Dave Arey

Comments:

• Thank you for sharing these thoughtful and thought provoking questions.

  Post: At Dave’s Request

  Link to comment from August 6, 2024

• Edmund - It would be beneficial for me (and I think lots of others here) if you posted the questions the elders and deacons came up with for younger folks and those near or in retirement.

  Post: Unasked Questions

  Link to comment from August 3, 2024

• I whole heartedly concur with you regarding the right to end one’s life in a safe, loving, and caring way…aka assisted suicide. Many readers of HD are well prepared and have planned for longevity risk. That’s great. From a macroeconomic and demographic point of view, perhaps the upper quintile (20%) of baby boomers might have sufficient financial resources to “make it” to age 95. But that begs the question, what will happen to the bottom quintile of baby boomer (some or all of whom have a negative net worth)? And what happens to the million and millions of baby boomers (the middle three quintiles, 60%) who run out of assets long before they die? For the fortunate top quintile who can afford long term care, what will the long term care infrastructure (facilities and staff) look like in 10-20 years? It’s already severely stressed with the much smaller Greatest Generation. Society and our faith communities (along with policy makers) have significant issues to grapple with that are as problematic if not more so than coming to terms with assisted suicide. We’ve known for decades Social Security needs to be “fixed”. And from the policy makers…crickets. For them, since it’s more than an election cycle way, it’s not a problem they need to address yet. I worry not at all for HD readers who are in the top quintile (or top 10% or top 5%) of the population in terms of net worth. The problem is all the other baby boomers of which there are probably 70 million. Seems like this HD post is sort of the tip of the ice berg. With climate change, we won’t even have ice bergs upon which to put our elders (us). At any rate, I really appreciate your post here. Thank you very much.

  Post: Long Odds

  Link to comment from May 4, 2024

• Which is a shame. Allowing people (who typically want to make this switch because their health has declined) to move from Advantage to a Supplement without medical underwriting means EVERYONE who is covered by a Supplement plan will see their premiums rise. The "free lunch" those who take "advantage" of these laws is paid for by those who are in the Supplement plans.

  Post: Fully Committed

  Link to comment from April 20, 2024

• Dennis - I always enjoy your well written and thoughtful articles. I will be 70 this year and similar to you, my wife is 5 years younger than me. We have been converting traditional IRAs to Roth the past several years at the rate of about $75,000-$100,000 per year. Last year we finished convert all of my wife’s traditional IRA to Roth. I inherited an IRA from my mother and in 2024 and 2025 (while the TCJA remains in place) we plan to take $40-$50,000 out of the Inherited IRA and have all of it withheld for state and federal tax (93% federal 7% state) and convert $175,000 to $200,000 of my Traditional IRA to Roth. Along with other income the IRMAA surcharge will be applied doubling the part B premium and the Part D premium will also be around $40 or $50 a month. Using the Inherited IRA as a way to pay the income taxes for much of the Roth conversions for the next couple years is a prudent way to utilize the gift of the inherited IRA. I’m not sure what Congress will do in a couple of years when the TCJA is due to sunset. But, given I am five year older than my wife, the actuarial odds are she has a decent chance of outliving me by perhaps for 7-10 years. It seems clear to me that wether the TCJA is re-upped or it sunsets, we will still have a progressive income tax system where the tax brackets for single taxpayers are about half what they are for married taxpayers. Same with IRMAA. By taking perhaps 2/3s of my Inherited IRA over the next three years before I have to start RMDs on my traditional IRA and withholding all of the Inherited IRA for income taxes, we should be able to significantly reduce my traditional IRA so that the RMDs from that along with my pension and our Social Security will be helpful in keeping our Taxable Income in what is currently the 12% bracket (so the qualified dividends paid in our joint brokerage account are taxed at 0%) and we have no IRMAA to worry about while we are both alive. Clearly, we have been blessed with extremely good fortune. Having to plan for how to minimize future income tax brackets and IRMAA surcharges are entirely different situations and fade away to nothing compared to worrying about if you’ll have enough income to make it to when the next Social Security check is deposited. Bottom line: we couldn’t be more blessed than to have good health, two well launched “kids”, 3-year old twin granddaughters, and thinking about how much of a Roth conversion should we do this year and next.

  Post: A Time to Spend

  Link to comment from January 13, 2024

• dl777 Only life insurance companies (all of which are regulated by the state in which they are domiciled) can offer annuity contracts. While not perfect, checking out the life insurance company's score from various Rating Companies, e.g. A.M. Best, Moody’s, Fitch, and Standard and Poor’s. I like to see how Weiss rates life insurance companies too: https://weissratings.com/en/insurance. So, go with high rated life insurance companies and then know that every state has a "Guaranty Association" to address what happens if a life insurance company that issued annuity contracts (except variable annuity contracts) "gets wiped out and go bankrupt through bad management or market conditions. See the following link for information about state guaranty associations: https://www.immediateannuities.com/state-guaranty-associations/ For retirees, SPIAs (single premium immediate annuities) can be appropriate -- pay a life insurance company $100,000 premium in in return that company promises to pay you (and if you name another person) an income for as long as you live. If you want to get a rough idea what sort of "guaranteed monthly income" $100,000 in premium will buy, you can use the "quote" feature at Immediate Annuities (https://www.immediateannuities.com/) or their Annuity Shopper's Guide: (https://www.immediateannuities.com/pdfs/as/annuity-shopper-current-issue.pdf?arx=d) For what it's wroth, given state guaranty associations, I'd never purchase a SPIA for a premium in excess of the guaranty association maximum (usually $300,000). Two other sources about annuities for your consideration ate:

