Author Archives: Gage Paul, CFP®, RICP®, EA

Preventative Maintenance for Your Retirement Portfolio

Preventative Maintenance for Your Retirement Portfolio


I have spoken before on how to rehab your portfolio and return to investing after suffering an investment ‘injury’. In this post, I will discuss the idea of preventative maintenance and how to incorporate these concepts into your investing.

What is Preventative Maintenance?

There is a concept in the training space known as preventative maintenance. This is where you take action before you get injured to reduce the risk of injury altogether. This can include, but is not limited to:

  • Getting enough sleep
  • Proper Nutrition
  • Proper Hydration
  • Allowing adequate time in between training sessions to recover
  • Adapting your training to your current abilities
  • Performing exercises to strengthen potential weak or problem areas
  • Stretching
  • Soft-tissue mobilization work
  • Seeking professional guidance, therapy, or coaching

I wanted to include things that may seem obvious, but are often neglected. Meaning someone may want to pay for expensive treatments or recovery devices, but doesn’t get enough sleep and eat very poorly. Doing the basic things well is a simple concept but difficult to execute consistently.

Doing these things will not guarantee you won’t get injured, since there are factors you cannot control. Preventative maintenance, instead shifts the focus on things you can do that are directly in your control to reduce your risk of injury. 

What is Preventative Maintenance for Your Retirement Portfolio?

When investing for retirement there is a benefit to regularly monitoring your portfolio and making periodic adjustments. This is because over time the composition of your portfolio is likely to change due to the uneven nature of the financial markets. A well-diversified portfolio will have assets that behave differently and growth will not be uniform.

Making many minor periodic adjustments to keep you in line with your long-term investment strategy can reduce the risk of having to make a major investment choice with short-term emotions clouding your decision-making.

Three Preventative Maintenance Strategies for Your Retirement Portfolio

1. Revisit Your Purpose for Investing

We feel it is important to have a reason behind your investment strategy. Understanding your purpose can be helpful when there is a lot of uncertainty in the markets.

However, it is possible your priorities could change and you should ask yourself:

  • Is my current strategy still appropriate given any change in circumstances?
  • Am I still investing in a way that is serving my goals?
  • Am I taking too much risk?

2.Review the Asset Allocation of Your Portfolio

Once you revisit your purpose for investing you can look at how your portfolio is allocated. You can view this on an account-by-account basis, but there is also a benefit to looking at the overall allocation of your total portfolio since you likely have stocks, bonds, and cash in a number of places.

I have provided a worksheet you can use to calculate your overall portfolio across all of your accounts.

Once you know your overall asset allocation you can ask yourself:

  • Is my current allocation different than when I created my investing strategy? If so:
    • What do I need to sell and what do I need to buy to get back to this allocation. This concept is known as ‘Rebalancing’ your portfolio.
  • Are you currently taking any money from your portfolio or do you plan on taking any money out of your portfolio within the next 5 years? If so:
    • How much?
    • From which account will these funds becoming from?
    • Do you already have assets earmarked for these expenses?
    • Will there be any tax consequences from these distributions?

3.Investment Due Diligence

The third thing I will discuss is a review of what you are investing in. The specifics of what you are investing in are often overemphasized by the financial media. In reality, your individual investments could be very boring. Meaning your investments could be in low-cost broad-based funds that are well diversified across the financial markets. 

With that being said it is a good idea to review the fees you are paying for your investments and compare what you are investing in with other similar investments to see if their relative performance is adequate.

If you hold active funds or individual investments, this process should be more thorough and more frequent in nature. I will not detail what this due diligence process would consist of since it is outside of the scope of this article.

The Role of a Financial Advisor

The alternative to performing the tasks yourself is working with a financial advisor who would perform these duties on your behalf.

It’s important to find a financial advisor who understands your reason for investing and can communicate their investment process to you in plain English.

There is no single right answer to investing for retirement.

To learn more about how you can optimize your investment and retirement planning needs, click here to learn more about Our Process.


