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Author: Minich MacGregor Wealth Management

Things Most Advisors Don’t Tell You #1

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

When it comes to helping people reach their goals, most financial advisors tend to focus on areas like investing, tax planning, and other money-related topics. We are no exception. After all, these things are critically important if you want to save for retirement, start a business, travel the world, or simply leave a legacy for your family.

However, we’ve learned a very valuable lesson over the course of our careers: Achieving the things you care about most requires more than just money. There are certain habits and behaviors that, while not directly related to finance, can spell the difference between reaching your goals or not.

In our experience, people rarely hear about these from their advisors.

Although we are not life coaches, over the next few months, we’d like to share some non-financial lessons we’ve learned. It’s our belief that applying these lessons makes working towards your goals both easier and more rewarding. Let’s call them “Things Most Financial Advisors Don’t Tell You”.

So, without further ado, here is:

Things Most Advisors Don’t Tell You #1:
The importance of avoiding burnout

Burnout, of course, is a “physical or mental collapse caused by overwork or stress.”* Anyone who has ever worked a demanding job or raised children has probably experienced it at some point or another. But what does this have to do with your financial goals?

In a word: Everything.

You see, there’s a reason we call it “working towards your financial goals.” Because it’s a lot of work! It’s not uncommon to take decades to accomplish what you value most.

During that time, you may work at the same job for many years. Or, you may change jobs frequently. You may set aside money for the future only to be forced to use it when times are tough. As a result, there may be occasions where the daily grind just doesn’t seem like it’s getting you anywhere. In other words, you get burned out.

Some common symptoms of burnout include:

  • Fatigue that just doesn’t seem to go away
  • An inability to complete projects, or get started on new ones
  • Apathy about your job or your goals
  • An increase in addictive behavior (like eating unhealthy foods or watching too much TV)
  • A drop in efficiency, competence, or productivity in your work

Here’s why this matters from a financial standpoint. People who are burned out often start making short-term decisions that delay their long-term goals. For example, instead of investing for the future, they start spending more on instant gratification. Instead of planning ahead and being proactive, they procrastinate. Instead of making consistent, steady progress towards the things they want most, they get side-tracked by things they only want right now. That’s why, as financial advisors, we try to teach our clients how important it is to do everything you can to avoid burnout. Here are a few methods we’ve found effective:

Take the idea of time management seriously. Time management might seem dry and boring, but in truth, it’s an incredibly useful skill that helps you get more out of your day while doing more of what you love! There are several methods, but most have the following in common: Setting aside specific times and time limits for specific activities every day.

Take smart vacations. Going on vacation is a common remedy for burnout, but some vacations are more therapeutic than others. If you’re trying to avoid burnout, don’t go somewhere far away that you’ve never been to. Those types of destinations, while rewarding, can also cause a lot of stress. (Ever wanted a vacation from your vacation?) Instead, revisit somewhere you know you’ll enjoy and have little trouble navigating.

Make physical and mental health your first priority. Take power naps every day. Work out. Eat healthy. Schedule times to pursue your passions. The more you take care of yourself, the more armored you’ll be against burnout. After all, you shouldn’t have to wait until retirement to start enjoying life!

Delegate/ask for help. Burnout is often a result of trying to do too much by yourself. While society often lauds “the rugged individual” or “do-it-yourself” types, the truth is, you are not alone. Don’t hesitate to delegate responsibilities to family members or ask neighbors and coworkers for help with projects! It can make a huge difference in avoiding burnout.

As you can see, working towards your financial goals involves more than just money. It involves taking care of yourself so that you keep moving forward, step by step, day after day.

In our next related post, we’ll dive more into the concept of time management, including how to balance the short-term and the long-term. In the meantime, have a great month!

*Vanessa Loder, “How to Prevent Burnout,” Forbes, January 30, 2015. https://www.forbes.com/sites/vanessaloder/2015/01/30/how-to-prevent-burnout-13-signs-youre-on-the-edge/#4f241d604e3d

New Tariffs 2019

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive.

After months of relative quiet, the trade war between the U.S. and China has erupted again in a big way. The markets are the most immediate casualty, with the Dow plunging over 600 points on Monday alone.1

In all likelihood, you’re probably more focused on things like spring cleaning, your upcoming summer plans, and the end of Game of Thrones. My job in this letter is to briefly explain what’s going on, what matters, what doesn’t, and why you can go back to focusing on those other things.  

