When you work and pay FICA or self-employment taxes, you get something in return for your contributions. In 2021, you receive one credit for every $1470 you pay taxes on, and the maximum annual accrual is four credits.
You become eligible for Social Security and Medicare when you have 40 credits. For Medicare, the eligibility age is currently 65, though there are proposals to reduce the eligibility age.
The age at which you can qualify for Social Security is not as simple and straightforward. It is 66 for people born between 1943 and 1954, and the age goes up by two months for every birth year after that.
This two-month-per-year increase stops at 67 for people that were born in 1960 or later. This is the eligibility age for the full benefit, but you can accept a reduced benefit when you are as young as 62 years of age.
Out of Pocket Costs
It is important to recognize that there are some out of pocket costs you must pick up yourself when you qualify for Medicare, and there is one major expense that is not covered at all.
Part A is the hospitalization portion. You do not have to pay a premium for this coverage, but there is a $1484 deductible per benefit period this year.
Part B covers treatments and services that are provided by doctors and other health care providers. There is a monthly premium of $148.50 in 2021, and there is a $203 deductible. After you pay the deductible, you have to cover 20 percent of the costs out of your own pocket. Seniors generally purchase supplemental insurance for these expenses.
There can be premiums, deductibles, and co-payments for the prescription drug coverage, and the exact details depend on the plan that you choose.
Medicare does not pay for the custodial care that nursing homes provide or for in-home care attendants, and this presents a challenge.
Long-Term Care Facts and Figures
When you look at the statistics, you see that there is a good chance that you will require long-term care at some point. About 70 percent of seniors will receive living assistance, and over half will incur assisted living costs.
Just over one third of elders will reside in nursing homes, and these facilities are quite expensive. The average length of stay is one year, but of course, there are those who spend multiple years receiving nursing home care.
When we say that the care is expensive, you are looking at a median cost of $8600 a month in the Charlotte area, and the figure is $7148 in the Ashland, Kentucky area.
Medicaid Planning
You can protect your assets from these potentially devastating costs if you take the right steps in advance. Medicaid will cover long-term care, but you can’t qualify if you have significant assets in your name.
Many people can afford to retire because they have nest eggs that generate income for them. If you give away these assets to qualify for Medicaid, you will lose this income so it can be a nonstarter on the surface.
However, there is a solution. You could convey assets into an irrevocable, income only Medicaid trust.
As the name suggests, you would not be able to revoke the trust, and you would no longer have access to the principal. The good news is that you could accept distributions of the trust’s earnings until you apply for Medicaid.
There is a five-year Medicaid look back period so you have to complete this type of planning at least five years before applying for Medicaid. With this in mind, you can fund the trust when you are perfectly capable of independent living. If you will need nursing home care in less than five years, there are still frequently planning options to preserve significant assets; the key is to talk to an elder law attorney as early as possible so you have the most options.
Schedule a Consultation Today!
If you are ready to work with a Charlotte, North Carolina or Huntersville, North Carolina elder care planning attorney to develop a plan, we are here to help. You can schedule a consultation if you call us at 704-944-3245.
We also have a location in Ashland, Kentucky, and the number for that office 606-324-5516; our Florence, Kentucky office can be reached at 859-372-6655. If you would rather send us a message, fill out our contact form and we will get back in touch with you promptly.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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