Reader Question: In one of your columns, you addressed a question about investing unneeded money from required IRA distributions and one suggestion was to open a personal investment account at a discount broker and invest in no load mutual funds. That left me wondering. Since I will soon be taking IRA distributions, is there a reason why I should not move my entire IRA account over to a discount broker such as Charles Schwab or Vanguard who offers lower management fees versus leaving it with a firm that charges 2/3 more to manage my account? P.K.
Answer: What you are referring to are Required Minimum Distributions (RMDs). The law says you must begin taking distributions from your retirement funds by April 1 of the year following the year you turn age 70½. Yes, I know….leave it to the government to make something complicated that could be simple. Many folks who must take RMDs don’t need the money so a good choice is to open a personal investment account with a discount broker and simply move your annual RMD into your personal account. Many retirees make the mistake of leaving their company 401k plan with their prior company. Some company plans have high fees so your best move is to compare fees and services under your current plan to those of a discount broker such as Schwab. In many cases, you’ll find the discount broker is a better deal.
Reader Question:I will be 65 this month and retiring. I am eligible to draw a pension from my church, plus have decided to begin drawing my Social Security. I will most likely be rehired part time until a replacement can be found. I have been inundated with advertisements from so many insurance companies! It’s confusing. I will be eligible for Medicare and will need a supplement. My wife is working, but has no insurance through her job (church) and will need to purchase health insurance. She won’t be eligible for Social Security for another four years. What’s your advice? B.M.
Answer: Our in-house expert on Medicare, Kimberly Reynolds, MS, CFP says: In regards to Medicare, you are correct that there are many choices and it can be very confusing. There are two options for you to consider: The first option is to remain on original Medicare which means you simply add a Supplemental Part C Plan such as Blue Cross Blue Shield C Plus. The supplemental plan generally pays the 20% that Medicare alone does not cover for medical costs. Your monthly premium for the Part C Supplemental plan will range from $115 to $145 but you’ll have little or no out-of-pocket costs. The Supplemental Part C plans do not cover prescription drugs so you’ll have to purchase a stand-alone Part D Prescription Plan to pair with your Supplemental Plan. With the Part D drug plan you also pay a monthly premium and pay a co-pay for each prescription. There are over 30 plans offered in Jefferson and Shelby County so I advise you to use the Medicare website www.medicare.gov to help you choose the plan that best fits your prescription needs. On the website you will need to click on "Compare Health and Drug Plans." The prescription Part D plans change on an annual basis so you need to review each year. The second option is to purchase a Medicare Advantage Plan which consolidates Medicare Part A, B, C and D all into one plan. You can find plans that have $0 to over $125 monthly premiums. You share the cost with this type of plan and each time you have a doctor’s visit you pay a set copay/deductible.
For your wife, I would recommend you apply for an individual policy through Blue Cross Blue Shield which will cover her until she becomes eligible for Medicare.
Posted On: May 20, 2012
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