation to inform readers of any changes in tax laws or other factors that could affect the information contained herein.

^Citations.

1. ^{Treasury.gov, 2023}
2. ^{SSA.gov, 2023}
3. ^{IRS.gov, 2022}
4. ^{Investopedia.com, February 24, 2022}
5. ^{IRS.gov, 2022}
6. ^{IRS.gov, 2023}
7. ^{IRS.gov, 2022}

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5 Retirement Concerns Too Often Overlooked

Baby boomers entering their “second acts” should think about these matters.

Provided by Marc Aarons

Retirement is undeniably a major life and financial transition. Even so, baby boomers can run the risk of growing nonchalant about some of the financial challenges that retirement poses, for not all are immediately obvious. In looking forward to their “second acts,” boomers may overlook a few matters that a thorough retirement strategy needs to address.

RMDs. The Internal Revenue Service directs seniors to withdraw money from qualified retirement accounts after age 72. This class of accounts includes traditional IRAs and employer-sponsored retirement plans. These drawdowns are officially termed Required Minimum Distributions (RMDs).¹

Taxes. Speaking of RMDs, the income from an RMD is fully taxable and cannot be rolled over into a Roth IRA. The income is certainly a plus, but it may also send a retiree into a higher income tax bracket for the year.¹

Retirement does not necessarily imply reduced taxes. While people may earn less in retirement than they once did, many forms of income are taxable: RMDs; investment income and dividends; most pensions; even a portion of Social Security income depending on a taxpayer’s total income and filing status. Of course, once a mortgage is paid off, a retiree loses the chance to take the significant mortgage interest deduction.²

Health care costs. Those who retire in reasonably good health may not be inclined to think about health care crises, but they could occur sooner rather than later – and they could be costly. A report by HealthView Services found that even with additional insurance coverages such as Medicare Part D, Medigap, and dental insurance, a healthy 65-year-old couple can expect to pay almost $208,000 out-of-pocket for their healthcare expenses.³

Eldercare needs. Those who live longer or face health complications will probably need some long-term care. One month’s stay in a private room in a nursing home costs an average of $9,000 nationally, so it’s important to consider these when preparing for retirement. Long-term care insurance is expensive, though, and can be difficult to obtain.⁴

One other end-of-life expense many retirees overlook: funeral and burial costs. Preparing to address this expense may help surviving spouses and children.

Rising consumer prices.

Historically, healthcare costs inflation has risen between 1.5-2 times the Consumer Price Index. For a 65-year-old couple, this equates to an additional projected $85,917 in lifetime retirement healthcare costs. Retirees would be wise to invest in a way that gives them the potential to keep up with increasing consumer costs.⁵

As part of your preparation for retirement, give these matters some thought. Enjoy the here and now, but recognize the potential for these factors to impact your financial future.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

^Citations.

^{1 – thebalance.com/required-minimum-distributions-2388780 [1/14/22]}

^{2 – https://www.investopedia.com/articles/retirement/12/will-you-pay-taxes-during-retirement.asp [7/31/22]}

^{3 – https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-Healthcare-Costs-Data-Report.pdf [2021]}

^{4 – https://www.genworth.com/aging-and-you/finances/cost-of-care.html [2022]}

^{5 – https://hvsfinancial.com/wp-content/uploads/2022/03/HVS-Data-Report-Brief-0312222.pdf [2022]}

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Getting Disability Income
The facts about applying for SSDI and SSDI benefits.

Provided by Marc Aarons

If you cannot work due to a disability, you might be eligible for Social Security Disability Income (SSDI). These federal government payments could offer you a degree of financial relief.¹

Most SSDI recipients get paid between $700-1,400 per month. This year, the average monthly SSDI benefit for an individual is $1,358. Your monthly benefit could range from $100 to $3,345 based primarily on your earnings history. Roughly speaking, the greater your average annual earnings (in terms of taxable income), the greater your SSDI benefit.^1,2

Suppose you have previously spent some time out of the workforce, had jobs in which you did not pay Social Security taxes, or lived in a household receiving other government benefits. In that case, this can also affect SSDI payment amounts.^1,2

How do you apply for SSDI? You can apply at the Social Security Administration’s website, ssa.gov, or call the SSA at 1-800-772-1213. The SSA has a Disability Starter Kit, downloadable at ssa.gov, to help you get ready for a phone interview or fill out the application so that you have the right documentation in hand when you apply.³

Once you complete and submit your application, it goes to the Disability Determination Office in your state for review. After that, the DDO sends you a letter notifying you whether or not you have qualified for SSDI. (If you fail to qualify, you can appeal the decision in writing within 60 days of getting the letter.)¹

