Some market strategists are calling the end of the bear market already … do you think they’re right?

(Keep reading to see what could be behind the surge, as well as a breakdown of how the $2 trillion CARES Act affects your wallet.)

With markets whipping between rallies and retreats, it’s natural to ask:

Is it time to buy?

Is it time to sell?

Are we near the bottom?

Is the bear market finally over?

Despite the recent market surge, which propelled the Dow 21% higher in just 3 days (technically ending its bear market correction), it’s likely too soon to get overly optimistic.¹

What gives? How can markets be rallying when the crisis hasn’t even peaked yet? When markets have fallen so much and “priced in” so much bad news, it’s common to see short-term surges on good news like the relief bill. However, these “head-fake” rallies can be unsustainable when there’s so much uncertainty.

Bottom line: No one is good enough to call the exact bottom of a market. What’s important is looking through the bear market to the other side and picking up opportunities along the way. 

Whether the bear market is over or not, we’ve been here before and know what to do.

How worried should you be about a recession?

Cautious, but not panicked. When a $21 trillion economy comes to a screeching halt, there’s going to be an economic contraction. Multiple timely indicators show that we are already experiencing a sharp downturn.²

However, the $2 trillion fiscal rescue act and the Federal Reserve’s new asset-buying program are a double-barreled bazooka aimed at the effects of a serious recession.

We’re monitoring the data rolling in and will know more about how the economy is reacting to the unprecedented aid in the coming weeks and months.

What’s inside the $2 trillion CARES Act? What’s in it for you?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is designed to provide relief for individuals and businesses who have been hurt by the outbreak. I won’t try to include all 800+ pages in this email, but here are a few key provisions that you should know about:³

One-time cash payment

Taxpayers are eligible for a one-time direct deposit of up to $1,200 per adult ($2,400 per couple) plus $500 per child under age 16. Amounts are reduced for those who make more than $75,000 ($150,000 if married). If you have filed your 2019 taxes already, the IRS will use that income to calculate your payment; if not, they’ll use your 2018 tax filing.

Better unemployment benefits

The Act will extend and expand unemployment insurance through Dec. 31. Eligible workers (now including self-employed, independent contractors, and gig economy workers) will receive an extra $600/week for four months, on top of what they receive from state unemployment benefits.

Early withdrawal penalty waiver

The Act waives the standard 10% early withdrawal penalty for eligible coronavirus-related distributions from retirement accounts (retroactive to Jan. 1). You’ll still pay income taxes on withdrawals, but you can spread them over a three-year period or use that time to roll the distribution back over.

2020 RMDs suspended

You won’t have to take a Required Minimum Distribution from your IRA or 401(k) this year, leaving you in control of how much you withdraw. If you’ve already taken your RMD for 2020, you have several choices: keep it and pay taxes on it, return it to your IRA as an indirect rollover, or convert the amount into a Roth IRA (Roth conversions are permanent).

If you need help with your financial planning, contact me to see how I can help!

The post Bear Markets & CARES Act appeared first on Michael Kelley, CFP.

What Is Medigap?

According to Medicare.gov, Medigap is a supplemental insurance policy designed to help cover the costs of certain medical expenses that Medicare doesn’t cover, such as:

• Copayments
• Coinsurance
• Deductibles
• Medical care when traveling abroad²

Unlike Medicare, Medigap policies are offered by private insurance companies, and their availability and coverage options can vary state by state. Just like most other insurance policies, you pay the company a monthly premium for the coverage, in addition to any Medicare premium you may be required to pay. 

When using a Medigap policy, users are not limited to visiting certain doctors within a network. Instead, Medigap allows the policyholder to visit any doctor, regardless of whether or not they accept Medicare assignments. 

How Does Medigap Insurance Work?

Medigap is designed to “pick up” where Medicare leaves off. If you have Medigap coverage, Medicare will pay its share of any approved amounts for covered costs, and then your Medigap policy will pay its share. In order to be eligible for Medigap, you must already have Medicare Part A and Part B.²

Medigap policies are only designed to provide coverage for one person, meaning you and your spouse will each need to select your own policies. In addition, Medigap policies have guaranteed renewal. The insurance company providing the policy can’t drop you as long as you continue to make your monthly payments.² 

What Is Not Covered By Medigap?

