Social Security Questions
 

Hey, all,

I am a fifty plus guy, but I usually just hang out in Foo. I have a couple questions about social security that I thought some of you might be able to answer.

1--How do they determine what your check will be each month? I have heard that it is pegged to your last five year's wages, or the ten best years, among other things. What is it, really? This is important if I decide to take a lower-paying job soon in order to enjoy life a bit more. I don't mind taking a small pay cut, but I am worried that it would impact my income for the rest of my life, which might make it a pretty dumb move.

2--When do you first get benefits, and what are the plusses and minuses of waiting longer to get a bigger check? (I am 55)

3--When do you incur a penalty for working while you are getting a check, and what is up with that, anyway?

As a side note, how good is Medicare, when do you get it, and how much do you pay for a supplemental plan? If you buy the plan and keep it paid up, are you covered for good, or are you still at risk of tapping out if you get sick?

(Apologies if you guys have been over this, but it's all new to me)

See above

I would post your question on the Bogleheads forum: https://www.bogleheads.org/forum/index.php

You need to register for Medicare when you are within 3 months (I think) of age 64, but are not required to use it if you are still working and have coverage from an employer.

Not more than 2 months... I just did it.

I believe my employer provided Blue Cross coverage will require me to use Medicare when I hit 65 and they will then pick up the difference.

Although I really hope to cease my employment when I hit that age.

Thanks for the answers so far, which led me to some more answers, and left me with a lot of calculations to ponder.

I've asked a few people in the non-virtual world, including some of them already getting benefits, and nobody knew the right answers. I assume AARP has this right:

So, that means that taking a smaller wage for the last ten years of work would knock me down some, but not as bad as if they only looked at the last years, as some people said.

Fidelity says you can start at 62, but the benefit is reduced by about 30% if you start at 62, and a bit less until you get to 100% at FRA (full retirement age, 67 for me). Then, you also get 8% more each year up to 70 if you wait even longer, which sounds like a square deal.

I still don't understand the penalty for working while you receive benefit, or really anything about medicare.

As you'll see from the SS site, the longer you wait the higher your monthly check.

If you know exactly how long you're going to live it's fairly easy to calculate the optimal age to start collecting so that you get the maximum amount over your lifetime. If you don't have that information, the decision becomes a bit more difficult.

Not surprisingly, I don't know that. I assume it makes sense to bet long so you don't end up in the poor house. But, I have a sense that the medicare question is tied up with all this. Can I lock in a certain payment for a supplemental policy and figure out my real health care cost, or should you just keep on banking all you can in case you end up in a nursing home or something?

On the flip side, of course, there is something to be said for enjoying life while you can still do it.

Go to ssa.gov. There are answers to many of your questions. Create your account to see what your future benefit looks like. Medicare starts at 65. Register 3 months before but not more than 3 months after your 65th birthday. By the time you reach that time the rules may change. There are many strategies for when to start or delay.

You are required to register on the Medicare site when you turn 65, or a couple months before. You do not get drug coverage for free and if you don't have drug coverage you will pay a monthly fine if you do get it later. You can get a Medicare Advantage plan from an insurance company which covers drugs and co-pays, it's a good deal and there are a lot to choose from.

When I retired I was 65 but my "full retirement" age was 66. I worked part of that year and made $23k. At the time the penalty was they would subtract $1 from my payment for every $2 I made over $17k. This goes away in the year of my "full retirement" age, which was the next year. I didn't work that year anyway.
The other consideration is if you collect SS while working you may have to pay taxes on it. I think this also goes away at some point.

Big John is pretty much correct about signing up for Medicare at your 65th birthday, but I believe its a six-month window that's 3-months before and three months after 65. You can sign up for the basics (Parts A and C), then add on PArts B and D for an additional cost. OR . . you can sign up for the MEdicare 'Advantage' program, which is basically an HMO. And make sure you sign up during that window and dont be late; severe penalties are imposed if you sign up late!!!!

