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David, a 65-year-old retired Washington State employee, never gave long-term care much thought. He had a solid pension, good health, and figured Medicare would handle any future medical needs.
Then his wife Sarah fell and broke her hip. What started as a simple recovery became a 14-month journey through assisted living that had significant costs. David's savings—money earmarked for travel and home improvements—vanished. The financial stress nearly cost them their home. "I thought we were prepared for retirement," David told me. "Nobody warned us that Medicare doesn't cover long-term care, or that it could cost more per year than I ever made working." If you're a Washington State public employee approaching retirement, the statistics are sobering: 70% of people over 65 will need long-term care services¹. In Washington, that care averages $152,570 annually for a nursing home and $83,700 for assisted living². Here's what these costs really mean for your retirement security and how to plan for them. The Long-Term Care Cost Realities Every Washington Retiree Must Know 1. Washington's Costs Exceed National Averages - A semi-private nursing home room averages $12,714 per month in Washington, while assisted living costs $9,277 monthly³. 2. Medicare Covers Almost Nothing - Medicare pays for skilled nursing care only after a hospital stay, and only for a maximum of 100 days with significant copays after day 20⁴. Long-term custodial care—help with bathing, dressing, and daily activities—isn't covered at all. 3. Geographic Location Creates Dramatic Price Variations - Monthly assisted living costs range drastically. 4. WA Cares Fund Provides Limited Coverage - Washington's WA Cares Fund provides up to $36,500 in lifetime benefits for qualifying residents1. While helpful, this covers roughly 3-4 months of nursing home care or 6 months of assisted living. Your 3-Step "Cost Reality" Assessment Step 1: Calculate Your Potential Exposure The math is straightforward but sobering. Here's what you're looking at in current Washington dollars: Nursing Home Care:
Critical insight: The average long-term care need lasts 3 years, but 20% of people need care for 5+ years, and 10% need it for over a decade6. Step 2: Understand What WA Cares Fund Actually Covers Washington's WA Cares Fund launches full benefits in July 2026 with important limitations: Eligibility requirements:
Reality check: This covers approximately:
Step 3: Evaluate Your Coverage Gap Most Washington State public employees face a significant coverage gap between their actual care needs and available resources. Example scenario: State employee Jennifer, age 64, projects her long-term care exposure: Potential costs over 4 years:
Be sure to factor in what your pension amount is and Social Security, along with how your spouse will maintain their standard of living. Strategic Approaches for Different Situations The "Self-Insurance" Strategy Set aside $300,000-500,000 in dedicated long-term care reserves. Best for high-net-worth retirees who can afford to self-fund without compromising spouse's security. The "Hybrid Insurance" Approach Combine WA Cares benefits with private long-term care insurance or hybrid life insurance policies. Best for middle-income retirees seeking comprehensive coverage. Case Study: Retired fire captain Mark and his wife Lisa analyzed their options at age 63: Their situation:
Long-term care costs in Washington aren't just expensive—they're potentially catastrophic for unprepared retirees. But with proper planning, you can protect your retirement security while ensuring quality care when needed. The key is understanding that WA Cares Fund, while valuable, is just the starting point for comprehensive long-term care planning. Long-term care in Washington costs vary depending on the type of care. WA Cares Fund provides valuable but limited coverage. Most public employees need additional planning to avoid financial devastation from extended care needs. Sources and Resources
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A 65-year-old retired Washington State employee, signed up for Medicare and thought he was done. Three months later, he received a hospital bill that shocked him.
