Here are a few articles we were reading this month that we wanted to pass along to you. Enjoy!
Most retirees will pay for Medicare Part B costs directly from their social security checks. However, for higher-income individuals, they can face a substantial "income-related monthly adjustment amount" (IRMAA). This applies a surcharge to Part B and Part D premiums based on the two prior years' Modified Adjusted Gross Income. The income thresholds kick in at $85,000 of MAGI for individuals and $170,000 for couples. Strategies that manage AGI become very appealing for those nearing the thresholds, especially if income can be manipulated to come in just below one of the tiers. Potential strategies include: do partial Roth conversions up to (but not above) the first/next MAGI threshold, to reduce taxation of IRAs (or taxable RMDs) in future years; complete Qualified Charitable Distriubtions to statisfy RMDs, and purchase a non-qualified deferred annuity to limit annual exposure to taxable growth.
Over the past 30 years, college tuition has risen a whopping 400% (an average annual growth rate of about 5.5%, with growth at 6%/year since 1990), sparking an emerging student loan crisis as young adults struggle to afford tuition. Now, however, the tide may be starting to turn, with tuition at college and graduate schools (after scholarships and grants) up just 1.9% last year, moving in-line with the general level of inflation. The problem appears to be a combination of the sheer challenges of affordability, and the fact that the number of two-year and four-year colleges rose 33% from 1990 to 2012, even as college enrollment has declined by 4% from its peak in 2010; in other words, there may be a supply-demand shift underway, as a growing number of colleges compete for fewer students, driving them to offer more discounts and even cut prices in some cases.
As the studies of lottery winners regularly show, just giving someone a giant pile of money doesn’t mean they’ll be able to turn it into sustainable wealth, which requires a certain mindset beyond “just” being able to get the money in the first place (whether by lottery, inheritance, or the hard work of earning, saving, and investing). So what are the mindset habits of those who tend to retain their wealth? Key areas include:
1) the rich are voracious readers (as Buffett is known to be a voracious reader, along with Mark Cuban, Bill Gates, and Elon Musk)
2) be “relentlessly resourceful” by not just making excuses, but trying to figure out how to do whatever it takes to move forward and improve (in other words, if you’re dealt a bad hand, don’t blame the dealer, just figure out if there’s a way to win);
3) the rich don’t save, they invest (compound interest!)
4) believe in positive energy and people (as the famous saying goes, “you are the average of the five people you surround yourself with”),
5) have big expectations, but with easily-definable goals (as if you don’t know where you want to end up, it’s hard to figure out what steps to take in order to get there, or build the habits it takes to sustain the path of success); and
6) learn from other people’s mistakes (as at a minimum, you should try to only make a mistake once and not repeatedly, but ideally you should try to learn from the mistakes of others so you don’t have to make as many mistakes in the first place!).
Eric Barker offers 6 suggestions:
1) Book the trip as early as possible, to build the anticipation (as it turns out more anticipation actually elevates how much we enjoy the vacation itself!);
2) Remember to plan the trip around your personality and what you like to do, and don’t just overschedule events or overly focus on getting “value” even if it’s not what you really like;
3) Have a structured schedule, even if the “structure” includes allotments for free time, because it turns out that the frequency of enjoyable activities beats the intensity (which means multiple fun things beats a long time at just one fun thing);
4) Savor the experience by finding ways to stay in the moment (which means trying to unplug, at least for some of the time!);
5) Use the “Peak-End” rule, recognizing that what we remember most tends to be what comes at the end (so schedule your most fun and enjoyable items at the end, so they’re the last fond memories you leave with!); and
6) Ease back into work, rather than just scheduling yourself to plunge right back in full steam (which can just amplify the stress of the transition, and turn that negative finale into your “peak-end” experience!).
While most consumers are accustomed to getting their health care by visiting a local doctor’s office, submitting insurance information, being seen by the doctor, and then paying any co-pay or coinsurance obligation (while the doctor’s office files a claim for the rest), in recent years a new type of doctor’s model is emerging: dubbed “direct primary care” and around since the late 1990s (but gaining more momentum in recent years), the practices don’t accept insurance at all, and instead simply charge an ongoing monthly membership fee that covers everything from doctor’s visits themselves, to many types of prescription drugs and lab visits that can be purchased at ‘wholesale’ prices (plus perhaps just a small 10% markup). Part of the competitive advantage for direct primary care physicians is that, thanks to less overhead for handling insurance filings and claims, they can generate similar revenue but see fewer patients (with direct primary care doctors keeping no more than 500 – 1,000 patients, compared to 2,000+ for typical family practice doctors), allowing more time for each visit, and more flexibility for scheduling appointments. Notably, direct primary care is different than the emerging “concierge medicine”, where the former may cost no more than $100 – $200/month, and the latter may cost thousands per month; the distinction is that direct primary care isn’t meant to replace the full spectrum of health care needs, but simply a different way to access primary care doctors directly.