Navigating Medicare decisions in tricky situations

What encore careers, young dependents and early retirement mean for your elections.

Medicare is an important component of holistic financial planning, but it can get complex for investors who retire early, care for young dependents or work beyond 65. But knowledge is power. Being aware that your unique situation should influence your Medicare choices is half the battle.

Tips for common scenarios

Not everyone retires right at 65. In fact, it’s becoming more common that people are making their own rules and timelines when it comes to retirement.

If you’re planning to retire before age 65, think about how you plan to bridge your healthcare coverage until you become eligible for Medicare. Medicare is designed for those 65 and older or people with certain disabilities. The only way to ensure healthcare coverage before that date is with private health insurance through your employer or the exchange.

What if you decide you’re working past the age of 65 (the Medicare eligibility point), and you’re not sure if you should enroll in Medicare yet? You can drop your employer’s healthcare plan and enroll in Medicare, but first you should consider the out-of-pocket costs associated with doctor’s visits and procedures. Many people will enroll in Medicare Part A, which is hospital insurance, because there's no premium for most people, as long as they have 10 years of Medicare-covered employment. But to enroll in Part B and simultaneously carry group health insurance is like paying double.

What if you’re married and cover your spouse on your employer’s plan? Medicare is individual healthcare coverage, so your spouse would either need to be eligible for Medicare or have their own private health insurance.

Let’s say you have young dependents at home. Maybe they’re your own kids you had later in life, or maybe you care for your grandchildren or other dependents. While Social Security offers benefits for young dependents, Medicare doesn’t. Your dependents would need their own healthcare insurance plans.

Keep up with changes

Regardless of the Medicare decisions you make, you should revisit your selections every year. Open enrollment starts annually in October, which is the time to review what works for you and your family.

Sometimes changes are made to the program or laws that get passed affect Medicare. An example is the Inflation Reduction Act that was passed by Congress in 2022. It doesn’t go into full effect until 2025, but it will reduce out-of-pocket costs for everyone from $7,000 to $2,000 for drugs. It also caps out-of-pocket insulin at $35 per month, which is significant for those with diabetes.

If you need a little bit more guidance with your Medicare decision-making, the first point of contact is Medicare.gov. That site offers a ton of information, including how to enroll. Of course, you can enlist your trusted advisor to help you navigate these important decisions as part of a holistic financial plan as well.

As you consider your Medicare elections:

• Determine if any of your dependents will need to switch to an individual healthcare plan.
• Speak to your advisor about your holistic financial situation to determine what makes the most sense.

Sources: aspe.hhs.gov

The information contained in this report does not purport to be a complete description of the healthcare issues referred to in this material. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

RMD rules delayed for inherited IRAs...again?

What the latest change can mean for some beneficiaries

If you’ve recently inherited an IRA or are set to inherit one soon, you need to know that the rules surrounding IRA inheritances have become more complicated for some designated beneficiaries. Most notably, a “10-year rule” applies to most non-spousal beneficiaries who receive inherited retirement accounts. This rule requires that beneficiaries of IRAs must liquidate the entire account by the end of the 10-year anniversary of the IRA owner’s death. However, proposed Treasury regulations require that beneficiaries under this 10-year clock, who inherit from an IRA owner who died after their Required Beginning Date, to take annual Required Minimum Beneficiary Distributions (RMBDs) in years 1-9. These proposed regulations have left taxpayers unsure if they’re required to follow them and take an annual RMBD.

What’s going on

The 10-year rule went into effect for most non-spousal beneficiaries who inherit IRAs after December 31, 2019. Most industry professionals believed that the 10-year rule only required the account to be fully distributed by the end of the 10th year, without annual distributions. But a proposed 2022 regulation added a required minimum beneficiary distribution to the equation for a subset of IRA beneficiaries: specifically, designated beneficiaries who inherit from an IRA owner who died after their Required Beginning Date. These beneficiaries will have to make an annual RMBD. If you an inherit from an IRA owner who died before their Required Beginning Date, only the 10-year rule applies, but there’s no RMBD.

RMBDs require you to withdraw funds at a specified amount and if not taken, penalties will apply. Since the 2022 proposed regulations took taxpayers and industry professionals by surprise, the IRS has issued penalty waivers for those individuals possibly affected by the proposed regulations, which also gives the IRS more time to issue final regulations.