So, here’s what’s going on:

Failed deals lead to new tariffs

You may have noticed that headlines about the trade war had been rather muted in 2019. That’s because negotiators for both nations had been quietly working behind the scenes to come to an agreement on how to address the $375 billion trade deficit the U.S. has with China. The White House expressed optimism that a deal was close – until a sudden hardening of positions prompted both sides to retreat to their corners.  

On Friday, May 10, President Trump raised the stakes by placing 25% tariffs on all Chinese imports that had previously been spared. Here’s how the U.S. trade representative put it:

“[The President has]…ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”2

Throughout this trade war, it has seemed like both countries are waiting for the other to blink first. Both are still waiting. For on Monday, May 13, China announced it would raise tariffs on $60 billion in U.S. goods, some up to as much as 25%.3 

Why all this matters to the markets

You’ve heard, of course, of the principle of cause and effect. If one thing happens, something else is affected. Fail to brush your teeth and you get cavities. Leave meat out of the refrigerator too long and it will spoil. You get the idea.  

Investors, analysts, money managers, and traders who participate in the markets on a daily basis make decisions based on cause and effect. How tariffs impact certain companies is a perfect example of this.  

For instance, imagine a fictional American company called Widgets n’ Stuff, or WNS for short. In order to make its widgets, WNS buys thingamajigs from China. But thanks to tariffs, the price of importing thingamajigs goes up.  

Investors know this, and thanks to the principle of cause and effect, predict it will have a negative impact on WNS’s finances. Maybe they’ll have to raise prices on their own widgets to make up the difference. Maybe they’ll have to produce fewer widgets. You get the idea. So, investors sell stock in Widgets n’ Stuff because it no longer looks like an attractive investment.  
Like them or not, tariffs act as a double-edged sword that affect companies and consumers on both sides of the Pacific. On the American side, China’s tariffs can make it harder for U.S. companies to sell their goods to Chinese consumers. At the same time, American tariffs can make it harder for U.S. companies to import the goods they need for their own products. Either way, prices go up, corporate finances suffer, and consumers are often the ones left to foot the bill.  

That’s why the markets care about the trade war.  

But here’s why all this doesn’t matter to us – yet

The principle of cause and effect is important, but here at Minich MacGregor Wealth Management, we rely more on another principle: supply and demand. You see, as investors, we rarely know what the long-term effects of something actually are. Too many investors, in fact, rely on pre-conceived narratives to guess at the effects – and guessing isn’t really a viable strategy in life, is it?  

The fact is that the markets have fallen after almost every round of tariffs, only to recover a few days later. So, because we can’t really predict the long-term effects of this trade war, let’s ignore the narratives and focus on what we can control. By using technical analysis, we can look at the various investments in your portfolio to determine whether demand is higher (meaning the price is likely to go up, trade war or not) or whether supply is higher (meaning prices are likely to trend down).  

In short, we’re not going to make decisions because of the trade war in and of itself. We’ll continue making decisions by tracking trends – and trends are driven by many factors, not just what’s in the news on a given day.  

Hippocrates once wrote that, “To do nothing is sometimes the best remedy.” For that reason, it’s okay for you to go back to planning your summer vacation or betting which character will die next on Game of Thrones. In the meantime, We will continue monitoring our clients’ portfolio. If the dynamics of supply and demand change, we’ll make decisions accordingly.  

As always, please let us know if you have any questions or concerns. We’re always happy to speak to you!

1 “Dow plunges 700 points after China retaliates with higher tariffs,” CNN Business, May 13, 2019.https://www.cnn.com/2019/05/13/investing/dow-stocks-today/index.html

2 “Trump Renews Trade War as China Talks End Without a Deal,” The NY Times, May 10, 2019. https://www.nytimes.com/2019/05/10/us/politics/trump-china-trade.html?module=inline

3 “After China Hits Back With Tariffs, Trump Says He’ll Meet With Xi,” The Wall Street Journal, May 13, 2019. https://www.wsj.com/articles/china-to-raise-tariffs-on-certain-u-s-imports-11557750380

Trending Now – April Market Recap

Written by Minich MacGregor Wealth Management on . Posted in Archives, Minich MacGregor Missive, News.