"I thought Medicare covered everything," he told me during a call. The reality hit hard: Medicare Part A required a $1,676 deductible, and Medicare Part B only paid 80% of his outpatient costs, leaving him responsible for the remaining 20%. His mistake? He skipped Medicare Supplement Insurance, assuming it was unnecessary. That one decision cost him thousands in unexpected medical bills and left him financially vulnerable. If you're a Washington State public employee approaching Medicare eligibility, choosing the right Medicare Supplement plan isn't optional—it's essential. Here's how to avoid a costly mistake and select the coverage that protects both your health and your wallet. The Medicare Supplement Rules Every Washington Retiree Must Know 1. Original Medicare Leaves Significant Gaps Medicare Part A has a $1,676 deductible per benefit period in 2025¹. Medicare Part B requires a $257 annual deductible plus 20% coinsurance on all approved services². These gaps can create thousands in unexpected costs. 2. Medicare Supplement Plans Are Standardized All Plan G policies provide identical benefits regardless of which insurance company sells them³. The only difference between companies is the premium price and customer service quality. 3. Washington Has Unique Advantages Washington is one of the few states where you can switch between Medicare Supplement plans (Plans B-N) without medical underwriting at any time⁴. This provides flexibility other states don't offer. 4. Timing Matters for Best Rates Your Medigap Open Enrollment Period lasts 6 months from when you enroll in Medicare Part B⁵. During this period, you cannot be denied coverage or charged higher premiums due to health conditions. 5. Plan G Has Replaced Plan F as the Gold Standard Plan F is no longer available to people who became eligible for Medicare after January 1, 2020. Plan G provides nearly identical coverage for a lower premium in most cases. Your "Coverage Protection" Strategy Step 1: Compare Plan G vs Plan N These are the two most popular Medicare Supplement plans for new Medicare beneficiaries, and for good reason. Plan G Coverage:
Step 2: Shop Washington's Competitive Market Washington has multiple insurance companies offering Plan G with significant price differences⁷. Price range for 65-year-old non-smoking woman:
Unlike most states, Washington allows Medicare Supplement policyholders to switch between Plans B-N without medical underwriting. Strategic advantage: You can start with Plan N to save on premiums, then switch to Plan G later if your healthcare needs increase, without answering health questions. Example strategy: Start with Plan N at age 65 to save $40+ monthly in premiums. If you develop health conditions requiring frequent doctor visits, switch to Plan G to eliminate copays. Step 4: Consider High-Deductible Options Some companies in Washington offer High-Deductible Plan G with a $2,870 deductible in 2025. When it makes sense: If you're healthy and rarely use medical services, the lower monthly premium ($69-80 range) might save money annually even if you hit the deductible. Break-even analysis: Compare the annual premium savings against the deductible amount to determine if this option fits your situation. Three Scenarios for Different Needs The "Comprehensive Coverage Seeker" Choose Plan G for predictable costs and maximum coverage. Best for retirees who want peace of mind and can afford higher premiums for complete protection. The "Budget-Conscious Optimizer" Choose Plan N for lower premiums with minimal cost-sharing. Best for healthy retirees comfortable with small copays in exchange for monthly savings. The "Minimal User Strategy" Consider High-Deductible Plan G if you rarely use healthcare services. Best for very healthy retirees who want catastrophic protection at the lowest monthly cost. Maria chose Plan G because she visits specialists regularly and the comprehensive coverage saves her money despite higher premiums. Don't let Medicare's gaps create financial hardship in retirement. The right Medicare Supplement plan provides predictable costs and comprehensive protection when you need healthcare most. Bottom line: Medicare Supplement Insurance isn't optional—it's essential protection against Medicare's significant coverage gaps. Plan G and Plan N offer the best value for most retirees, but the right choice depends on your health needs, budget, and risk tolerance. Sources and Resources Karen, a 65-year-old Washington State teacher, thought she had everything figured out for retirement. She'd had health coverage for 28 years and assumed she could just keep her coverage when she retired at the end of the school year.
