ADDING A SOCIAL SECURITY AND MEDICARE SAFETY NET TO YOUR RETIREMENT PLAN Learn how coordinating these two programs can significantly benefit your retirement income.
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FOREWORD Thank you for your time and interest! This booklet was created as an educational guide to bring you greater clarity and understanding of the financial decisions you make. If you need more information on a subject discussed, we welcome your email and will attempt to get you the answers you need. Please be mindful as you read this; everyone’s financial situation is different. So any product or solution must match your specific financial picture. We strongly recommend you consult with a highly-rated professional about every financial decision you make. Because, just as not all products are created equal, neither are all financial professionals, and the difference in knowledge and advice can be substantial from one advisor to another. Working with a highly knowledgeable, independent, well-rated professional can make all the difference when it comes to the results you achieve. If you are ready to explore your retirement options and want some help cutting through the clutter and jargon, visit www.CertifiedSafeMoney.com for unbiased information and connect with professionals who can answer all of your most pressing questions. If you ever have feedback related to this booklet or concerns about your retirement income and financial security, please email us at [email protected]. 3 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
Today, financial planning for retirement and keeping your money safe is quite different than in the past. One reason is that many companies have done away with pensions, leaving the responsibility to the employee or retiree to ensure they have enough income and the safest investments for a comfortable retirement. Another reason is the longer life expectancy of today’s retirees. This has many retirees asking: “Is Social Security enough?” and “Should I invest in an IRA vs. a 401k?” Now more than ever, it is imperative to coordinate the “safety net” of Social Security and Medicare to create the safest retirement plan you can build. WHY SOCIAL SECURITY COULD BE YOUR MOST VALUABLE ASSET When asked about their most valuable asset, many people answer that it is their home or their retirement savings. In many cases, your Social Security benefit is the most vital component of any good retirement plan, especially if you live a long life. That is because Social Security pays benefits for as long as you live (and your spouse or other survivors, if applicable). For average wage earners, Social Security will typically replace about 40% of preretirement earnings. But there are some safe money retirement planning techniques you could use to maximize your Social Security, allowing you to bring in much more income throughout your retirement years. Along with Social Security, Medicare provides benefits to older Americans. This health insurance program covers the cost of hospital stays, doctor visits, medical supplies, equipment, and various other items and services. Given that people now live longer lives coordinating the Social Security and Medicare “safety net” is one of the best retirement strategies, as these benefits can help ensure you will have guaranteed retirement income and medical care for the remainder of your life. WHO IS ELIGIBLE FOR SOCIAL SECURITY? To be considered eligible for Social Security retirement income benefits, you or your spouse must work in a job that pays into the Social Security program. When you, your spouse, or both of you work and pay Social Security taxes, you will earn “credits” towards Social Security benefits. Anyone born in 1929 or later is required to earn 40 credits to be considered fully eligible for Social Security retirement benefits. In 2021, for instance, one Social Security work credit is earned for every $1,470 of earnings. You are allowed to receive a maximum of four credits per year. So, it takes ten years of working and earning these credits to become fully eligible. 4 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
WHEN CAN YOU START RECEIVING SOCIAL SECURITY RETIREMENT BENEFITS? You can start receiving your Social Security retirement benefit at age 62. However, if you begin these benefits before reaching your “Full Retirement Age,” or FRA, the amount of your benefit will be permanently reduced. When the Social Security program was initially created, those who had reached age 65 were considered to have reached their FRA and were therefore eligible to receive their full retirement benefits from the system – provided that they qualified based on work credits. To ease some of the funding strain on the Social Security system, the full retirement age was changed in 1983 from 65 to 67, depending on the year of the recipient’s birth. Social Security Full Retirement Age Source: Social Security Administration Year of Birth Minimum Retirement Age for Full Benefits 1937 or Before 65 1938 65 + 2 months 1939 65 + 4 months 1940 65 + 6 months 1941 65 + 8 months 1942 65 + 10 months 1943 to 1954 66 1955 66 + 2 months 1956 66 + 4 months 1957 66 + 6 months 1958 66 + 8 months 1959 66 + 10 months 1960 or Later 67 5 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