“We are now in a bear market – here’s what that means.”– CNBC headline on December 24, 20181

“The stock market rally to start 2019 is one for the history books.”– CNBC headline on February 22, 20182

If you’re like most people, it’s probably not uncommon for you to plan your day or week based on the weather forecast. For example, you might check the forecast, see that it’s supposed to be sunny, and decide to go fishing on Saturday.  

But when Saturday rolls around, it starts to rain.

The frustration you’d feel is very similar to how investors and analysts often feel about the markets. The forecast says one thing – and then the opposite happens.  

For example, let’s go back to the end of 2018. For months, the markets had been hammered by volatility. The Nasdaq entered bear market territory. Many pundits predicted even more volatility after the new year.  

But four months later, the markets are on the verge of record highs.  
So, the question is: Why the change in direction? What’s behind this year’s market rally? And most importantly, what can we learn from it?  

The volatility that dominated the end of 2018 was largely due to fears of an economic slowdown. The Federal Reserve raised interest rates, which can cool both inflation and economic growth. Trade tensions with China showed no signs of stopping. Corporate earnings slowed down, oil prices had dropped, and several other indicators had many analysts predicting a recession in 2020 or 2021.  

Even after the turn of the year, there was some interesting data that, when compared with historical trends, suggested more storms on the horizon. For example, you may have seen the term “inverted yield curve” bandied about in the media for a time.  We’re venturing into “financial nerd” territory here, but this is when the yield on short-term Treasury bonds rises higher than the yield on long­-term bonds. It doesn’t happen often, and historically, it has sometimes been a sign of an impending recession.  

The result of all these signals was a forecast that had many investors reaching for their umbrellas, convinced that gloomy weather was here to stay.  

But instead, the markets enjoyed their strongest start to a year since 1998.3

In many ways, this rally has been driven by something very simple: Nothing really got worse. The Federal Reserve has stopped raising interest rates, saying that it won’t raise them again in 2019.4 The trade war with China seems to have hit a lull. And now, investors can point to a host of different historical trends that work in their favor. For example, some data suggests that when the stock market rises 13% or more “during the first three months of a calendar year,” it will gain even more before the end of the year.3

So, does that mean the good times are here to stay?

No.

Warren Buffett, the legendary investor, has a saying: “Be fearful when others are greedy and greedy when others are fearful.” While we shouldn’t take that maxim too literally, it does illustrate an important point. Time after time, conditions that cause fear can change in an instant, leaving the fearful behind. On the other hand, conditions that stoke greed can shift before you know it, giving the greedy a nasty shock.  

On their website, CNN has something called the Fear & Greed Index.5 Using seven different indicators, they can calculate which emotion is driving the markets most at any given time. As of this writing, that emotion is greed. A few months ago, it was fear. As we’ve just seen, the scale can swing from end to another very quickly.  

When you look more closely at the data, there are still reasons to think a recession is possible in the next year or two. (A contracting labor market, problems in Europe, stocks being valued too highly, to name just a few.) Other data suggests that the stock market’s current highs are overblown.6 But does this mean it’s time to run and hide? Nope! While data is very good at telling us what was and what is, it’s still unreliable at telling us what will be – at least as far as the markets are concerned. In fact, for as much grief as we give meteorologists for getting a forecast wrong, they do a much better job predicting the weather than experts do the markets!  

Here’s what we can learn from all this

As financial advisors, the reason we’re sending this article is because there are a few things we think we need to keep in mind as 2019 rolls on.  

First, we need to remember to guard against recency bias. Recency bias is when people make the mistake of thinking what happened recently is what happens usually. It’s why investors tend to panic during market volatility or take on unnecessary risk during a market rally.  

Second, remember that emotion is a good servant, but a bad master. Emotion helps us interact with other people. It makes experiences more memorable and life more colorful. But it can be come harmful if it drives our decisions. We should always strive to keep our own personal Fear & Greed Index from swinging too sharply one way or the other.  

