Key Financial Benefits to Look Forward To
November is the month to give thanks for life’s blessings, including family, friends, health and the freedom to enjoy retirement. As we approach a new year, retirees may also have some financial benefits to be thankful for, including the following.
#1 – A new out-of-pocket maximum on prescription drug expenses
A key change to Medicare in 2025 is a $2,000 out-of-pocket maximum for prescription drugs covered by Medicare Part D and Medicare Advantage plans. This $2,000 maximum applies to deductibles, coinsurance and copayments for eligible drugs.
Here’s how that $2,000 out-of-pocket maximum is reached:
- Deductible – If your Part D or Medicare Advantage drug plan requires a deductible, you’ll need to pay 100% of your prescription drug expenses until you reach the 2025 deductible amount of $590.
- Initial coverage – Once you’ve met the $590 deductible, you’ll pay 25% coinsurance for covered medications until you’ve reached the $2,000 out-of-pocket maximum.
- Catastrophic coverage – Catastrophic coverage kicks in once you’ve met the $2,000 maximum. At this point, you’ll pay nothing additional for your prescription drugs during the plan year.
It’s important to note that this maximum doesn’t apply to premiums or drugs that aren’t covered by Medicare Part D. For example, chemotherapy or injections received at a doctor’s office are typically covered under Medicare Part B and aren’t included in the new out-of-pocket maximum.
#2 – Increases in Social Security benefits
The Social Security Administration recently announced several increases that will take effect in 2025, including the following:
- Cost-of-living adjustment (COLA) – 2025 benefits checks will increase by 2.5% to keep up with inflation.
- Maximum benefits – The maximum Social Security benefit for an individual at full retirement age (age 67 for those born after 1960) will increase from $3,822 in 2024 to $4,018 in 2025.
- Benefits for disabled workers and widows/widowers – Disabled workers, widows and widowers will be eligible for increased benefits in 2025. For example, a disabled worker with a spouse and one or more children may be eligible to receive $2,826 in 2025, up from $2,757 in 2024. Likewise, a widowed mother with two children may see an increase from $3,669 in 2024 to $3,761 in 2025.
#3 – Strong stock market performance
As of October 30, 2024, the year-to-date performance of the S&P 500 Index was 21.88%.1 If your portfolio remains invested for growth, you likely saw your account values rise over the course of the year. This could be good news for your long-term financial security.
As a reminder, we often recommend that our clients maintain three to five years of living expenses in a short-term, semiliquid investment account. This is typically a mix of bond funds that can provide a monthly income to support your living expenses. We then recommend that any additional assets be invested in a diversified portfolio that focuses on growth and inflation protection. This approach can help you access the upside potential of market growth while protecting your short-term savings from volatility. As you progress through retirement, your wealth manager will help you identify opportune times to transfer assets from your long-term portfolio to your short-term savings in a tax-efficient manner.
Do any of these topics leave you wondering if you’re on track for a successful, financially secure retirement? Creative Planning is here to help you prepare for — and walk you through — retirement. Our goal is to provide you with the confidence of knowing you’re on track to achieve your retirement goals. To do so, we integrate the various aspects of your financial life into a comprehensive financial plan specifically designed to help you retire. To learn more, schedule a call with a member of our team.