You can wait to file for your Social Security retirement income benefits until after your full retirement age. If you do so, you can receive a higher dollar amount, and this increased income will remain in effect for the rest of your lifetime. The longer you wait to receive your benefits, the more “delayed retirement credits” you will receive – until you reach age 70. (Note that you are allowed to continue to delay the receipt of your benefits beyond age 70. However, once you’ve reached the age of 70, you will not be able to build up any more delayed retirement credits). The amount of this delayed retirement benefits increase is 8% per year for anyone who was born in 1943 or later. Looking at an example, if your full retirement age is 66 and your total amount of Social Security guaranteed retirement income is to be $2,000 per month, you could end up with a 32% “raise” by waiting until age 70 to start collecting. The increased income doesn’t include the cost of living adjustment(s) you may receive in the future, which are also calculated on the larger initial monthly benefit amount. If you take benefits at age: Monthly benefit amount: 66 (FRA) $2,000 67 $2,160 68 $2,320 69 $2,480 70 $2,640 IF YOU’RE WONDERING WHETHER YOUR SOCIAL SECURITY WILL BE ENOUGH FOR RETIREMENT OR WANT TO KNOW HOW TO MAXIMIZE YOUR SOCIAL SECURITY BENEFITS, FIND A SOCIAL SECURITY AND SAFE MONEY EXPERT www.certifiedsafemoney.com. 6 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
SOCIAL SECURITY SPOUSAL BENEFITS If the spouse of a qualified Social Security recipient has never worked outside the home – and therefore, has not earned any Social Security work credits – he or she may still be eligible for income through Social Security spousal benefits. They can do so, provided that they are at least 62 and their spouse (or their former spouse) is currently receiving Social Security benefits or is eligible to receive Social Security retirement or disability income benefits. Like the worker’s Social Security retirement benefits, if a spouse begins receiving his or her benefits between age 62 and their full retirement age (based on the year of their birth), the benefit they receive will be permanently reduced. Suppose the spouse waits until their full retirement age to start receiving their Social Security spousal benefits? In that case, the benefit amount they receive will be equal to one-half of their worker spouse’s full benefit amount. By adequately coordinating when each spouse starts to take their benefits, married couples could significantly increase the overall amount received from Social Security. Ex-spouses may also be eligible for Social Security benefits based on their former husband or wife’s earnings. For instance, if you are divorced, you may be able to receive benefits based on your ex-husband or wife’s work record – even if he or she has remarried – provided that the following factors apply: • Your marriage lasted for at least ten or more years. • You are age 62 or older. • You are unmarried. • Your ex-husband or ex-wife is entitled to receive Social Security benefits (although they do not have to be receiving those benefits yet), and • The Social Security retirement benefits you are entitled to receive based on your work record are a lesser amount than the benefits you would receive based on your ex-spouse’s record. Similar to Social Security spousal benefits, your benefit as a divorced spouse is equal to one-half of your ex-spouse’s guaranteed retirement income, provided that you begin receiving those benefits at your full retirement age, or FRA, (based on the year of your birth). The amount will be less if you start receiving benefits earlier than that time. Should you remarry, you typically will not be able to continue collecting Social Security benefits based on your ex-spouse’s work record – unless your later marriage also ends (either by death, divorce, or annulment). 7 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