There are certain services and medical costs that no Medigap policy will cover. According to Medicare.gov, these typically include:

• Long-term care
• Vision or dental care
• Hearing aids
• Eyeglasses
• Private-duty nursing

Medigap vs. Medicare Advantage

It’s important to note that it is illegal for an insurance company to sell you a Medigap policy if you already have a Medicare Advantage plan, as these two options usually cannot be combined. This would only be allowed if you currently have Medicare Advantage and are planning on switching back to an original Medicare plan.² 

Medicare Advantage (or Part C) is a type of healthcare plan offered by private companies contracted through Medicare. It’s designed to combine Part A (hospital insurance) and Part B (medical insurance) as well as, in some instances, offer a prescription drug plan or other additional coverage.³ Medicare Advantage is an alternative to original Medicare offerings, whereas Medigap is considered supplemental. 

Whether you’re nearing the enrollment period for Medicare or considering switching your policy, it’s important to understand your options when it comes to supplemental coverage and alternatives. As you decide what’s the right choice for you, compare plans across different providers and discuss this decision with your trusted financial professional.

If you need help planning for your financial future, contact us so we can help you make the best plan for you and your family!

1 https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare

2 https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap

3 https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap/medigap-medicare-advantage-plans#

The post What Is Medigap Insurance and How Does it Work? appeared first on Michael Kelley, CFP.

Mistake #1: Neglecting To Create a Retirement Plan

Interestingly enough, in a 2019 Retirement Confidence Survey, 8 in 10 retirees said they were feeling confident that they’ll have enough to live a comfortable retirement, yet only 42% (or 4 in 10) have actually attempted to calculate how much money they’ll need in retirement.¹

The first (and one of the biggest) money mistakes any pre-retiree can make is not heading into retirement with a plan. Understanding how much you really need to retire before you reach retirement can give you time to adjust your savings strategies, portfolio allocations or insurance products. Additionally, it can help you and your spouse understand if your retirement expectations are going to be realistic or not.

Simply put, if you don’t understand how much you should have to retire comfortably, you won’t know if you’re on track.

Mistake #2: Waiting To Start Saving

Once you’ve created your retirement plan and discovered how much you and your spouse need for retirement, it may become clearer as to why you shouldn’t delay the savings process. And while putting away a couple thousand now might feel hard to do, it’s important to remember that due to the principle of compound interest, your couple thousand now could potentially turn into tens of thousands in retirement (depending how the markets perform, what you invest your money in, and how many years away you are from retirement). The best way to make this happen? Time. Give your money the years (or decades) it needs to collect interest and grow into what you’ll need in retirement.

Mistake #3: Underestimating Healthcare Long-Term Care Costs

Those between the ages of 65 and 74 spend an average of $5,956 in healthcare costs annually, not including any type of long-term care.² Whether that sounds like a lot to you or not, the number can certainly add up over time and eat into your retirement savings, especially if an unexpected injury or illness occurs.

One way to help with the costs of healthcare is to understand your Medicare coverage and supplemental plan options. For every full 12-month period that you wait to sign up for Medicare upon becoming eligible, you face a 10% penalty that gets added on to the standard premium. This penalty on the premium will have to be paid every year that you choose to use Medicare.³

Mistake #4: Underutilizing Tax-Advantaged Accounts

Never underestimate the impact taxes can have on your income now and through retirement. Both traditional and Roth IRA and 401(k) options can provide tax-advantaged opportunities that can make a difference in your retirement savings. Traditional retirement accounts reduce the amount of taxable income for the year they are created. For example, if your income is $60,000 but you put $4,000 into a traditional IRA, your taxable income for the year drops to $56,000. Roth IRA contributions are still taxed as part of your income for the year they’re added into the account, but then they are withdrawn from the account tax-free during retirement.

And if you haven’t heard, the IRS raised the contribution maximum for employer-sponsored retirement accounts in 2019 from $18,500 to $19,000 a year and IRA contributions from $5,500 to $6,000 a year for individuals under 50.⁴ That makes now an opportune time to begin catching up on your retirement plan contributions if you’ve found yourself falling behind in recent years.