Finally, whether the markets go up, down, or sideways, you’ll probably hear about many different statistics, indicators, and historical trends that predict this, that, or the other thing. When you do, remember that correlation is not causation.  

Correlation, as you probably know, is the measurement of how closely related two things are. In finance, we often find that many things tend to change in sync with one another. Asset classes, market sectors, you name it. It’s why we spend so much time looking at things like inverted yield curves – because they are often correlated with the health of the markets or economy.  

But just because two things are correlated does not mean that one causes the other. (It’s why an inverted yield curve doesn’t always mean a recession is nigh.) All the indicators and historical trends you hear about in the news are important, and worth studying – but again, they only tell us what was or what is. Not what will be.  

So, to sum up:

  • Just as we didn’t give in to fear when the markets were down, so too will we not give in to greed while the markets are up.  
  • We will remember that sun today doesn’t protect against rain tomorrow, or vice versa.  

Instead, we’ll make decisions as we’ve always done: by keeping our clients’ long-term goals foremost in our minds. In other words, we’re not working to help you go fishing just this weekend.  We’re working to help you go fishing any weekend you want.  

As always, if you have any questions or concerns about the markets, please don’t hesitate to contact us. In the meantime, have a wonderful Spring!  

1 “We are now in a bear market – here’s what that means,” CNBC, December 24, 2018. https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html

2 “The stock market rally is one for the history books,” CNBC, February 22, 2019. https://www.cnbc.com/2019/02/22/the-stock-market-rally-to-start-2019-is-one-for-the-history-books.html

3 “The Stock Market is Having Its Strongest Start in 21 Years,” Money, March 20, 2019. http://money.com/money/5639032/stock-market-strong-start/

4 “Fed holds line on rates, says no more hikes ahead this year,” CNBC, March 20, 2019. https://www.cnbc.com/2019/03/20/fed-leaves-rates-unchanged.html

5 “Fear and Greed Index,” CNN Money, accessed April 17, 2019. https://money.cnn.com/data/fear-and-greed/

6 “Dow, S&P 500 and Nasdaq near records but stock-market volumes are the lowest in months,” MarketWatch, April 18, 2019. https://www.marketwatch.com/story/why-stock-market-volumes-are-the-lowest-in-months-as-the-dow-sp-500-and-nasdaq-test-records-2019-04-17

7 Rules of Investing

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

from one of the greatest investors of all time

Over the past century, many of the world’s leading economists have studied the art – or science – of investing. Dozens of investing theories, models, and systems have been created, most of them requiring a PhD to understand. But when it comes to learning how to invest, sometimes it’s best to turn to the people who do it for a living. 

Case in point, take Peter Lynch. 

From 1977 through 1990, Lynch ran one of the most successful mutual funds ever, posting an average annual return of 29%. Over his career, Lynch espoused many investing principles, but there are seven in particular that we think all investors should keep in mind.1 So without further ado, here are:

Peter Lynch’s 7 Rules of Investing

  1. KNOW WHAT YOU OWN. Invest in companies, industries, and funds you understand well. What do they do? Who uses their goods or services? Is it a company you would want to do business with yourself?
  2. PREDICTION IS FUTILE. No one can predict where the markets will go or what the economy will do, so don’t even try. Instead, focus on what you can control, like the types of companies or funds you invest in, how much you save, etc. 
  3. TAKE YOUR TIME. Investing isn’t a race. You have plenty of time to do your research and find outstanding companies to invest in. Follow the tortoise’s example, not the hare’s.
  4. AVOID LONG SHOTS. Investing isn’t gambling, either. While we have no control over the markets, we do have control over how much risk we take on. Your portfolio isn’t the place for speculation or bets. For that, head to Vegas. 
  5. BUY GOOD COMPANIES. Invest in companies that have proven management, a strong business model, and that sell things people actually use. Otherwise, you’re investing in companies you guess might prove popular…and that’s just another form of gambling. 
  6. LEARN FROM YOUR MISTAKES.  Even the greatest investors sometimes get things wrong. When that happens, accept it humbly and try to determine how you can improve.
  7. BEFORE YOU BUY, BE ABLE TO EXPLAIN. Before investing, can you explain to a family member what you’re buying and why? Can you describe how that company or fund works? If not, take your time and do more research.

