Money Matters: 2017 brings Medicare Price Changes

Posted on February 1, 2017 by The Dunmorean

By Nathaniel Sillin

If you’re eligible for Medicare, or will be in the coming year, there are a few changes you should know about for 2017.

An increase in the Department of Labor’s Consumer Price Index (CPI) means there’ll be an increase in Social Security benefits and Medicare Part B premiums. For most recipients the increases almost offset each other, but those who aren’t covered by the “hold harmless” provision (about 30 percent of recipients) face a larger Part B premium increase.

These changes, along with several others, will go into effect soon and you should consider how they could affect your budget.

A slight increase in your Social Security benefits. Since 1975, Social Security benefits have an automatic cost-of-living adjustment (COLA). The adjustment depends on the CPI and helps keep your benefits in line with the rising cost of goods.

There wasn’t a COLA for 2016 benefits, but there is a .3 percent adjustment for next year. Meaning, you’ll get an additional $3 per $1,000 you receive in benefits. The estimated average monthly benefit for all retired workers is expected to increase $5, from $1,355 to $1,360.

Medicare Part B premiums will also rise. The COLA also affects Medicare Part B premiums, the part of Medicare that covers some types of procedures and medical equipment. However, for about 70 percent of Medicare recipients, the Social Security Act’s “hold harmless” provision prohibits an increase to Medicare B premiums of more than the previous year’s COLA adjustment.

According to the Centers for Medicare and Medicaid Services, held harmless recipients will pay $109 per month, an increase of $4.10.

If you aren’t held harmless, Part B premiums could increase by about 10 percent. The remaining 30 percent of Social Security beneficiaries will have their Part B premium increase by about 10 percent. You could fall into the non-held-harmless group if you:

Are a new enrollee
Enrolled in Medicare but don’t receive Social Security benefits
Get billed directly for Medicare Part B
Receive Medicare and Medicaid benefits and your state Medicaid programs pay your Part B premium
Are a high-income earner subject to an income-adjusted premium

For the non-held-harmless group, the premium depends on the recipient’s (or couple’s when filing a joint tax return) adjusted gross income (AGI).

The lowest monthly premium, for individuals who have an AGI of $85,000 or less ($170,000 for couples), will increase from $121.80 to $134 a month per person.
On the high end, for recipients with an AGI over $214,000 ($428,000 for couples), the monthly premium will increase from $389.80 to $428.60 per person.

Medicare Part A and B deductibles will also increase. Most people don’t have to pay Medicare Part A premiums, but you could still have to pay a deductible or coinsurance for some Part A benefits.

The deductible for inpatient hospital coverage, which helps cover the first 60 days of care, will increase from $1,288 to $1,316 per benefit period.
Daily coinsurance for the 61st through 90th day of treatment will increase from $322 to $329.
Daily coinsurance for day 91 on will rise from $644 to $658.
Each day past day 90 counts towards your lifetime reserve. You have a maximum of 60 lifetime reserve days; after which you could be responsible for all costs.
Skilled nursing facility care is completely covered for your first 20 days.
Daily coinsurance for day 21 to 100 of skilled nursing care will increase to $164.50.
You could be responsible for all costs beyond day 100.

The Part B annual deductible will also increase, from $166 to $183. Generally, after you’ve met your deductible, you’ll pay 20 percent of Medicare-approved costs for services covered by Part B.

Bottom line: Social Security benefits, Medicare Part B premiums and Part A and B deductibles and coinsurance will increase in 2017. Whether you’re held harmless or not, take steps to understand which changes could affect you and alter your budget accordingly.

Money Matters: Year-End Tax Moves That Could Save You Money

Posted on December 7, 2016 by The Dunmorean

By Nathaniel Sillin

The end of the year is approaching and between visiting friends and family and celebrating the holidays, your taxes may be the last thing on your mind. However, putting off tax preparation until later could be a costly mistake. While tax season doesn’t start until mid-January, if you want to affect the return you file in 2017, you’ll need to make some tax moves before the end of 2016.

You might make this a yearly tradition – while there may be slight alterations in the rules or numbers from one year to the next, many of the fundamentals behind tax-saving advice remain the same.

Sell losing investments and offset capital gains or income. Do you have property, stocks or other investments that have dropped in value and you’re considering offloading? If you sell the investments before the end of the year, you can use the lost value to offset capital gains (profits from capital assets). Excess losses can offset up to $3,000 from ordinary taxable income and be rolled over to following years.

Optimize your charitable contributions. Many people make an annual tradition of donating their time and money to support charitable causes. It’s a noble thing to do and could come with a tax benefit. The value of your donation to a qualified charitable organization, minus the value of anything you receive in return, could offset your taxable income.

Charitable contributions are deductible if you itemize deductions. However, most taxpayers find it best to take the standard deduction – $12,600 for married people filing jointly, $9,300 for heads of households and $6,300 for single or married people filing separately for the 2016 tax year. If it’s best for you to take the standard deduction for 2016 but you think you may itemize your deductions next year, consider holding off until the new year to make the donations.

Defer your income to next year. You might be able to lower your taxable income for 2016 by delaying some of your pay until after the New Year. Employees could ask their employer to send a holiday bonus or December’s commission in January. It could be easier for contractors and the self-employed to defer their income since for them, it’s as simple as waiting to send an invoice.

