Changes to 401Ks & Medicare in 2022, Ep #75

As we head into a new year, the typical changes the government makes regarding retirement accounts and government healthcare are being announced. It looks like we’re going to see changes to 401K accounts and changes to medicare premiums. Some of these changes are pretty significant, especially in light of the high rate of inflation and increased cost of living we’re experiencing at the moment. This episode is going to break it down for you.

Also, we have a number of very interesting listener questions and one in particular that I found very insightful, so I’ll be answering that question about how conservative bond fund investments can actually lose money over the short term. I invite you to listen!

You will want to hear this episode if you are interested in…

2022 changes to your 401K [5:43]
The largest Medicare premium increase in history is coming in 2022 [7:54]
Would you purchase a qualified longevity contract? (a deferred annuity) [14:25]
A flexible retirement date and has a bonus and vacation income to consider [16:07]
What are your thoughts about investing my company’s stock inside a 401K? [18:12]
A recommendation to create a self-directed IRA… should I do it? [20:24]

Additional investments to your 401K are allowed in 2022

As you know, the government restricts how much money investors can put into tax free or tax deferred retirement accounts like 401Ks and IRAs. But now and then, typically at the beginning of the year, changes are made to those rules. This is one of those times. The announcement came recently that you can now contribute an additional $1000 a year to your 401K plan. That means in total, you can contribute $20,500 into your plan… and here is still that $6500 for people over 50. You might be wondering, does that amount limit include the company match? No, it doesn’t. Those figures are only related to your personal contributions.

The 2022 Medicare Part B Premium is going up 14.5% – a planning lesson

Another significant thing that’s happened for 2022 is that the biggest Medicare premium increase in history is going to be implemented with the new year. Medicare announced a 14.5% increase to Medicare Part B premiums. That’s a monthly cost of $170.10 (at the lower income level). There is a sense in which this doesn’t make sense. Why? The government recently increased the amount of Social security benefits by 5.9% because of inflation and the increased cost of living. That’s great and it makes sense. But given that, you’d expect the Medicare Part B increase to be something similar, but it wasn’t. It was far more.

There’s a lesson about retirement planning to be learned here. Take a moment to consider what the premium was in 2012: $99.90. That means Medicare premiums have increased 70% in the last ten years. That’s a huge data point to consider when you’re planning for retirement in the next 10 years. Do you think those types of increases will flatten out or increase? The reality is that past increases can help us forecast what could happen in the future. This enables us to plan for a more accurate increased cost of living in your retirement.

Q: Why am I losing money when I’m investing in conservative bond funds?

Many people equate the term “conservative” with “loss prevention” when it comes to investing. But that’s not the case. This week a listener asked specifically about the losses they are experiencing in a conservative bond fund and the truth of the matter is that bonds are tied to inflation in an indirect way. That means they won’t be as good of an investment when inflation is high. You’ve got to recognize the things that affect each type of investment and diversify your investments into different buckets to avoid having too much risk in your portfolio. I cover this on the episode, so be sure you listen.