  1. Wade Pfau, PhD, CFA -- either his comprehensive "The Retirement Researcher's Guide Series Retirement Planning Guidebook and/or his "Safety First Retirement Planning: An Integrated Approach for a Worry-Free Retirement; or
  2. Stan G. Haithcock, AKA "Stan the Annuity Man" - who is a licensed (in all 50 states) insurance agent. His web site is: https://www.stantheannuityman.com/. He has written six booklets about annuities -- Annuity Owner's Manuals (AOM): ("Deferred Income/Longevity AOM; Fixed Index AOM), Income Rider Owner's Manual; SPIA AOM; Qualified Longevity Annuity Contract Owner's Manual; and MYGA - Multi Year Guaranteed AOM. Stan is a marketing guy for sure but he knows annuities, he know life insurance companies, and he really is "no pressure". He'll send you these booklets free: https://www.stantheannuityman.com/get-smarter/annuity-books
  Given fewer and fewer retirees will have an employer provided pension for a monthly income they can't outlive, allocating a portion of their accumulated retirement assets into a SPIA premium so they have their own personal pension is worthwhile consideration. Hope this help...

  Post: Financial Superpowers

  Link to comment from August 19, 2023

• The Pension Protection Act of 2006 granted employers a safe harbor encouraging them to both automatically enroll workers into 401(k) plans AND auto escalate deferrals. Plenty of small employers don't offer 401(k) plans (as they are very expensive to set up and maintain. However, traditional IRAs and Roth IRAs are available. Of course, people have to know they exist, make the effort to set one up, and then figure out how to "fund" them. Outside of Social Security, the US does not have a coherent retirement income policy at the federal level. Should be a bi-partisan issue but apparently it's not (individual responsibility vs. the nanny state).

  Post: Smooth Moves

  Link to comment from June 11, 2022

• Linda - A 15-year old with earned income (W-2 wages) is eligible to contribute to a Roth IRA (2022 max is $6000). If his wages in 2022 are $2,500, he can contribute all of it to a Roth IRA. Some parents/grandparent encourage saving in a Roth IRA by offering a super generous "matching" contribution...grandson invests $250 of the $2500 of earnings and grandmother matches with $2250 (a gift) to get to $2500. At 8% in 50 years, $2500 would be $117,254, at 10% it would be $293,477. An easy, very good read for anyone including a 15-year old is (in my opinion) Morgan Housel's "The Psychology of Money."

  Post: Smooth Moves

  Link to comment from June 11, 2022

• Health care costs have exploded over the past 4 decades and employers have utilized shifting costs onto employees, HMOs, and PPOs to manage employee benefit costs. See this from Kaiser Family Foundation https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#item-start Here is a quote from that article: "Health spending totaled $74.1 billion in 1970. By 2000, health expenditures reached about $1.4 trillion, and in 2019 the amount spent on health more than doubled to $3.8 trillion. Total health expenditures represent the amount spent on health care and related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds." I think before they retired that many/most individuals were in some sort of a PPO (and in some areas an HMO). There are similarities between an employer offering a PPO plan and Medicare Advantage Plans. However, to me a big difference with a Medicare Advantage Plan is that the individual insured/patient on his or her own (with no ability to negotiate anything) versus the insurance company. And the individual has to do that every year. By contrast, it would not be unusual for large employers to negotiate with PPOs on behalf of their employees to get the best "deal" possible. Also, I would assume that the need for accessing health care increases as one ages. So I'm not all that surprised that especially that a "young" cohort of retirees (say age 65-75) are very please with their Advantage Plan. It seems to me that 65-75 year olds have fewer chronic, expensive, and complex health care related issues than say 75-85 year olds. Advantage Plans were first offered in 1997. They have gained in popularity especially in the last decade. See this from KFF (Enrollment in Medicare Advantage has double over the past decade): https://files.kff.org/attachment/Fact-Sheet-Medicare-Advantage#:~:text=In%202019%2C%20the%20majority%20of,to%2022.0%20million%20in%202019. However, if Advantage Plans cover a younger, healthier group, they should appeal to younger healthier retirees. And premiums for Advantage Plans should be low (as low as zero). Might it be the case that most Advantage Plan insureds are under the age of 75? I get that those covered are, at this time, very pleased with their Advantage Plan. However, that doesn't mean over the LONG term, people in Advantage Plans might be better off with a Medicare Supplement Plan.

  Post: Medicare and Me

  Link to comment from October 16, 2021

• Henry Hoyle and GaryW - I agree that PPO Advantage Plans can be very good options. And I agree that the issue is with the insurer not Medicare Advantage. However, things outside the patient/insured's control change which might make a Medicare Advantage Plan (PartC) less desirable. (1) Preferred provider networks change. (2) Regional insurers change (e.g. one regional insurer is bought out by or merges with another regional insurer). (3) Patients (insureds) change -- they move out of one network and into another network. (4) Patients/insureds may decline in cognitive abilities and their Agent named in the Power of Attorney control health care decisions, including understanding the local Advantage Plan. That might not be a challenge when there are just two regional insurers to choose from -- but that might not be the case in NYC, suburban Chicago, or Dallas. From a macro point of view, Medicare is paying insurance companies for every individual they sell an Advantage Plan to -- to get off the risk (cost) of providing Medicare benefits. Insurance companies are in the business to make money. One of the ways they do that is in HMOs and PPOs, the insurance company decides what's medically necessary. So yes, I agree that the issue is with the insurer not Medicare Advantage.

  Post: Medicare and Me

  Link to comment from October 16, 2021