Feel free to email us at info@westernreservecm.com with any questions you have.


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Rehabbing Your Investment Portfolio

Ep 04. Rehabbing Your Portfolio The Retirement Rabbit Hole

Rehabbing an Injury from Training

If you experience injury from exercising, a structured rehabilitation process may be recommended to help facilitate your return to training. The rehab process will include gradual exposure to movements and increasing loads to allow for proper recovery and to rebuild the individual’s self-confidence.

It is not uncommon for someone to be hesitant to resume training due to the fear of reinjuring themselves. While there is always a risk of injury when training there are also health risks from ceasing training that can gradually manifest if exercise is not resumed. 

How to Rehab Your Investment Portfolio

If you were invested in the stock market and sold out of a portion, or all, of your investment portfolio and went to cash the idea of reinvesting can seem daunting. Like getting injured while training, the idea of skipping the rehabilitation process and avoiding training can feel more comfortable in the short-term but can carry long-term consequences.  

Cash is Comfortable

Someone who holds an excessively large proportion of their portfolio in cash is similar to someone who lives a sedentary lifestyle. The potential negative consequences of not putting your cash to work do not manifest themselves until many years down the road when inflation has gradually eroded the purchasing power of that cash.

Investing a portion of your portfolio in stocks does carry market risks but the potential risks may be necessary to fund your future goals. Stocks provide the potential of growth above the rate of inflation and can help you maintain the purchasing power of your portfolio over time. 

How to Rehab Your Portfolio

I have provided a “Portfolio Rehab” process to resume stock investing for someone who has been “injured” by the market. This is not specific investment advice, but rather a framework to be applied regardless of your investing preferences and goals. 

Start with Why  

  • What is your purpose for investing?
  • Is your current portfolio allocated in a manner to allow you to achieve your set purpose?
  • If no, further consideration is needed to determine what changes can be made to give you a better chance of achieving your goals. 

Embrace the process  

  • There will be ups and downs along the way, as investment returns are never linear.  

Manage expectations  

  • Understand that market volatility is always a part of the investing process, and investing can be painful, but “hurt” does not always equal “harm.”
  • The goal is to set realistic returns and volatility expectations. 

Return to Investing  

  • Gradually and systematically increase your stock exposure until you reach your target allocation.
  • Using a systematic process that allows you to reinvest over time helps to remove the emotion from the investing decisions. 

Seek professional help   

  • If you are struggling with the idea of investing, having difficulty finding an entry point into the investing process, or have tried to proceed through this process without success, it is reasonable to seek out assistance from a trusted advisor.
  • This may involve someone local to you, or the team at Western Reserve Capital Management is happy to help. 

The thought of investing in the stock market can seem intimidating but following a systematic process to begin or resume investing in the stock market can be a useful way to increase your equity exposure over time.

The stock market exposes you to additional risks but when these risks are managed appropriately, it can provide you a greater chance of funding your long-term goals.  


Feel free to email us at info@westernreservecm.com with any questions you have.



Resisting the Temptation of Trendy Investments


Progress is not achieved by luck or accident, but by working on yourself daily.

Epictetus

Trends in Nutrition

In the nutrition space, there is always something new to capture your attention. There are special diets, secret ingredients, or tactics that marketed to the masses in an attempt to get them to purchase something, often at a premium.

Once the initial buzz wears off there is always another new nutritional breakthrough and the marketing cycle repeats. People float from one trend to the next without ever making any lasting progress. Any results they do get are often short-lived or due to other underlying lifestyle changes, they made during that time.

Successful dieting is simple, but far from easy. The boring principles of consistency and hard work are not appealing when there are quick fixes to their issues. Anyone who tells you otherwise may have a vested interest in trying to convince you there are.   

Trends in Investing

A recent entitled Competition for Attention in the ETF Space by Ben-David et al. looked at a similar thing taking place in the investing space, where there were two kinds of exchange-traded funds (ETFs) being released.