Preparing for retirement can bring about a mix of emotions – excitement to leave the workforce and anxiety about affording your ideal standard of living, just to name a few. Putting in the work now to help avoid common retirement pitfalls could mean creating more peace of mind as you and your spouse look forward to enjoying your years of freedom ahead.

1. https://www.ebri.org/docs/default-source/rcs/2019-rcs/2019-rcs-short-report.pdf
2. https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-older-americans.htm
3. https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-late-enrollment-penalty
4. https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000″ rel=”noopener noreferrer

This content is developed from sources believed to be providing accurate information, and provided by Kelley Financial Planning & Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The post The Most Common Mistakes Pre-Retirees Make appeared first on Michael Kelley, CFP.

1. You must make 120 on-time payments on the right type of loan
2. You must be enrolled in the right type of repayment plan
3. You must be making these 120 payments while at the right type of employment

The right type of loan:

• Must be Federal Direct Loans
• Not Perkins Loans
• Not FFEL Loans
• Not Parent Plus Loans (or a consolidation loan that repays a Parent PLUS loan)

The right type of repayment plan:

• Income-driven plans such as IBR, PAYE or REPAYE
• The 10-year standard repayment plan does count (although, if you paid on a 10-year loan for 10 years, you probably don’t have a balance left so it’s pointless)
• Congress did recently pass the Temporary Extended PSLF for borrowers that may have been paying on a graduated repayment plan by accident, thinking they could still qualify for PSLF. This is a limited pool of money and is offered only on a first come first serve basis.

The right type of employment:

• Government organization at any level (federal, state, local, or tribal)
• Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the IRC
• Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the IRC, if their primary purpose is to provide certain types of qualifying public services

If all 3 of the requirements are met, the remainder of your balance will be forgiven tax-free. YAY!

The post Will I Qualify For Public Service Loan Forgiveness (PSLF)? appeared first on Michael Kelley, CFP.

Small businesses or family-owned organizations are traditionally owner dependent models. By starting the estate planning process early, you’re assured the business will continue as a multi-generation operation. The other option is to consider selling the business on your death to an outside source. If you chose the second option, estate planning steps make sure your wishes are executed.

1. Know the Facts

Like it or not – things don’t always go as planned. For this reason, an estate planner can help family members and business associates understand what is going to happen. It’s time to have an open discussion with the group. By sharing your decisions and setting the plan in place, you will avoid misunderstandings and legal interferences associated with the ownership of business assets.

2. Entity Form & Partnerships

The worth of the business changes from the first day of opening to the day it passes on through the process of estate planning. This is where meeting with a professional estate planner can help with making the right decisions. The entity’s form can be designated as the holder of the business assets. 

Whether you chose to form a family limited partnership or a family limited liability company you can transfer portions to your successors. The process eliminates these portions from the taxable estate. Because limited partnership interests don’t control the partnership value – the transferred assets can be issued as a gift – reducing taxes.

3. Liabilities & Creditor Debts

Business liability insurance should continue for a reasonable amount of time. Your estate planner can help you choose the timeframe. The purpose is to protect the successor or surviving members against alleged lawsuits against the business. Preplanning also assures the creditors that the business remains intact or the process of closure includes collection or debt payment schedules. 

4. Assigning a Managing Executor

The executor’s task is to manage the estate plan and carry out its instructions. Because the process can get complicated – an experienced professional is more readily prepared to address the legal aspects.

If the owner wishes to terminate the business or the business is deemed worthless at the time of the owner’s death, the estate plan needs to consider the legal aspects. The intent is to protect the family members from the potential estate taxes.

5. Inheritance & Beneficiaries

Copies of the business’s life insurance policies, retirement plans, and property deeds or leases need to be identified in the estate plan. Traditionally, profitable income generated by owner dependent businesses are deposited into payable-on-death bank accounts. These accounts are part of the distribution process and need to be identified.

