Understand Government Retirement Benefit Programs

They say that days seem to drag on forever, but years pass far too quickly. Without question, it can be kind of shocking to sit back and see how rapidly time flies. This applies especially to the approach of your senior years.  The sooner you start to prepare yourself, the better. One step will be to educate yourself about the government retirement benefits that you can expect to receive.

With this in mind, we will look at some key facts about Social Security and Medicare. To warn you in advance, some of what we will be sharing may not be to your liking, but it is important to face the limitations of these programs head on.

Retirement Income

You qualify for Social Security by accumulating retirement credits while you are working and paying FICA or self-employment taxes. In 2019, you get one credit for every $1360 that you earn that is taxed. The maximum accrual in a calendar year is four credits.

When you do the math, you see that you will definitely get the four credits if you work for any length of time within a year. Once you have at least 40 credits to your name, you will qualify for these programs when you reach the age of eligibility.

It is possible to start to receive a reduced Social Security benefit when you are as young as 62 years of age. A lot of people think that’s great news, and they resolve to jump on the opportunity as soon as they can.

Before you embrace this perspective, you should understand that the your monthly payout would be reduced by somewhere between 25% and 30% of your full benefit. The exact amount of the reduction would depend on your birth year.

Plus, you can only receive the total amount of the reduced benefit if you make $17,640 a year or less. You would be penalized by one dollar for every two dollars that you earn over this amount.

The exact age of eligibility for your full benefit also depends on the year of your birth. If you were born in 1954 or earlier, the you would become eligible when you celebrate your 66^th birthday.

Beyond that, the eligibility age goes up by two months per year. For example, if you were born in 1955, you would become eligible for your full benefit two months after the day that you turn 66 years of age. The two months per year arrangement ends in 1960; people that were born during that year and after become eligible at the age of 67.

Your exact benefit amount will be determined based on your 35 highest earning years. The average Social Security benefit for an individual in 2019 is $1461 a month. Clearly, this is quite modest, and the maximum benefit of $2861 a month is not exactly a king’s ransom.

You can maximize your benefit if you decide to delay your application submission beyond the full retirement age. If you do this, your benefit will increase by 8% for every year that you delay, but this window of opportunity closes when you reach the age of 70. At that point, it there are no additional benefits to be gained by any further delays.

Health Care Insurance

Those 40 retirement credits also lead to eligibility for Medicare coverage when you reach the age of 65. This health care insurance will certainly help, but you should budget in advance for the out-of-pocket expenses along with one major gap in the coverage.

Part A pays for hospitalization, and most people pay no monthly premium for this portion. There is a deductible per benefit period, and in 2019, it is $1364.

The portion of the program that covers visits to doctors and outpatient care is Part B. The monthly premium is $135.50 this year, and Medicare will only pay 80% of covered expenses.

You can choose to take advantage of Part C to use your Medicare eligibility to purchase a Medicare Advantage plan from a private insurer. Part D is the prescription drug piece, and there are deductibles, coinsurance, and premiums for this coverage.

Most seniors will need some type of living assistance eventually, and a significant percentage of elders will ultimately reside in nursing homes. Medicare will not pay for this type of care, and it is extremely expensive.

Fortunately, if you take the right steps in advance with the help of an elder law attorney, you may be able to qualify for Medicaid. This government program does pay for living assistance if you can qualify.

Schedule a Consultation!

Our doors are open if you would like to prepare for the eventualities of aging with the assistance of legal counsel. You can call us at 704-944-3245 to set up a consultation in North Carolina (Charlotte, NC and Huntersville, NC), and the number for our Ashland, Kentucky office is 606-324-5516, or 859-372-6655 for our Florence, Kentucky office. There is also a contact form on this website that you can use to send us a message.