Q: What is so important about these two birthdays?
For those born 1943-1954, full retirement age (FRA) is 66, and that means you can claim full Social Security benefits. It also means you can earn unlimited income without reducing your Social Security payment.
Age 65 is when most seniors file for Medicare. Although Medicare eligibility begins at age 65, enrollment is only automatic for seniors who already have begun receiving Social Security benefits. Others should visit the local Social Security office or file online at the agency’s website. Application should be made 3 months before you turn 65 or up to 3 months after in order to file “on time.” Filing “on time” is very important.
Q. What if I am still working when I am 65 or 66?
If you file for Social Security benefits before your FRA, your benefit is reduced each year and your earned income is limited. (Earned income is defined as wages from employment or net earnings from self-employment). For a 62-year-old, the net effect is a permanent reduction of annual benefits of 25%. On the other hand, the SSA will increase your payment each year a senior delays filing beyond the FRA up to age 70.
For seniors who are still employed at age 65, Medicare is the primary payor in some circumstances, but not in others. At companies with fewer than 20 employees, Medicare is the primary payor. At larger companies, the employer is primary. In the latter case, a senior can postpone filing for Parts A (hospitalization) or B (outpatient services) although many choose to enroll for Part A anyway since it doesn’t require premium payment. The decision to postpone enrollment should be discussed with the SSA and the employer’s plan administrator in order to avoid premium penalties later.
Q. How is my spouse affected by the decisions I make?
Married couples need to pay attention to the interaction of both of them. Making a visit together to the Social Security office to develop a plan can often result in better long-term payments for both. In general, it is beneficial for the higher-earning spouse to delay taking Social Security benefits until FRA or beyond.
Q. How much does Medicare Part B cost?
In 2012, most pay $99.90/month, and the premium is usually withheld from the Social Security check. However, the premium due for Medicare Part B is “means-tested,” and those single filers whose MAGI is more than $85,000 and joint filers whose MAGI is more than $170,000 pay more. Although the surcharge affects just 5% of seniors, the payments are substantial.
Q. What is a Medigap policy and why would I want one?
Many Medicare beneficiaries opt to purchase an optional Medigap policy. Although the cost requires an additional monthly payment, the policy pays certain out-of-pocket costs Medicare does not cover. It is usually best to buy the Medigap policy during the six-month open-enrollment period around your 65th birthday or when you enroll in Medicare Part B.
Securities and investment advisory services offered through Financial Network Investment Corporation, member SIPC - Founders Federal Credit Union, Founders Financial Group, LLC and Founders Insurance Services are not affiliated with Financial Network Investment Corporation. Financial Network Registered Sales Branches are located at 607 N. Main Street, Lancaster, SC 29720; 1290 Old Springdale Road, Rock Hill, SC 29730; 100 Springcrest Drive, Fort Mill, SC 29715; 1307 Boiling Springs Road, Spartanburg, SC 29303.
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This article was written by Kristen Davis Rhyne, CFP with Founders Investment Services Team.
It was published in the Founders FCU's Open Exchange Newsletter (April 2012).