What are your chances of qualifying for SSDI? Typically, it would be best if you met the following criteria. One, you must be currently out of work and unable to participate in what the SSA terms Substantial Gainful Activity – meaning you can’t earn something approximating a minimum wage by any means. Two, your disability renders you unable to perform your job or any other type. Three, your disability is expected to last 12 months or longer or eventually result in death. (The criteria for veterans, children, the widowed, and the blind differ slightly.)^1,4

If you qualify for SSDI, the money will take time to arrive. The SSA starts your benefit payments once you are determined to have been disabled for six full months. So there is a five-month waiting period that begins the first full month after your qualification date.³

The takeaway from this is obvious: there is no point in hesitating to apply for SSDI. You want to apply as soon as you can.

There are two other important things to note about SSDI. If you qualify for it, you become eligible for Medicare just two years after you are entitled to benefits. Also, SSDI benefits adjust for inflation, so your monthly use is designed to grow larger with time.²

This information intends to provide general information on the subjects covered. Readers should not infer specific legal advice regarding eligibility for disability income or criteria for eligibility.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

^Citations

1. ^{Investopedia, March 31, 2022}
2. ^{Disability Secrets, November 8, 2021}
3. ^{Social Security Administration, July 2, 2022}

^{4. Investopedia, December 18, 2021}

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Rehearsing for Retirement

Try living as a “retiree” for a month or two before you commit to leaving your career.

Provided by Marc Aarons

Imagine if you could preview your retirement in advance. In a sense, you can. Financially and mentally, you can “rehearse” for the third act of your life, while still enjoying the second.

Pretend you are retired for a month or two. Take two steps to act out your rehearsal – one having to do with your budget, the other with your expectations.

Draw up a retirement budget & live on it for one, two, or three months. Make a list of essential expenses (groceries, gas, utilities, mortgage, medicines), and then a list of discretionary expenses (such as movie tickets, dinners out, spa treatments). This may reveal that you can live handily on less than what you currently spend each month.

Next, list your income sources for retirement. They might include Social Security benefits (depending on when you want to claim them), retirement plans, pension checks, dividends, freelance or consulting payments, or other revenue streams. Investment income is also in the mix here, so check with a financial professional to determine a withdrawal rate from those accounts that you can safely maintain through your retirement. (It might differ slightly from the long-recommended 4%.) When you have your list, stack the projected total income up against your essential expenses and see how much you have left over.

Try living off of that level of monthly income for a month or more while you are still working. If it covers your necessary monthly expenses and not much else, then some adjustments in your retirement strategy might be needed – a housing change, a change in your retirement date.

See how it feels to retire. Before you conclude your career, try to arrange some “previews” of your retirement lifestyle. If you want to serve your community, volunteer avidly for a month or two to get a taste of what daily volunteer work is like. If you see yourself traveling enthusiastically at the start of retirement, take a dream vacation or even a couple of consecutive trips (if your schedule allows) to see how they truly fit into your financial picture.

Your “rehearsal” need not be last-minute. If you think you will retire at 65, you could try doing this at 63, 60, or even before then. The earlier your attempt, the more time you have to alter your retirement strategy if needed.

What else should you consider as you rehearse? Besides income, expenses, and the day-to-day retirement experience, there are a few other factors to gauge.

How much cash do you have on hand? Starting retirement with a strong cash position provides you with some insulation if you happen to retire during a market downturn. The possibility of a bear market coinciding with your entry into retirement may make you want to revisit your portfolio allocations as well.

Take a second look at your projected monthly income. Will it be consistent? If it will vary, you will want to address that. If you are in line for a pension, you will face a major, likely irrevocable, financial decision: should it be single life, or joint-and-survivor? The latter option may reduce your pension income in retirement, but give your spouse 50% or more of your pension payments after you die. Your employer might also offer you a lump-sum pension buyout; if that turns out to be the case, you might want to consult with a financial professional who can help you to decide if the lump sum constitutes the better deal versus a lifelong income stream.¹

How about your entry into Medicare? You may enroll in it at medicare.gov within a window of your 65th birthday (that is, beginning three months prior to your birthday month and ending three months after it). If you sign up before your birthday, you will be covered beginning on the first day of your birthday month. Sign up following your 65th birthday, and you may have to wait for coverage to begin.²