Ultimately, all investing comes with risk, and there is no strategy or rule that guarantees success. But there are solid “rules of thumb” you can follow to make smart, simple investment decisions. 

And best of all, you don’t need a PhD to understand them! 

1 “The Greatest Investors: Peter Lynch” https://www.investopedia.com/university/greatest/peterlynch.asp

Medicare – Insurance for Retirement #3

Written by Minich MacGregor Wealth Management on . Posted in Minich MacGregor Missive, News.

We have come to the final lap with Medicare.  The three articles that have made up this series are in no way a complete analysis on Medicare, but hopefully this information will provide you with a good understanding of the basics of Medicare planning.

Medigap Plans (also known as Medicare Supplement)

Medigap is extra health insurance that is purchased from an insurance company to help control the costs of healthcare expenses. For a monthly premium, a Medigap policy can help pay for things such as deductibles, co-pays, and/or co-insurance of your Basic Medicare (Part A and B).  Medigap can also be used for health care expenses if you travel outside the U.S.  Medigap policies will not cover things like long term care, dental care, vision care, eye glasses, hearing aids, and private nursing.  Medigap can be used to put a maximum cap on your annual medical expenses. This is very useful because Medicare Part A and B do not have a maximum out-of-pocket expense limit. It should be noted, that many Part C plans include some maximum out-of-pocket limit.

Medigap comes in many distinct “Parts” (Medigap Part A through N) and they are standardized. This means that the benefits of each Medigap Plan are the same regardless of the insurance provider.   It is important to note that Minnesota, Wisconsin and Massachusetts have different Medigap policies. 

Medigap can deny you for a pre-existing condition if you apply for a Medigap policy more than 6 months after you apply for Part B – no matter if you are still working or not. For example, you turn 65 and apply for Part B, but because you are still working you decide to not apply for Part C or Medigap. At age 68, you incur a preexisting condition and so you retire. At that point, you try to sign up for Medigap, but because of your pre-existing condition, the insurance company may deny you. Furthermore, a preexisting condition may not be covered within the first 6 months of signing up for Medigap. Note, that Part C cannot exclude you from coverage because of a preexisting condition, so it ends up being the back-up plan for many savvy people in this position.

Depending on the amount of insurance coverage you are looking to obtain, most iterations of how people get Medicare coverage is as follows:

  • Medicare Part A, B, and Part D (least amount of coverage)
  • Medicare Part A, B, and Part C (average amount of coverage)
  • Medicare Part A, B, D, and Medigap (most amount of coverage)

In the above, Option 2 or 3 are usually the most recommended strategies because of how inexpensive a Part C (Medicare Advantage Plan) can be in comparison to a standalone Part D. To go from Option 2 to Option 3, expect much higher monthly premiums. Those who expect to need that much insurance may benefit from Medigap policy, but because of the higher premiums ($51/month to $568/month, depending on the Plan) it is not for everyone.

Now that we have gone over the basics of Medicare, what are the next steps? If you are looking to get advice or find the strategies that are specific to you, please call our office to schedule an appointment.  We have been able to assist a good number of people in making well informed decisions when it comes to Medicare and their individual needs. 

It is also important to note that many states offer health insurance advisors and Medicare consultants whose sole objective is helping people evaluate health plans.  If you would like to discuss specific Medicare health care plans with your local Medicare office, visit www.shiptacenter.org to find a counselor in your area.

Medicare – Insurance for Retirement #2

Written by Minich MacGregor Wealth Management on . Posted in Archives.

We reviewed Medicare Part A and Part B, in the first article in this series.  Now it is time to explore Medicare Part C and Part D. If you need a refresher on Part A and Part B, that article can be viewed on our website: http://www.mmwealth.com/medicare-insurance-for-retirement-1/

Medicare Part C

Part C is also known as Medicare Advantage Plans. Unlike Parts A and B, Part C is optional (Part B is technically optional, but usually it is highly recommended). Before signing up for Part C, you must sign up for Part A and B. Many times, Part C covers the same things covered by Part A and B, however it also covers additional items of insurance including vision, prescriptions, and dental. 

Part C is supplemental insurance to Medicare Part A and B, but it should not be confused with Medicare Supplement Plan or “Medigap”.  We will cover Medigap policies in part 3 of this article series.   