How we got here

Beginning with the SECURE Act of 2019, the IRS applied stricter distribution rules on those inheriting IRA accounts by implementing a 10-year rule for most non-spouse beneficiaries, significantly reducing the distribution timeframe.

In February 2022, the IRS proposed an additional regulation that would impose both a 10-year rule and RMBDs on anyone who inherited an account from someone who was already past their own required beginning date.

It’s not difficult to see the problem: The IRS released proposed regulations in 2022 that applied to a group of beneficiaries that inherited them in 2020 and later. It also left taxpayers wondering if they need to follow proposed regulations or wait until final regulations are issued. This resulted in the IRS waiving penalties for RMBDs not taken in 2021 and 2022. On July 14, 2023, the IRS announced that inheritors who didn’t take RMBDs in 2023 will also receive penalty waivers, since the proposed regulation hasn’t been finalized yet as we head into 2024.

What you should do

If this all sounds confusing, that’s because it is. If you inherited an IRA after December 31, 2019 and you’re unsure if or how this applies to you, meet with your financial advisor – and perhaps also a tax professional – to review your situation. They can tell you how to comply with the new rules and how to factor those pesky RMBDs into your long-term financial plan.

Sources: keiter; kiplinger; kitces; putnam wealth management

Raymond James does not provide tax advice. Please discuss these matters with your tax professional. RMD rules delayed for inherited IRAs...again?

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Help safeguard your assets from a beneficiary's divorce

How a careful and intentional trust will help ensure your intentions are upheld.

Smart estate planning doesn’t just take into account what you’ll pass down to your heirs, but how you’ll do it. There are numerous ways to make the transfer, and some offer more protection than others. If one of your heirs gets divorced down the line, you don’t want to risk your wealth ending up in unintended hands.

One of the simplest ways to transfer your wealth to your family is by naming beneficiaries on your accounts. But even assets solely in your child or grandchild’s name might be up for debate in a divorce proceeding. At the very least, the asset can be used in consideration when determining alimony or child support.

Here are some ways you can help protect your estate from an heir’s divorce.

Wording is everything

First, enlist an estate planning attorney to advise you on the correct wording when it comes to trust documents. Be sure to express your concern about assets becoming vulnerable in the case of an heir’s divorce. The attorney should include language that helps protect your beneficiaries from an ex-spouse claiming entitlement to any of the inheritance.

Be painfully clear in trust documents by explicitly stating that nonbeneficiaries are not entitled to receive any assets from the trust even if they’re married to a beneficiary. Make your intentions specific to reduce the possibility they come into question during a divorce proceeding.

While trusts often use language that specifies absolute requirements for payments – in other words, conditions for the distribution of assets – they can become a conflict point in a divorce. If a court determines the distribution of assets was guaranteed, the court may consider dividing assets between the couple.

You may also want to think about indirect distribution of assets. You can allow the trust to make payments to third parties instead of distributing them directly to your beneficiary. Examples include declaring the trust will pay college tuition or fees, or for repaying your beneficiaries’ loans.

Think about structure

Some states are better for protecting assets in a divorce than others. Alaska, Nevada, South Dakota and Tennessee currently allow courts to shield assets in a trust from divorce claims, including alimony and child support. You should know the laws that govern your trust, which will depend on where it originated.

As the trust grantor, you have the power to decide what a trustee can do. It’s possible to expand the trustee’s powers to allow for specific changes to the trust if it becomes compromised by an heir’s divorce. This might include authorizing your trustee or successor trustees to remove a beneficiary completely if there’s an impending divorce, or move assets into a completely new trust for the divorcing beneficiary.

If you know exactly what you want to pass on to an heir who you’re concerned may get divorced, you can create an irrevocable trust for that express purpose. Unlike revocable trusts, the terms of an irrevocable trust cannot be changed. Once the trust is funded and the assets are transferred to the control of the trustee, it’s permanent. You could create a second trust that’s revocable for the purpose of transferring your other assets to other family members.

Most importantly, speak to your advisor about your heirs’ inheritance in the case of divorce. Consulting an estate attorney and even a divorce attorney in some instances may be helpful when creating or revisiting your estate planning documents. There are provisions that can be put in place to help ensure your wealth, family and intentions are protected.