If you expect to stay on the job after 65, consider signing up for Medicare Part A (the part that pays for hospital care) within the usual window. It will not cost you anything to do so, and sometimes Part A makes up for shortcomings in employer-sponsored health plans. You can enroll in Part B and other Medicare component parts later – within eight months of your retirement, to be precise. You will want to pay attention to that 8-month deadline, as your premiums will jump 10% for every 12-month period afterward that you refrain from enrolling. If you pay for your own insurance, you will still need to enroll in Medicare when you are eligible (Medicare will make that coverage superfluous, so you can anticipate dropping it).³

Rehearsing for retirement can be very insightful. Some new retirees leave work abruptly only to have their financial and lifestyle assumptions jarred. As you want to make a smooth retirement transition to a future that corresponds to your expectations, test-driving your retirement before it begins is only wise.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

^Citations.

^{1 – TheBalance.com, December 13, 2021}

^{2 – Medicare.gov, 2022}

^{3 – CMS.gov, 2022}

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Are You Retiring Within the Next 5 Years?

What to focus on as the transition approaches 

Provided by Marc Aarons

You can prepare for the transition years in advance. In doing so, you may be better equipped to manage anything unexpected that may come your way.

How much monthly income will you need? Unfortunately, there is no “magic” number for everyone to strive for. Instead, examine your monthly expenses, considering any trips, adventures, or pursuits you have in mind for the near term. As a test, you can even try living on your projected monthly income for 2-3 months prior to retiring.

Should you downsize or relocate? Your home is not only a significant asset, it also represents a significant part of your lifestyle. After all, our homes are often a reflection of who we are. It follows that the decision of how much home we want—or need—may vary with each situation; it is not strictly a financial decision. However, if you are considering downsizing or relocating, the financial component of the decision should be considered thoughtfully.

How should your portfolio be constructed? For many retirees, the top priority is generating consistent income. With that in mind, your financial professional can adjust your portfolio with respect to your time horizon, risk tolerance, and goals. For example, some retirees prefer to maintain an amount of risk-averse investments that can provide income during retirement. However, even the most risk-averse investments aren’t immune to risk entirely.

How will you live? Whether you dream of endless Saturdays or dedicating your time to volunteering, remember that retirement is a beginning. Ask yourself what you would like to begin doing now. Think about how to structure your days to pursue that goal, and give it a shot! There’s no better way to prepare for what may come, than to practice in the present.

How will you take care of yourself? If you retire before age 65, Medicare may not be an option. If you’re considering early retirement, check if your group health plan extends certain benefits into retirement.

Even if you retire at 65 or later, Medicare may not be your ideal solution. Consider items Medicare doesn’t traditionally cover, such as extended care or other specialized medical services.

Review your retirement strategy as the transition approaches. Give your financial professional a call today. An adjustment or two before retirement may be all you need for a successful next chapter.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

MMI Disclosure: This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Investments seeking to achieve higher rate of return also involve a higher degree of risk.

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Enrollment period begins October 15.

 Provided by Marc Aarons

 Medicare’s annual open enrollment period begins October 15 and ends December 7. During this time, current Medicare beneficiaries have the option to adjust their coverage for the coming year. Any changes to your plan will go into effect on January 1, 2022.¹

This is an opportunity to reassess your current coverage and identify potential areas for improvement. Maybe you’ve recently changed medication, find yourself underutilizing coverage, or are in need of additional benefits.

Before open enrollment begins, you’ll receive a report outlining your current coverage. Review your elections carefully, especially if you haven’t updated coverage in the last few years. Medicare offers a Plan Finder tool to help compare other offerings if you’re considering making a switch.

Your health insurance coverage in retirement should work to protect your financial wellbeing. I’m happy to help navigate new opportunities or plan changes during this upcoming open enrollment period. Feel free to reach out with any questions, or to schedule a meeting to talk.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

  ^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

 ^Citations

1. ^{Centers for Medicare & Medicaid Services, February 2, 2020}

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Breaking down the enrollment periods and eligibility.

Provided by Marc Aarons

 Medicare enrollment is automatic for some. For those receiving Social Security benefits, the coverage starts on the first day of the month you turn 65.¹

If you are not receiving Social Security benefits at 65, you may be delaying until you reach full retirement age, or until you reach 70. If you’re coming up on 65 and not receiving Social Security benefits, SSDI, or benefits from the Railroad Retirement Board, you can still apply for Medicare coverage. You can visit your local SSA office or visit www.socialsecurity.gov/medicareonly/ to determine your eligibility.¹

If you’re getting Social Security checks and approaching age 65, you’ll get a Medicare card in the mail three months before your 65th birthday. If you are getting SSDI (Social Security Disability Insurance; regardless of your age), the card is scheduled to arrive coincidental with your 25th month of disability. You must be a U.S. citizen or a permanent legal resident of this country. If so, you or your spouse must have earned sufficient credits to be eligible for Medicare, typically earned over 10 years.²

 When can you add or drop forms of Medicare coverage? Medicare has enrollment periods that allow you to do this.