The cost of Medicare Advantage Plans, or Medicare Part C, can vary greatly because the premium increases as supplemental items are added to the coverage. The average monthly premium is approximately $34.00.  Premiums can be as low as $0, but remember, nothing is truly free because there are co-pays and deductibles. The cost of premiums also varies based on geography.  Be aware that a New York policy may not be usable in Florida.

Medicare Advantage insurance is purchased through a private insurance company, which is why comparative shopping every year is important. Sticking with the same coverage year after year may end up being a costly mistake because premiums can increase, coverage may change, and your health needs may be different over time.   It is a best practice to make sure your current Part C coverage is still the best solution for you when enrollment begins on October 15th.  The best policy does not necessarily mean the cheapest premiums, deductibles and co-pays. It is important to make sure the policy works well with the preferred doctors in your area.   

Medicare Part A and B offer a 7-month enrollment window however, Medicare Advantage offers individuals two months to sign up after a special enrollment event (i.e. retirement).  If the enrollment window is missed, the next opportunity will be open enrollment which begins on October 15th.  One key fact to remember: a person cannot be disqualified based on preexisting conditions.

The government rates Medicare Advantage (Part C) and Prescription Drug (Part D) plans using a scale of one to five stars.  Individuals that are eligible can enroll in a five-star plan anytime throughout the year.  This is a convenient option for those that want or need to obtain coverage before October 15th or after December 7th.    

Medicare Part D

Medicare Part D is also known as the Medicare prescription drug benefit.   It is an optional plan for those that have signed up for Medicare Part A and B only, or those who have Part A, B and Medigap.  Individuals that have Medicare Part C coverage may not need Part D because prescriptions are usually covered by Part C.   

There is a late-enrollment penalty for those that do not enroll for Part D when they were first eligible and do not have creditable prescription coverage from a source such as an employer or Medicare Part C.  The late enrollment penalty is 1% of the national base beneficiary premium ($35.02 in 2018) multiplied by the number of months the person could have had Part D but did not. For example, waiting 12 months after you retire and not signing up for another credible prescription drug coverage means that your Part D premiums will be $3.50 more per month for the rest of your life. It is not a considerable amount, but it is an easy expense to avoid by being aware of the enrollment guidelines.

Part D standalone must cover at least two drugs per drug category, but each plan can choose which specific drugs they cover. It is the individual’s responsibility to shop for the Part D plan that will best cover the prescription drugs they need.  Individuals should not purchase a Part D plan thinking it covers all prescription drugs, because it will not.

Just like with Part C, Medicare Part D is purchased with a private insurer, which means comparative shopping each year is a good idea for those that have a standalone Part D plan.   The main reason for this is because the prescription drugs covered by the plan may change.  Those that are enrolled in Part D will receive a packet of information in September that details the changes to the current plan.   

The average monthly premium in 2018 for Part D is $43.00 per month.  Part D’s premium is not the major expense of this insurance, it is, in fact, the co-pay. The copays for different Part D policies vary greatly and therefore it is important to look at the co-pays of the drugs that you may take to understand what your total out-of-pocket expenses will be (Premiums + Copays).

In the next and final article in this series, we will look at Medigap also known as Medicare Supplemental Policy.    

Check the other artciles
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Protect Your Identity – Free Credit Freeze

Written by Minich MacGregor Wealth Management on . Posted in Archives.

It’s been over a year since Equifax, one of the three largest credit reporting agencies in the U.S., revealed they’d been hacked.  Because the hackers were able to access everything from Social Security numbers to payment histories to driver’s license numbers, the cyberattack put over 145 million Americans at risk of identity theft.1

What did you do to protect your data?

If you’re like most Americans, the answer is probably, “not much.”  According to a survey by AARP, only 14% of adults chose to freeze their credit after the hack – even though freezing your credit is one of the best ways to prevent identity theft.2 

One possible reason for this is that credit freezes have traditionally cost money.  But now you can freeze your credit for free!

Thanks to the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” a new law enacted in May, credit reporting bureaus like Equifax, TransUnion, and Experian must offer free credit freezes.3    

SEC. 301. PROTECTING CONSUMERS’ CREDIT.

