Insurance - Miscellaneous Insurance
Use the Miscellaneous Insurance tab to model non-life insurance policies. The policies mainly focus on the premiums to properly categorize the expenses. Certain premiums, such as medical insurance premiums, can affect tax calculations. Benefit information for Disability and Long-Term Care should be entered in the Disability / Long-Term Care tab.
Insurance premiums are considered standard personal expenses by the program. This means that Aspire retirement projections will ignore the premiums during pre-retirement years, assuming the individual will be able to pay them. Only during retirement will the Aspire retirement projections account for insurance premiums and use assets to cover whatever cannot be paid by existing incomes, such as Social Security.
Since Prosper is a cash flow reporting model, the reports will account for all incomes and expenses regardless of retirement status. If insurance premiums contribute to a shortage prior to retirement, the program will use assets to cover the shortage amount.
Learn more about Aspire vs. Prosper.
Table & Buttons
The table provides a summary of all non-life insurance policies. It will show the description, the type of policy, who is insured, and the annual premiums. Select a policy from the table to expand inputs to modify the policy.
Summary: Click this button to the left of the insurance table to expand another table that summarizes the total premiums paid for each type by each insured option (Individual 1. Individual 2, and Joint).
Policy Information
To expand these inputs add or select a policy from the table. This is where the main insurance information is entered. Premiums that begin in the future, or any other potential changes to premiums can be modeled in the Future Changes section.
Description: Enter a name for the policy to identify from other insurance policies. It is recommended that the description is unique for all policies.
Type: Select the policy type from the menu. Certain policies may offer tax benefits. Provided is a summary of all insurance policy types:
Auto: Policy for automobiles with no special tax treatment.
Disability: Policies in the event of disability that prevents the individual from working. Disability benefit information is modeled in the Disability / Long-Term Care tab. The program has no special tax treatment for these policies.
Long-Term Care: These policies are used to cover periods of extensive care over the course of several years, typically in old age. Long-Term Care benefit information is modeled in the Disability / Long-Term Care tab. LTC premiums can be covered by tax free withdrawals from an HSA. If not covered by an HSA, the premiums count towards itemized deductions as a medical expense.
Medical: The cover any out-of-pocket medical insurance policies. The premiums count towards itemized deductions. However, these policies do not qualify for tax free withdrawals from an HSA.
Medical Pre-Tax: The policies cover medical insurance policies that are fully deducted from taxable income. This typically covers employer plans that are deducted from payroll. Since these are a direct deduction, or "above-line" deduction, the premiums do not count towards itemized deductions and are not HSA qualified.
Medicare Part B: This type of policy comes with special inputs. Continue reading for more information. Premiums are calculated by the program and assumed to begin at the insured's age 65. The premiums paid can be covered tax free from an HSA. If not covered by an HSA, the premiums count towards itemized deductions for medical expenses.
Insured: Select the individual insured by the policy between Individual 1, Individual 2, and Joint.
Company: Enter the company that is insuring the individual or couple. This field is optional and used for informational purposes only.
Annual Premium: Enter the annual premium for the policy. This field is not available for Medicare policies since the insurance premiums are calculated based on income.
Inflation Rate: The inflation rate for the premiums is entered here. For newly created policies, the program uses the default inflation rate for personal expenses entered in the Default Rates section of Settings (Moneytree's product default is 3.2%).
Medicare Part B
Medicare Part B policies come with special fields. The program calculates premiums based on Modified Adjusted Gross Income (MAGI) from 2 years prior. MAGI is the individuals' AGI plus tax free interest. For example, policies beginning in 2025 would have their premiums calculated based on the AGI plus any tax free interest from 2023.
Insured: Since Medicare is taken by specific individuals, there is no option for Joint.
Start Age: This field defaults to age 65 for newly created policies. If an individual qualifies to begin benefits early, or if they intend to begin later, use this field to change the default. The program assumes the individual qualifies to start at the entered age without penalty. This field is especially useful for individuals that are working past age 65 and elect to stay on their employer's health insurance plan.
Inflation Rate: This rate increases the premiums at this rate. Medicare premiums are divided across breakpoints. As MAGI passes a breakpoint the annual premiums increase. The breakpoints themselves increase based on the rate entered in the field "Increase Rate for Federal Tax Tables/Exemptions" which is found in the File Status / Options tab of the Taxes section.
Year Prior MAGI: For clients currently taking Medicare or planning to take Medicare next year, enter last year's MAGI in this field. If the value is left at $0 the program will use the current year MAGI as an approximation. For individuals that truly had no income, enter $1 so the program uses the lowest possible premium amount.
Two Year Prior MAGI: Enter the clients' MAGI from two years ago in this field if clients are currently on Medicare or planning to begin benefits in the immediate future. If this field is left at $0 the program will use the current year MAGI as an approximation. For individuals that truly had no income 2 years ago, enter $1 so the program uses the lowest possible premium amount.
Future Changes
Use the Future Changes table to make any changes to insurance premiums in the future. For policies that begin in the future, leave the Annual Premium field above at $0, then use this table to specify the age when the premiums begin and the amount in today's dollars. This section can also be useful for stopping premiums for insurance policies that expire, by adding an entry, entering the age the benefit expires, and premiums of $0.
Add New Entry: Click this button to add a future change to the table.
Age: Enter the age the premiums will change.
Premium: Enter the annual premiums at the specified age in today's dollars. $0 can be entered to stop the premiums at the specified age.
NOTE: Future Changes can also be used for Medicare Part B to start and stop benefits at specific age. Entering a premium amount of $0 will stop premiums from being calculated at that age and beyond. Entering a premium amount of $1 will cause the premiums to start at that age and beyond. The program will not calculate penalties for benefits that were stopped and resumed.