Three months into retirement, Karen got a letter that made her stomach drop. SEBB/PEBB was terminating her retiree coverage because she hadn't enrolled in Medicare Parts A and B. The cost? She'd have to pay COBRA premiums while waiting to re-enroll. All because she didn't understand one critical rule: PEBB/SEBB retirees must enroll in Medicare Parts A and B to keep their health coverage. If you're a Washington State public employee approaching 65 or retirement, you're facing a Medicare enrollment decision that could save—or cost—you thousands. Here's the critical information about navigating this transition without losing coverage or paying unnecessary penalties. The Medicare-PEBB Rules Every Pre-Retiree Must Know 1. Medicare Enrollment Is Mandatory for PEBB Retiree Coverage - You and your covered dependents are required to enroll in both Medicare Part A and Part B as soon as eligible to stay enrolled in a PEBB retiree health plan¹. No exceptions. 2. Apply 3 Months Before You Turn 65 - Social Security is currently experiencing longer processing times for Medicare enrollment requests. PEBB strongly encourages applying three months before your Medicare start date². Missing this window can create coverage gaps. 3. Medicare Becomes Primary, PEBB Becomes Secondary - Once you enroll in Medicare, Medicare becomes primary coverage, and PEBB medical becomes secondary coverage³. This coordination reduces your out-of-pocket costs significantly. 4. PEBB COBRA Bridge Coverage Is Available - If you're unable to provide proof of Medicare enrollment due to Social Security delays, you can enroll in PEBB COBRA to ensure coverage until you can provide proof of Medicare⁴. Coverage becomes retroactive once Medicare proof is provided. 5. Working Past 65 Changes the Rules - You're not required to enroll in Medicare while still working if your employer has 20 or more employees. PEBB medical remains primary coverage with Medicare as secondary if you choose to enroll⁵. Your "Coverage Protection" Strategy Step 1: Calculate Your Medicare Timeline Here's where most PEBB members make their first mistake: they think Medicare enrollment is automatic. Real scenario: Fire Captain Mike turns 65 in July and plans to retire in August. He needs to apply for Medicare by April (3 months before) to ensure his coverage starts July 1st. The timing breakdown:
Step 2: Understand Your Coverage Coordination Options Once you have both Medicare and PEBB retiree coverage, you're not paying double for duplicate coverage—you're getting enhanced benefits. How the coordination works:
Here's something most don't know: Social Security processing delays can jeopardize your PEBB retiree coverage. The safety net strategy: If you can't get Medicare proof in time, enroll in PEBB COBRA as temporary bridge coverage. Real numbers:
Three Scenarios for Different Situations The "Standard Retiree" (Most common) Retire at 65, enroll in Medicare Parts A and B three months before birthday, transition seamlessly to PEBB retiree coverage with Medicare coordination. The "Early Retiree" (Age 62-64) Retire before Medicare eligibility, continue PEBB employee coverage through COBRA until 65, then switch to Medicare + PEBB retiree coverage. The "Working Senior" (Working past 65) Stay on PEBB employee coverage as primary, optionally enroll in Medicare as secondary, or delay Medicare until retirement (must enroll within 8 months of stopping work). Master Class Case Study: Police Sergeant Linda, age 64, retires December 31st and turns 65 February 15th. Her timeline:
Critical deadlines to remember:
This strategy works best when coordinated with your overall retirement income planning, pension timing, and Social Security optimization decisions. Bottom line: Medicare enrollment isn't optional for PEBB retirees—it's required. When timed correctly, Medicare and PEBB work together as coordinated benefits. Missing the deadlines can result in coverage loss and lifetime Medicare penalties. Critical Resources Tom, a retired firefighter, discovered something that made his stomach drop when reviewing his tax situation.
At 73, Tom was required to take $25,000 from his traditional IRA. He also donated his usual $8,000 to the food bank where he volunteers. He handled both transactions the way most people do—took his RMD as income, then wrote a separate check to charity. The result? Tom paid $1,900 in federal taxes on money he gave away, plus faced higher Medicare premiums due to the increased income. All because he didn't know about the three letters that could have saved him $1,900+: QCD. If you're a Washington State DRS member over 70 ½ with a traditional IRA, you're sitting on one of the most powerful tax strategies in the code. Yet many retirees never learn about Qualified Charitable Distributions until it's too late to maximize the benefit. The QCD Rules Every DRS Retiree Must Master 1. The Magic Number Unlocks Everything - Once you reach age 70 ½, you can send money directly from your traditional IRA to qualified charities¹. This counts toward your Required Minimum Distribution but never touches your tax return as income. 2. It's Not Just About Federal Taxes - In Washington State, every dollar of federal tax savings goes directly to your pocket². But QCDs also reduce your Adjusted Gross Income, triggering cascading consequences. 3. The $108,000 Annual Limit (2025) Per Person - You can donate up to $108,000 annually via QCD³. Married couples filing jointly can each do $108,000 from their respective IRAs—that's $216,000 in tax-free charitable giving power. 4. It Must Go Direct From IRA to Charity - The money cannot touch your bank account⁴. Your IRA custodian must send the check directly to the qualified charity, or you lose the tax benefits entirely. Your "Stealth Income Reduction" Strategy Step 1: Calculate Your RMD Tax Damage Here's the math most retirees ignore until December. Real scenario: Captain Sarah, age 73, has $850,000 in her traditional IRA. Her RMD this year: $34,600. At the 22% tax bracket, that's $7,612 in federal taxes she can't avoid. But Sarah donates $12,000 annually to local charities. Using the QCD strategy, she can eliminate taxes on $12,000 of her RMD. Her tax savings: $2,640 in federal taxes alone. The cascade effect beyond basic tax savings:
