Personal Finance

Medicare open enrollment ends Dec. 7. These last-minute tips can help

Published

1 month ago

December 3, 2024

Business Finance News

The Good Brigade | DigitalVision | Getty Images

Older Americans have just a few days left to evaluate their Medicare coverage for next year.

Medicare’s annual open enrollment period for health plans and prescription drug coverage runs until Dec. 7. Experts say it’s worthwhile for Medicare’s 67.8 million beneficiaries to make sure they have the best coverage for their needs.

“Now is as good a time as any,” said Juliette Cubanski, deputy director of the program on Medicare policy at KFF, a provider of health policy research.

While many beneficiaries are comfortable with their plans and may be reluctant to change, it’s still a good idea to look at all the options that are available, she said.

“It’s possible that you could save money,” Cubanski said. For example, you may find a plan that offers lower cost sharing for expensive medications or offers better coverage or extra benefits, she said.

Beneficiaries should start with Medicare.gov as they start to shop for plans, according to Philip Moeller, author of “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs.”

Medicare.gov’s online plan finder can help provide an overview of the plans available in a beneficiary’s geographic area and the monthly premiums and specific costs associated with services provided through those plans, Cubanski said.

Trained counselors are also available to provide free Medicare advice in every state through the State Health Insurance Assistance Program, also known as SHIP.

To effectively compare plans, there are some helpful tips that are good to keep in mind, experts say.

Make sure you have access to preferred providers

Beneficiaries may choose to go with original Medicare — Parts A and B with the option to add Part D prescription drug coverage — or private Medicare Advantage plans.

With original Medicare, you can see any doctor in the country who accepts Medicare, so access is not an issue, Moeller said.

But with Medicare Advantage plans, there are provider networks that limit the choice of doctors and hospitals from which a beneficiary may choose, he said.

It’s best to check — not assume — that the doctors you want to see will be covered by your plan, Moeller said.

Call Medicare Advantage plans or medical providers directly to find out if they are still covered, as brochures can sometimes be outdated, Cubanski said.

Check if your prescription drugs are covered

U.S. President Joe Biden delivers remarks, during an event on Medicare drug price negotiations, in Prince George’s County, Maryland, U.S., August 15, 2024.

Ken Cedeno | Reuters

Starting in 2025, there’s a $2,000 annual out-of-pocket cap on prescription drug costs through Medicare Part D.

That change is due to the Inflation Reduction Act, a federal law enacted in 2022.

Consequently, insurance will pay more for about 8% of people who take expensive prescription medications, but they may look for ways to get their money back for the remaining 92%, Moeller said.

That may come in the form of higher co-pays or deductibles or less generous plan benefits.

“The details really matter this year for Part D plans,” Moeller said. “People should do their homework and make sure that their Part D plan still does what they wanted it to do.”

Medicare Advantage plans, on average, will see deductibles for prescription drug coverage increase next year. Typically, those have been around $50 per month on average, though next year that will go up to just over $200, according to Cubanski.

“People in Medicare Advantage on average, will be facing a higher deductible for drug coverage in 2025,” Cubanski said.

Pay attention to your out-of-pocket costs

Open enrollment provides an opportunity for beneficiaries to manage how much their overall out-of-pocket costs — including premiums, deductibles and coinsurance — may increase in 2025.

“Make sure that you have manageable out-of-pocket expenses for the year,” Moeller said.

With original Medicare, beneficiaries typically pay no premiums for Medicare Part A. However, in 2025, the standard monthly Part B premium will go up to $185 per month — a $10.30 increase from $174.70 this year. Annual deductibles for Medicare Part B will go up to $257 in 2025 — a $17 increase from the $240 annual deductible for 2024.

Notably, Medicare Part B typically only covers 80% of expenses for doctors and outpatient costs, which can take a financial toll on beneficiaries, Moeller said. To help defray those costs Medicare doesn’t fully pay for, most people get a Medigap plan, he said.

Medigap, also known as Medicare supplement insurance, provides private insurance to help pay for out-of-pocket costs not covered under original Medicare plans. Average monthly Medigap premiums are $217, according to a recent KFF analysis, though those rates vary by state.

With Medicare Advantage, costs may vary from plan to plan, Moeller said, and you may pay more to see a doctor who is out of network.

Medicare Advantage enrollees face an average out-of-pocket limit of $4,882 for in-network services, according to KFF, or $8,707 for both in-network and out-of-network services.

Bottom line: “Details matter,” Moeller said.

Medicare original vs. Advantage: Choice is personal

Humana shares tumble on lower Medicare Advantage quality rating

Medicare Advantage has received its share of criticism, particularly for restricted access to care and unexpected costs some beneficiaries have encountered.

But experts say the choice between private Medicare Advantage plans and government Medicare original plans is largely personal.

