It all began with my husband's surprise party. I planned an intimate dinner with close friends and family at a local restaurant to celebrate his 65th birthday. Mission accomplished. He was surprised, and we all had a good time.
Little did we know that milestone birthday would trigger numerous age-related decisions regarding health care and estate planning. This is my seventh dispatch from the retirement front, an occasional series of articles where I chronicle our personal retirement choices.
Mike and I had already decided that he would enroll in Medicare Parts A and B, even though as a federal retiree it is not mandatory. The online enrollment process was a snap, taking less than 10 minutes as promised on the Social Security Administration website.
At the main Social Security web page, he clicked on "menu" then under the benefits subhead, he clicked on "Medicare." He selected the option "to apply for Medicare only." Within hours, he received an email confirmation that his Medicare application was accepted. We expect his decision letter detailing his monthly Part B premium amount will arrive within weeks.
Enrolling only in Medicare allows Mike to delay claiming Social Security benefits until they are worth more later. I plan to claim my Social Security retirement benefits at 66. At that point, Mike will be 68, and he will be able to file a restricted claim for spousal benefits and collect half of my full retirement age amount while his own benefit continues to grow by 8% per year up until age 70. Then he will claim his own maximum benefit, which will continue as the survivor benefit after one of us dies.
Next, Mike must contact his Federal Employee Health Benefits provider to inform them he has enrolled in Medicare A and B. That means his federal health insurance will become the secondary payer and act as his Medigap policy. We will continue to pay the monthly premium for this full-service health insurance policy until I turn 65 and enroll in Medicare, allowing us to drop back to a less expensive plan that will act as a Medigap policy for both us.
Because federal health insurance benefits include prescription drug coverage, there is no need for Mike to enroll in Medicare Part D.
Mike's 65th birthday also triggered a surprise notice from the Office of Personnel Management, the federal agency that administers pensions and other benefits for federal employees and retirees. The notice said now that he is 65, life insurance premiums would no longer be deducted from his monthly pension. That was a bit concerning.
After numerous calls to OPM, Mike finally got a satisfactory explanation of the notice. It turns out that now that he is 65, he will no longer be billed for life insurance premiums. His life insurance policy will remain in force for free but the face value of the policy will gradually decline from 100% of his final salary to 40%.
The declining life insurance coverage was not an immediate concern, as we have more than adequate protection through beneficiary designations on our retirement accounts and survivorship provisions on several annuities we own. But it did raise our awareness that it was time to review our basic estate planning documents.
I was confident that our advance health care directives, financial powers of attorney and will were in order. But after hearing numerous radio ads for free seminars sponsored by a prominent estate planning attorney, we made an appointment to attend a session at a local hotel.
In preparation for the seminar, we pulled out a copy of our will. To our chagrin, it was dated 1995. A lot has changed in the past 22 years, including a federal estate exemption that has soared from $600,000 to $5.49 million per individual. Our two sons, then minors, are now 33 and 30. There is no longer the need for guardians for them that we appointed two decades ago and the siblings we selected as our executors back then are now in their 70s. It's time for a new estate plan.
The estate planning seminar was the incentive we needed to review our goals, rethink earlier decisions and update our documents. This time our estate plan will be more comprehensive involving trusts for our assets, protections for our heirs and steps to ensure our adult sons create basic estate planning documents of their own. Our long-term care insurance policies will help pay for care should Mike or I need it, but our estate planning documents will lay out specifically where and how we would like to receive that care — and for how long.
Birthdays are a wonderful reason to celebrate life. They are also a reminder that time passes quickly, and preparing for the inevitable is one of the greatest gifts we can give our loved ones.
(Questions about new Social Security rules? Find the answers in my new ebook.)
Mary Beth Franklin is a certified financial planner.