TRAILER

Welcome to episode 81 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. There are a host of options when it comes to investing and there is an order of priority in which these should occur. In this episode, I’ll share my thoughts on that order.

In the tips, tricks, and strategies portion, I will share a tip regarding 401k contributions for those nearing retirement.

In this episode...

• Cash Flow Management [1:58]
• Emergency Fund [4:17]
• Contributing up to Company Match [5:51]
• Paying Down High-Interest Debt [6:20]
• Funding an HSA [7:50]
• Saving Further into a 401(k)/IRA [9:03]
• Extra Savings [10:12]

MAIN

I recently re-read the classic book, The Richest Man in Babylon. It’s a great story on how simple steps can help one build wealth, even those who are mired in debt. The truths contained therein are conveyed so well through the story that I’m having my oldest two boys read the book.

In the book The Richest Man in Babylon, its emphasis was more on savings than investing. Presently there are almost countless ways one can invest. For that reason and others the investment world can be overwhelming and as a result, many choose not to participate. And that is literally and figuratively unfortunate as far too many fail to make small changes that over time have massive results. This episode is meant to help demystify which investments one should select and in what order.

But of course, before we can even think of investing we need to ensure we are monitoring our cash flow. That is the money coming in and the money going out. Some call that a spending plan others call it a budget. I’ll go with the former as it seems more palatable and less restrictive than a budget.

The general rule of thumb when it comes to spending plans is pretty straightforward. One should allocate ~20% of your spending plan to your savings. Those savings can include an emergency fund as well as your retirement and non-retirement savings vehicles. I mention savings first as you should always get in the habit of paying yourself first. It’s an absolute game-changer. As Warren Buffett said so well, Do not save what is left after spending but spend what is left after saving.

Approximately ~50% of one’s budget should be spent on their needs. This would include housing (be it a mortgage or rent), groceries, electricity, transportation, etc. Finally, ~30% of your budget should be allocated to your wants such as a gym membership, eating out at restaurants, travel, etc. However, this should only be the case if all one’s higher interest-rate debt is paid off. I would define higher-interest debt as over 6% which is not your mortgage. Now some might argue that one’s health is paramount and that you should devote money to gym memberships, etc. I agree that one’s health is critical as I recently shared in episode 78 how the first wealth is health, but one can work out without the need of a gym. Additionally, one can eat without the need to go to a restaurant. For those reasons, these are considered “wants instead of their needs” expenditures.

Now that I’ve set a framework regarding cash flow planning the next step is to consider what should be the order of where one puts their money. This may seem similar to the baby steps that Dave Ramsey has made famous. I will share a few key differences between those steps. Dave’s Ramsey’s Baby Steps are great as a general rule and the impact he has had on thousands upon thousands of Americans is nothing short of remarkable so I’m in no way trying to belittle his steps.

The first step, which I will call 1a, which is similar to Dave Ramseys, is building up an emergency fund. As JP Morgan notes in its Guide to Retirement - Life is uncertain –spending shocks and/or...

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Welcome to episode 80 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This episode is part 2 of a 2 part series on Medicare, which is the Federal health insurance program that helps pay for the health care costs of retirees. In episode 79, which was part 1 of this series, I shared what one needs to understand about Medicare and in this episode I’ll share the most common Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding choosing between Medicare Advantage and Medicare Supplement Insurance.

In this episode...

• Medicare Isn't Cheap [2:23]
• Late Medicare Enrollment [4:47]
• Skipping Part D [5:46]
• Enrollment isn't One-time [6:48]
• Ignoring Pre-existing Conditions [7:50]

MAIN

In Episode 79 of the One for the Money podcast, I shared how expensive healthcare can be in retirement, even with Medicare covering a lot of the expenses. According to a survey released by the investment company Fidelity in August of 2024, most individuals expect healthcare costs in retirement to be~ $75,000 per person or $150,000 per couple but the actual expenses are $165,000 per person or $330k per couple. That is more than double what people estimate they will have to shell out.

Medicare will play a major role with regard to their health care in retirement. However, the Medicare system itself can be challenging to fully comprehend given the various coverage options, expenses, and deadlines involved.

