Save On Your Electric Bill

It's Sunday, which means another snow storm in Eastern Massachusetts. As I listen to our apartment's forced hot air fan turn on again, I can't help but think about my electric bill. Last month, we were victims of, "yes I know rates are going up, but really, how much could it impact us?" Well, it did. Combine the winter weather we have had in Boston with increases in electricity costs and you can get shockingly high electric bills.

Since the major electric distributor in our area is Nstar (now Eversource) and much of our experience is in dealing with Nstar, we will focus on working with them. 

In November, NStar released new rates, up almost 30%. (see the Boston Globe article below)

http://www.bostonglobe.com/business/2014/11/07/nstar-raise-electric-rates-percent/pAFfYV5SjYJQHr1ISJPQkN/story.html

Besides cutting back on your use or putting solar panels on your roof, you have another option to change your supplier. By default, your distributor also becomes your supplier, but you have choices. You can go online or call the suppliers directly to get price options. At home we changed to ConEdison and at the office we switched to Think Energy. This is translating into significant savings.

For those of you with Eversource (NStar), here is a link of suppliers to get you started. 

https://www.eversource.com/NSTAR/CustomerCare/residential/CompetitiveSupplierAdmin/CompetitiveSuppliersDisplay

To find out if this is relevent to you, your recent electric bill can serve as a good starting point. Your charges are broken down into 2 main components: delivery services and supplier services. Under your supplier services, it shows your cost per kwh. If this number is above .10, it may be worth looking into this further.

Medicare & HSAs

A quick note about the impact of filing for Medicare on HSA plans.  If you are still working past 65, and are enrolled in an HSA plan through your health insurance plan, you want to be careful about your selections for Medicare.

Enrolling in any part of Medicare, including enrolling only in Part A, makes you ineligible to contribute to an HSA plan going forward.  If the HSA is a big part of your health insurance strategy during these years, you want to be careful about the impact of applying for Medicare. 

Remember, when you apply for Social Security Retirement benefits you are automatically enrolled in Part A of Medicare.  So, if you are still working past 65, and have an HSA plan, it is another reason to consider delaying your application for social security retirement benefits.

Retirement Plan and HSA Limit Increases for 2015

The numbers were released back in October, but the first week of January is the time where many folks increase their automatic deferrals into 401k plans and other tax favorable accounts. With that said,we thought it would be timely to remind everyone of the increase in limits for 2015. Below is a brief summary of the most common accounts we see. You can visit the IRS for more details (links at the bottom of this post).

401K
Annual deferral limit increases from $17,500 to $18,000. The catch-up increases from $5,500 to $6,000

IRA
The limits went unchanged at $5,500 and $1,000 for catch-up contributions

SIMPLE IRA
The maximum contributions increased from $12,000 t0 $12,500 and the catch-up contribution increased from $2,500 to $3,000

SEP IRA
The maximum contribution increased from $52,000 to $53,000


HSA (Health Savings Account)
For self only coverage, the contribution limit is $3,350 and for families it  is $6,650. This is up from $3,300 and $6,550 respectively. For those over age 55, there  is an additional allowance of $1,000


Click here for a link directly to the IRS publication regarding qualified plan contributions.

Click here for a link directly to the IRS publication regarding HSA contributions.

Year End Tax Planning

Looking for some opportunities to do some year end tax planning?  Below is a link to 2 great lists from Samet & Co., a CPA firm in the Boston area.  This is one of the best lists we've seen this year outlining strategies for actions you can take before year end.  One for individuals and one for businesses.

Tax Planning 2014: 15 Tax Planning Strategies for Individuals

Tax Planning 2014: 10 Tax Planning Strategies for Businesses & Business Owners

Some of the highlights include:

Considering a Roth Conversion in lower income years.
Making gifts to charity - specifically gifts of low basis stock.
Realizing gains or losses on investments

Medicare: What you need to know about Nursing Care coverage

One of the listed benefits of Medicare Part A is nursing care.  However, there have been many examples of people being surprised by a bill for nursing care that Medicare said it would not cover.  These situations can cur when someone is initially hospitalized, then moves to a nursing home for follow up care.  It all has to do with how you are being coded, or covered, during your time at the hospital.

This really comes down to whether the hospital considers you an inpatient or outpatient case. 

Inpatient means you are admitted into the hospital per doctor's order.  Staying in a hospital overnight does not necessarily signify this.  If you aren't formally admitted, and are considered to be under observation, you could be considered "outpatient" even if you stay in the hospital overnight.

When you are inpatient, Part A covers your hospital services for 60 days after you pay a deductible.

When you were outpatient, Part A does not cover any services.  These would be covered under Part B (and a supplemental plan) and you would be responsible for any copayment after a small deductible is met.

Medicare will not cover follow up care in a nursing home for outpatients.  You must spend 3 consecutive nights as an inpatient in order to be eligible for nursing home coverage.

So, what does this mean for you?  It means that even when you are dealing with a major medical issue that requires hospitalization & nursing home care, you need to be aware of what type of patient the hospital considers you (or have someone with you that can be making sure they know).  The question to ask the hospital is whether you are considered inpatient or outpatient.  Either way you will need 3 consecutive nights as inpatient to have nursing home covered.

Medicare: Part B & D Premiums & Other Costs

We continue our Medicare Planning series of blogs with additional information on the costs of Part B & D plans. 