If you have insurance through a big company right now call them up and see if they participate in Medicare, then ask them if they have advisors to help you through the 'mess'. The advisors are supposed to be independent, but most will try and sell you to sign up with their company as the provider, especially if you choose the Advantage HMO-style platform. For me, I'm in an HMO stlye system and they do participate in Medicare, I like the service, so I'll probably just continue on with the company under Medicare oversite.

Check out the details on the Medicare site, as they can change and I tend to spout a lot of BS anyway.

Social Security and working: Check out he SS website. FWIR you can work up to a maximum number of hours per year and still get your full SS benefits; IIRC I believe its 50% of full-time. And there's also a maximum income level before your SS checks get reduced gets cut (regardless of the hours you work).

For Medicare which most people get at the same time as Social Security. For informational purposes only. Not advice. See your own advisor before taking action or committing money to any company. TL;DR: Sign up for Part A when you turn 65. Check with your employer if you continue working to see if your medical plan is considered "Credible Coverage" for Medicare Purposes. If not Sign up for Parts B & D at 65 to avoid permanent (lifelong) penalty.


MEDICARE
Medicare is the Government provided healthcare system for seniors. It provides basic hospitalization, and can pay for doctor visits and drugs. There are two basic plans:
A,B,D (and sometimes a “supplement” plan to fill in the gaps in coverage). You have probably heard these called “Medigap” or “Donut Hole” insurance. And Part "C" or "Advantage Plans".

Part A-Everyone gets when they retire if they have worked 40 “3 month” periods and contributed to Social Security. Covers basic hospitalization. No charge to customer if they meet working criteria, otherwise $422 per month to private pay. 2021 has a $1484 deductible.
Part B- This covers doctor visits and some home health services. Basically anything not covered by Part A. In 2021 new enrollees $148.50 / month (individual income less than $85,000 per year.)
*Income over $85,000 per year (individual) premium is $187.50 / month.
With a $203 deductible.

Part D – this is the Drug plan brought in January 1, 2006. There is a plan premium based on provider plan 2020 average is $32.74.
*Maximum annual deductible for a plan is $445 (Many plans are lower).
*Part D covers drugs from deductible to $4020. After $4020 the person is in “The Donut Hole” where they pay a discounted rate (25%) until $6550. After $6550, the Catastrophic coverage picks up again.

Supplement or Medigap Plans- These private insurance policies cover all, or a portion of the costs not covered by Original Medicare A & B. Designated by letters A through N, each plan with a given letter will provide the same coverage no matter the insurance company through which it is provided. There is a difference in costs between companies. For example: Mary went on Medicare at 65 and chose Supplement Plan F through a magazine ad from a seniors’ membership organization and pays $205 per month. Mary got into a conversation with a licensed insurance agent who gave her a quote from a different well known company for $155 per month for the same plan. Mary would receive the EXACT same coverage and save $600 per year by switching.

Part C Plans: Known as “Advantage Plans”. These are HMO or Preferred Provider Plans which contain Hospitalization, Physician services and Drug coverage. They tend to be less expensive initially than A,B,D plans but tend to have more limited services, or higher co-pays and annual out of pocket expenses of up to $6700.

People can switch between A,B,D and Advantage plans during the annual open enrollment period. BUT THERE IS A BIG CAUTIONARY POINT!!!
Initial choice of plans bases the customers costs on the average health condition of the whole group of 65 year old’s. Switching to another plan (usually people want to go from Advantage to A,B,D) is based on the person’s specific health criteria. MOST PEOPLE WANT TO SWITCH WHEN THEY WANT MORE COVERAGE BECAUSE THEIR HEALTH IS DECLINING and they realize they will have high out of pocket costs.
It is generally too expensive to switch at that time or the cannot qualify for the Supplement (i.e. they can't pass underwriting)

Medigap (Supplement) Plans: 10 plans. Plan G is the most comprehensive and most popular. Costs between $175-$425 per month. Fills in gaps or extends coverage for Parts A,B,D coverage.

Most of this is on your SS statement... they used to send these out every year but now you have to go to the site and print one out for yourself.
You certainly won't reduce your payments if you work part time BEFORE you start taking benefits, and if you work WHILE taking benefits it just shifts the benefits around... you get bigger payments later.