Don’t let FSA savings go to waste. Employer-sponsored Flexible Spending Accounts (FSA) let employees contribute pre-tax money into their FSA accounts, meaning you don’t have to pay income tax on the money. FSA funds can be spent on qualified medical and dental procedures, such as prescription medications, bandages or crutches and deductible or copays.

FSA funds that you don’t use by the end of the year could get forfeited. However, employers can give employees a two-and-a-half month grace period or allow employees to roll over up to $500 per year. Check with your employer to see if it offers one of these exemptions, and make a plan to use your remaining FSA funds before they disappear.

What can wait until after January 1? Procrastinators will be pleased to hear that there are tax moves you can make after the start of the new year.

You have until the tax return filing deadline, April 18 in 2017, to make 2016-tax-year contributions to a traditional IRA. The money you add could offset your income, and you’ll be saving for retirement – a double win.

The maximum contribution you can make is $5,500 ($6,500 if you’re 50 or older) for the 2016 tax year. However, the deductible amount depends on your income and eligibility for an employer-sponsored retirement plan.

Bottom line. Don’t wait for the tax season to start to take stock of your situation and get your finances in order. While there are a few tax moves that can wait, what you do between now and the end of the year could have a significant impact on your return.

Money Matters: Preparing to Become a Caregiver

Posted on November 2, 2016 by The Dunmorean

By Nathaniel Sillin

Becoming a caregiver for an aging relative is a profound expression of love. You may find that you will begin to take on many of the responsibilities they might have had while raising you. Like raising a family, being a caretaker can be physically, emotionally and financially challenging but it is also extremely rewarding. It’s a responsibility that millions of people take on each year out of love for their families.

Whether you are preparing to care for a parent or another relative, understanding and preparing for the financial implications can help you provide the best care possible.

Start the discussion with your family

Whether you think you’ll provide direct care, decide to hire a caregiver, or both, you can work with your family members, including the relative in question, to create a plan.

Starting the conversation early can help you all reach conclusions without pressure to make a quick decision. You may want to cover the types of care that are available and learn which your parent prefers. For example, does he or she want to stay at home for as long as possible or prefer to live in an assisted-living home or elderly community?

You should discuss who’ll be responsible for managing personal, financial and medical affairs if your parent can’t handle those responsibilities anymore. Beyond making a verbal agreement, a parent can give someone legal authority by signing durable power of attorney agreements, which keep the delegation of decision-making authority intact even if your parent becomes incapacitated. There are two durable powers of attorneys, one for medical-related decisions, and a second for legal, personal and financial decisions.

Your parents might also want to execute a living will, also known as an advance directive. It has instructions for the medical treatments they want, or don’t want, if they are unable to communicate.

Determine what resources are available to your parent

Your financial situation may depend in part on your parent’s finances and the assistance that’s available to him or her from outside sources. Creating a list of these resources ahead of time can help you all plan for the future.

Your parent’s finances. Together with your parent, and possibly with the assistance of a financial planner, you can create a list of your parent’s current financial assets and future income.
Government and non-profit programs. Medicare and Veteran Affairs benefits may be available for those that are 65 or older. Medicaid, a joint federal and state program, often provides benefits to those with limited income, although the qualifications and benefits can vary by state. There are also non-profit organizations that provide helpful services to the elderly.
Family assistance. Whether it’s unpaid care or financial assistance, also take into account the family’s contribution to your parent’s care. Call a family meeting with your parent, siblings and extended family to discuss how you’ll take care of each other.
Professional support. You could hire an outside expert as well. A quick internet search may turn up organizations that specialize in working with families and elderly family members to plan for the future.

After gathering this information, you’ll have a better understanding of where the caregiving funds will come from and how they can be used. You may also discover gaps in coverage that you may want to fill in on your own.

Look for tax savings while paying for care

As an adult child and caregiver, there may be ways to structure an arrangement to improve your parent’s, and your own, financial situation.

Working with a tax professional, you may find there are ways to use the tax laws to maximize your parent’s money. For example, if your mother has gifted you money, you could then use it to pay for her medical expenses. If you’re able to claim the expenses as a deduction, you could put your tax savings back into her “medical care” fund. You might also be able to claim medical expenses you paid on behalf of your parent, which could include supplies and at-home caretaking, as an itemized deduction.

Find the best services you can afford

There are many different types of programs available, and someone might move back and forth from one facility or service to another as their health and preferences change.

Home care. Non-healthcare related assistance, such as buying groceries, preparing meals, cleaning the home, helping with bathing and other day-to-day tasks.
Home health care. At-home health-related support, including services from a physical therapist, nurse or doctor.
Assisted living. Assisted living homes are non-healthcare providing facilities that may provide supervision, a social environment and personal care services.
Skilled nursing home. A care facility designed to deliver nursing or rehabilitation services.

Your parent’s location can impact which option makes the most sense, and you can research and discuss the pros and cons of your parent moving. For example, some states have Medicaid waiver programs that allow Medicaid recipients to receive care in their home or community rather than in a nursing home or long-term care facility. Also, a parent that lives near or with a relative might only require part-time outside care.

Bottom line: As you prepare to take care of aging parents, work with them to understand their wishes, needs and financial situation. Together you can explore the family’s ability to provide physical and financial support and learn about the help available from government, non-profit or other programs.