Below is the breakdown of costs for Part B coverage in 2014 (and the additional cost for Part D) based upon your Modified Adjusted Gross Income each year.  We recommend looking at your tax return (and current year income assumptions) to see how close you may be to the higher or lower end of one of these bands to determine if there is any year end tax planning that could be done to help you remain in a lower premium bracket.  We are not suggesting you let the tax tail wag the dog, however, if you are right on the cusp it could be worth some minor tax planning to save hundreds of dollars a year in premiums. 

*Currently, there is a proposal on the table that will lower the income brackets (beginning in 2016) that the premium increases kick in at, and also increase the additional premiums to be paid.  This could have a dramatic impact on future Medicare costs for those in the higher tax brackets.

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Because your premium is based upon income, often times we see people who are retiring right at age 65 have their Medicare premium for year one be based on a higher bracket than their actual income will be going forward.  This is because they were working in the previous year, and their income was much higher.  If this is the case, you should let the social security office know and they can base your premium on your "projected" income for that first year, saving you the increased costs.

An issue we see quite a bit is a one-year jump in income for clients affecting their Medicare premiums.  This could occur due to any number of circumstances such as:  the sale of assets generating capital gains (possibly the sale of a house), or additional income earned through consulting during retirement.

As Medicare gets this information directly from the IRS (via your tax returns) there is often a 1-2 year delay in the implementation of the increased premium.  During that time, your income may have normalized, putting you back into one of the lower brackets.  If this is the case it is important to be proactive and reach out to the social security office to let them know that this increased premium should only apply for one year.  If you get ahead of it, you won't need to wait the 1-2 years for them to catch up to you and avoid paying the higher premiums immediately.

Medicare Part D, the prescription drug coverage, comes with a "donut hole," which is a gap in coverage. After clients satisfy their deductibles, they then pay a percentage of their prescription drug costs up to $2,850 a year. After that point, they must cover all these costs until they hit $4,550, after which point the insurance kicks in again. While in the "donut hole," clients receive full credit for the cost of the medication but the actual cost is reduced by 28% for generics and 52.5% for name brands. Under the Affordable Care Act, however, that donut hole is shrinking. By 2020, it is expected to be closed.

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For MA residents there is some great information on Part D plans at http://www.massresources.org/medicare-drug-plans.html

Also, medicare.gov has a fantastic resource where you can enter in all of your prescription drugs and it will analyze your expected all in costs for the various Part D plans available in your area.  We strongly recommend taking advantage of this each year during open enrollment (especially if your prescriptions have changed during the past year).

Medicare: When & How to Enroll:

Medicare:  When & How to Enroll:

In our ongoing series of posts on planning for Medicare, we move onto when and how to enroll. 
Please click this link to view our previous post on Planning For Medicare, which provides an overview of the Medicare system.

http://singlepointpartners.blogspot.com/2014/11/planning-for-medicare.html

It is important to enroll in at least Part A of Medicare during the window that starts 3 months prior to your 65th birthday, and ends 3 months after.  If not, penalties may apply.

It is even more important to apply for Part B  during the prescribed enrollment period.  For each 12 months when you were eligible and not covered by a group plan, your Medicare Part B premium is going up 10%, and will remain up 10% for the rest of your life.  We have seen this period missed most often by those who have been laid off prior to 65 and are on COBRA.  They assume they are covered and don't need to sign up until COBRA ends.  Having coverage through an active employer allows you to defer this, however, COBRA coverage does not.

If you are collecting social security you should automatically be enrolled in Medicare Part A at age 65.  Coverage will begin on the 1st month of your 65th birthday, unless you were born on the first of the month then the coverage begins the previous month.  You will need to be proactive about signing up for Part B, D, & Medigap plans at this time by contacting your social security office.

Most of our clients are employing strategies to defer social security (to at least full retirement age of 66, or even as far as age 70).  If you fall into the boat that is not collecting social security at age 65 you will need to contact the social security office to sign up for Medicare.  You should do this about 3 months prior to your 65th birthday to avoid any delays. 

If you are covered under an employee medical plan at age 65 (still working) you should still contact social security 3 months prior to your 65th birthday and sign up for Medicare Part A.  You can delay signing up for Part B, D & Supplemental plans for as long as you have your group insurance coverage from an employer for whom you or your spouse are actively working.    When you stop working you will be entitled to a special enrollment period to sign up for B, D & Supplemental Plan.

Even if you have a retiree health insurance plan that includes prescription drugs, you will need to sign up for Medicare Part A.  Often times, your plan will also require you to sign up for Part B, which will act as the primary insurance with your retiree plan acting as supplemental coverage.

Additional Resources:

Beyond working with your financial planner to design the right coverage for you, there are a number of resources available:

Centers for Medicare & Medicare Services (CMS):  800-MEDICARE (800-633-4227) or www.Medicare.org

Social Security Office:  National # 800-772-1213.  Or call your local office to set up an appointment.  www.ssa.gov

Local Senior Center:  Senior centers often have resources or people to talk to who are well versed in Medicare related issues. 

State Specific Resources:  Many states have additional resources and programs you can take advantage of. 
In Massachusetts we have:

• SHINE:  Serving the Health Information Needs of Everyone.  800-AGE-INFO (800-243-4636).  www.800ageinfo.com
• Mass Med Line:  Pharmacy Outreach, help with affording prescriptions, information about medications and side effects.  Free to MA residents.  866-633-1617.
• Prescription Advantage Program:  State plan that supplements Part D.  800-243-4636