Medicare’s IRMAA

SS and med
It’s that time of year! The Medicare enrollment period recently began on October 15th and will stay open until December 7th. While the baseline premiums for Medicare Part B aren’t expected to change for 2018, there will be some changes related to income-based surcharges that could impact you.

What Is IRMAA?
Income-Related Monthly Adjustment Amounts (IRMAA) are surcharges that are applied to Medicare Part B and Part D Premiums for higher-income Medicare recipients. There are 4 different “brackets” of surcharges, each corresponding to a specified range of income.

How is Eligibility Determined? IRMAA eligibility is determined by looking at your tax return from two years prior. In other words, information from your 2016 tax return will determine your IRMAA eligibility and any potential surcharge for 2018.

How Is the IRMAA Calculated? IRMAA surcharges and the income bracket structure have been in place since 2007. But in 2018, three brackets will be defined by a lower income threshold, which means the same level of income may now lead to a higher surcharge than in previous years. We’ve noted the changes below:
IRMAA Blog Post Table

What Can You Do About It? If you have experienced a “life-changing” event in the last two years, you may be able to request that Social Security revisit the surcharge determination. Marriage, divorce, death of a spouse, reduced work hours/retirement, and loss of a pension are all considered life-changing events and may help you qualify for a lower IRMAA determination. To request a new initial determination, you can schedule an appointment with Social Security, or submit a Medicare IRMAA Life-Changing Event form, which can be found here:

If you think the new IRMAA surcharge income brackets may impact you, or if you have questions, Woodward Financial Advisors is here to help.

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Woodward Financial Advisors to Teach Retirement Planning Class: October/November, 2017

Woodward Financial Advisors will once again teach a retirement planning class on the UNC-Chapel Hill campus. Several clients and blog readers are graduates of this course, and reviews have been consistently positive.

Our next course offering will be in October/November, 2017. If you know someone who might be interested in the course, please forward this on to them.

(Please note that this course is not intended for current clients of Woodward Financial Advisors since the material covered is already part of the advice given to current clients.)

Classes will be held on Wednesdays (October 25, November 1 and November 8) from 7 PM – 9 PM

Location: UNC-Chapel Hill Friday Center (100 Friday Center Drive, Chapel Hill, NC  27517)

Course Description: Retirement Planning Today Course Description

Instructor: Benjamin Birken, CFP®

Tuition is $49, which includes the 224-page textbook.

To register, please complete the online registration form  and use Course ID: 5955421, or call our registration hotline at (984) 960-1985

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Trust the Process

Flow Chart

Over the last 4 years, the NBA’s Philadelphia 76ers have consistently lost in historic fashion. Strange as it might sound, this was intentional: the worst team each year has the highest odds of winning an early pick in the next year’s draft, which is usually where the better players can be found. Philadelphia’s management believed that this was their best path to getting better. And by some metrics, the plan worked. Those four years of epic and calculated losing resulted in lots of high draft picks, and Philadelphia is now formidable.  Along the way – despite much ridicule and public pressure – the 76ers clung to a simple mantra: Trust the Process.

We’re not building a basketball team at Woodward Financial Advisors (yet), and we certainly don’t advocate losing on purpose. But we wholeheartedly subscribe to the importance of processes. While the 76ers have been busy losing, we’ve been building, tweaking and formalizing the processes and workflows that make our firm run.

There’s a tendency to avoid talking about what goes on behind the scenes at advisory firms, with the belief that folks don’t want to “see how the sausage is made.” That’s understandable in some circumstances. But if I was on the outside looking in, I would draw tremendous comfort from learning that an organization that I trusted to manage my life’s savings went to great lengths to formalize and institutionalize all the tasks that go into accomplishing that.

Our business processes range from the mundane (e.g., changing a client’s address) to the series of steps and tasks that go into preparing for and holding a client meeting. One of the more frequently used processes is for when clients call to request cash from their portfolios, a simplified version of which is laid out below:

Cash Distribution Flow Chart


Each box represents a separate task in this process. As each task is completed, the subsequent task is triggered and shows up on the next person’s to-do list. Some steps are only kicked off if certain criteria are met. For example, if a client account has enough cash such that any scheduled distributions won’t be compromised by the request, we might not suggest or make any trades. In other business processes, some tasks consist of instructions to refer to a separate checklist that contains items to review, like with our annual Tax Return Review.

So far, we’ve got 55 active business processes, and we’re constantly tinkering. We have a standing Process Committee whose job it is to solicit feedback, develop new processes and refine existing ones.

Why do we spend so much time thinking about and improving our processes?