Broad-based ETFs that generally hold low-cost, diversified (boring) portfolios and specialized ETFs that offer trendy themes and generally hold less diversified portfolios. The results in the paper suggested the trendy ETFs fail to add value but rather are launched to capitalize on a recent investment theme that has sparked the interest of unsophisticated (small) investors.

The paper stated the buzz around these specialized ETFs soon fades and they are then replaced by a different fund that attempts to capitalize on the next investing fad. Meanwhile, institutional (large) investors tended not to invest in these specialized ETFs but rather choose to invest in the low-cost diversified ETFs (Ben-David et al.).

The “Secret” to Investing

Successful investing like dieting is simple, but far from easy. The uniformed consumer often thinks there is a large amount of skill and specialized knowledge required to be successful. The reality is after learning the fundamental principles of investing, success is more a result of the investing process they follow, their ability to be self-reflective, and learning from their past experiences.

They likely found an approach that works for them and follow it diligently rather than spotting the next big trend and capitalizing on it. Some may consult investment experts for advice, but they do so for guidance on their journey and not for a shortcut to the finish line. 


Attention is a scarce resource and competition is often fierce in investing space. The idea that investing is not meant to be exciting, and you should get “rich” slowly does not create mass appeal. This leads to trendy products being pedaled to the uneducated consumer audience. These products tend to be more expensive and less effective than a less flashy alternative.

Understanding the fundamentals and following an approach that works for you will likely result in more meaningful outcomes than any single product could.


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Using Wealth Promoting Investing Patterns


Life is a matter of choices, and every choice you make makes you

John C. Maxwell

Make Every Bite Count with the Dietary Guidelines

In December 2020 the U.S. Department of Agriculture (USDA) released the Dietary Guidelines for Americans for 2020 – 2025. The dietary guidelines are science-based recommendations to promote health, prevent disease, and meet nutrient needs. The advice they give has remained relatively consistent over time and evolves as scientific knowledge expands.

They emphasize the guidelines are not a rigid set of rules but rather a customizable framework of core elements that allow individuals to make dietary choices that meet their personal preferences, cultural traditions, and budgetary considerations. They highlight the importance of healthy dietary patterns at every stage of life since dietary requirements change as people age. 

The Dietary guidelines encourage individuals to focus on eating primarily whole foods, choosing a variety of options for each food group, and paying attention to the portion size. They also encourage the limiting of foods and beverages higher in added sugars, saturated fat, and sodium (aka junk food.) 

The USDA realizes humans are not robots…and pizza is too good to never eat it again. This is why the guidelines, show you how to incorporate “junk” food in an otherwise health-promoting diet.

Make Every Dollar Count with Investing Guidelines

Just like how dietary guidelines are recommendations for health-promoting dietary patterns, investing guidelines (policy) can be used to provide recommendations for wealth-promoting investment patterns.

These guidelines are not a rigid set of rules but rather a customizable framework of core elements that allow individuals to make investment choices that accommodate their personal circumstances and preferences. Following these predetermined guidelines can help to create wealth-promoting investing patterns for every stage of life.

There is no universal diet, and there is no universal investment portfolio. A portfolio should be constructed base on an individual’s circumstances and focus on investments that can meet their needs while allowing for less efficient investments in limited quantities.

Just like with the dietary recommendations, variety (diversification), and portion size (allocation) are important considerations when implementing a balanced investment approach.

Allowing for Inefficiency

Similar to how the USDA shows you how to fit “junk” food into your diet, it is important to show investors how to incorporate less than ideal investments in an otherwise wealth-promoting portfolio. For some people, this means taking a portion of their portfolio and investing it in more “speculative” investments while for others it’s using that portion and stuffing it under their mattress.

Neither is right or wrong, but rather an outlet that allows someone to leave the core of their portfolio invested in a way that gives them the best chance of meeting their goals. Even if this means your overall portfolio is not the “most efficient” for your situation, having it set up in a way that allows you to handle market volatility and stay invested is far more important.


