Most adults become eligible for Medicare on the first day of the month they turn age 65. Whether you need to sign up and how to go about doing so depends on the type of coverage you select and whether you collect Social Security benefits prior to becoming eligible for Medicare.

Medicare Eligibility

If you have already started receiving Social Security benefits before your 65th birthday, you don't have to sign up for Medicare Part A or Part B. Part A is basic hospital insurance; Part B helps to pay for medically necessary services such as doctor visits or outpatient care. You automatically become eligible on the first day of the month you turn age 65. Premiums for Part B (there is no premium for Part A) will be deducted automatically from your Social Security check.

If you are not receiving Social Security benefits, you will be required to sign up for Part A and Part B. Contact your local Social Security office three months in advance of your 65th birthday to start the process.

If you still receive medical insurance from another provider (such as your employer or your spouse's employer), you can wait to sign up for Medicare. To avoid paying a higher premium, you will be required to enroll during the eight-month period that begins during the month your employment ends or the group health coverage ends, whichever is first. Note that you may be assessed with higher premiums if your modified gross adjusted income is over $85,000 for single filers and $170,000 for married couples filing jointly.

Medicare Part C and Part D

Both Medicare Part C (Medicare Advantage) and Part D, which is prescription drug coverage, are provided by private insurers whose plans are approved by Medicare. You can get information on these providers on the Medicare Web site (www.medicare.gov).

You can sign up for both Part C and Part D when you first become eligible for Medicare. You can also sign up between January 1 and March 31 or between November 15 and December 31 each year. Even if you don't currently have many prescriptions, you may want to consider signing up for Part D as soon as you become eligible. If you wait and try to sign up during a subsequent enrollment period, you may be charged a late enrollment penalty and be forced to pay higher premiums.

Supplementing With Medigap

Many retirees supplement their Medicare coverage with Medigap plans, which are sold by private insurers. The state where you live may determine the type of plan available to you. It's important to note that these policies do not cover long-term care, vision care, dental care, hearing aids, eyeglasses, prescription drugs, and private-duty nursing. If you anticipate ongoing use of these services, you may need to obtain another form of insurance or pay out of pocket.

When you sign a contract for Medigap insurance, you usually permit the insurer to access your Medicare Part B claim information directly from Medicare and to bill your health care providers directly. In certain instances, Medigap providers will manage claims for Medicare Part A as well.

Your Rights as a Medigap Beneficiary

Medigap policies cover only one individual, which means that for couples, each partner needs to purchase a separate policy. The best time to purchase a Medigap policy is during the Medigap open enrollment period, which lasts for six months after you are both age 65 or older and enrolled in Medicare Part B. During this period, an insurer cannot refuse to sell you a Medigap policy or impose a surcharge because of your health status.

A standardized Medigap policy typically is guaranteed renewable, which means that, as long as you continue paying premiums, an insurer cannot use your health status as a rationale for cancelling the policy. If you were diagnosed or treated for a pre-existing medical condition within six months prior to a Medigap policy taking effect, an insurer can make you wait up to six months before providing coverage for the condition. In certain instances, if you had health insurance coverage during the six-month period before the Medigap policy takes effect, the waiting period may be eliminated or shortened.

Capital Advantage, Inc. financial advisors are available to answer your questions. Please call our office at 925.299.1500 or 888.299.1500 to speak with your advisor or to schedule your next portfolio review. Referrals to professional resources are also readily available upon request.

Understanding 529 Plan Distributions  

Parents looking to take advantage of the many benefits of saving for college with a 529 plan will want to know the full details on which educational expenses qualify for tax-free distribution status -- and which do not. In Publication 970, the IRS gives detailed guidance on qualified expenses.

Here are a few important points:

What Is Covered:

1. Tuition and fees are covered in full.

2. Room and board, if the student is enrolled at least half time. But, such expense must not be more than the greater of (1) the allowance for room and board, as determined by the school, that was included in the cost of attendance; or (2) the actual amount charged if the student is residing in housing owned or operated by the school.

3. Food. If you spend a certain amount for a meal plan, that entire amount can be deducted, even if used for coffee or ice cream and not a full meal. Weekend meals can also be included if the dining halls are not open.

4. Books and supplies. Any fees associated with purchasing school textbooks are considered qualified, as is required equipment or supplies such as notebooks and writing tools.

5. Computers/laptops, but only if required by the school. If required, internet fees and PDAs or "smartphones" may also qualify. The Savings Enhancement for Education in College Act (H.R. 529) that is currently being considered by Congress would expand this definition to apply to all computer technology used by the student.

6. Special needs services required by special-needs students that are incurred in connection with enrollment or attendance at school.

What Is Not Covered:

1. Student loans. Interest on or repayment of student loans is not considered a qualified expense by the IRS.

2. Insurance, sports or club activity fees, and many other types of fees that may be charged to students but are not required as a condition of enrollment.

3. Transportation to and from school.

4. Concert tickets or other entertainment costs, unless attendance is requisite to a course or curriculum.

5. Note that expenses must apply to a qualified college, university, or vocational school for post-secondary educational expenses. Also, keep in mind that taxes and a possible 10% penalty will apply to all distributions that are not considered qualified educational expenses by the IRS, so be sure to check first.

Capital Advantage Inc. continues to grow!

In order to maintain the highest levels of service to both our clients and their portfolios, we are proud to announce the addition of two new professionals to our team! Colin Taylor has joined us as our Investment Analyst, and Sylvia Hack will be joining our team in July as a Senior Financial Advisor, working with many of Gary Clarke's former clients. Please read more about our newest team members below...

Colin Taylor is the Investment Analyst at Capital Advantage, Inc. He is responsible for the operation, maintenance, and modernization of the organization's financial and technical systems. As part of the investment team, Colin provides investment and market commentary, equity and fixed income selection and analysis, and asset allocation recommendations. Colin received a Bachelor's Degree in Economics and Business from The Colorado College in Colorado Springs in 2001. Colin is a Registered Investment Advisor and a Chartered Financial Analyst (CFA) Level II Candidate. Colin began his financial services career in 2001 as a Mutual Fund Analyst for Prima Capital in Denver, Colorado. From 2002 through 2006, he worked for Techfi Corp. and Advent Software, Inc. (who acquired Techfi), providing out-sourced back office operations support to investment advisors. In 2006, Colin joined Catalyst FPIM, Corp., a private wealth management firm in Oakland, serving as the Director of Operations. He joined Capital Advantage, Inc. in 2011. Colin lives in Oakland. In his time outside of work, he enjoys bicycling and hiking, martial arts, and reading.

Sylvia Hack is a Senior Financial Advisor at Capital Advantage, Inc. She is responsible for establishing new client relationships, managing investment portfolios and financial planning. Sylvia received a Bachelor's Degree in International Economics and German Literature from the University of California at Davis in 1993 and a Master's Degree in Business Administration from Thunderbird, The American Graduate School of International Management, in 2000. Sylvia is a Registered Investment Advisor. Sylvia began her career in the finance industry in 1997 as a Research Associate with Sutro & Company in San Francisco. Over the years, she transitioned through various positions in the industry ranging from Sales Assistant at Goldman Sachs to Institutional Bond Sales at Dresdner, Kleinwort, Wasserstein in New York to Financial Consultant at Charles Schwab & Co., Inc. in San Ramon. She joined Capital Advantage, Inc. in 2011. Sylvia lives with her husband and son in Danville. In her spare time, she enjoys cooking, attending various cultural events, and keeping up with her busy family.