“For some people, Medicare Advantage might be the right call,” Moeller said.

Medicare Advantage has certain upsides. It’s generally cheaper for consumers than traditional Medicare with a Medigap plan, Moeller said. It generally provides out of pocket protection against catastrophic health bills. It may also provide supplemental coverage for hearing, vision and dental, while traditional Medicare does not, he said.

However, Medicare Advantage enrollees may need to get prior authorization before receiving certain types of care, Cubanski said. In contrast, traditional Medicare generally does not use prior authorization.

You may still be able to make changes after Dec. 7

A senior citizen holds a sign during a rally to protect federal health programs at the 8th Annual Healthy Living Festival on July 15, 2011 in Oakland, California.

Justin Sullivan | Getty Images

In some cases, beneficiaries may still be able to make changes after the official Dec. 7 end of Medicare open enrollment.

“Dec. 7 is important, but it’s not the end-all date, in case you need to make some changes,” Moeller said.

Medicare Advantage has its own special open enrollment period that will start on Jan. 1 and last through the first quarter. During that time, Medicare Advantage beneficiaries may switch to a different Medicare Advantage plan, opt for original Medicare or enroll in a standalone Part D drug plan.

Alternatively, if you have had a life-changing event, such as a move, you may qualify to take advantage of Medicare’s special enrollment periods.

Moreover, people who live in areas that were affected by hurricanes or wildfires in 2024 may have more time to sign up for their 2025 coverage, according to KFF.

Personal Finance

Biden signs Social Security bill to increase benefits for millions of public workers

Published

11 hours ago

January 5, 2025

Business Finance News

U.S. President Joe Biden speaks as he participates in a bill signing ceremony for the “Social Security Fairness Act” in the East Room of the White House, in Washington, U.S. on Jan. 5, 2025.

Nathan Howard | Reuters

President Joe Biden on Sunday signed the Social Security Fairness Act, bipartisan legislation that clears the way for teachers, firefighters, policeman and other public sector workers who also receive pension income to receive increases in their Social Security benefits.

The benefit boost comes as the new law repeals two provisions — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — that have been in place for more than four decades.

The WEP reduces Social Security benefits for individuals who receive pension or disability benefits from employment where Social Security payroll taxes were not withheld. As of December 2023, that provision affected about 2 million Social Security beneficiaries.

The GPO reduces Social Security benefits for spouses, widows and widowers who also receive income from their own government pensions. In December 2023, the GPO affected almost 750,000 beneficiaries.

“By signing this bill, we’re extending Social Security benefits for millions of teachers, nurses and other public employees and their spouses and survivors,” Biden said Sunday. “That means an estimated average of $360 per month increase.”

That extra income is a “big deal” for middle-class households, he said.

More than 2.5 million Americans will receive a lump sum payment of thousands of dollars to make up for the shortfall in benefits they should have received in 2024, Biden said.

The Social Security Fairness Act will affect Social Security benefits payable after December 2023. More details on how the benefit increase will be implemented are not yet available, according to the Social Security Administration.

“With the repeal of WEP and GPO, federal retirees, along with so many others, will finally receive the full Social Security benefits they’ve earned,” William Shackelford, president of the National Active and Retired Federal Employees Association, said in a statement.

The bill was passed by the Senate on Dec. 21 with a 76 bipartisan majority vote, including Sens. Sherrod Brown, D-Ohio, and Susan Collins, R-Maine, who co-led the legislation in that chamber. In November, the Social Security Fairness Act was passed by the House with a 327 bipartisan majority, led by Reps. Garret Graves, R-La., and Abigail Spanberger, D-Va.

Advocacy groups who lobbied for the changes praised Biden’s signing of the bill as a historic move.

“Our organization has spent decades lobbying for the repeal of the WEP and GPO,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement. “We endorsed the Social Security Fairness Act — and are gratified to finally see this legislation enacted and signed by the president.”

The provisions have reduced Social Security benefits for decades.

“This victory is more than 40 years in the making, and while we celebrate today, we also reflect on those who were impacted by these provisions but are no longer here to witness this change,” Shackelford said. “Their service and contributions are not lost on us, and we honor their legacy by continuing to advocate for fairness in retirement benefits for all public servants.”

Personal Finance

Here’s how to maximize your 401(k) plan for 2025 with higher limits

Published

18 hours ago

January 5, 2025

Business Finance News

Lordhenrivoton | E+ | Getty Images

If you’re eager to save more for retirement, you could be overlooking ways to maximize your 401(k) plan, including key changes for 2025.

Some 40% of Americans are behind on retirement planning and savings, according to a CNBC poll conducted by SurveyMonkey, which polled 6,657 U.S. adults in August.

But before making 401(k) plan changes, experts say you should always review your financial situation, including your income, immediate spending needs and goals.