*The initial enrollment period is seven months long. It starts three months before the month in which you turn 65 and ends three months after that month. You can enroll in any type of Medicare coverage within this seven-month window – Part A, Part B, Part C (Medicare Advantage Plan), and Part D (prescription drug coverage). As it happens, if you don’t sign up for some of this coverage during the initial enrollment period, it may cost you more to add it later.¹

*Once you are enrolled in Medicare, you can only make changes in coverage during certain periods of time. For example, the open enrollment period for Part D is October 15-December 7, with Part D coverage starting January 1.¹

 Do you have questions about eligibility or the eligibility of your parents? Your first stop should be the Social Security Administration (see the contact information in the fourth paragraph above). You can also visit www.medicare.gov and www.cms.gov.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

  ^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

1. ^{medicare.gov, October 20, 2020}
2. ^{aarp.org, October 1, 2020}

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What you need to know about Plan F and Plan G.

 Provided by Marc Aarons

As many may recall, seniors who previously enrolled in Medicare are facing some changes.

Medigap Plan F might not be sold after 2020 and Medigap Plan G will be undergoing some changes.¹

These changes only impact new Medicare enrollees, however. If you enrolled in Medicare prior to 2020, and have Plan F or Plan G coverage, you can keep that coverage.²

Why do people like Plan F? Plan F is basically a “Cadillac plan”: it is not cheap, but it lets you see any doctor or hospital that accepts Medicare patients, and the upfront cost is the total cost. If you have Plan F coverage, it’s rare to be surprised by subsequent requests to pay a deductible, a copayment, or coinsurance.²

How does Plan G differ from Plan F? While both plans provide similar coverage, one of the many differences comes down to dollars and cents. Plan G asks you for the $198 Part B deductible while Plan F does not.³

According to Medicare.gov, Plans F and G also offer a high-deductible plan in some states. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,340 in 2020 before your policy pays anything. But remember, Plans C and F aren’t available to people who are newly eligible for Medicare on or after January 1, 2020.⁴

Are you thinking about switching Medigap policies? In most cases, you won’t have a right under federal law to switch Medigap policies unless you’re eligible under a specific circumstance, guaranteed issue rights, or if you’re within the 6-month Medigap open enrollment period. One thing to keep in mind is that you don’t have to wait a certain length of time after buying your first Medigap policy before you can switch to a different Medigap policy.

If you do switch you also have 30 days to decide if you want to keep the new Medigap policy. This is called your “free look period” and it starts when you get your new Medigap policy.⁵

Marc Aarons may be reached at(714) 887-8000 or marc@ocmoneymanagers.com

 ^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

1. ^{Ehealthinsurance.com, October 13, 2020}
2. ^{Medicare.gov, October 7, 2020}
3. ^{CMS.gov, November 8, 2019}
4. ^{Medicare.gov, October 7, 2020}
5. ^{Medicare.gov, October 13, 2020}

The post How Medigap Choices Have Changed appeared first on Money Managers, Inc..

Separating some eldercare facts from eldercare myths.

Provided by Marc Aarons

How much does eldercare cost, and how do you arrange it when it is needed? The average person might have difficulty answering those two questions, for the answers are not widely known. For clarification, here are some facts to dispel some myths.

True or false: Medicare will pay for your mom or dad’s nursing home care.

FALSE. Medicare is not extended care insurance.¹

Medicare Part A will pay the bill for up to 20 days of skilled nursing facility (SNF) care, but after that, you or your parents may have to cover some costs out-of-pocket. After 100 days in a SNF, you will have to cover all costs out of pocket. The only way to “reset the clock” for Medicare coverage of these services is if the patient can somehow go without skilled nursing care for 30 or 60 days or if they require a hospital stay of three full days or longer.¹

True or false: A semi-private room in a skilled nursing facility costs about $35,000 a year.

FALSE. The median cost of a semi-private room is now $89,297. A private room in an assisted living facility has a median annual cost of $100,375 annually. A home health aide could run you up to $4385 per month for full-time care. Even if you just need someone to help mom or dad with activities of daily living (ADLs), such as eating, bathing, or getting dressed, the median hourly expense is not cheap: non-medical home aides run about $23 per hour, which at 10 hours a week, means nearly $12,000 a year.^2,3

True or false: Only around 40% of Americans aged 65 and older are expected to need extended care.

