FOR MOST SENIORS, purchasing Medicare Part D prescription drug insurance is the right move—even if they don’t require any expensive medicines right now. The coverage insures against the risk of someday needing prescription medication that costs thousands of dollars and might be otherwise unaffordable. The federal government subsidizes Part D, so it’s cheaper than purchasing stand-alone private drug insurance. Another good reason to enroll in Part D at the first opportunity: You avoid the penalty associated with a late sign-up. Part D has an initial open enrollment window that runs from three months before to three months after your 65th birthday month. After that, there’s a late enrollment penalty unless you have “creditable coverage”—meaning that, up until that point, you had equivalent drug insurance from, say, your current or former employer. You’d also avoid the penalty if you’re enrolled in Medicare Advantage, a comprehensive health plan that typically includes prescription drug coverage. If neither applies, Medicare imposes a penalty on those who sign up late. It’s trying to squelch moral hazard—free riders who only buy coverage after being prescribed costly medicine. The math on the Part D penalty is complex. But here’s Medicare’s official explanation: “Medicare calculates the penalty by multiplying 1% of the ‘national base beneficiary premium’ ($32.74 in 2023) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.” Scratching your head? Here’s the boiled-down version: In 2023, delaying signing up by one month adds 33 cents to the Part D premium. That may not sound like much until you consider some delay signing up for months or even years—and the penalty persists for as long as they’re enrolled in Part D. In a hypothetical example, Medicare calculates that someone who was 29 months late enrolling would pay an extra $9.50 a month for coverage or $114 a year—for life. Still, Part D might not be right for everyone. Who might choose not to enroll? Two groups come to mind. As I mentioned, those who enroll in a Medicare Advantage plan usually have prescription drug insurance bundled into their overall coverage. In fact, if your Medicare Advantage plan covers prescription drugs, you can’t have Part D, too. A second, smaller group could be those fortunate few who are both healthy and wealthy. They might choose to self-insure—pay drug costs from their pocket—to avoid a substantial surcharge owed by high-income individuals who enroll in Part D. [xyz-ihs snippet="Mobile-Subscribe"] The Part D surcharge is $70 a month per person in 2023 for joint filers earning between $366,000 and $750,000 annually. For those making more than $750,000, the monthly surcharge ramps up to $76.40 a month. These are known as income-related monthly adjustment amounts, or IRMAA for short. IRMAA surcharges are levied not only on Part D, but also on Part B—and the Part B charges are even higher. Healthy and wealthy people can avoid the Part D cost by self-insuring. Under the worst-case scenario, they’d pay for up to 12 months of prescriptions before enrolling in Part D at the next opportunity, at which point the charge would include the penalty for late enrollment. Part D can be purchased each year during an open enrollment period that runs from Oct. 15 to Dec. 7. It’s not underwritten—meaning no one is turned away from coverage based on health. Individuals paying the highest income-based Part D IRMAA fee of $76.40 a month—on top of the average Part D premium of $32.74—would save $1,309.68 by not signing up for one year. They would pay a penalty for delaying if and when they signed up, however. If they delayed signing up for Part D by one year, I estimate it would take 28 years before the late enrollment penalty exceeded the savings of delaying Part D coverage for one year. I’m assuming that a wealthy person could afford to pay out-of-pocket for prescriptions for one year. To be sure, if you’re not wealthy, this is living dangerously. The most expensive prescription drug, Zolgensma, a one-time infusion to treat spinal muscular atrophy, costs $2.1 million in 2022, according to GoodRx. The site lists 10 drugs that cost more than $600,000 over the length of therapy, none of them commonly used. Still, if you couldn’t afford them, be sure to enroll in Part D when it’s available. James McGlynn, CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers. Check out his earlier articles. [xyz-ihs snippet="Donate"]

IF YOU’RE MARRIED, filing for Social Security can be confusing. But there’s one group who has it even worse—those who are divorced. In recent weeks, I’ve had a number of conversations with women who had no idea that they were even eligible for spousal benefits based on their ex-husband’s earnings record. (I also recently watched the television show Dirty John: The Betty Broderick Story, which gave completely erroneous advice on benefits for ex-spouses.) My hope: Someone reading this may learn that he or she is eligible for spousal or survivor benefits from an ex-spouse. A divorced spouse is eligible for Social Security spousal benefits if he or she was married for 10 years or more. Period. Being married for only nine-and-a-half years doesn’t cut it. Every divorce lawyer in the country should be aware that it’s worth delaying a divorce, so the marriage officially lasts at least 10 years. There are other mistakes and misconceptions among those who are divorced. The ex-spouse isn’t informed that you’re filing. The ex-spouse can’t prevent you from filing. As long as you’ve been divorced for more than two years, you’re aged 62 or older and your ex-spouse is at least age 62, you would be eligible for Social Security