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Open enrollment season brings Medicare decisions, RMD planning conversations, and the perennial question of whether to pay off your mortgage before retirement. Adam and Andy tackle all three.
The first big Medicare decision is whether to go with original Medicare or a Medicare Advantage plan. Both have distinct advantages depending on your circumstances.
Original Medicare includes Part A (hospital insurance, typically free), Part B (doctor visits, $185/month in 2025), Part D (prescription drugs, around $30-40/month), and a Medigap plan to fill coverage gaps. Monthly premiums run a few hundred dollars total, but you get significant flexibility.
The major benefit? Go anywhere that accepts Medicare. Snowbirds, frequent travelers, and anyone who wants to see specialists across state lines appreciate this freedom.
Medicare Advantage plans wrap everything into a single card with lower premiums. Some cost almost nothing beyond the Part B amount. Many include perks original Medicare doesn't cover like vision, dental, and gym memberships.
The tradeoff is network restrictions because you're working within a gated system. Getting care outside that network requires special approval, which can be difficult to obtain.
Adam'weighs the pros and cons of both options. Medicare Advantage candidates: generally young and healthy with no major health issues, living primarily in one location, and happy with local network doctors. Anyone who needs flexibility should lean toward original Medicare.
But regardless of which path you choose, review your coverage every year during open enrollment. Keep in mind that prescription drug coverage changes, network compositions shift, your health needs evolve. Status quo bias is expensive.
Required minimum distributions force you to take money from pre-tax retirement accounts starting around age 73-75 (depending on birth year) for the purpose of generating taxable income. For successful savers, RMDs can create an uncomfortable situation: reporting more income in your eighties than during peak earning years.
The solution requires planning years in advance through tax diversification. If all your savings are in pre-tax 401(k) accounts, you have limited flexibility. Building multiple buckets by tax type creates options.
The retirement window between when you stop working and when RMDs begin offers the best opportunity for Roth conversions. You're no longer earning W-2 income, which keeps your taxable income low. You can withdraw living expenses from taxable accounts while converting pre-tax money to Roth accounts.
This strategy reduces the pre-tax balance subject to RMDs while filling up lower tax brackets. A decade of strategic conversions can reduce future required distributions, sometimes dramatically.
Qualified charitable distributions (QCDs) provide another tool once you reach age 70.5. You can direct up to $100,000 per year from your IRA directly to a 501(c)(3) charity. This satisfies your RMD without creating taxable income.
The QCD age threshold used to align perfectly with RMD age at 70.5. Recent legislation pushed RMD age back but kept QCD age the same, which means you can now start making charitable distributions before RMDs even begin.
Should you pay off your mortgage before retirement? The answer depends on your interest rate, but more importantly, on your psychology.
For 2-3% mortgage rates from the 2020-2021 era, the math favors keeping the mortgage. That money typically earns more staying invested. You can buy Treasury bills right now and comfortably clear the hurdle rate with zero equity risk.
But if eliminating that debt provides significant peace of mind and you have ample resources to live on afterward, the decision becomes defensible even when the numbers suggest otherwise. Adam doesn't advocate for over-optimization when it comes at the cost of psychological comfort.
The calculation shifts for 6-7% mortgages. The hurdle rate climbs higher and the interest costs become substantial. At that point it becomes more of a coin flip, with flexibility serving as the tiebreaker.
There's a generational component too. People who bought homes during the high-rate environment of the 1970s and 80s have different visceral reactions to mortgage debt than those who locked in 3% rates during the 2010s.
Neither group is wrong. Risk tolerance and lived experience shape these preferences in legitimate ways.
The critical factor regardless of rate: maintain flexibility. Don't drain all your liquid resources to eliminate the mortgage. Keep enough cushion for unexpected health expenses and other surprises that arise during retirement.
Medicare coverage, RMD strategies, and mortgage decisions all share a common thread. The purely mathematical answer often conflicts with the psychological reality of how these choices actually feel.
Status quo bias keeps people from reviewing Medicare plans that might save thousands annually. Tax optimization requires giving up the comfortable simplicity of letting money grow untouched in pre-tax accounts. Mortgage payoff debates pit spreadsheet logic against the genuine relief of eliminating debt.
The goal isn't perfection. It's finding the approach that works for your specific situation while avoiding obviously bad choices. Review your Medicare annually and build tax diversification while you can. Consider your mortgage rate and your peace of mind when deciding whether to pay it off.
And remember Adam's fake obituary example: "He optimized his 401(k) withdrawals and saved X amount in taxes" rarely appears as someone's defining legacy. These financial tools exist to support the life you want, not to become the life itself.