Ask Liz Weston

Get smart with your money

Q&A

Q&A: Small firms have special Medicare Part B rules

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Dear Liz: You recently answered a question about whether someone 65 or older with employer-provided health insurance needs to sign up for Medicare Part B, which covers doctors’ visits and requires paying premiums. Your answer was correct for an employee of a large employer. If the employer has 20 or more employees on a typical business day, then the group insurance coverage is primary when the employee has both Medicare and group insurance. So the employee does not need to purchase Medicare Part B. However, if the employer has fewer than 20 employees on a typical business day, then Medicare is primary for the employee. In that situation, the employee should buy Medicare Part B. The group health plan will not pay what Medicare should have paid had the employee elected Part B. Your answer needs the appropriate clarification.

Answer: The question was from a spouse who wanted to make sure that the rules covering her husband — the employee — also applied to her, which they do. The employee was told by his employer that he would not need to purchase Medicare Part B until he retired (and even then, there is an eight-month grace period before penalties start to accrue). That applies to spouses covered by the health insurance as well.

But you’re correct that smaller companies have different rules. It’s always a smart idea to seek clarification directly from a company’s human resources department and the health insurer as well as from the Medicare helpline at (800) MEDICARE ([800] 633-4227).

Q&A: A surviving spouse gets a pension surprise

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Dear Liz: I have a question about my late husband’s pension. He was with a company for 25 years and retired early with a defined benefit pension of about $3,700 per month. When he died four years ago, the pension stopped. The company said it was a “single life” pension, but when I tried to get records proving that, they said they had no records. Do you think I have any recourse to petition for some kind of pension? Should I find a lawyer and if so, what kind of lawyer handles this type of thing?

Answer: Traditional pensions typically give workers two options: a single life annuity, whose payments are higher but cease when the recipient dies, or a joint-and-survivor annuity that continues for a surviving spouse’s lifetime. When someone is married, the default option is supposed to be the joint-and-survivor annuity unless the spouse signs a waiver giving up rights to lifetime income. If the company can’t or won’t provide proof of such a waiver, then you’d be smart to get legal help to pursue the issue.

You may be able to get free legal assistance through the U.S. Administration on Aging’s Pension Counseling and Information Program, which currently serves 30 states. If you live in one of the states that isn’t served, you may be able to get help by visiting PensionHelp America, a site run by the nonprofit Pension Rights Center.

Q&A: The payments aren’t late, but the debt collectors are calling. What does it mean?

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Dear Liz: In the last few months, I have received collection calls and emails for payment, sometimes before I even got the invoice and in every case before payment was due. For example, on Sept. 25 I was emailed for the second time for payment on an invoice with an Oct. 17 due date. Some but not all of these communications relate to medical bills. Is this legal?

Answer: Probably. Most companies wait until a bill is seriously overdue before turning it over to collections. Some hire collection agencies much sooner, however, and a few — including some medical providers — turn over their whole accounts receivable process. That means the collectors are responsible for regular billing, not just debt collection.

It’s unpleasant to hear from collectors, especially on an account that isn’t overdue, but you’re not likely to face credit score damage as long as the bill gets paid on time. Even if it’s past due, there is now a 180-day waiting period before unpaid medical debts can show up on people’s credit reports. (The clock starts on the bill’s first due date.)

Collectors may justify their “outreach” calls and emails by saying many people are confused by medical billing and put off paying because they think insurance will take care of the bill. That doesn’t make such contacts less annoying for those who pay on time.

Consider letting the medical providers and other companies know that you don’t approve of these tactics. Some may care enough about customer service to change their billing approach, or require the collection company to stop the premature contacts.

Q&A: A reader’s college funding rules

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Dear Liz: I’d like to share with other parents how my husband and I paid for college for our two daughters. We had three rules. 1. If an out-of-state or private college was chosen, then they would be required to pay us back the difference compared to an in-state public school. They both did opt for that and both paid us back every cent. 2. We would only pay for four years and not one more day. Get in, get out. Go to summer school and work jobs. 3. They would receive a monthly allowance of $100 only. Both daughters got a fabulous education, are grateful and felt they had invested in their future well. So did we and we are very proud of them.

Answer: As well you should be! Obviously, many parents can’t afford to be nearly as generous with their kids, but those who can be should think about putting limits on their generosity to make sure their progeny are motivated to get the most out of their education. One caveat: Getting a degree in four years has become increasingly difficult at many public colleges because of budget cuts. You don’t say when your daughters graduated, but today’s parents may need to keep that in mind when figuring out how much to contribute.

Q&A: Medicare Part B allows an eight-month grace period

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Dear Liz: I have a question after reading your column about avoiding costly Medicare mistakes. My husband and I have both reached 65 this past year. We both signed up for Medicare Part A hospital coverage, which is free. I retired two years ago, but am covered by my husband’s employer’s health insurance. I’m now confused about whether I should have signed up for Medicare Part B, which covers doctors visits but requires monthly premiums. His employer explained to him that he would avoid penalties if he signed up for Part B within eight months of his retirement, but no one has mentioned his wife.

Answer: You’re covered under the same rules. As long as your spouse is still working and you’re covered by that employer’s health insurance, you don’t have to sign up for Medicare Part B. But, as your husband’s employer noted, when that employment ends you both should enroll in Part B within eight months to avoid future penalties.

Q&A: When to keep a mortgage into retirement years and reasons you might want to pay it off

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Dear Liz: My husband and I have no debt other than the mortgage on our home. My husband will retire in three years while I will continue to work. (I will have to pay for healthcare at that time, as I currently receive my benefits through his employer.) My husband insists that we pay our mortgage off before he retires. The mortgage balance is $59,000 now. We are able to do this, however, I am concerned that we will have no tax deduction whatsoever if we do. Who is correct?

Answer: You may have received some tax benefit in the past for your mortgage. After last year’s tax reform, it’s unlikely you’ll get any tax break going forward.

You have to be able to itemize your deductions to write off your mortgage interest. Now that Congress has nearly doubled the standard deduction, few taxpayers will have enough deductions to make itemizing worthwhile.

Even before tax reform, though, many homeowners got little or no tax benefit from their mortgages. They didn’t pay enough mortgage interest to make itemizing worthwhile, or their itemized deductions barely exceeded the standard deduction. The homeowners who got the biggest benefit were the ones with the largest mortgages. Even people with big mortgages tend to pay less interest over time as they pay down their loans.

Keeping a mortgage just for the tax break is kind of shortsighted, in any case, since you’re only getting back a fraction of what you pay out. For example, if you were in the 25% tax bracket, each dollar you paid in interest reduced your taxes by just 25 cents.

The best arguments for keeping a mortgage have to do with liquidity and investment returns. You shouldn’t pay off a mortgage if it means most of your money is tied up in your home, and if you don’t have enough other assets to cover emergencies and to generate future income. Also, some wealthier people opt to keep a mortgage because the loan is cheap, and they can make better returns on their money elsewhere.

Most people are better off without debts in retirement, though, so if you can pay off your home loan without compromising the rest of your financial life, you probably should.