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Good to see you asking these questions now. Of course the laws may change but for the most part the posts are dead on. I asked the same questions at a High School reunion and received some advice that held true. The advice came from a top attorney financial adviser, now retired from Houston. He said to try to take at least half of the money SS pays you and squirl it away for when they ask for it back. I laughed at the time but in fact two years latter owed a payback to SS for more than 12K. Long story but it was all my fault and maybe I should have listened more closely to his advise.

Further advice would be that every time your SS check arrives and clears the bank to smile and let it be a surprise... Ha

As for Medicare just remember this... "THERE IS NO ADVANTAGE IN A MEDICARE ADVANTAGE PLAN". Go for straight Medicare and select a reasonable secondary. Make sure the secondary has good ER coverage and covers office Copays.

Just don't put all your eggs in the social security basket. The projections for when it runs out of money isn't very positive (no, I will not get into a political debate so don't start). I'm 53 and glad I already have a good pension so I don't even need it.

Well, the one thing that seems very clear is that there is no percentage in taking benefits early if you are still working. Your tax bill would go up, you would pay a penalty, and your future benefits would be reduced.

Social Security is pretty minimal at age 62. I was forced to start taking SS at age 62 after being hit by a car, then discovering I had cancer while the collision injuries were being evaluated. I was unable to work for more than a year, so I transitioned from Supplemental Security Income to regular Social Security.

I could return to work and still draw Social Security. I might consider that after the pandemic is under control and the economy settles. I'm still being very cautious due to an autoimmune disorder. But my former job is no longer available. And, TBH, 2018 was quite a shock so I've been more concerned about my health after basically neglecting myself for more than 20 years.

Fortunately I'm covered by the VA for health care so I don't really need Medicare although I have it. I had my first intake interview with my primary care provider through Medicare this week, but it was a phone interview so I still have no particular opinion about my experience with Medicare. I'll probably continue with the VA for most health care, particularly since the Mission Act gives us access to providers outside the VA system.

However Medicare is actually pretty good now and offers choices of primary care providers and specialists. I was my mom's caregiver for a decade as her Alzheimer's, arthritis and osteoporosis worsened, so I ended up taking care of all of her SS and Medicare paperwork. It was surprisingly good and we could go outside of her primary facility for specialty care when needed. And because of her severe disability and low income she qualified for a state-sponsored supplement that covered most of her prescription drug costs as well.

In my mom's case, while she was able to stay home she benefited from the Medicare replacement programs because they offered plenty of choices and coverage for most expenses. However during her final year when she was in a nursing home we switched her back to regular Medicare, which offered better coverage for her needs at that time.

I suggest you review the fine print in your pension plan. I was able to retire early but when I turned 62 my pension was reduced forcing me on SS.I knew this going in so it was no surprise. Hope yours is not reduced.

I was somewhat kidding of course as none of us have the answer to that vexing question. And it also depends on if one has heirs. If my wife predeceases me, I have no kids and would prefer to pass with $10 left in the bank.

My retirement advisor has a plan whereby I have a few hundred thousand remaining when I hit 92. And I'm thinking I'm not likely to live that long.

I'm closer to retirement than you and still don't feel confident regarding supplemental insurance. There are so many anecdotal stories of medical bills resulting in financial ruin. OTOH, my mother passed from a long and expensive battle with cancer and they said the out of pocket costs were minimal. With the right plan, it's not a problem. But how the heck do I determine that?

my Father & MIL are both 93 & show no signs of kicking the bucket, tho they are a bit looney. Mom is 91, same deal ... I'm betting they all have another 10 years left in them. maybe less for Mom, cuz she still drives ... eek!

is it taxed? or what do you mean they ask for it back?

If you're working and don't need the extra money, it's probably better to wait. If you like working than what's the hurry? I hated working and couldn't wait to get out. I am not in a financial position to stop working and have no property or other pensions or anything, really. But I couldn't stand it any longer and I would have retired at 62 except several events conspired to keep me working. I was even ready to go the 3 years until 65 without any medical insurance.

I have a military pension. It only goes up.