Around age 60, it’s time to start learning about the requirements and deadlines associated with Social Security, Medicare and retirement distributions.
The first and best approach is to consult an expert, emphasizes Deborah DiDominicus, deputy director of Southern Maine Area Agency on Aging in Portland. Especially for Medicare, “you need professional advice,” she says.
That advice is available at no charge (although donations are accepted) through each Agency on Aging. The Portland branch offers as many as six “Welcome to Medicare” seminars each month, including at least one after work hours.
Even with such a generous schedule, each seminar tends to fill up, DiDominicus says, because of the large number of citizens entering their 60s. “The boomers are exploding,” she adds.
Part A, which covers hospitalization, is automatically available when you turn 65, or earlier if you retire and begin receiving Social Security payments.
This is the part of Medicare that you’ve pre-paid through deductions from your paycheck, so that it’s penalty- and premium-free, explains Carol Rancourt, Medicare educator for the Agency of Aging. Even if you have other coverage, Part A “waits in the wings,” she adds.
Part B is the one you have to pay attention to, as it usually requires action on your part. In most cases, you are required to sign up at age 65.
You have a seven-month window to sign up without penalty: from three months before to three months after your 65th birthday. If you miss that window, you’ll pay an extra 10 percent on your premiums, for the rest of your life, says Rancourt.
Since Part B does come with a monthly premium (the base rate this year is $115.40), it pays to find out if you can delay enrollment even though you’ve retired or reached age 65.
If you’re still working and have qualifying insurance you might be able to delay, says Rancourt. It’s essential to find out if your coverage qualifies, though, and to report such coverage.
“Unless you’re working, with continuity of coverage, you’ll face a heavy penalty for late sign-up,” Rancourt cautions. “Contact your HR department and ask what effect turning 65 will have on your own or your spouse’s insurance.”
If you retire before age 65 and start receiving Social Security, Part B will start automatically, complete with the premium. If, however, your working spouse’s insurance still covers you, you may be able to suspend your Part B. (Make sure to double-check if your coverage qualifies.)
Both Part A and Part B have copays and deductibles. This year, Part A has a $1,132 deductible per 60-day period, while Part B has a yearly $162 deductible. To help cover these, Medicare Supplemental Plans are available through private insurers. To qualify, an MSP must fully cover copayment amounts; qualifying plans are listed at www.maine.gov.
Including Part B, Part D (for prescriptions) and a supplemental plan, premiums for Medicare, which many people think is free, can run between $200 and $500 per month. Aid is available for those with low incomes (currently below $1,745 a month for a single person and $2,347 for a couple), for both premiums and copayments.
You’re not alone if you find Medicare surprisingly complicated. Rancourt compares the Medicare system to the “house that Jack built,” with new bits and pieces added on as the years have gone by.
“I don’t think you can hear this information often enough. It’s not something we as a nation teach very well,” she adds.
In comparison, Social Security is relatively straightforward. Here, the magic age is 66 (eventually going up to 67). That’s when you can apply and receive full benefits, says Robert Clark, public affairs specialist for Social Security Administration in Portland.
The main issue to consider is your intended retirement age. You can retire and start receiving Social Security as young as age 62, but payments will be lower. “We start with the month you reach full retirement age, and if you file before that (it goes down) one-half percent for every month you’re early,” he says.
Waiting until after age 66, on the other hand, increases your payments. Until age 70, “every month you wait to start, we increase the benefit, by two-thirds of a percent per month, (resulting in) eight percent in 12 months,” he says.
You can apply for Social Security by phone or online. Although most applications are processed within a couple of days, Clark advises that you start your application two or three months before you want to begin receiving benefits.
Until recent budgetary changes, Clark gave outreach seminars “outlining fundamental issues, such as filing before, at or after full retirement age,” he says. “Social Security 101, you might say.”
Seminars might be resumed in the future, but a wealth of information is available from the Social Security website or local office, he says. The website includes detailed guidelines about deciding when to start receiving benefits and how work affects your benefits.
There is also a calculator to estimate what your benefits will be (the statements you used to receive in the mail have been suspended). For the average wage-earner, “Social Security can be expected to replace approximately 40 percent of pre-retirement income,” says Clark. The current average is $1,777 per month, and the maximum for those turning 66 this year is $2,366.
As you approach retirement it’s also time to consider when and how you will receive distributions from the retirement plans you’ve been working so hard to build.
For both 401(k) and IRA accounts, you can learn some basic guidelines but should consult your own financial expert to make sure that you know the individual details of your particular plan.
Your distributions are taxable as income, but in typical circumstances withdrawals before you turn 59 1/2 will incur additional tax penalties. After 59 1/2, there are no penalties. Nonetheless, “it becomes income and you could bump yourself into a higher tax bracket,” warns DiDominicus.
The other important age marker is 70 1/2. Required distributions start on April 1 of the year after you turn 70 1/2 or the year you retire. Your individual plan determines whether required distributions will start even if you haven’t yet retired.
The AARP website has a variety of articles and tools to help with retirement planning, including calculators for estimating your Social Security and deciding when to claim, general retirement readiness and fees and contributions for 401(k) and other plans.
Jennifer Brewer is a freelance writer who lives in Saco.
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