“(A) IN GENERAL.— Upon receiving a direct request from a consumer that a consumer reporting agency place a security freeze, and upon receiving proper identification from the consumer, the consumer reporting agency shall, free of charge, place the security freeze not later than…1 business day after receiving a request by telephone or electronic means…[or] 3 business days after a request that is by mail.”3 

– Economic Growth, Regulatory Relief, and Consumer Protection Act

What is a credit freeze?

To calculate your credit, agencies like Equifax store important data like loan and payment history, birth dates, Social Security numbers, and more.  Whenever you apply for a loan or approval on a credit card, banks and other lenders will request that information from a credit reporting agency. 

When you apply for a credit freeze, the agency will essentially lock, or freeze, your file so that it can’t be accessed.  That way, even if a lender requests your information, the agency will not release it until you “thaw” the freeze first.  It’s an excellent way to keep your personal information from falling into the wrong hands.  That’s because it “makes it harder for criminals to use stolen information to open fraudulent accounts, or borrow money, in your name.”4 

In many cases, you can safely keep your credit frozen year-round unless you need to apply for a loan.  Unfortunately, many people don’t take advantage of this.  Some probably didn’t want to pay the money, while others find the process to arduous.  And some, likely, don’t think identity theft will ever happen to them.  That’s despite the fact that, in 2014 alone, 17.6 million Americans experienced identity theft!5

In our opinion, freezing your credit is definitely an option to consider. 

A few things to know:

  • To get the most protection, you should freeze your credit at all three of the major credit reporting agencies.  Visit these websites to learn how:

TransUnion: transunion.com/credit-freeze

Experian: experian.com/freeze/center.html

Equifax: equifax.com/personal/credit-report-services

  • The new law also enables parents to freeze their children’s credit for free if they are under age 16.  While a child’s identity is usually not as vulnerable as an adult’s, it still should be protected, and it’s a terrific way to teach children about the dangers of identity theft!
  • While a credit freeze is a valuable weapon in the fight against identity theft, it won’t protect you from everything.  That’s why you should check your credit report regularly.  (You can still request a credit report even if your credit is frozen.) 
  • Freezing your credit will not affect your credit score.

To learn more, visit the Federal Trade Commission’s website at https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs. 

Identity theft is one of the biggest threats to reaching your financial goals.  Take steps to protect your identity as soon as possible.  Please let us know if you have any questions – and be sure to visit the links listed above to learn more!

1 Stacy Cowley, “2.5 Million More People Potentially Exposed in Equifax Breach”, The New York Times, October 2, 2017.  https://www.nytimes.com/2017/10/02/business/equifax-breach.html?module=inline

2 “Up for Grabs: Taking Charge of Your Digital Identity,” AARP National Survey, August 2018.  https://www.aarp.org/content/dam/aarp/research/surveys_statistics/econ/2018/taking-charge-of-your-digital-identity-national.doi.10.26419-2Fres.00228.000.pdf

3 “Text of the Economic Growth, Regulatory Relief, and Consumer Protection Act,” https://www.congress.gov/bill/115th-congress/senate-bill/2155/text

4 Ann Carrns, “Freezing Credit Will Now Be Free,” The New York Times, September 14, 2018.  https://www.nytimes.com/2018/09/14/your-money/credit-freeze-free.html

5 “17.6 million U.S. residents experienced identity theft in 2014,” Bureau of Justice Statistics, https://www.bjs.gov/content/pub/press/vit14pr.cfm

Medicare – Insurance for Retirement #1

Written by Minich MacGregor Wealth Management on . Posted in Archives.

Introduction – The Complexities of Medicare

Medicare is the health insurance that people dread to think about because of the complexities and lack of information available. Many, even those already on Medicare, do not know the rules or how it works. Once they sign up for Medicare, most think it’s a set-it-and-forget-it health insurance. But, premiums can increase, benefits can change, and medical needs can increase. It is for these reasons that it is important to understand Medicare before and after you sign up for it.

This is article number one of a three-part series on Medicare. Open enrollment for certain parts of Medicare started on October 15th and now is as good a time as any to better understand Medicare. This article will address Basic Medicare (Part A and B). Our next article will go over Medicare Advantage Plans (also known as Part C) and Part D. The third and final article in this series will focus on the Medicare Supplement Plan (also known as Medigap).