  1. Consistency – we want to make sure that all clients enjoy the same client experience. Processes ensure that we all do things the same way for each client.
  2. Accountability – each step in a business process is assigned to someone. That way, we can see where we are in each process, as well as where any bottlenecks might be.
  3. Risk Management – if only one person knows how to do perform some action and that person goes on vacation or gets hit by a bus, we’re in trouble. By documenting our processes, we make ourselves a lot less vulnerable to losing institutional knowledge.
  4. Training – it’s a lot easier to bring a new WFA team member up to speed on how we do things if everything is documented.

We can’t control every outcome. But we can certainly control the steps in the process. In future blog posts, we’ll talk about how this idea is infused into many of the planning and investment-related things we do.

We know that our process-oriented culture results in long-term success for our clients. If you think we might be able to help you, let us know.

Posted in Financial Planning, Firm News | 1 Comment

A Day in the Life – Part 2

41236520 - piggybank with eyeglasses and calculator on wooden table

I previously shared an eye into a “typical” day in the life of a Senior Financial Planner at Woodward Financial Advisors in Part 1.  Since it was so well received and no day is actually “typical,” here is another sampling. It turns out this day doesn’t involve client meetings but instead a lot of behind the scenes research.

9:00 – 10:00 am – Analysis of client I-bond holdings

Mr. and Mrs. Adams emailed us last night to let us know they have some paper I-bond certificates and aren’t sure what to do with them. I do some research to confirm my understanding of these bonds, including taxation and interest rate details as well as how our client can convert these paper bonds to an electronic version.  That’s step one.  The next step will be to slowly divest of these bonds based on my knowledge of this client’s specific situation.

10:00 – 11:00 am – Cost basis analysis

Ms. Jefferson has asked for our help sorting out the cost basis for the numerous stock holdings that she accumulated over the years. Some of the holdings were inherited, some were gifted and some she purchased. We break out the spreadsheet and stock-split history to make progress on this initiative, which will take some time to complete.

11:00 am – 1:30 pm – Rebalancing of client portfolios

I’ve got several portfolios to rebalance today and a lot of information goes into the rebalancing thought process. I’m balancing in my mind a client’s tax situation, their cash flow needs, their target asset allocation and what the trading costs will be. I’ll follow our firm’s process to recommend trades, get them approved and execute.

1:30pm – 2:00pm – Lunch

I’m having lunch in the office today with my colleague, Allison. She and I are both senior planners here at Woodward so it’s great to chat and to share ideas about common client challenges we’ve encountered and solutions we’re currently implementing.

2:00 – 2:30 pm – Discuss Social Security claiming strategy with client

I have a phone call with Mrs. Washington to review the claiming strategy she and her husband will use when applying for their Social Security benefits. Every client is different – some clients will be waiting until they turn 70 to turn on their benefits while others will be collecting benefits earlier and potentially taking advantage of some advanced strategies like filing a Restricted Application.

2:30 – 3:30 pm Summarize Insurance quotes for client

Mr. and Mrs. Madison asked us to obtain some price quotes for both disability insurance and long-term care insurance. As fee-only advisors we don’t sell insurance, but we certainly help our client shop for policies. Once designed these policies will likely cost several thousand dollars per year. While expensive, the financial protection the policies provide is worth the cost.  I’ll write up a summary and send to our clients to see if they have any questions or if they’d like to move forward with obtaining either of these policies.

3:30 – 4:30 pm Long Term Care hybrid analysis

Mr. and Mrs. Monroe had some whole life insurance policies that they weren’t actively using to meet any of their goals. They didn’t particularly need the policies but the premiums were reasonable and the policies were paying a decent participating dividend. The Monroes wanted some long-term care insurance but didn’t want to buy traditional long-term care insurance. Instead they asked us to investigate some ways that they could obtain additional long-term care insurance but still retain some of the benefits of traditional life insurance. We looked at a few different options and were able to help them obtain a hybrid life-LTC policy that met their needs.

4:30 – 5:00 pm Annuity Analysis

Mrs. Jackson purchased an annuity from her previous financial advisor with various guaranteed income benefit riders.  We put in a call to that insurance company and spent some time understanding how the annuity works and what income options are available to the her. It turns out that since the annuity was purchased before the 2008 market downturn, taking advantage of the GMIB (guaranteed monthly income benefit) annuity riders is probably going to be in the best interest of the client.  I call Mrs. Jackson to deliver my analysis and make recommendations on how she should proceed.  Since this is a very confusing product, she was thankful to have this analysis performed.

5:00 – 5:30 pm Wrap-Up

I look over my inbox to see if there are any more follow up emails that need to go out today, then I look at my calendar for the following day and the rest of the week to see what’s on the docket. I can see upcoming meetings, more analysis work and investment related projects. The biggest things I see are more opportunities to help serve our clients and help them simplify their financial lives.



Disclosure:  All names of individuals used in this post are fictitious.  Any resemblance to actual clients is purely coincidental.


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