Step 2: Audit Your Charitable Giving Pattern Most retirees give the same amount to the same organizations every year. That's actually perfect for QCD optimization. The QCD advantage: Instead of writing checks from your bank account (using after-tax dollars) and itemizing deductions (assuming you are over the standard deduction), send the money directly from your IRA. Why this works: You get the same charitable impact but eliminate the income that would have triggered taxes and Medicare premium increases. Example breakdown:
Here's where it gets sophisticated. You don't have to make your entire RMD a charitable distribution. You can split it strategically based on your charitable giving goals and tax situation. Advanced scenario: Mike, age 74, has a $40,000 RMD but only donates $15,000 annually. His split strategy:
This works best when coordinated with your overall retirement income strategy, Social Security timing, and Medicare planning. Bottom line: If you're over 70½ and donate to charity, QCDs can save you thousands annually while supporting the same causes. Sources and Resources Meet Captain Sarah Martinez, a 30-year veteran firefighter in Washington State. At 57, she's eligible for LEOFF Plan 2 retirement with a solid pension and $650,000 in her deferred compensation account. As a LEOFF Plan 2 member, Sarah didn't pay into Social Security during her career. She recently learned that her Medicare premiums could increase dramatically based on her retirement income. For Department of Retirement Systems (DRS) members, understanding how retirement income affects Medicare premiums is crucial for accurate retirement planning. Your pension, Social Security, and investment withdrawals all factor into a calculation that could significantly impact your healthcare costs. Core Principles Understanding Medicare premium calculations starts with these fundamental principles: 1. Income-Related Monthly Adjustment Amount (IRMAA) Rules¹ Medicare Part B and Part D premiums increase based on your Modified Adjusted Gross Income (MAGI) from two years prior. Higher income means higher premiums. 2. The Two-Year Lookback Period² Medicare uses your tax return from two years ago to determine current premiums. Your 2025 premiums are based on your 2023 income. 3. Federal Income Focus³ IRMAA calculations are based solely on federal Modified Adjusted Gross Income (MAGI), making it easier to project and plan for these premium increases. 4. All Income Sources Count⁴ Your DRS pension, Social Security, investment gains, rental income, and required minimum distributions all contribute to the MAGI calculation. 5. Planning Opportunities Exist⁵ Strategic income timing and Roth conversions during lower-income years can help manage future Medicare costs. Understanding Sarah's Medicare Premium Challenge Calculating Sarah's Projected MAGI Let's examine Sarah and Tom's expected combined income sources when Sarah becomes Medicare-eligible at 65:
However, this scenario creates a major problem down the road. By not touching their retirement accounts, Sarah's $650,000 deferred compensation balance and Tom's $450,000 401(k) will continue growing. Let’s assume they grow at approximately 7% annually. The IRMAA Time Bomb: When RMDs Begin At $114,600 combined MAGI, Sarah and Tom each pay the standard $185 monthly premium. This seems manageable, but they're building toward a significant problem. By age 73, when required minimum distributions begin, their retirement accounts will have grown substantially:
When Sarah's Premiums Will Peak The Growing Problem: When IRMAA Becomes Unavoidable Sarah and Tom's Medicare premiums face escalating costs as their untouched retirement accounts continue growing: Ages 65-72: Comfortable with standard Medicare premiums while living on pension and Social Security Age 73: RMDs begin at approximately $84,000 combined, pushing their total MAGI to $202,600 - dangerously close to IRMAA thresholds Ages 75-80: RMDs continue growing, easily exceeding $100,000 annually and triggering the first IRMAA bracket ($1,786 additional annual cost for both premiums – see below) Ages 80+: Large retirement account balances generate RMDs exceeding $140,000, potentially pushing their combined income above $258,000 and into the second IRMAA bracket, costing them an additional $371.80 monthly ($4,462 annually) for both Medicare premiums The 2025 Medicare Part B IRMAA brackets for married couples filing jointly:
Sarah's Income Smoothing Strategy Here's how Sarah can manage her income to minimize Medicare premiums: Ages 57-64 (Pre-Medicare Planning Phase)
Sarah monitors their long-term strategy focusing on:
The "Do Nothing" Approach - Combined Financial Picture at Age 75:
But the story gets even more dramatic at age 80: "Do Nothing" at Age 80:
Lifetime Medicare Premium Savings: Over $50,000 The strategic approach transforms their retirement in multiple ways beyond Medicare savings: Additional Benefits of Sarah and Tom's Proactive Strategy:
Remember, Medicare premium planning requires coordination with your overall retirement income strategy. Like Sarah, you need a comprehensive approach that considers your LEOFF/PERS benefits, Social Security timing, and investment withdrawals. Sources and Resources
-Seth Deal |
AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
November 2025
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