Medicare Part A

Medicare Part A is known as hospital insurance. It covers hospitalization, skilled nursing facility care, inpatient care in a skilled nursing facility, hospice care and home health care.

Generally, it is available to people that are 65 years or older (as well as younger people with disabilities or end stage renal failure). Part A is premium free if you are 65 or older and you or your spouse have worked and paid Medicare taxes for a minimum of 10 years.

Although Part A is premium free, that does not mean there’s no out-of-pocket expense. In 2018, there is a $1,340 deductible per “spell of illness”. A single “spell of illness” begins when the patient is admitted to a hospital or other covered facility, and ends when the patient has gone 60 days without being readmitted to a hospital or other facility. That means that if you need to be hospitalized, you must pay $1,340 out-of-pocket as a deductible and then Part A kicks in. If you pay $1,340 as a deductible, leave the hospital and come back in 3 months for a different reason, you would have to pay the deductible again. This surprises many people because they are used to the annual deductible reset, not the 60-day deductible reset.

Another aspect of Part A that people find surprising is there is no maximum out-of-pocket expense. If you need skilled nursing care for home health care, you must pay the $1,340 deductible and then Medicare Part A will help pay for SOME of the costs, not all. Therefore, if you need Part A coverage for more than 100-150 days for hospitalization or skilled nursing care, you may have to pay the entire bill thereafter. This, of course, can lead to catastrophic healthcare expenses. We will discuss a potential solution in our upcoming articles.

Medicare Part A is the first part of Basic Medicare. Because there is no premium, there is no reason why most people should not sign up for Medicare Part A three months prior to their 65th birthday. There is one specific exception…if you are working, covered by your employer’s high deductible healthcare plan AND contributing to your Health Savings Account. If this is the case then you should visit our office to speak with us to determine if it makes sense for you to sign up for Part A.

Medicare Part B

Medicare Part B is known as medical insurance. It helps covers services and supplies that are medically necessary for the diagnosis or treatment of a health condition. This includes outpatient services, at a hospital, doctor’s office, clinic, or other health facility. Medicare Part B also helps cover many preventive services to prevent illness or detect them at an early stage. Together, Medicare Part A and Part B are known as Original Medicare.

Part B has the same eligibility as Part A – 65 years of age or older and you or your spouse have worked and paid Medicare taxes for a minimum of 10 years.

Unlike Part A, Part B has a monthly premium and a yearly deductible. The monthly premium for 2018 starts at $134 amount and can increase if your gross income (which is your adjusted gross income plus tax-exempt interest) is above a certain amount. Higher premiums may also apply if you do not enroll in Medicare Part B when you were first eligible.

The deductible for Part B is relatively low ($183 per year in 2018). Furthermore, Part B has a coinsurance of 80%.

After the initial yearly deductible, Part B will pay for 80% of the “Medicare-approved amount”. This basically means Medicare says what something should cost. If a medical provider charges 120% of what Medicare says it should cost, you will have to pay for that extra 20% premium. In truth, Medicare Part B, on average, will only pay about 60% of these medical costs! Lastly, just like Part A, there is no limit on out-of-pocket expenses.

For a variety of reasons, it does not always make sense for someone to sign up for Part B at age 65. If you are still employed with a company that has a minimum of 20 employees, or if your spouse is, you do not have to sign up for Medicare Part B. Instead, you can stay on the medical plan offered by your or your spouse’s employer. If you plan to do this, you should check with the benefits administrator to see how the plan works with Medicare. A good rule of thumb is when you hear that your work insurance is secondary to Medicare, it would be a good idea to apply for Part A and B at the very least.

Enrollment for Medicare Part A and B is easy. Call Social Security at 800-772-1213 or go to the nearest Social Security office. Bring your photo identification (state issued ID or passport) and proof of your birth (birth certificate). You will also need proof of your marriage (marriage certificate) if you are applying for Medicare through your spouse’s work record. You can sign up for Medicare three months before your 65th birth month. For example, if you were born in July, you can apply for Medicare on April 1st for the benefits to start July 1st.

We will cover Medicare Part C, D and Supplemental in our upcoming articles.