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C.H. Robinson

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Health Insurance is Out of Control

Written by Summit Wealth on .

After reading an article titled: "MN Insurance Premiums Jump, State Calls Increases 'Unsustainable,'" by Katharine Grayson of the Minneapolis / St. Paul Business Journal, we felt compelled to share some of that information. We are well aware that this topic is of great interest and concern to our clients. Here are some of the facts Katharine references in her article that are alarming:

  • Minnesota insurers will increase rates for individual health plans by an average of more than 50% in 2017.
  • The insurer with the smallest approved rate increases in the individual market was HealthPartners, although it still received a 50% rate hike on average.
  • The largest rate increase is for UCare, which received a premium increase of nearly 67%.
  • Rate hikes in the small-group market (businesses with 50 or less workers) were considerably less, ranging from a decline of 1% to an increase of 14.8%.

Based on the above information, we feel it is increasingly important to understand what health care costs could look like for you, and the impact those costs could have on your retirement cash flow needs, especially if you anticipate retiring before age 65.

If you have any questions regarding your specific situation, please contact SWA as we have resources that can work with you, on an individual basis, to help find the best solution for you.

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When Should You Enroll in Medicare?

Written by Summit Wealth on .

Knowing when to sign up for Medicare can be tricky. When you turn 65, you will be enrolled in Medicare Part A & B automatically (although you have a choice to accept Part B), if you are already receiving Social Security or Railroad Retirement Board benefits. If you are age 65 or older and are not receiving Social Security or Railroad Retirement Board benefits (because you are still working), Medicare enrollment works differently. In this case, you will not automatically be enrolled for Medicare Part B and you will need to sign up during your Initial Enrollment Period. If you have health insurance coverage because you are actively employed and choose to delay your enrollment in Medicare Part B, you will be granted a "Special Enrollment Period" that begins when you quit working or your health insurance ends.

For enrollment in Medicare Part A, if you are still working at age 65, your situation may be different. If you've worked at least 10 years (40 quarters) and qualify for premium-free Medicare Part A, you will be automatically enrolled in Part A when you turn age 65, even if you are still working. However, if you haven't worked enough quarters to receive Medicare Part A without paying a premium, you will need to enroll in Part A yourself.

If you need to sign up for Part A and / or Part B, you can sign up during the following time frames:

  • Medicare Initial Enrollment Period: When you first become eligible for Medicare, you have a 7 month period to sign up. This 7 month period begins 3 months before the month of your 65th birthday, including the month you turn 65, and ends three months after the month you turn 65.
  • General Enrollment Period: If you happen to miss the Initial Enrollment Period, you can sign up between January 1st and March 31st each year. Your coverage will begin July 1st. Unfortunately, you may have to pay a higher premium if you enroll late.
  • Special Enrollment Period: If you or your spouse (or a family member, if you are disabled) is currently working and you are covered by a health insurance plan through an employer or union (that meets certain Medicare standards), you have a "Special Enrollment Period" when your coverage ends. This period ends 8 months after employment health insurance coverage ends.

If you have any questions about your Medicare benefits or how the impact of what we have outlined above may affect you, please contact us today. We have resources available that can help answer your questions.

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Get Ready to File the FAFSA Now

Written by Summit Wealth on .

If your child is heading to college next fall, now is the time to drill in to the details of how you (parents and/or child) are going to pay for it. There is a wide range of options to pay for college tuition, such as cash savings, 529 plan, grants, scholarships, work study and loans. Other than the 529 plan, each of these options require the student and parent complete the Free Application for Federal Student Aid (FAFSA).

The FAFSA used to be a big headache as parents scrambled to gather the information required to complete the application as close to early January as possible. The reason being financial aid is typically doled out on a first come first serve basis. The problem was always getting income amounts (FAFSA requires income from the parent and child's 1040). Since most people don't file tax returns in January, let alone have all of the information available to file, it was very difficult get the required information.

Good news! Beginning with the 2017-2018 school year, you will be able to file the FAFSA beginning October 1, 2016. Under the old rules, this would seem impossible, but last year new rules were put in place to use parent and child's income from the prior year tax return (2015 tax return is used for 2017-2018 school year FAFSA). And, to make matters even better, the electronic version of the FAFSA goes directly to the IRS and pulls (using the IRS Data Retrieval Tool, if you opt for it) the required income amounts into the FAFSA for you.

There is still some work for you to do to complete the FAFSA. You still need to gather asset information, which can be a pain looking for all of your account balances. However, if you are an SWA client, you can use Wealth Access, our new client net worth statement application. Most of your asset information will be available at the click of a button.

Please feel free to contact your SWA advisor or Kay Strand if you need further information regarding FAFSA or Wealth Access.

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Grandparent Gifting

Written by Summit Wealth on .

Labor Day is behind us, and the kids are off to school. And, many parents, including three of us at SWA, have children in college. Years of planning and saving don't always get you to a lofty goal of paying for that college education. Let's face it, saving for retirement, let alone college, can be difficult. In some cases, we see grandparents step in to help cover the gap when the parent and student finances just don't meet the mark.

If not done carefully, the grandparents intended "help" can actually hinder. We see grandparents saving to 529 plans (for the benefit of the college student) or planning gifts of appreciated assets. Both are quite generous and well-intended, but both have a hidden "gotcha."

For example, using a grandparent 529 plan can negatively impact the amount of financial aid available to the student. Many grandparents save to the 529 plan as their 529 plans don't show up on the student's financial aid form (i.e. FAFSA). But, when the funds are disbursed from a 529 plan, those funds show up on the form, limiting available aid for the student.

The same is true In the case of gifted assets. Retired grandparents may be able to sell their appreciated asset at attractive capital gains rates (as low as 0% federal tax), but these assets too will show up on the financial aid form, again, limiting aid for the student.

This doesn't mean that grandparents can't utilize these tools, but to avoid the "gotcha" they need proper planning. With proper multi-generational planning, the grandparent's 529 plan and gifted assets can avoid the negative impact on the student's financial aid form. Let us know if you would like assistance in this area, and we can develop a strategy to optimize those gifted assets.

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Social Security Benefits May Not Go Up in 2017

Written by Summit Wealth on .

I recently read a great article by Mary Beth Franklin entitled, "Don't Count on Social Security Benefits Rising in 2017." Please allow me to share some key information from that article:

  • There appears to be a high risk of either an extremely low annual cost-of-living adjustment next year, or worse – none at all. The Social Security Administration will make an official announcement about the 2017 COLA in October.
  • Although inflation has been low over the past several years, Social Security beneficiaries have lost 23% of their purchasing power since 2000, according to The Senior Citizens League (TCSL).
  • Over the past 16 years, COLAs have increased benefit payments by only 36% while typical senior expenses, influenced by higher medical and prescription drug costs, increased by about 75% during the same time period, according to TCSL.
  • To put these percentages into dollars, for every $100 worth of expenses seniors could afford in 2000, they can afford just $77 today. Unfortunately, this problem appears to be getting worse each year.

Regrettably, there doesn't appear to be a good solution for this issue coming from our government anytime soon. Therefore, it is even more important that we look to your portfolio to produce the cash flow you need to comfortably support yourself in retirement.

If you have any questions about your Social Security benefits or how the impact of what we have outlined above may affect your retirement, please contact us today.

North Metro: 763.355.5873
227 East River Parkway
Champlin, MN 55316-5873

South Metro: 612.987.9112
5871 Crossandra Street SE
Prior Lake, MN 55372-3337

West Metro: 763.639.3425
322 Greenhill Lane
Long Lake, MN 55356

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