By using either dietary or investing guidelines you can customize the framework to meet you where you are and develop patterns that will drive positive long-term results. Consistent good decisions, however small they may seem, can make a huge difference when compounded over a lifetime.

Make every bite count, make every dollar count.


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The Practice of Financial Planning


The good life is a process, not a state of being. It is a direction, not a destination

Carl Rogers

Training For a Specific Event

If you have ever participated in an athletic competition you likely have a medal, trophy, or picture to commemorate its completion. This memento is likely on a shelf or in a box somewhere in your home.

Looking at it brings fond memories of what you achieved along with all the training and hard work you put in leading up to the event. You were possibly in the best physical shape of your life during this time.

Unfortunately, having competed in an event once does not make you fit for life. Even if you never compete again, you must continue to train and remain active if you want to stay in shape. 

Training as a Practice

Events like these can provide people with the motivation to train because there is an end goal they can focus on. After the competition, most people lose the desire to continue training since there isn’t a payoff for their effort.

This mindset is understandable if you treat training as something you do for this one-time thing and not as part of an exercise practice in an overarching fitness journey. In this journey, your goal is to progress and make improvements over-time.

The results of any single event are of minor significance in the grand scheme of things.

Viewing Financial Planning as an Event

If you view planning for retirement through this lens, going through the financial planning process once will not likely create lasting financial security nor ensure you have a successful retirement. This plan is a snapshot of your financial standing at a point in time and recommendations on the general direction you should head from there. 

Financial Planning as a Practice

The real value of financial planning comes when you make planning an iterative process, “a practice”, where you consistently monitor, review, and refine the plan as life unfolds. Any single review of your plan will not provide certain insights into your long-term outcome since it is only one data point.

The more important item is comparing your results over-time to track your progress to see if you are heading in the right direction or if adjustments should be made. With this long-term perspective, minor changes can have a major impact when given time to compound. 


You can make creating a financial plan an event, something that you do once, where you place the resulting binder on a shelf to remind you of its completion. Or you could make financial planning a practice where you regularly review your plan and make informed decisions and adjustments as life plays out.


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Specificity in Investing


The art of good decision making is looking forward to and celebrating the tradeoffs, not pretending they don’t exist

Seth Godin

Specificity in Training

When training you tend to have a specific goal in mind, meaning if your focus is on getting stronger, you should prioritize your exercise activities on specific movements with a set training volume and intensity to drive the stimulus required to get the desired results. The more specialized the training, the more you can optimize the results.

Any training you do that does not have the specific intent to improve the desired outcome will lead to sub-optimal results.

For example, if someone wants to perform their best at a powerlifting meet they will likely have to train differently than someone who wants to run a good time in a 5k race. This does not mean the person who does powerlifting can’t do distance running, or vice versa but compromises will need to be made to their relative performance in either event.

If someone wants to maximize their potential in one arena it will be at the detriment of the other. This means as your goals change, you will likely have to modify your training accordingly to produce the greatest results.

Specificity in Investing

Similar parallels can be drawn to investing. The characteristics of different types of investments lend to their effectiveness based on the objectives of the investment strategy someone put in place. The three characteristics I will discuss today are growth, income, and stability.

Growth: Becomes more valuable over time. (Buy at X, sell at Y)

Investments that offer the greatest potential of growth, will likely not provide much stability or income.

Income: Receive payments of dividends or interest.

Investments that produce a large amount of income may not offer the greatest stability or potential for growth.

Stability: Preservation of your initial investment.

Investments that offer a high level of stability probably do so at the cost of the possibility of growth or income generation.

A diversified portfolio will have a blend of assets with differing characteristics

You will likely have portions of your portfolio focused on either growth, income, or stability. How much you allocate to each of these assets will determine how your overall portfolio will perform. Therefore, your investment strategy should be based on what is important to you and created to give you the greatest chance of reaching your desire outcome.

Investing With a Purpose

Just like with training there is a give and take between optimizing for growth, income, and stability. It is not possible for a single investment to have all of the good qualities of each and none of the bad. As your priorities shift from one area to another you may likely have to reconsider how you are invested and find a new balance to align your investments with what you want to do for yourself.