Sources: blg.com; smartasset.com; schwab.com

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Raymond James Trust, N.A. is a subsidiary of Raymond James Financial, Inc. Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Trust.

Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Document shredding and food drive

Clean out your cabinets and drawers of those old documents and bring them to be safely shredded, on site, by the professionals of Shred it™ and enjoy some good food and live music!

When: May 11th

Where: Outside of the Merritt Island office 2395 N. Courtenay Parkway

Time: 11:00am-2:00pm

Please consider bringing a non-perishable food item for our Food Drive to benefit Harvest Time International

Please Donate:

Low sodium canned vegetables - Canned meats - Canned soups - Boxed oatmeal or grits - Canola or olive oil - Peanut butter - Nuts - No sugar added fruit cups - Canned beans - Granola/Protein bars - Pasta - Beans - Rice - Dry powdered milk

Questions please contact

Karin@crossleyshear.com or call 321-452-0061

Raymond James is not affiliated with Harvest Time International, Shred-it, or 4th Street Fillin Station.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

From the Desk of Dale Crossley and Evan Shear

I hope this newsletter finds you and your loved ones well. The markets were off to a strong start the first quarter of 2024. In fact, during the first quarter of 2024, the S&P 500 climbed an impressive 10.6%. As always, we’re watching some events that may or may not impact the markets during the rest of 2024 – recent geopolitical developments, federal monetary policy decisions, and of course, 2024 is an election year. That’s precisely why we develop long-term financial plans to ensure you have well-balanced portfolios designed to help mitigate losses during the inevitable ups and downs in the market.

Holding the line on interest rates

The Federal Reserve's recent decision to maintain interest rates can send some uncertainly throughout financial markets, often sparking a flurry of reactions from investors and institutions alike. With the Feds continuing to opt not to reduce interest rates, it signals that the central bank deems the economy stable enough to withstand current conditions without the stimulus of lower rates. While some market sectors react to the growth and stability this represents, other sectors are affected. For example, sectors that typically benefit from lower borrowing costs, such as housing and manufacturing, may suffer from decreased consumer spending. Overall, the Federal Reserve's continued position of not reducing interest rates can prompt reactions across various sectors and markets. Ongoing inflation will continue to impact this.

Geopolitical Events

Recent geopolitical events in Israel and Gaza, as well as the ongoing conflict in Ukraine, can significantly impact global financial markets due to their potential to escalate tensions and disrupt regional stability. In the case of Israel and Gaza, heightened violence or the prospect of prolonged conflict can lead to increased uncertainty in the Middle East, a region crucial for global energy markets. Any disruption in oil supply from the area could lead to price spikes, impacting energy-sensitive sectors and potentially causing volatility in equity markets worldwide. As the Ukraine conflict continues, it has implications for markets beyond the region, particularly in European markets. Concerns about potential economic sanctions, trade disruptions, or heightened geopolitical tensions between major powers could impact global economic growth prospects.

The 2024 Election

Lastly, the 2024 election cycle can have a significant effect on the financial markets due to the uncertainty and potential policy changes associated with a new administration or changes in congressional leadership. Leading up to the election, market participants may exhibit heightened caution as they assess the potential impact of different electoral outcomes on various sectors and industries. During election years, market volatility often increases as investors react to changing political dynamics and policy proposals put forth by candidates. Uncertainty about future government policies regarding taxes, regulations, trade, and fiscal stimulus can lead to fluctuations in stock prices, bond yields, and currency exchange rates. Additionally, specific sectors, such as healthcare, energy, and financial services, may be susceptible to election-related developments due to potential changes in regulatory environments or government spending priorities.

Monetary policy, geopolitical events, and politics, among other factors, will always create ups and downs in the markets. Although we have an eye on these events and others, our role is to create diversified financial plans that help position your investments well for the long term. If you haven’t already scheduled a yearly appointment to discuss your portfolio, please do so at your earliest convenience. It’s the best time for us to discuss any changes in your circumstances and rebalance your portfolio, but it’s also a regulatory requirement. You can schedule an appointment here.

Any opinions are those of CrossleyShear Wealth Management and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. All opinions are as of this date and are subject to change without notice. Past performance is not a guarantee of future results.