FALSE. Someone turning 65 today has a 70% chance of needing extended care. That means that by 2030, it’s estimated that around 24 million Americans will need extended care.  This is double the current number already receiving care.^4,5

 True or false: The earlier you buy extended care insurance, the more manageable the premiums.

TRUE. Younger policyholders may pay lower premiums.

The best time to consider extended care insurance is when you are healthy. While may be paying a premium for a longer amount of time, the expense may pale in comparison to paying for unexpected medical costs out of pocket.⁶

True or false: Medicaid can pay nursing home costs.

TRUE. The question is, do you really want that to happen? While Medicaid rules vary by state, in most instances, a person may only qualify for Medicaid if they have no more than $2,000 in “countable” assets ($3,000 for a couple). A homeowner can even be disqualified from Medicaid for having too much home equity. A primary residence, a primary motor vehicle, personal property, and household items, burial funds of less than $1,500, and tiny life insurance policies (with face values of less than $1,500) are not countable. So, yes, under these economic circumstances, Medicaid may end up paying extended care expenses.⁷

A little strategizing now could make a big difference in the years to come. Call or email an insurance professional today to learn more about ways to pay for extended care and discuss your choices. You may need to find a way to address this concern.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

1. ^{Medicare.gov, March 26, 2020}
2. ^{SeniorLiving.org, June 24, 2020}
3. ^{APlaceForMom.com, May 11, 2020}
4. ^{AmericanActionForum.org, February 18, 2020}
5. ^{LongTermCare.gov, July 23, 2020}
6. ^{Forbes.com, April 17, 2020}
7. ^{LongTermCare.ACL.gov, July 23, 2020}

The post How Much Do You Really Know About Extended Care? appeared first on Money Managers, Inc..

Exploring your extended care options may be wise at this time.

Provided by Marc Aarons

Given the threat of COVID-19, seniors today may be considering their extended care alternatives with extra caution.¹

In addition to health factors, the cost can be an issue. According to Genworth’s 2020 Cost of Care Survey, the median annual cost of a semi-private room in a nursing home is now $90,000. A single-occupancy room may cost over $100,000 a year.¹

While you could designate a portion of your retirement savings for possible extended care costs, there are other choices to consider as well.¹

Many extended care insurance policies now reimburse the cost of eldercare provided at home. While traditional extended care policies are becoming rare and more expensive, some insurers are bundling extended care features into other policies, with the goal of making such coverage more accessible. A look at different policies may be illuminating, especially with help from an insurance professional with an eye on industry trends.²

Another possible option – a Health Savings Account (HSA). This is a tax-advantaged savings account designed to help pay for medical expenses. You are eligible to have an HSA if you have a qualifying high-deductible health plan (HDHP) and have not yet enrolled in Medicare.^3,4

HSA dollars can be used to pay for assorted medical expenses, including prescription drugs, dental care, and therapies. HSA funds can also be applied to premiums for extended care insurance. You defer pre-tax income into your HSA, which may be invested for you over time. There are annual HSA contribution limits. In 2020, they are $3,550 if you are single, $7,100 if you have a spouse or family. An additional annual “catch-up” contribution of up to $1,000 is allowed for each person in the household over age 55.^3,4

Money taken out of an HSA for a nonmedical reason is considered taxable income. If you make such a withdrawal before you turn 65, the withdrawn amount is usually subject to a 20% federal tax penalty.⁴

Medicare may not suffice if you need extended care. Generally speaking, it will pay for no more than 35 hours a week of home health care and only up to 100 days of nursing home care after a hospitalization. It may pay for up to six months of hospice care. If you or someone you love has dementia and needs to move into an assisted living facility, Medicare may not pay their room and board.⁵

Medicaid is different: in some instances, it can pay for certain extended care expenses. Qualifying for Medicaid is the hard part. It is public assistance, offered to people who can no longer pay for extended care with insurance or their own funds.⁵

Think ahead and take some time to explore extended care options. As always, your financial professional is a knowledgeable ally, as you consider which strategies may help you meet this challenge.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – Genworth, March 30, 2020

2 – Nerdwallet, May 28, 2019

3 – CNBC.com, February 4, 2020

4 – Investors.com, November 8, 2019

5 – Medicare.gov, July 2019

The post Eldercare Choices in the COVID-19 Era appeared first on Money Managers, Inc..