Balancing stocks in a retirement savings portfolio

Dear Liz: I am 65 and retired. My husband has early dementia, so all financial issues are on me. Fortunately we are very well off. Besides a pension we have a trust, an IRA and a Roth that combined exceed $3 million. However, 60% of these assets are in stocks and the investment firm will not lower this proportion any further.

They are doing well with our money, but I’m still wondering if I should move my accounts to a firm that can offer me a more conservative portfolio. Even with a long-term care policy, my husband’s care could get costly. One month of in-home care currently costs $13,000. He’s in good shape otherwise and could live many years.

Answer: It’s one thing if the investment firm took a careful look at your situation, projected your current and future spending needs, added in your husband’s likely need for long-term care and announced that a 60% stock allocation was the appropriate level of risk for your situation. It’s quite another if the firm simply has a 60% allocation for people who are 65, like it or lump it.

The investment firm should be able to tell you why this stock allocation — which is a bit on the high side for a retired couple — is appropriate in your individual circumstances. It would be ideal if the firm could also show you what a lower stock allocation might mean in terms of your current and future income, in case you want to make spending adjustments that would allow you to take less risk.

If the firm can’t make the case that a 60% allocation is appropriate and necessary, then you’d be smart to look for a fee-only, fiduciary financial planner who can take your situation and preferences into account.

Medicare vs. spouse’s health plan

Dear Liz: I am planning to retire in a few months at 65. My husband, who is five years younger, works for a corporation that provides excellent health insurance. When I sign up for Medicare, will I still be able to stay on my husband’s health insurance? Which insurance will be listed first for coverage?

Answer: The rules are different depending on whether your husband’s insurance is considered a large employer plan or a small employer plan.

If the plan covers 20 or fewer employees, his employer can boot you off the plan or make it secondary to Medicare. If the plan covers more than 20 employees, though, the employer typically can’t treat you differently from younger employees and spouses and must allow you to stay on the plan, which would remain your primary insurance with Medicare as the secondary insurer.

Medicare penalties are another issue to consider. Medicare Part A, which covers hospital visits, is usually premium-free, but people generally pay premiums for Medicare Part B, which covers doctor’s visits, and Medicare Part D, which covers prescription drugs. If you don’t sign up for Medicare Part B and Part D when you’re first eligible, you could face permanent penalties that would raise your monthly premiums for life.

These penalties don’t apply if you put off signing up for Part B and Part D because you’re covered by a large employer health insurance plan from current employment, either yours or your spouse’s. Once that employment or coverage ends, though, you’ll need to sign up for Part B and Part D promptly or the penalties kick in.

Notice the use of the words “typically,” “normally” and “generally” in the paragraphs above. Medicare’s rules and exceptions can be tricky to navigate. Talk to the benefits manager at your husband’s company so you know where you stand, and what parts of Medicare to sign up for as you turn 65.

Triggering the windfall elimination provision

Dear Liz: After working and paying into Social Security for more than 40 years, I took a city job at age 60. This job does not pay into Social Security and will afford me a small pension upon retirement in a few years (I’m now 64). Will this pension amount be deducted from my Social Security payments?

Answer: Normally, people who get pensions from jobs that didn’t pay into Social Security face the “windfall elimination provision,” which can reduce any Social Security benefits they may have earned. If, however, you have 30 or more years of “substantial earnings” from a job that paid into Social Security, then this provision does not apply. The amount that counts as “substantial earnings” varies by year; in 2019, it’s $24,675.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.