NEWSLETTER
2024 • Quarter 1 • Issue 9
Robert Dumais
Principal, LBA
FROM BOB DUMAIS' DESK:
Friend,

As we begin the new year, I hope this letter finds you happy and in good health. The arrival of a new year often prompts us to reflect on our lives, set new goals, and embrace positive changes. In the spirit of this tradition, I would like to propose a unique New Year's resolution that may not be what you'd expect, but is quite significant — getting your affairs in order.

It's a truth we shy away from, but none of us will live forever. Acknowledging this reality, why not make a resolution that goes beyond the usual promises. Consider taking a proactive step towards ensuring that when the inevitable happens, the transition will be a little less painful and difficult for your loved ones.

Getting your affairs in order involves organizing important documents, mapping out and maybe simplifying investments, creating a will, and ensuring that your final wishes are known and respected. While this may sound daunting, it can provide a profound sense of peace and security, and it’s a gift from you to your family.

As we celebrate the new year, let's embrace the opportunity to make positive changes that extend beyond our immediate gratifications. Let this be the year we prioritize not just our present but also the future we leave behind.

Wishing you a year filled with joy and peace.

Be well my friends,

Bob Dumais
Principal, LBA
TABLE OF CONTENTS
Now That's Funny
LBA 911
Good To Know
What's Uncle Sam Up To
It's Your Money
NOW THAT'S FUNNY
LBA 911
Medicare Changes After The December 7 Deadline
Even though the Medicare Annual Enrollment Period (AEP) ended on December 7th, the advisors at LBA continue to receive calls from people who are concerned about their Medicare elections.

The good news is that Medicare allows for certain exceptions or Special Enrollment Periods (SEPs). These SEPs allow individuals to make some changes to their Medicare benefits after December 7th.

Some common exceptions include:
  1. Moving - If you move to a new location.
  2. Loss of Other Coverage - Individuals who lose other health coverage, such as employer-sponsored insurance.
  3. Qualifying for Extra Help - Those who qualify for the Extra Help program, which assists with prescription drug costs.
  4. Dual Eligibility - Individuals eligible for both Medicare and Medicaid .

Regarding Medicare Advantage plans, special exceptions may include:
  1. Plan Termination - If your Medicare Advantage plan is terminated or is no longer available in your area.
  2. Star Rating Changes - If your plan's Star Rating changes significantly.
  3. Enrollment Errors or Misconduct - If you were enrolled in a plan due to an error, misrepresentation, or misconduct, you may have an opportunity to make changes.
  4. Medicare Advantage Open Enrollment Period - From January 1st to March 31st each year there is a period called MA OEP. During this time if you are already enrolled in a Medicare advantage plan, you have the option to make certain changes. Changes might include switching to another Medicare advantage plan or dropping your advantage plan to return to original Medicare.
These exceptions are subject to specific conditions and eligibility criteria. Talk with an LBA advisor for the most accurate and up-to-date information tailored to your individual circumstances.

GOOD TO KNOW
"SEQUENCE OF RETURNS"
WHAT DOES IT MEAN, WHY DOES IT MATTER
The concept “sequence of returns” is crucial, especially for senior citizens in retirement, as it directly influences their financial well-being. This concept refers to the timing of investment gains and losses during the withdrawal phase of retirement. The order in which these returns occur can significantly impact the sustainability of one's retirement income.

Consider two retirees with identical average returns over their retirement period, but also consider the order or sequence of the returns. If a retiree faces significant market downturns early in retirement, it can have a lasting impact on the overall portfolio. This is because withdrawals during market lows can deplete the principal faster, reducing the ability of the portfolio to recover even when the market rebounds.

For seniors, this means that the timing of market fluctuations, especially early in retirement, can have a lasting impact on the longevity of their savings. Managing the sequence of returns involves strategies such as diversification, having a well-structured withdrawal plan, and adjusting the investment portfolio based on market conditions. Understanding and addressing the sequence of returns is crucial for seniors to ensure a more secure and sustained income throughout their retirement years.
Our strategy at LBA is very conservative. We don’t want to see anyone lose money on our watch. We can help ensure that your nest egg will last as long as you do.
WHAT'S UNCLE SAM UP TO
The Senior Citizens Tax Elemination Act
Throughout your working careers, a percentage of your income is paid to the federal government to fund Social Security.
Prior to 1984, when you began collecting Social Security benefits, they were not subject to federal income taxes. After 1984, legislation was put in to tax a portion of those Social Security payments dependent on the recipient’s income level. So, if someone’s income reached or rose above certain thresholds, some portion of their Social Security benefit would be taxed at the federal level.

Congressmen from Florida and Kentucky feel that this is double taxation, and they have re-introduced The Senior Citizens Tax Elimination Act. For many seniors on a fixed income, paying taxes on their Social Security may be a financial hardship. The Senior Citizens Tax Elimination Act if passed would amend the internal revenue code to eliminate the inclusion of Social Security benefits and tier 1 railroad retirement benefits from an individual’s gross income.

The bill currently sits with the House Ways and Means Committee, and so far, there has been no companion measure at the US Senate. While it is wishful thinking that this act could actually be passed, it does face major hurdles.
IT'S YOUR MONEY
REQUIRED MINIMUM DISTRIBUTIONS (RMDs) - GUIDELINES AND STRATEGIES
The concept of RMD’s simply means that if you have retirement accounts which include dollars that have not been already taxed, at some point in time the government wants that tax revenue. The government provides a table which shows the percent of your dollars that you must pay taxes on in any given year based upon your age.
Guidelines:

1. RMDs typically start at age 72 for individuals who turn 70½ after December 31, 2019. If you reached 70½ before this date, the previous age of 70½ still applies.

2. RMDs are calculated based on life expectancy tables and the account balance at the end of the previous year.

3. Traditional IRAs, 401(k)s, 403(b)s, and other employer-sponsored retirement plans are generally subject to RMD rules.

4. Failing to take the full RMD amount can result in a substantial tax penalty which is usually 50% of the amount not withdrawn.
Strategies to deal with RMDs:

1. Consider withdrawing more than the RMD amount if your financial situation allows. This can help manage future tax implications and provide flexibility.

2. Make direct charitable donations from your IRA up to the RMD amount. This can satisfy the RMD requirement without adding to your taxable income.

3. Convert a portion of your traditional IRA to a Roth IRA. While this involves paying taxes on the converted amount, Roth IRAs are not subject to RMDs during the original account holder's lifetime.

4. If you're still working past age 72 and don't own more than 5% of the company, you may be able to delay RMDs from your employer-sponsored retirement plan until retirement.

5. Assess how RMDs fit into your overall estate plan, especially if you want to leave a legacy for heirs. Proper planning can help minimize the tax impact on your estate.
Remember, these strategies should be implemented based on individual circumstances, financial goals, and current tax laws.
The advisors at LBA are here to help.
LBA consultants aremembers of
OPEIU Local 25
Robert Dumais, Principal

275 West Natick Road
Suite 450
Warwick, RI 02886

401-868-1400 (O)
774-991-3369 (M)
401-737-0330 (F)
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