In this episode of Protecting and Preserving Wealth, we dive into the upcoming changes to Medicare for 2025, focusing on critical issues that affect both current Medicare recipients and those who have yet to claim it. Bruce Hosler and Alex Koury from Hosler Wealth Management discuss Medicare enrollment, premium penalties, and significant updates coming in the next few years.

We start by addressing the complexities surrounding Medicare enrollment for individuals turning 65. Bruce highlights a key nuance: while it may sometimes be beneficial to stay on a company’s health plan, particularly if it's cheaper, there’s a catch. If you’re on a high-deductible health plan, it may not offer “credible coverage” for Medicare Part D, which covers prescription drugs. If you miss getting a Part D plan, you could face costly penalties later. The message here is to ensure you’re covered, even if you delay Medicare enrollment.

Alex introduces one of the biggest changes coming in 2025: a new cap on out-of-pocket Part D drug expenses, set at $2,000 annually. This reform eliminates the confusing "donut hole" many have faced in recent years, where prescription costs shift dramatically at certain thresholds. While this is a win for those with high prescription costs, Bruce and Alex emphasize the importance of regularly reviewing Medicare Advantage plans, as changes to drug formularies, premiums, and deductibles could affect out-of-pocket costs.

Bruce stresses that regular Medicare typically offers more flexibility in choosing specialists or medical facilities, like the Mayo Clinic, whereas Medicare Advantage plans can be restrictive. This is crucial for those considering future healthcare needs, as Medicare Advantage may not cover all specialists or provide access to top-tier care.

The episode wraps up by discussing the expansion of mental health services under Medicare, starting in 2025. More providers, including mental health counselors and addiction specialists, will be covered, reflecting a growing recognition of the importance of mental health care in retirement.

Overall, this episode is a must-listen for anyone navigating Medicare, providing clear guidance on how to avoid penalties, manage drug costs, and ensure access to the best care as these changes roll out.

For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit them online at https://www.hoslerwm.com/

Or call them in their Prescott office at (928) 778-7666 or their Scottsdale office at (480) 994-7342.

For more podcast episodes, visit our podcast website at https://hoslerwm.com/protectingwealthpodcast/

Limitation of Liability Disclosures: https://www.hoslerwm.com/disclosures/#socialmedia

Copyright © 2022-2024 Hosler Wealth Management LLC, All Rights Reserved. #ProtectingWealthPodcast #ProtectingandPreservingWealthPodcast #HoslerWealthManagement #BruceHosler

It’s true, and in this episode of Protecting and Preserving Wealth, we focus on this crucial aspect of estate planning: converting your IRA to a Roth IRA before passing it to your children. We discuss the importance of making this conversion while you're alive because your children cannot convert an inherited IRA to a Roth IRA after your death. I will share an example of a client who could have benefitted from starting the conversion process earlier, explaining that even partial conversions would allow beneficiaries to enjoy tax-free growth from a Roth IRA.

Our conversation delves into the details of Roth's conversions, highlighting people's common misconceptions. Alex notes that there are no age or income restrictions on who can convert their IRA to a Roth. Even wealthy individuals like Bill Gates could convert if they wished. We discuss how spouses can inherit Roth IRAs with no required minimum distributions (RMDs), which allows them to let the account grow tax-free for the rest of their lives. Upon the spouse's death, the Roth IRA can pass to the children, who must distribute it within ten years, but still tax-free.

I break down the changes brought by the SECURE Act, which eliminated the "Stretch IRA" rule for most non-spousal beneficiaries, including adult children. Instead, inherited IRAs must now be fully distributed within ten years, which can create significant tax implications. I stress the importance of eligible designated beneficiaries—such as spouses, minor children, and disabled individuals — only they can stretch the IRA distributions over their lifetimes.

The key takeaway is simple: if you want your children to benefit from tax-free growth, you must convert your IRA to a Roth yourself. This will empower you with the sole responsibility to secure your children's financial future. Otherwise, they will be burdened with a traditional IRA and its tax obligations. With tax rates potentially rising in the future, converting now at lower rates could save your heirs from paying much higher taxes later. The message is clear: plan early and wisely to preserve wealth for future generations, providing a sense of relief and security.

For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit them online at https://www.hoslerwm.com/

Or call them in their Prescott office at (928) 778-7666 or their Scottsdale office at (480) 994-7342.

For more podcast episodes, visit our podcast website at https://hoslerwm.com/protectingwealthpodcast/

Limitation of Liability Disclosures: https://www.hoslerwm.com/disclosures/#socialmedia

Copyright © 2022-2024 Hosler Wealth Management LLC, All Rights Reserved. #ProtectingWealthPodcast #ProtectingandPreservingWealthPodcast #HoslerWealthManagement #BruceHosler

In this episode of Protecting and Preserving Wealth, we delve into the updated 10-year IRA rule for beneficiaries, finalized by the IRS on July 18, 2024. Under the old Strech IRA rules, beneficiaries could stretch out Required Minimum Distributions (RMDs) over their lifetimes, creating a favorable tax strategy for passing on wealth. However, with the finalization of the SECURE Act regulations, the 10-year rule now applies, requiring beneficiaries to thoroughly distribute inherited IRAs within 10 years, limiting the potential for long-term legacy planning.

The rationale behind this change is to ensure the IRS receives its share of taxable income more quickly, as opposed to waiting decades under the stretch IRA framework. This shift in perspective also means that the IRS no longer views the passing of retirement savings to the next generation as something that should be drawn out over time.

We also explore the nuances of the required beginning date for RMDs, which has been extended to age 73. However, clients are advised to start taking distributions IN the year they turn 73 rather than waiting until the following year to avoid doubling their taxable income from this source. If an IRA owner dies before their RBD, no RMDs are required during the 10-year window. Still, the entire account must be distributed by the end of that period. Conversely, suppose the owner dies after their RBD. In that case, beneficiaries must continue taking RMDs based on their age, and any delays could result in substantial tax hits later on.

We stress the utmost importance of proactive planning, particularly for beneficiaries of large IRAs who may face significant tax burdens if they wait until the 10th year to withdraw funds. A million-dollar IRA, for example, could double in size, leading to a massive taxable distribution. To mitigate this, it’s often beneficial to take distributions gradually.

Finally, we touch on the benefits of Roth IRAs in this context: While Roth IRAs are also subject to the 10-year rule, they are not subject to RMDs during that time, allowing tax-free growth for the entire period. Beneficiaries should wait until the end of the 10 years to maximize tax-free withdrawals.

In conclusion, the new 10-year rule presents challenges, but with careful planning, including the strategic use of Roth IRAs, beneficiaries can still preserve wealth efficiently. For personalized advice, we encourage listeners to reach out to Hosler Wealth Management.

For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit them online at https://www.hoslerwm.com/

Or call them in their Prescott office at (928) 778-7666 or their Scottsdale office at (480) 994-7342.

For more podcast episodes, visit our podcast website at https://hoslerwm.com/protectingwealthpodcast/

Limitation of Liability Disclosures: https://www.hoslerwm.com/disclosures/#socialmedia

Copyright © 2022-2024 Hosler Wealth Management LLC, All Rights Reserved. #ProtectingWealthPodcast #ProtectingandPreservingWealthPodcast #HoslerWealthManagement #BruceHosler