spousal benefits, as long as the marriage lasted 10-plus years. There are also misconceptions about when to file for spousal benefits. Unlike filing for Social Security benefits based on your own earnings record, where it often pays to delay to age 70, there’s no advantage to delaying spousal benefits beyond your full retirement age, which is age 66 or 67, depending on the year you were born. If you’re planning to receive only spousal benefits, because the benefit based on your own earnings record is modest, you shouldn’t wait to age 70, but rather file no later than your full retirement age. It doesn’t matter if your ex-husband or ex-wife has remarried. Filing for spousal benefits doesn’t reduce benefits for his or her new spouse. If you have remarried, however, you can’t file for spousal benefits based on your ex-spouse’s earnings record. Instead, you’d be eligible based on your new spouse’s earnings record. This brings me to another common mistake that can be costly—and it has to do with survivor benefits. Spousal benefits are benefits for when the spouse or ex-spouse is alive. Survivor benefits are benefits for when the spouse or ex-spouse is deceased. For those who are divorced, Social Security has different eligibility rules for survivor benefits. If you remarry before age 60, you aren’t eligible for survivor benefits based on your ex-spouse’s earnings record. But if you remarry after age 60, but your earlier marriage had lasted 10-plus years, you should have the option to receive a survivor benefit from either your current spouse or your ex-spouse. Just as every divorce lawyer should be aware that a marriage needs to last 10 years to be eligible for spousal or survivor benefits, every engaged couple should be aware that if they’re marrying in their late 50s, they might want to wait to age 60 to be eligible for survivor benefits based on an ex-spouse’s earnings record. The bottom line: Keep in mind four crucial rules. First, if you were married at least 10 years, you might be eligible for spousal or survivor benefits. Second, if you’re divorcing, you might want to make sure your marriage lasts at least 10 years. Third, if you’re remarrying, you might want to wait until age 60. And finally, if you’re filing for spousal benefits, there’s no advantage to delaying beyond your full retirement age. James McGlynn, CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers. His previous articles include Four Simple Tips, Filling the Gap and Four Opportunities. [xyz-ihs snippet="Donate"]

I HAD LUNCH RECENTLY with a longtime friend—a 66-year-old retiree. I asked him how he’s generating income since he hasn’t filed for Social Security and doesn’t have a pension. He said that, for now, he’s just drawing down his savings. I know his wife is three years older and her lifetime earnings were much lower than his, so I asked him if she’d filed for Social Security. He proudly said that she hadn’t—because she expects to live to age 90, like her mother. What he didn’t know: Because the Social Security benefit based on his wife’s own earnings record is less than half of his benefit as of his full Social Security retirement age (FRA), it probably didn’t make sense for her to delay her own benefit beyond her FRA. Why? Let’s start with the basics: His wife’s spousal benefit is a maximum 50% of his FRA amount. Her benefit would be reduced if she receives benefits—whether it’s benefits based on her own earnings record or his—before her FRA. What if she claims after her FRA? That’ll increase the benefits based on her own earnings record. But it won’t increase her spousal benefit. Moreover, she can’t receive that spousal benefit until her husband claims his benefit. Got all that? Many retirees delay benefits until age 70, thinking that’s the prudent course, given the chance they’ll live to a ripe old age. But in many cases, it’s best to file at your FRA if your spouse is entitled to a much larger Social Security benefit. Let’s continue with the example of my friend and his wife. Suppose his Social Security benefit at FRA is $3,000 a month, while his wife’s benefit at FRA is $1,000 based on her own earnings record. To keep things simple, we’ll also assume her FRA is age 66, and we’ll ignore Social Security’s annual cost-of-living adjustment. Also, keep in mind that my friend’s wife is three years older. If she’d claimed her own benefit at her full retirement age of 66, she would have started receiving $1,000 a month. By delaying until age 70, her benefit beginning at that age would be $1,320 a month. But remember, three years later, when her husband turns 70 and claims Social Security, she’d be eligible for spousal benefits, which would be worth $1,500 a month. In other words, by delaying her benefit based on her own earnings record until age 70, she’d receive a total of $47,520 over the next three years, while she could have collected $84,000 over seven years if she’d begun her own benefit at her full retirement age of 66. The bottom line: Many people assume that delaying benefits until age 70 is always the best solution. But they fail to consider that the value of the spousal benefit is often larger than the lower-earning spouse’s individual benefit, and thus that individual benefit disappears when spousal benefits become available. When I explained to my friend that his wife should have filed at her FRA, I also told him that there’s still time for his wife to act—and there’s a sweetener for doing so. What’s that? After folks reach full retirement age, those filing for benefits can opt to collect a six-month lump sum as though they’d filed six months earlier. Even my friend thought that was pretty generous.

