Tips for Navigating Medicare and Social Security Benefits - A Guide to Financial Security

Source: rocket50

By: rocket50 staff     

Date: May 8, 2023

As a US citizen, when you’re about to retire, opting for Medicare as your health insurance seems straightforward, but it isn’t. The choices are even murkier once you work past the normal retirement age.

For one, Medicare only applies to people past 65 and is divided into four parts/plans (Part A through D). Social Security and Medicare are tied at the hip since the Social Security Administration (SSA) recruits you to Medicare and deducts Medicare premiums from your monthly benefits.

So, which Part or plan should you choose?

It is in your best interest to settle on a plan that suits your health condition to minimize out-of-pocket expenses. Here’s a look at how older adults can manage Medicare and Social Security and remain financially stable.

Navigating Social Security

Social Security is a federal program that benefits mature adults or their survivors. Individuals who qualify for disability are also eligible for these benefits. For brevity, this article will only discuss Social Security and Medicare related to seasoned adults.

The Social Security Administration (SSA) manages this program. As of 2023, approximately 67 million Americans receive Social Security benefits yearly, with adults 65 and older taking up most of the collections.

What Are the Eligibility Requirements for Social Security?

You must have paid enough Social Security taxes during your working years to accumulate enough credits to become eligible for benefits. 

To qualify for Social Security retirement benefits, you or your spouse/ex-spouse must have earned 40 work credits, equivalent to 10 years of work experience. You do not need work credits if you qualify based on your spouse or ex-spouse’s employment history. 

If you are 60 or older and a widow or widower, you can use your late spouse’s work history to qualify. That is regardless of how long you were married.

How Are Benefits Calculated?

The overall amount of your Social Security payout depends on your specific circumstances. Your monthly Social Security income is based on your birth year, employment history, claiming age, and earnings history.

How Can I Apply for Social Security?

You may submit an application for retirement benefits from Social Security online or at a local Social Security office. The SSA will also require your employment history details, including past employers’ names, addresses, and tenure with each organization.

Further, you must provide proof of your identity, such as a birth certificate, Social Security card, or passport.

How Can I Get the Most on My Social Security Benefits?

Here are some tips to help navigate Social Security:

• Know your FRA: Full Retirement Age (FRA) is the age at which you become eligible for your full Social Security benefits. For those born between 1943 and 1954, it is 66. It increases gradually for those born between 1955 and 1960 until 67. For those born in 1960 and after, it’s 67.

• Claim spousal benefits: If your spouse’s employment history meets the qualifications, you might be eligible for spousal benefits. This payment is equivalent to half of your spouse’s full retirement age benefit.

• Delay taking benefits: It is possible to start your Social Security retirement benefits early at age 62, but there is a reduction in payment if you do so before your FRA. Your benefits will grow by 8% annually until age 70 if you delay claiming them beyond the FRA.

• Consider working longer: SSA determines your monthly payment by your total lifetime earnings. They index your earnings to account for changes in the average pay since the years you earned them. If you work for more than 35 years, your benefit will grow because higher earnings in later years will offset lower payments in earlier years, increasing your average earnings.

• Avoid social security taxes: Working after you begin receiving Social Security benefits may be a great way to augment your retirement income, but it’s essential to understand the tax implications. One way to reduce taxable Social Security income is to diversify your income streams so your income never rises beyond a certain threshold.

Navigating Medicare

Medicare is a federal health insurance program for individuals aged 65 and older who have worked at least 10 years in a Medicare-covered job and are US citizens or permanent residents. It is also available for persons with long-term disabilities.

As with Social Security, you’ve probably contributed to Medicare health insurance all your working life. You can use Medicare to settle medical costs, and like other health insurance plans, you will encounter limits, copayments, and out-of-pocket expenses.

Parts of Medicare

Original Medicare consists of Part A and Part B. To receive the services under these parts, you must meet copayments and deductibles requirements. The SSA will charge you a premium monthly payment under Part B if you earn more than a set threshold. Overall, Medicare has four Parts:

• Part A (Hospital Insurance): It covers inpatient hospital care, skilled nursing facilities, hospice care, and home health care services. There are no monthly premiums for Medicare Part A, but it may not cover all your medical expenses. Part A is automatically available to individuals who have worked and paid payroll taxes for at least 10 years. It is also available for purchase for those who do not otherwise qualify. However, it has an annual deductible of $1,600 in 2023.

• Part B (Medical Insurance): This plan covers doctor visits, drugs and chemotherapy, outpatient care, medical equipment, and preventive services. The monthly premium depends on your income, but the minimum you can expect to pay in 2023 is $164.90. Medicare Part B also has a deductible of $226 per year in 2023. The SSA will deduct the premium from your monthly benefits if you receive Social Security.

• Part C (Medicare Advantage): This private insurance plan provides the same benefits as Medicare Parts A and B and other services, including coverage for vision care, dental care, and prescription. The monthly premiums and deductible amounts vary from plan to plan. Before enrolling, ensure you understand the program’s out-of-pocket expenses, whether you need referrals, and which healthcare providers are accepted.

• Part D (Prescription Drug Plan): Private insurance companies provide Medicare Part D as an add-on for an extra monthly cost. It helps pay for prescription drugs.

Who Is Eligible for Medicare?

• When you turn 65, you are eligible for Medicare if you have worked and paid income taxes for at least 10 years.

• You or a spouse has contributed to Social Security for at least ten years

• Are a US citizen or a permanent legal resident

When Should I Enroll for Medicare?