Often this means making compromises in your overall returns or your overall comfort level. Having a portfolio allocation you can stick with both in good times and in bad is a critical factor in your long-term success as an investor.


In training and investing, we are dealing with limited resources and have to find balance and make compromises as a means of achieving our set objective. As our objectives change we will likely have to make adjustments to find a new optimum for our given circumstances. Being able to continually iterate and make the most of what you have is a key component to success in any endeavor.


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Pain and Underperformance


The stock market is a device for transferring money from the impatient to the patient

Warren Buffett

What is Pain?

Everyone experiences pain from time to time. People often view pain as an indication of mechanical damage to an area of the body similar to the damage done to a part of a larger machine. Using this logic, if something “hurts” it always indicates “harm”, and therefore painful activities should be avoided. This isn’t necessarily the case.

Humans are complex organisms and can adapt to almost anything. Recent research has shown the experience of pain is complex and is related to the perception of threat and the need for protection rather than active tissue damage.

The perception of pain can be influenced by numerous “biopsychosocial” factors and the expression of pain can be met with a low level of fear where the individual has high self-efficacy and allow for recovery. 

Or if they instead catastrophize their experience of pain and have a high level of fear, they will have a low self-efficacy. This can cause them to avoid the pain and could inhibit recovery.      

With this in mind, we can view pain as not always as bad (harmful), rather as discomfort we all occasionally must deal with.

Pain in Investing

For many, investing can be seen as a “painful” experience, because you often expose a portion of your portfolio to investments that experience market volatility. When investing you must determine if the pain you are experiencing is indicating harm (damage) or is to be tolerated.

All investing involves risk, often when investing for the long-term you must expose a portion of your portfolio that will be exposed to the volatility of the market. The pain of market volatility may “hurt” but is not “harmful” and should be viewed as a fee you pay when investing in these types of assets.

A Potential Issue with Active Investment Strategies

Active investments’ offer the potential for outperformance relative to their benchmarks. Future outperformance is uncertain and underperformance relative to a benchmark is always a possibility. The use of active management depends on experience, talent, cost, and patience.

When implementing an active investment strategy, there will inevitably be periods where it underperforms its benchmark. The duration and magnitude of the underperformance cannot be known in advance.

This “active-risk” exposes you to a new kind of “pain” and you must ask yourself if the pain you are experiencing is normal or is there actual harm being done?

How to Manage Active-Risk

How much active-risk you are willing to accept should be determined in advance of implementing any active investment strategy. You must ask:

  • How much relative underperformance you are willing to accept?
  • How long will you allow any underperformance to be sustained?

This way you are not making decisions based on emotions but on pre-determined guidelines.

These pre-determined guidelines help to prevent you from making decisions based on emotions during the inevitable periods of underperformance.


Investing is painful enough on its own. Active management exposes you to a different type of risk and potentially increases the pain you experience. Investing is a means of reaching a desired future state.

It should be used as a way to maintain a certain level of wealth, with the possibility to incrementally increase it over time. Everything has a cost, even if it not currently apparent. There is no risk-free return.


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How Much “Risk” Must you Take?



“The Dose Makes the Poison.”

Paracelsus

What is the Minimum Effective Load When Training?

In strength training, the idea of “minimum effective load” is doing the smallest amount of work to generate the stimulus needed to get the desired response. Anything beyond that could generate greater fatigue than necessary and be detrimental to your long-term progress in the gym. This often leads to a feeling that you could have done more or “worked harder” than you did. 

I know from personal experience this concept has been difficult for me to adopt. I used to think more was always better, but have since realized sometimes more is just more. There came a point where I had to decide between training just to get tired and sweaty and training to make progress towards a goal.     

What is the Minimum Effective Risk When Investing?