Due to these misunderstandings far too many American’s make critical mistakes regarding their Medicare coverage. Here are five of the most common mistakes

First, many Americans might assume (given that they've paid into the Medicare system through payroll taxes throughout their careers) that Medicare coverage is completely free. Whereas, in reality, several parts of Medicare (e.g., Part B medical coverage (doctor visits) Part C, and Part D (which provides prescription drug coverage) require you to pay premiums. Further, even if one understands that they will have to pay premiums, they might not be familiar with Income-Related Monthly Adjustment Amount (IRMAA) surcharges (aka IRMAA), which apply to retirees with higher incomes in retirement which can increase their costs further. And so the Mistake people make is thinking Medicare is inexpensive or free but Medicare does not cover 100% of your healthcare  costs.

• Medicare part A covers inpatient hospital care, skilled nursing facility stays, hospice care, and some home health care,

Part A Deductible and Coinsurance Amounts for Calendar Years 2024 and 2025

by Type of Cost Sharing

2024

2025

Inpatient hospital deductible

$1,632

$1,676

Daily hospital coinsurance for 61st-90th day

$408

$419

Daily hospital coinsurance for lifetime reserve days

$816

$838

Skilled nursing facility daily coinsurance (days 21-100)

$204.00

$209.50

• Medicare Part B (Medical Insurance):.
• Part B is optional and available to anyone who qualifies for Part A. It requires a monthly premium, regardless of work history.
• Part B covers doctor visits, outpatient care, medical services like lab tests, and most preventive services.
• Premiums for part B in 2025 as low as 185/mo or as high as 628.90/month based on your income from the previous years. Those higher premiums are a result of the IRMAA charges I...

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Welcome to episode 79 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This part 1 of a 2 part series on Medicare. Medicare is a significant part of every single American’s retirement planning. Knowledge of Medicare is critical to making the most of your retirement. In this episode I’ll share what you need to understand about Medicare and in Episode 80 airing on February 15th, I’ll share the Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding Medicare enrollment.

In this episode...

• Rising Healthcare Costs [1:53]
• Medicare Basics [2:57]
• Importance of Annual Medicare Reviews [12:03]

MAIN

In Episode 79 of the One for the Money podcast, I shared how the first wealth is health. I also shared the importance of exercise and nutrition and how they can increase not only one’s life span, but their health span, which is the years one has good health. Because healthier retirees incur fewer health related expenses it really is in retirees long term financial interest to INVEST in their health because health care related expenses in retirement are WAY higher than what most people anticipate.

In fact last August, the investment company Fidelity released its Fidelity's latest Retiree Health Care Cost Estimate, which surveyed retirees. Most individuals surveyed expect their share of health care related expenses in retirement to be ~ $75,000 retirement (or $150k per couple), but current retiree healthcare expense data shows that each individual should expect to pay $165,000 or $330k/couple in retirement for health care expenses. That is more than double what people estimate they will have to shell out. Now these estimates assume that these individuals have health care coverage through Medicare. This might have many scratching their heads wondering what Medicare actually pays for. Quite a lot actually, it’s just that health care is incredibly expensive especially as one ages.

I’ll first explain what Medicare is and what it takes to be eligible before explaining why health care costs in retirement are still expensive even with Medicare.

Medicare is health insurance for retired Americans. According to usdebtclock.org, the the US government spent ~ $1.8 Trillion dollars on Medicare/Medicaid in 2024 which accounts for over 25% of the annual Federal budget.

Some of Medicare is paid for through payroll taxes. Employees pay 1.45% of their income and employers pay another 1.45% of their employees income to the government to help fund Medicare and Medicaid. These are part of the Federal Insurance Contributions Act or (FICA) taxes that we pay on our income. Social Security is funded with a tax of 6.2% paid by the employee and another 6.2% paid by the employer. However this is only paid on the first $176,100 of income. Any income earned above that level is not subject to the SS tax, and that’s because there is an upper limit on the social security benefit one could receive. However, the 1.45% medicare tax has no income limit so whether a person earns income of $10,000 or $10 million the Medicare taxes are applied to the entire amount.

Now Medicare has been around for a long time.

In 1935: President Franklin D. Roosevelt’s New Deal included the Social Security Act, which provided retirement benefits but did not include health insurance. Efforts to include health coverage in the program were unsuccessful due to political opposition.

By the 1960s, about half of Americans over 65...