Question: Can you tell me what the Medicare premiums and deductibles will be next year?
Answer: Medicare Part A pays for inpatient hospital, nursing home and some health care. Next year, the hospital deductible will increase $36 to $876. There is no daily copay required for hospital stays of up to 60 days, but for stays of 61 to 90 days, the copay will be $219. In a skilled-nursing facility, beneficiaries are not subject to a daily co-payment for 20 days. After that, the cost is $109.50 a day for up to 100 days.
The monthly premium on Part B — which includes coverage for doctor and outpatient services and certain home-health services and durable medical equipment — will rise to $66.60 a month, an increase of $7.90.
If you are enrolled in a Medicare HMO, you may not be affected by the Part A increase.
Question: I'm a teacher who is unhappy with the investment choices in my 403(b) retirement plan, which consists primarily of high-cost annuities. Is there anything I can do?
Answer: Possibly. A special rule called a "90-24 transfer" may be your ticket. The rule gives some 403(b) participants a way to transfer savings to a special private account in which they can invest in low-cost mutual funds. Such a transfer will not trigger an income-tax or withdrawal penalty. But there's a hitch: Your plan must allow it.
If your plan permits transfers, consider transferring your money to a new 403(b)(7) account. Most mutual fund companies offer 403(b)(7) accounts.
If you're currently invested in annuities, watch out for stiff surrender charges that often last five to seven years. If you would pay high surrender fees to get out of your annuities, consider putting new contributions in your plan's money-market fund — if available — and periodically transferring the money out of the plan to the new custodial account. For more information on your 403(b) rights, go to www.403bwise.com.
Setting up a 403(b)(7) custodial plan can pay off handsomely because high fees can significantly reduce your return. For instance, if you contribute $3,000 annually to a low-cost plan — with, say, a $30 annual administrative fee — that grows at an average annual rate of 8 percent, you would have about $365,000 after 30 years.
Contrast that with a plan that has similar returns but which extracts 2.5 percent a year for annuity and investment advisory fees. After three decades, your nest egg in the high-cost plan would total just under $240,000 — 34 percent less.