6. Review and Update

Business ventures, life and tax laws change through the years. Be sure to update your estate plan annually. Because business liabilities are linked to special tax considerations, the first organization to enter the discussion is the Internal Revenue Service.

Here’s your chance to voice exactly what should happen in case of death. Estate planning is a lawful necessity for the business, separate from a will and equally important. Think of it as a protective course of action for the business and the survivors. Take the time to meet with an estate planner and have an open discussion with everyone involved. You will find it prevents business interruptions, unexpected estate taxation, and internal disputes.

_{This content is developed from sources believed to be providing accurate information, and provided by Kelley Financial Planning and Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}

The post 6 Estate Planning Tips For Your Business appeared first on Michael Kelley, CFP.

There are a number of underlying issues that contribute to this problem, which are both psychological and emotional. When debt becomes a burden, these effects can be devastating, affecting people in a variety of ways. Here are a few:

Anxiety and Depression

Studies have shown that individuals who struggle with debt are more likely to also suffer from depression and anxiety. This may cause headaches, or an inability to focus or function. There is also a high link between suicide and debt, and people who commit suicide are eight times more likely to be in debt.

Resentment

When debt becomes a problem, so can resentment, especially in relationships. According to family studies at Kansas State University, disagreements about money is a top predictor in divorce.² When there are large amounts of debt within a household, it creates a dark cloud and resentment may start to set in. 

Denial

One of the ways to deal with the emotional stress of debt is to not deal with it at all. When people feel overwhelmed, denial of the situation often seems easier than taking the first step toward fixing the problem. The constant reminders of those bills that need to be paid, calls from creditors, and consistent overdraft or over the limit charges can cause a toll. Many people feel that if they act as if the problem doesn’t exist, it will go away. Instead, this creates a reverse effect, as balances grow higher and the debt continues to grow.

Stress

When debts are looming and there is not enough money to pay, stress quickly becomes a factor. Debt can create stress that makes even the most positive of circumstances seem bleak. Just the thought of having a phone call from a creditor, or facing another bill that cannot be paid on time can cause health problems, anxiety and depression.

Frustration

Frustration often leads to anger. It can be frustrating knowing debt is a major problem and that you may or may not have had a direct impact on the situation. When you feel as if you’re up against a wall, frustration can make you do impulsive things. No one likes to deal with the effects of unwanted stress, especially in an instance where you may have no control over the debt, such as medical emergencies or the loss of a job.

Regret

If you have put yourself in debt and are now fighting to keep your head above water, you could go through a period of regret. This is something a number of students who are strapped with student loans experience. They did not understand how quickly the grace period would come, or how quickly interest would accrue, and now facing a mountain of debt when first starting a career is challenging.

Embarrassment

Once the regretful period is over and reality starts to sink in, a period of embarrassment may take place. Who wants to tell people they can’t go out to dinner or participate in other entertainment events because they are in a mountain of debt? The higher the debt, the more embarrassed someone may feel. Once you get into this stage, the fear of not being able to pay can take hold. The first thing to remember is you are not alone.

There are many people going through all these feelings as it relates to debt. Understanding the problem and implementing steps to overcome the problem is the only way these feelings of inadequacy will start to fade. Once you start making baby steps and see the debt vanishing, the sense of accomplishment is priceless. If you feel yourself having these symptoms, talking to a financial professional who specializes in debt reduction is a great first step in the right direction.

^{1 The Economic Journal – Debt and Depression: Causal Links and Social Norm Effects http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2012.02519.x/abstract}

^{2 https://www.k-state.edu/media/newsreleases/jul13/predictingdivorce71113.html}

_{This content is developed from sources believed to be providing accurate information, and provided by Kelley Financial Planning and Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}

The post The Emotional Effects of Debt appeared first on Michael Kelley, CFP.

Modern Portfolio Theory: Assuming the Best

If you’re interested in learning more about the MPT, a good reference point is Eugene Fama’s Efficient Market Hypothesis, published in the 1960s. Fama, known as the father of modern finance,³ takes an idealist approach to investments. In his theory, Fama describes a world in which the markets are efficient, where those who invest always make smart, forward-thinking decisions. Additionally, because all people have access to market information, securities are never priced too high or too low for what they’re worth.¹ This belief stems from the idea that if the market is, in fact, efficient, then there is no reason for a stock to be bought at a price lower than it’s truly worth.   