CAN SOCIAL SECURITY RETIREMENT BENEFITS BE TAXED? In some cases, Social Security retirement benefits will be taxed. This depends on several factors, such as whether you have reached your full retirement age and receive income from other sources. Tax on your Social Security retirement income can also be dependent on how you file your annual income tax return (such as individual, married filing jointly, or married filing separately). For example, you could have to pay tax on a percent of your Social Security benefits (in 2021) if you meet any of the following criteria: • You file a federal tax return as an individual, and your combined income is: ▶ Between $25,000 and $34,000 (up to 50% of your benefits may be taxable) ▶ More than $34,000 (up to 85% of your benefits may be taxable) • You file a joint tax return, and you and your spouse have a combined income that is: ▶ Between $32,000 and $44,000 (up to 50% of your benefits may be taxable) ▶ More than $44,000 (up to 85% of your benefits may be taxable) • You’re married, and you and your spouse file separate income tax returns. *Note that your combined income equals your adjusted gross income plus any non-taxable interest earned, plus one-half of your Social Security benefits. HOW TO MAXIMIZE SOCIAL SECURITY INCOME There are hundreds of combinations for receiving Social Security guaranteed retirement income benefits. Using various strategies, you could substantially increase the safe money income you receive through Social Security. Some of the ways to increase your Social Security income include: • Waiting until your full retirement age – or even later – to file for your benefits • Working for at least 35 years (so there are no zeroes in your benefit calculation) • Maximizing your earnings while you’re still working • Minimizing your taxable income if you claim Social Security income before you have reached your full retirement age and you are also bringing in income from other sources LOOKING FOR WAYS TO MAXIMIZE YOUR SOCIAL SECURITY INCOME? VISIT www.certifiedsafemoney.com TO FIND THE HIGHEST-RATED SAFE MONEY EXPERTS IN YOUR AREA. 8 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
INCLUDING MEDICARE BENEFITS FOR HEALTHCARE COVERAGE In addition to Social Security, Medicare can be another critical financial planning tool. This federally funded program provides basic health insurance to those 65 and over and certain disabled individuals under age 65. When it was created, Medicare had two essential parts. Medicare Part A covered hospitalization, and Medicare Part B offered coverage for doctors’ services and medical equipment and supplies. Today, there is also Medicare Part D for prescription drug coverage and Medicare Part C – also known as Medicare Advantage, which offers an alternate method of receiving your Medicare coverage. Medicare provides Part A coverage (usually for no out-of-pocket expense), while Part B is optional and requires a monthly premium. Medicare Part A and Medicare Part B are also referred to as the “Original Medicare Plan.” With the original Medicare plans, individuals can choose their doctors, hospitals, and other healthcare providers, rather than using only someone in a particular network. Medicare Part C (also commonly known as Medicare Advantage) combines Medicare Part A and Part B coverage. So, Medicare Part C enrollees receive the same benefits as those who are in Original Medicare as well as some added benefits. Only insurance companies approved by Medicare offer and underwrite Medicare Advantage plans. Generally, an insured person must see doctors listed in the plan’s “network”; however, their out-of-pocket costs could also be lower than in Medicare Parts A and B. They can also receive “extra” benefits, such as dental, vision, or wellness coverage, not offered through Original Medicare. Medicare Part D provides prescription drug coverage. This plan is optional and consists of private drug companies that Medicare approves. Part D covers different drugs, but medically necessary drugs must be covered. Part D may be purchased along with Parts A, and B. Medicare Advantage plans will often already have prescription drug benefits built into the plan. 9 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
WHO IS ELIGIBLE FOR MEDICARE? To be eligible for Medicare benefits, a participant must have lived in the United States for at least five continuous years and be a permanent resident of the country. Also, qualified recipients of Medicare benefits must be at least 65 or over or have a specific type of disability. HOW MUCH DOES MEDICARE COST? For most people, Medicare Part A is free. However, if you do not have at least ten years of work credits, you may have to pay a premium. There is a premium required for Medicare Part B. Most Part B recipients will pay approximately $150 per month. Your premium could be higher if you are considered a high-wage earner. Medicare Part D plans are sold through private insurance companies so that the premium could differ from one policy to another. Likewise, Medicare Advantage plans (i.e., Medicare Part C) are also obtained via insurance carriers. However, Medicare Advantage participants will also be responsible for paying their Medicare Part B monthly premium. Medicare recipients may also have to pay various out-of-pocket charges, such as deductibles and copayments. Because these costs can be high, many Original Medicare participants purchase Medicare Supplement insurance (or “Medigap”) to help reduce these expenses. 10 [email protected] www.certifiedsafemoney.com CSM202101SSANDMEDICARE
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