I RECENTLY VISITED Eastern Europe, where I volunteered to teach English in Poland through an organization called Angloville. I received free room and board at a resort in exchange for conversing from breakfast through dinner with Polish adults who wanted to improve their English. In addition to meeting Poles and being immersed in Polish culture, I used my free time to explore nearby countries. Planning a vacation abroad? Based on my recent trips to Poland, Germany, the Czech Republic, Slovakia, Austria and Hungary, here are 12 things to keep in mind as you pack your bags and plan your trip: A 220-volt adapter set. Pack adapters to charge your electronics. It might be difficult to charge your phone or iPad without them. I learned this the hard way on my visit to Berlin. Luckily, the hotel’s front desk had an adapter I could borrow. MasterCard and Visa. Many countries only honor MasterCard or Visa and not American Express. The good news is that most purchases can be charged, bypassing local currencies. Your credit card should also give you a fair exchange rate, and the U.S. dollar is strong against the euro right now. Airline lounges. These are insurance against long layovers, flight delays and crowded terminals—all epidemic nowadays. When I had a six-hour layover in London, I took a shower in the lounge. It also had free food, drinks and comfortable seating. I stopped at the lounges in Dallas-Fort Worth and Warsaw airports during my recent travels, as well. American Express. The major reason to carry the American Express card is to gain free entry to airport lounges. It doesn’t take too many visits to feel that the card’s cost is worth the sanctuary it can provide in a crowded airport. Seat61.com. This train travel site was invaluable in my rail journeys through five nations and seven cities. I booked my trips 60 days in advance for international train journeys, and 30 days if traveling within one nation. I paid a few dollars more for first-class seats, which saved the day when trains were overbooked and not everyone got a seat. I used the site to book a berth on the overnight train from Vienna to Berlin, arriving at 10 a.m. freshly showered and well rested. Sleeper trains tend to sell out early, so book them even more than 60 days ahead. Currency exchange. Yes, they charge high fees, but—surprise—not every European nation uses the euro. I needed a few forints in Hungary and the zloty in Poland for little things, such as coins for the public restrooms. For me, this was a return visit to Poland—and a former student exchanged some zlotys for dollars, so I eliminated some fees that way. International phone plans. Wi-fi is available in most hotels. Still, I needed phone service from AT&T at $10 a day for two reasons: Google maps and Uber. I used the map function almost everywhere I walked. I relied on Uber if mass transit was confusing. Uber or Bolt was available in every country I visited and was still quite affordable. Many drivers didn’t speak English but were able to drive me where I needed to go. Rome2rio.com. If I was in town for a few days, I’d attempt to take mass transit. This website helped explain which trams to take and when they were available. It was also a good backup site for train schedules. Tripit.com. I used Tripit to keep a detailed copy of my itinerary easily accessible on my phone. I forwarded my travel emails to the site so I could access all the information on my flights, hotels, trains and tours. I did carry a paper backup but didn’t need it except to scan QR codes for trains. VisitACity.com. This app and website has lists of things to do in thousands of cities, plus maps with walking distances between activities. It gave me good general information, though—to save on walking and to get more personal attention—I frequently took Segway tours. Hotels near train stations. As I was in most cities for only a couple of days, I limited myself to hotels near train stations. I was able to find conveniently located four-star hotels with a full breakfast for less than $100 a night. Angloville. I've traveled twice to Eastern Europe to take part in this immersive teaching experience. You must love to talk because English training sessions go from morning until night. Of course, this is a great way to meet others, such as the fellow teacher I saw in Bratislava, Slovakia, where we spoke with Ukrainian refugees one evening. I was even serenaded on my birthday at an Angloville resort. An opera singer wished me “sto lat”—may you live 100 years. James McGlynn, CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers. Check out his earlier articles. [xyz-ihs snippet="Donate"]