Another component of the MPT: by spreading your investment risk across different types of securities that have varied behavior and patterns, you are able to reduce your portfolio’s volatility while also enhancing its performance. And while you may assume an ideal portfolio means one that generates the highest possible returns, the MPT actually states that an optimal portfolio is one that balances the lowest level of risk for a given amount of return, as well as the highest return for the most logical level of risk.

Behavioral Finance: Bringing Us Back to Reality

Empirically, the MPT does not provide a strong basis for investment decision-making. While we all dream of a perfect world, unfortunately, the markets are anything but predictable. As a result, we turn to behavioral finance. Behavioral finance is all about the roles emotions and psychology play when someone is making important investment decisions. Because we are human — and far from perfect — oftentimes, our own human nature can get in the way of us making rational, predictable decisions. We are not always able to act in the most logical way possible — even if it would benefit us greatly. In fact, based on behavioral finance, investing is 80 percent psychology.²

While MPT is helpful to reference as an overarching framework for investing, behavioral finance offers a more accurate portrayal of the volatility of our own decisions, as well as the state of the market. However, by having a general understanding of both, you can merge both the ideal situation with the reality of investing to make strategic investment decisions that combine the useful knowledge of both schools of thought. 

New Perspectives Offer New Opportunities

As Meir Statman, professor of finance at Santa Clara University, once said, “Traditional finance assumes that we are rational, while behavioral finance simply assumes we are normal.” When it comes to the MPT and BF, one is not necessarily better than the other, but rather, it is important to have knowledge of both to make educated investment decisions. 

Modern Portfolio Theory is useful, it is more descriptive — rather than prescriptive — and the majority of the theory is based on assumptions that are oftentimes incorrect. Luckily, we have behavioral finance to add some rationality to MPT, reminding us that while we can hope the market is stable and we make logical, rational decisions, at the end of the day, we are all human, and the market’s unpredictability is vital to our own evolution and progress, as well as that of the investment world.

^{1 https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/efficient-markets-hypothesis/}

^{2 https://www.researchgate.net/publication/283488173_Behavioral_Finance_The_Psychology_of_Investing}

^{3 https://www.chicagobooth.edu/faculty/directory/f/eugene-f-fama}

_{This content is developed from sources believed to be providing accurate information, and provided by Kelley Financial Planning and Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}

The post What is the Difference Between Modern Portfolio Theory and Behavioral Finance? appeared first on Michael Kelley, CFP.

1. Reduce Your Debt as Soon as Possible

Many young graduates have accumulated student loans but do not make an effort to clear them as quickly as possible. Changing how you think about your loans is a good first step. Instead of making minimum payments every month, consider finding ways to reduce your monthly expenditure so you can maximize your monthly loan payments. Review all your student loans, and, if possible, combine them into one consolidated payment. This will make payments simpler and easier to manage and track. 

2. Take Advantage of Compounding Interest & Start Saving Now

It is surprising to find out that around one-third of young adults between the age of 18 and 24 do not have savings. When making a budget, remember to include savings to both an emergency fund (which you can easily access, such as a savings account at a bank) and a defined contribution plan such as an IRA or employer-sponsored 401(k). If your employer offers a 401(k) plan and a match, try to add as much as you can and take advantage of the match as fully as possible – you never want to leave money on the table.

Due to the way compound interest works, it is beneficial to save sooner rather than later. Compound interest occurs when the interest that accrues to an amount of money in turn accrues interest itself. It’s the deceivingly simple force that causes wealth to rapidly snowball. Thus, the longer you wait to start saving for retirement, the more you miss out on the benefits of the incredible power of compound interest.

If your not sure how much you can afford to save or the best ways to invest, now is a great time to talk with a financial planner who can help you develop a plan. 

3. Pay Your Bills on Time to Build Solid Credit

Chances are high that, like most people, you will have to rely on a mortgage or car loan to make major purchases. So be conscious of your credit, and focus on paying your bills 100% on time, as that is one of the simplest ways to establish good credit. It does not matter if you intend on taking out a loan in the near future or not. Having good credit history is important, as it affects many major financial occurrences in your life.

