Americans are woefully uneducated about Social Security and Medicare — and that creates some expensive mistakes. Here are a few facts you should know.
—Waiting until age 70 will increase your monthly Social Security check by 76 percent over claiming benefits when they are first available at age 62.
Yet nearly 40 percent of Americans claim Social Security at age 62, before they reach full retirement age, costing a fortune in future benefits.
—Every year you delay taking your benefit is equivalent to an 8 percent increase in your monthly check.
Before reaching age 70, when you must start taking benefits, use savings and IRA withdrawals to cover costs. That will create a larger base check on which future cost-of-living adjustments will be made.
—In 2019, the maximum Social Security benefit, if taken at full retirement age, is $2,861 per month.
That’s not nearly enough to live on these days. Yet, for about half of today’ seniors, Social Security provides at least 50 percent of their income, and for about 1 in 5 seniors, it provides at least 90 percent of income.
—The Social Security Administration admits publicly that the main Old Age and Survivors Trust fund will become “insolvent” in 2035 — absent any changes in taxes or the way benefits are calculated.
The program will still have money coming in every year through payroll taxes, estimated to be enough to pay an estimated 79 percent of currently promised benefits. That’s another reason for younger workers to accumulate retirement savings beyond Social Security. But it’s not enough reason to panic if you’re making the current decision about when to claim benefits.
— You should consider enrolling in Medicare Part A, the hospitalization coverage, at age 65, when you become eligible — even if you are still working and covered by a workplace plan.
There is no premium for Part A, and a penalty for not signing up when first eligible, unless you do not qualify for the premium-free Part A. The only drawback is if you are working and have an HSA you can no longer contribute to it. You have a 7-month window around your 65th birthday to sign up for Medicare Part A, but signing up in the three months before your birthday ensures coverage will start in your birth month.
—Sign up for Part B at the correct time, unless you are using an employer health care plan.
The Medicare initial enrollment period is from January 1 to March 31 each year, with coverage starting July 1. From October 15 through December 7 of each year, you can change your supplement and drug plans for the following year. And there is an eight-month special enrollment period for Medicare Part B, which begins when you lose your job. If you fail to do so, you’ll pay a steep penalty every month for life!
—If you’re still covered by insurance at work and not receiving Social Security benefits, you can use your employer’s healthcare plan — with one big exception: If your company plan has fewer than 20 employees, you need both Parts A and B even if you’re still working.
—Traditional Medicare pays only 80 percent of expenses for physicians, tests, equipment and other covered charges.
You need a supplemental policy — unless you opt for the all-inclusive Medicare Advantage plan, which restricts providers. Search for a supplemental policy at Medicare.gov or eHealthInsurance.com. Signing up within six months of enrolling in Part B means you cannot be turned down for the best supplement policies for health reasons.
This is but a start on what you need to know. If you’re nearing age 65 and want help, consider using the consumer-friendly software at www.i65.com, which will guide you through the process. The $65 cost is well worth it when you consider the cost of mistakes. And that’s The Savage Truth.