In investing, especially for retirement, you want to adopt a strategy that provides you the highest likelihood of achieving a desired future state. For many, this desired future state is maintaining a certain level of wealth that allows for an independent and dignified retirement. When creating your investment strategy, you know you must assume a certain level of risk.

This is where you could determine what is the “minimum effective risk” you must take in your portfolio. Meaning you only want to expose your portfolio to as much risk as necessary to meet your short-term and long-term goals. Taking risks above the required amount, provide you with diminishing marginal benefits on the upside but could be disastrous on the downside.

This is where you must decide if you want to make incremental progress over time or just end up being repeatedly tired and sweaty, with little to show for it.

“Risk is what is left over when you think you thought of everything.”

Carl Richards

Risk presents itself in many forms and changes with time horizons. Something that provides you desired certainty in the short-term is likely to provide undesired certainty in the long-run. Finding the balance here is an art rather than a science.

Often, we have competing desires of wanting to make the most of today and planning for tomorrow. Guidance with this issue is often helpful, but the decision is ultimately yours.


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How to use RPE in Retirement Planning


What is RPE?

When I exercise, I track the number of reps, weight used and judge the difficulty of each set by estimating my rate of perceived excretion (RPE).

Rate of Perceived Exertion is a way to measure the intensity of an exercise. It is based on a 1-10 scale, with 1 being a very light effort and 10 being a maximal effort. In addition to tracking the RPE of each set I do, I also judge the RPE for each training session as a whole after completing it. 

RPE is both qualitative (for example a RPE 7 is easier than a RPE 9) and quantitative. Rating a set’s RPE is influenced by how I feel and not necessarily what actually happened making it subjective.

Using a subjective rating of fatigue (using RPE) may correlate better to injury than objective metrics like load use, volume, etc. Meaning performing an exercise that generates too much fatigue could result in an injury irrespective of the actual weight used.

How does this relate to retirement planning? 

When planning for retirement, you often have to make sacrifices today in order to achieve a desired future state. This often requires you to save a portion of your current income, invest in assets that could experience market volatility, and purchase insurance you hope to never use.

All of these require you to delay/reduce gratification today to some point in the future. There is certainly a level of self-restraint that is needed to do and is often more difficult for some.

This is where RPE comes into the mix, meaning creating a plan that requires you to live like a monk and forgo all worldly pleasures would likely require a lot of effort to maintain and inherently unsustainable for the vast majority of people. Therefore, the greater the perceived effort you have to put into something the shorter the duration it can be sustained.

Meaning some people could only sustain a self-imposed subsistence lifestyle for a few days, while others could live this way for their entire life, regardless of their income. There is no right or wrong here, just the fact that everyone is different and perceives things differently.

The same measure could be used for investment strategies. So people can handle the market volatility that comes with a 100% stock allocation, while others begin to lose sleep when any portion of their portfolio is exposed to the stock market. Keeping a higher percentage allocation to stocks will be more difficult for some to maintain than is it for others regardless of the size of their portfolio.  

All experience is subjective. – Gregory Bateson

How to Use RPE in Retirement Planning

Within a given year you could have periods of increased savings (effort) to fund a short-term goal or to pay down debt. These periods could be viewed as “sprints” or short intervals of elevated effort followed by a period of normalized effort. This would allow for a break in between the sprints so that you can “recover” from reaching a goal.

The subjective nature of RPE is why I see it being useful in retirement planning. Often, using rules of thumb for someone’s savings rate or stock allocation does not adequately account for their perception of difficulty in implementation.

When a task is perceived to be more difficult relative to their perceived ability, it can lead to them feeling overwhelmed, and not able to perform the task competently.

If you could instead ask their opinion on how difficult they perceive something to be or much effort it would require to accomplish a task, you may have a better chance of getting the desired outcome. With that being said you can then frame the effort you are placing towards your long-term financial goals on a 1-10 scale of perceive difficulty to find a good balance for you.

Meaning something that is sustainable in the long-term but will allow you to still meet your goals. You can also incorporate periods of increased effort (sprints) followed by periods of normalized effort to reach shorter-term goals. 