4. Get into the Budget Habit

Budgeting does not mean you are stingy, but rather living within your means. Budgeting makes you knowledgeable about your finances and prepares you for whatever roadblocks life may present. Making a budget also enables you to see exactly where your money is going — and where it needs to go. With a budget, it often becomes clear where you need to tighten your spending. This gives you control over your money.

Being a fresh graduate, it is normal to feel overwhelmed by your new financial responsibilities. It is up to you to take charge of your finances by nurturing these simple habits for a financially stable future.
 

_{This content is developed from sources believed to be providing accurate information, and provided by Kelley Financial Planning and Twenty Over Ten. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.}

The post Smart Money Habits For Recent College Grads appeared first on Michael Kelley, CFP.

When advisors were surveyed about the benefits of cash flow management and budgeting, nearly 100 percent of them stated that their clients became more confident and secure about their financial futures after utilizing the service.² However, “consumer use” does not necessarily mean every age group of consumers is jumping on the bandwagon. The Society of Actuaries found that “only 52 percent of pre-retirees and 44 percent of retirees consult a financial planner or advisor.”³  Before you make a final decision, we’ve rounded up some of the key differentiators between each group so you can sign your contract with confidence.

Term #1: Financial Advisor

The most used term, a financial advisor is someone who helps you with different aspects of your financial life. This might include planning for and transitioning to retirement, investment advice, life insurance, 401(k) plans, IRAs, budgeting and more. Every financial advisor is different in what specific areas they specialize in and what services they provide, so if you are looking for help in one particular area, it is always best to ask. 

Financial advisors can be compensated in a variety of ways – they can be fee-based, fee-only, or charge a percentage based on your total AUM (assets under management). Learn more about the fee-only difference here.

Term #2: Financial Planner

Often synonymous and hard to tell from afar how they differ from a financial advisor, a financial planner is actually quite a bit different. As the name would imply, a financial planner is typically focused more on planning. Just like us at Kelley Financial Planning, we pride ourselves on being financial planners. All of our ongoing client relationships begin with a financial plan. We do this before any investment accounts are opened.

Term #3: Wealth Advisor

With more money comes more responsibility, and wealth advisors’ duties are catered specifically to those who have a decently-sized estate, often labeled as high-net-worth and ultra-high-net-worth individuals. Also known as wealth managers, some of the topics wealth advisors cover include risk management and estate planning.

Term #3: Investment Advisor

An investment advisor is a professional who focuses on just that – your investments. An investment advisor will manage your portfolio with the goal to get the highest rate of return that you can over the long run. Before they begin designing your portfolio, investment advisors should evaluate your current financial picture, as well as determine your optimal risk tolerance, which may involve you filling out a questionnaire. 

After discussing your needs and goals with your advisor, they typically will then present an investment strategy tailored according to the unique aspects of your life. Some investment advisors actually manage your money and do the investing for you, others simply “advise” on what you should do, leaving you to implement the strategies on your own. 

Keep in mind, many firms may categorize their own business under more than one of these labels (they might say they are a “financial advisor” as well as a “wealth advisor”. Of course, the best course of action is always to contact any financial professional you are interested in working with directly and learn more about their business model and what services they provide to their clients. 

^{1 https://www.cfp.net/news-events/latest-news/2015/09/24/survey-americans-use-of-financial-advisors-cfp-professionals-rises-agree-advice-should-be-in-their-best-interest}

^{2 https://www.cfp.net/news-events/latest-news/2019/03/06/new-research-shows-significant-gaps-between-advisor-consumer-views-on-money-management}

^{3 https://www.soa.org/globalassets/assets/Files/Research/research-2014-retire-survey-findings.pdf}

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The post What’s The Difference Between A Financial Advisor, Financial Planner, Wealth Advisor & Investment Advisor? appeared first on Michael Kelley, CFP.

Which Medicare Plan Is Right For You?