“401(k) investing focuses on long-term retirement goals,” said certified financial planner Salim Boutagy, partner at Moneco Advisors in Fairfield, Connecticut. But it should work alongside other savings that cover your midterm goals, emergencies and immediate spending needs.

If you’re ready to boost retirement savings, here are some key things to know about your 401(k) for 2025.

Use higher 401(k) contribution limits as a ‘prompt’

Starting in 2025, employees can defer $23,500 into 401(k) plans, up from $23,000 in 2024. The catch-up contribution limit remains at $7,500 for investors age 50 and older.

“This higher ceiling isn’t just a win for high earners,” said CFP Jon Ulin, managing principal of Ulin & Co. Wealth Management in Boca Raton, Florida. “It’s a prompt for everyone to consider boosting their savings rate,” Ulin added.

Even 1% yearly increases “can make a substantial difference” thanks to compound growth over time, he said.

The retirement plan savings rate for the third quarter of 2024, including employee deferrals and company contributions, was an estimated 14.1% as of Sept. 30, according to Fidelity Investments, based on an analysis of 26,000 corporate plans.

Leverage the 401(k) ‘super max catch-up’

On top of higher 401(k) deferral limits, there is also a new “super max catch-up” opportunity for some older investors in 2025, said CFP Dinon Hughes, a greater Boston area-based financial consultant with Nvest Financial.

If you are between the ages of 60 and 63 in 2025, the catch-up contribution limit increases to $11,250, which brings the total deferral cap to $34,750 for this group.

Only about 14% of employees maxed out 401(k) plans in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly five million participants.

Roth conversions on the rise: Here's what to know

However, there is “one major caveat,” Hughes said.

Your 401(k) must allow the increased catch-up contributions. Otherwise, payroll could flag the added funds as excess 401(k) deferrals, he said. There can be tax consequences if excess deferrals are not removed.

“Check with your employer now to avoid a much bigger headache at the end of 2025,” Hughes said.

Check for ‘true up’ before maxing out early

Generally, experts recommend investing sooner to boost compound growth over time. But you could lose part of your employer’s matching contribution by maxing out your 401(k) early — unless your plan has a special feature.

Typically, your employer’s 401(k) match uses a formula to deposit extra money into your account. You must defer a certain percentage of income from each paycheck to receive your full employer match for the year.

Some plans offer a “true-up,” or deposit of the remaining employer match, for employees who max out their 401(k) plan before year-end.

If your plan offers this feature, it’s a green light to contribute aggressively in January, maximizing market exposure from day one.

Jon Ulin

Managing principal of Ulin & Co. Wealth Management

“If your plan offers this feature, it’s a green light to contribute aggressively in January, maximizing market exposure from day one,” Ulin said.

Some 67.4% of plans made true-up matches when matches were not made annually in 2023, according to the Plan Sponsor Council of America’s latest yearly survey. The feature is most common in larger plans.

Don’t miss these insights from CNBC PRO

Personal Finance

Here are the changes to expect

Published

2 days ago

January 4, 2025

Business Finance News

Djelics | E+ | Getty Images

Retirees can expect to see some big changes in 2025 when it comes to their Social Security and Medicare benefits.

President Joe Biden is expected to sign a bill that will increase Social Security benefits for certain pensioners. Additionally, the annual Social Security cost-of-living adjustment goes into effect for all beneficiaries.

And Medicare enrollees who are worried about health-care costs now have a $2,000 annual out-of-pocket Part D prescription drug cap aimed at helping to reduce those financial pressures.

Here are some important changes to note for the coming year.

Some pensioners could get benefit increase

The Senate passed a bill in the final legislative days of 2024 to boost Social Security payments for millions of people who receive pensions from work in federal, state and local government, or in public service jobs such as teachers, firefighters and police officers. The House had passed the bill in November.

Now, Biden is expected to sign the bill into law in the coming days.

The Social Security Fairness Act eliminates two provisions that reduce Social Security benefits for certain individuals who also have pension income from public work where Social Security payroll taxes were not paid.

That includes the Windfall Elimination Provision, or WEP, which reduces Social Security benefits for individuals who also receive pension or disability benefits from employers who did not withhold Social Security taxes.

It also includes the Government Pension Offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who receive their own government pensions.

Together, the rules affect around 2.5 million beneficiaries, according to the Congressional Research Service. Once enacted, the law may provide higher benefit payments to those individuals.

Notably, it may provide retroactive payments of those benefit increases for the months after December 2023.

The legislation marks the biggest change to Social Security since certain couples claiming strategies were phased out in 2016, said Martha Shedden, president of the National Association of Registered Social Security Analysts.

“We’re sort of in limbo as to how that process will proceed, when people will see that increase and how the retroactive [benefits] will be applied,” Shedden said.