Planning for perfection is not prudent. You must find the balance between living for today and preparing for tomorrow. Persistence and adaptability are required and finding a sustainable level of effort you can put towards your desire outcomes will be key to your success.


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Understanding Medicare When Retiring After 65


The Basics of Medicare

Medicare is the federal health insurance program that covers most people who are age 65 and older. It is composed of different parts that help cover specific services. 

Original Medicare is divided into hospital insurance (Part A) and medical insurance (Part B), which are run by the federal government. Medicare Part C (Medicare Advantage) and Part D (prescription drug coverage) are provided by private insurance companies approved by Medicare.

Below is a basic breakdown of the Medicare coverage options someone has available to them at age 65.

Source: medicare.gov

Coordinating Medicare Benefits When Working Past 65

Use Your Employee Benefits Manager as a Resource

We are often asked how to enroll in Medicare when someone is over 65 and wants to retire from their current employer. We often guide them to their employee benefits manager to determine whether they have a group health plan coverage (as defined by the IRS) and to see what portions of Medicare (if any) they are already enrolled in.

Individuals with group health coverage based on current employment may be able to delay Part A and Part B and won’t have to pay a lifetime late enrollment penalty if they enroll later.

Medicare Part A Eligibility

If they are eligible for premium-free Part A, they can enroll in Part A at any time after they are first eligible for Medicare. Their Part A coverage will go back (retroactively) 6 months from when they signed up (but no earlier than the first month they were eligible for Medicare).

If they were eligible for premium-free Part A, and they didn’t buy it when they first eligible, they may have to pay a penalty. They may be able to sign up for Medicare during what is called a “Special Enrollment Period” (SEP).

This is available to them anytime as long as they or their spouse are working and covered under a group health plan from your current employer.

Coordinating Medicare Benefits When Retiring After 65

If they are not enrolled in Part A and/or Part B. There is an 8-month SEP to sign up for Part A and/or Part B that starts (whichever happens first): The month after the employment ends or the month after group health plan insurance based on current employment ends. There usually is not a late enrollment penalty if you sign up during a SEP.

COBRA Coverage and Medicare

You may be able to get COBRA coverage, which continues your health insurance through the employer’s plan (in most cases for only 18 months.) Don’t wait until COBRA ends to enroll in Part B. If you don’t enroll in Part B during the 8 months after the employment ends you may have to pay a penalty for as long as they have Part B and you won’t be able to enroll until January 1–March 31 and have to wait until July 1 of that year before your coverage begins. This may cause a gap in health care coverage.

High-Deductible Health Plans and Medicare

Under IRS rules cannot contribute to an HSA any month when you are enrolled in any part of Medicare (Part A, B, or D). If your current employer coverage is a high-deductible health care plan you may want to consider enrolling in Medicare until you retire.

To avoid a tax penalty, they should stop contributing to your HSA at least 6 months before they apply for Medicare. Part A coverage will go back (retroactively) 6 months from when they sign up (but no earlier than the first month they are eligible for Medicare).

Keep Your Notice of Credible Coverage

If they are not enrolled in Part D. There is also a 2-month SEP after the month your coverage ends to sign up for a Part D Medicare Prescription Drug Plan.

If you decide to join a Medicare drug plan, you should the “Notice of Credible Coverage” you receive. You will get a “Notice of Credible Coverage” each year if you have drug coverage from an employer/union or other group health plan. This notice will let you know if your current drug coverage is “creditable.” Keep this notice.

Start By Understanding Your Current Coverage

Medicare is complex and there are many decisions one must make when choosing your healthcare coverage. If you are over 65 and still employed it is important to first understand when the coverage you currently have through your employer, which (if any) part of Medicare you are already enrolled in.

From there, you will have a better idea of what the next steps need to be taken, to avoid any penalties and more importantly make sure you have proper coverage.

Useful Medicare Resources

Medicare.gov provides a wide variety of resources including the Medicare and You handbook which is updated annually.


Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.


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