Whether you’re looking into Medicare for the first time or taking advantage of open enrollment to update your strategy, this article is for you. Choosing the wrong plan can cost you big-time! Not only is healthcare likely to be the largest expense in your retirement (potentially $285,000 or more), but nearly every American over age 65 must eventually enroll in Medicare¹. Making the wrong choices could cost you thousands in permanent penalties, leave you facing high medical bills without coverage, or force you into a too-expensive plan. Don’t worry, I’ll walk you through the options so that you can feel comfortable about your decision.

The Options

Choosing a Medicare plan means balancing priorities and knowing what’s most important to you. Remember — each person has to choose what’s best for them. Just because your friend Karen is on Medicare Advantage doesn’t mean you need to be too. Also, remember that if you feel overwhelmed at any point, just pick up the phone and call our office. We’d be glad to help you understand your options and help you make the best decision.

Option 1: Original Medicare (Parts A & B)

Original Medicare is made up of two parts. Part A covers hospitals, rehab, and hospice care, while Part B covers doctor visits, lab tests, screenings, and other outpatient services. While Part A is free for most people, you will likely have to pay monthly premiums for Part B plus any deductibles, copays, and coinsurance.

Pros: You have the freedom to visit any provider or hospital in the U.S. that participates in Medicare and you don’t need to work with a primary care physician to see specialists. This flexibility is ideal if you travel outside of your home network or have existing relationships with doctors you want to keep.

Cons: Services have deductibles and copays, which may require you to purchase a Medigap or Medicare Supplement Plan (these two names are the same thing) to control your out-of-pocket spending. You will also need to purchase prescription drug coverage (Medicare Part D) separately.

Long Story Short. Does This Sound Like You?

• I already have doctors and specialists, and don’t want to switch…
• I travel away from home and want coverage that spans the entire United States…
• I value the freedom to visit almost any doctor, hospital, and medical provider that accepts Medicare…

Option 2: Medicare Advantage Plan (Part C)

Medicare Advantage Plans are offered through private insurers (think Blue Cross Blue Shield). Often referred to as Part C, this plan is typically structured like an HMO or PPO and provides comprehensive health coverage combining Parts A and B.

Pros: Many Part C plans cover extra services like vision, hearing, and dental and may include prescription drug coverage. Also, these plans typically have an annual limit on your total out-of-pocket costs.

Cons: In addition to paying a Part B premium, you’ll typically pay an extra monthly premium for the Medicare Advantage plan. Networks change, doctors can leave, and benefits can change over time.

Long Story Short. Does This Sound Like You?

• I don’t mind going through a primary care physician to see specialists…
• I stay close to home and can find a doctor within my network…
• I value simplicity and don’t want to manage multiple insurance plans…

Okay, Now Let’s Talk About Drugs….. Prescription Drugs

Medicare Part D helps you cover the cost of your prescription drugs. You’ll need to sign up for this plan as soon as you become eligible for Medicare, even if you don’t use prescription drugs, to avoid paying late enrollment penalties.

Some Medicare Advantage Plans cover prescription drugs but be sure to double check.

If you opted for Original Medicare you will have to add Part D.

Pros: Copays and other plan details vary by state and insurer, but they will cover most of the cost of your prescriptions.

Cons: After exceeding coverage limits, you’ll pay the full cost of your medications until a Medicare threshold is reached. This “donut hole” gap closes in 2020.

What About Supplemental Insurance? (Medigap)

Supplemental Insurance or more commonly referred to as “Medigap Insurance”, can be purchased through private insurance companies (again, think Blue Cross Blue Shield). This added insurance is meant to fill the coverage gaps in Parts A and B of Medicare and helps with deductibles, copays, coinsurance, etc.

Pros: It limits your out-of-pocket costs for Original Medicare.

Cons: There are many different types of Medigap plans, all with different details.

Before you buy this added insurance, make sure that you don’t have retiree coverage from the military or previous employer

81% of Original Medicare participants had some type of supplemental coverage ².

ps. I’ve created a step-by-step flowchart that you can use to walk through your options.

Sources: 1: https://www.cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html
2: https://www.kff.org/medicare/issue-brief/an-overview-of-medicare/

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

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