All Social Security beneficiaries to get 2.5% COLA

In 2025, all beneficiaries will see a 2.5% increase to their Social Security benefit checks, thanks to an annual cost-of-living adjustment.

Of note, the 2024 increase was 3.2%. This year’s COLA is the lowest increase beneficiaries have seen since a 1.3% increase in 2021, reflecting a decrease in the pace of inflation.

The change will be effective with January checks for more than 72.5 million Americans, including Supplemental Security Income beneficiaries.

The average worker retirement benefit will be $1,976 per month, up from $1,927 in 2024, according to the Social Security Administration.

Maximizing your Social Security benefits

Monthly Medicare Part B premiums go up

Monthly Medicare Part B premiums — which are often deducted directly from Social Security checks — may affect just how much of a bump beneficiaries see in their 2025 benefit payments.

Medicare Part B covers physician, outpatient hospital and certain home health services, as well as durable medical equipment.

In 2025, the standard monthly Part B premium will be $185 per month — a $10.30 increase from $174.70 in 2024.

Part B deductibles will also rise, to $257, in 2025 — a $17 increase from the $240 annual deductible for 2024.

Medicare Part B premiums are based on a beneficiary’s modified adjusted gross income, or MAGI, from their tax returns from two years prior. In 2025, beneficiaries who had less than or equal to $106,000 in MAGI in 2023 will pay the standard monthly Part B premium, as will married couples with less than or equal to $212,000.

Beneficiaries with higher incomes will be subject to income-related adjustment amounts, or IRMAA, that increase their monthly premium payments.

Medicare $2,000 prescription drug cap goes into effect

Annual out-of-pocket Medicare Part D drug costs will now be capped at $2,000, as changes enacted with the Inflation Reduction Act go into effect.

Beneficiaries with Medicare Part D drug plans that have a deductible will pay out-of-pocket costs until that threshold is met. In 2025, the highest deductible for those plans is $590.

Once beneficiaries pay their full deductible, they will owe 25% of the cost of coinsurance until their out-of-pocket spending on both generic and brand-name drugs reaches $2,000. After that, those beneficiaries will have what’s known as catastrophic coverage, which means they won’t be on the hook to pay out-of-pocket Part D costs for the rest of 2025.

However, beneficiaries will also have the option to pay out-of-pocket costs monthly over the course of the year, instead of all at once.

Notably, insulin costs have also been capped at $35 per month, both under Medicare Part D covered treatments and Medicare Part B covered insulin used with pumps.

Social Security trust fund depletion dates get closer

In 2024, the Social Security trustees projected the trust fund the program relies on to help pay retirement benefits may be depleted in 2033. At that time, just 79% of those benefits may be payable, unless Congress acts sooner.

Social Security’s combined trust funds — used to pay both retirement and disability benefits — are projected to run out in 2035.

Now that the calendar has turned to a new year, those depletion dates are closer.

Notably, the previously mentioned Social Security Fairness Act that will provide increased benefits to some pensioners may move the trust fund depletion date six months closer.

“That’s the major looming issue right now, is what can be done to shore up those trust funds,” Shedden said. “That’s going to require very comprehensive, bipartisan changes to multiple parts of the Social Security rules in the program.”

However, most financial advisors emphasize that shouldn’t affect personal claiming decisions.

For younger generations, there could be changes to future benefits, said George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Massachusetts.

“But for those already receiving or about to get Social Security checks, I don’t think that there is anything to worry about,” Gagliardi said.

Other important changes to note

Maximum taxable earnings — the amount of wages subject to Social Security payroll taxes — will rise to $176,100 in 2025, up from $168,600 in 2024. Once workers hit that cap, they no longer pay into the program for the rest of the year.

Social Security beneficiaries who claim benefits before their full retirement age and who continue to work face what is known as a retirement earnings test. The earnings exempt from the retirement earnings test is now $23,400 per year in 2025 for those under full retirement age, up from $22,320 per year in 2024. For every $2 in earnings above the limit, $1 in benefits is withheld. For the year an individual reaches retirement age, a higher threshold of $62,160 in earnings applies, up from $59,520 in 2024. For every $3 in earnings above the limit, $1 in benefits is withheld. Of note: this only applies to the months before a beneficiary turns full retirement age. Starting from their birthday month, the retirement earnings test no longer applies. Importantly, once a beneficiary reaches full retirement age, any previously withheld benefits are applied to monthly benefits.

Do you want to talk to the Social Security Administration face to face? Starting Jan. 6, the agency is requiring appointments for local office services, such as obtaining Social Security cards. To improve efficiency, the agency is directing individuals who need help to first try its online or automated telephone services. However, people who are unable to schedule in-person appointments, particularly vulnerable individuals, may still come in and get in-person service.