MEDICAL EXPENSES ARE a big worry for retirees—leading many to purchase supplemental insurance. But you need to think carefully about which Medigap policy you buy. What does this insurance get you? Medicare Part B, which covers doctor’s visits and other outpatient care, typically only pays 80% of the expenses that retirees incur. To plug this and other coverage gaps, many folks buy a Medigap insurance plan. Want to keep your current doctors and not be restricted to the network of medical professionals offered in a Medicare Advantage plan, otherwise known as Medicare Part C? You’ll want to stick with Medicare Part B and supplement it with a Medigap insurance plan sold by a private insurer. After signing up for Medicare Part B, most people have just six months during which they’re “guaranteed issue” for Medigap. “Guaranteed issue” means there’s no medical underwriting when choosing a Medigap plan. After those six months, you could be denied for health reasons. One potential pitfall: If you opt for a Part C Medicare Advantage plan when you’re first eligible for Medicare, you may forever be locked out of the Medigap market if you later want to switch out of Medicare Advantage. The reason: Your health may have deteriorated and you can’t pass the medical underwriting. How do you decide which Medigap plan is best for you? There are 10 different varieties of Medigap plan. In 2018, Medigap Plan F was chosen by 54% of all enrollees. While Medigap plans are standardized in terms of the coverage they provide, costs can vary significantly. Even though Plan F is the most popular, Plan G is the fastest growing—for good reason. Plan G is less expensive than Plan F. The only difference between the two is that Plan F pays the Part B deductible of $185, whereas Plan G doesn’t—and yet, for that convenience, Plan F typically charges more than $185 extra. In 2020, Medigap Plan F will no longer be offered to new Medicare enrollees. Result? Plan G is where most future enrollees will be going in 2020 and beyond—assuming they want comprehensive coverage. Those currently enrolled in Plan F might not be able to change to Plan G, because they’ll be subject to medical underwriting. But if you can pass the medical underwriting, consider switching. Why? The premiums for Plan F will likely start rising relative to Plan G—for three reasons. First, current Plan G enrollees are, on average, healthier. One indication: They’re less worried about the Part B deductible, because they don’t think they’ll have enough medical expenses to pay it in full. Second, since Plan F won’t get new enrollees in 2020 and beyond, the “book of business” will be aging and will likely be in worse health. Indeed, in 10 years, the youngest participant in Plan F will be 75 years old. Third, as premiums continue to rise for Plan F, those healthy enough to pass the medical underwriting will switch to Plan G, further exacerbating the health disparity between the two groups. What if you’re among those last few enrollees in 2019 who can choose Plan F? I can’t think of any reason to pick it over Plan G. Hoping to switch from F to G? It’s important to call an independent broker, who represents multiple insurance companies, including those offering both Medical Advantage plans and Medigap policies. Before you drop your current policy, make absolutely sure you can get on a new plan—and do so at a reasonable cost. James McGlynn CFA, RICP, is chief executive of Next Quarter Century LLC in Fort Worth, Texas, a firm focused on helping clients make smarter decisions about long-term-care insurance, Social Security and other retirement planning issues. He was a mutual fund manager for 30 years. James is the author of Retirement Planning Tips for Baby Boomers. His previous articles include Late Fee, Where to Begin and As the Years Go By. [xyz-ihs snippet="Donate"]