If you begin receiving retirement payments from Social Security before you turn 65, the SSA will automatically enroll you in Parts A and B.

For those not currently receiving Social Security benefits, the initial enrollment period for Medicare begins three months before the month they turn 65 and continues for seven months.

You might have to pay penalties if you don’t sign up for Medicare when you turn 65. Ensure you know your deadlines and coverage options. You are not required to re-enroll yearly, but you may want to evaluate your coverage and adjust as needed.

How Do I Enroll in Medicare?

You can visit the Medicare website or call Social Security at 1-800-772-1213 to enroll in Medicare. The offices may need you to detail your employment history and current medical insurance. You can also enroll in a Medicare Advantage or separate prescription drug plans. 

Understanding Medicare Enrollment Periods

Medicare enrollment periods are crucial for those who aren’t automatically enrolled to avoid financial penalties. It is possible to enroll in Medicare Parts A and B outside of the automatic enrollment period during the following windows:

• Initial enrollment period: This period spans seven months, from three months before the month in which your 65th birthday falls on to three months after.

• General enrollment period: You may still enroll in the plan each year from January 1 to March 31, even if you missed the Initial Enrollment Period. 

• Special enrollment period: This period is open to a special group of people and lets them sign up beyond the initial and general enrollment periods. 

How Can I Choose the Best Medicare Option?

If you find enrolling in Medicare confusing, you are not alone. A recent survey found that over two-thirds of Medicare beneficiaries find the program’s benefits challenging to comprehend.

That can lead to seasoned adults choosing policies that aren’t ideal for them. Here are some navigational tips for the program:

• Understand your Medicare options: Medicare has two options—Original Medicare and Medicare Advantage. If you have Original Medicare, you may see any doctor who accepts Medicare. Advantage plans for Medicare beneficiaries are more stringent but often include extras like dental and vision insurance.

• Check your medications: You must ensure your chosen plan includes coverage for your medication needs since the formulary or list of pharmaceuticals covered by a particular plan might vary.

• Know the costs: There are costs associated with Medicare, including premiums, deductibles, and copayments. Knowing how much money you will be spending on each plan is essential.

• Consider supplemental insurance plans: You can opt for supplemental coverage such as Medigap policies since Medicare doesn’t cover everything. Medigap policies fill up the gaps in Medicare coverage and help with out-of-pocket expenses like copays and deductibles. However, if you have other health insurance or qualify for Medicaid, you may not need a Medigap policy.

• Sign up for Medicare even on an employer health plan: If you or your spouse work past 65 years and are under an employer-sponsored health plan, signup for Part A, which offers free Medicare covering hospital bill gaps in the employer plan.

• Decline Part B under certain circumstances: If you are still working past the social security retirement age (66), file for social security benefits and supplement your earnings, as you won’t pay lower premiums if you are still on a salary. As the SSA will automatically enlist you into Medicare Part A and B, decline Part B. If your employer provides coverage, call SSA and decline Part B to avoid paying the extra premiums.

• COBRA: Those under 65, on their spouse’s employer health plan, and then said spouse goes on retirement should try the employer’s COBRA plan, which allows an extension of the employee’s coverage for another 36 months.

Will Medicare Lower Drug Prices?

The Human Services and Health Department began negotiations aimed at lowering drug prices in 2023, and these are some of the benefits you should expect:

• Drug makers must pay rebates if they raise their drug prices above the rate of inflation.

• You will incur no charge to get vaccine shots approved for adults by the CDC Advisory Committee for Immunization Practices such as the shingles vaccine.

• A $35 cap on 30-day insulin supply covered by a Medicare plan.

Future Benefits of Medicare

These are benefits you can expect in the near future:

• You won’t have to spend more than $2,000 on medication starting in 2025.

• From 2024 to 2029, Part D contributions won’t increase by more than 6% annually.

• If your annual income is 150% of the federal poverty limit, you will qualify for full benefits starting in 2024 (under the Extra Help Program), up from the current 135%.

How Medicare and Social Security Work Together

Although the two are distinct entities, the SSA is in charge of enrolling people for Medicare hospital insurance (Part A) and medical insurance (Part B).

The (SSA) will coordinate with the Centers for Medicare & Medicaid Services (CMS) to educate mature citizens on Medicare enrollment options, handle applications, and collect premiums.

The government will withdraw Medicare Part B premiums from your Social Security check if you receive benefits. If you are not receiving benefits, CMS will send you bills.

Note that you can’t make HSA and Medicare contributions simultaneously. Since you can’t get coverage from an employee plan and Medicare, even for your spouse, you have to settle on a plan that works best for you. Here’s how you can juggle HSA, Medicare, and Social Security:

• If your spouse goes on Medicare and you have a family plan, you can still make the full contributions.

• Defer Social Security until 70 if the employer pays the maximum HSA contributions.

• Don’t pay the last few months of HSA contributions before retirement, as you can backdate Medicare Part A contributions (up to six months) because the contributions count as taxable income.

Why You Need to Master Medicare and Social Security Provisions

Navigating Medicare and Social Security can be challenging and confusing, making securing older adults’ financial security more difficult. You can make well-informed choices that improve your quality of life in old age by understanding the benefits available to you.

If you want to enjoy all the benefits under these programs, keeping up with any policy or regulatory changes is in your best interest. 

As an older adult, you can rest easy and have more financial stability in your golden years if you take the time to deeply understand Social Security and Medicare.

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