Social Security Simplification & Wealth Building

Learn the importance of knowing all about social security prior to you actually deciding to get your benefits…

Caution: 50-minute read, but well worth it in the opinion of TheWealthIncreaser.com for those who desire to take control of their understanding of Social Security

In the current economy the threat of Social Security and Medicare tampering happens on a regular basis. But what exactly is Social Security and Medicare–and how can you make the Social Security and Medicare that you have contributed to work for your best advantage during your retirement years?

Deciding on the best approach to take to receive your Social Security benefits can be a confounding and confusing process for many, and this discussion is designed to clear up competing arguments on when and what is the best approach to receive retirement benefits and more specifically your Social Security benefits so that the average person can understand and possibly provide guidance so that they are better informed.

And just as your investments and how you approach them are determined by your unique goals that you have, your risk-tolerance level, your income and your personal situation–so too does your analysis of your Social Security that you will receive, to a lesser or greater degree, depend on those same factors.

In this timely discussion, TheWealthIncreaser.com will attempt to simplify the topic of Social Security so that you can make better use of Social Security during your retirement years–and possibly be of more benefit to your heirs after you transition.

Social Security & Your Finances

Learn how to determine the best time to receive the social security and other benefits that you are entitled to…

As you age and edge closer to retirement, Social Security and your other retirement income becomes a real concern.

In this discussion, TheWealthIncreaser.com will discuss the ins and outs of Social Security so that you can better time “the time” (pun intended) that you will elect to receive your benefits, and furthermore show you other things that you can do as you approach retirement that can enhance your Social Security and other benefits that you may be entitled to.

You can apply for Social Security disability income at any time if you are suffering from a disability that allows you to receive benefits.

Full Retirement Age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits, which are determined by your lifetime earnings. It is gradually increasing, from 66 and 6 months for those born in 1957 to 66 and 8 months for those born in 1958 and, ultimately, 67 for people born in 1960 or later. Be sure to “distinguish” that FRA when you are entitled to 100% of your Social Security benefit, is not the same as your Maximum Benefit Amount which could be 25% or more higher than the amount you receive at your FRA.

Those FRA dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record. They differ slightly for survivor benefits, which you can claim if your spouse dies.

Full retirement age for survivors is 66 and 4 months for people born in 1958 and gradually increases to age 67 for people born in 1960 or later.

Claiming benefits “before” full retirement age will lower your monthly payments that you receieve from the SSA; the earlier you file — you can start at age 62 — the greater the reduction in benefits. Spousal and survivor benefits are also reduced if you claim them before reaching full retirement age.

You can increase your retirement benefits by waiting past your FRA to retire. Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.

How early should I decide to get my benefits?

Your window to elect to receive Social Security benefits begin at age 62 and end at age 70 (note: you can elect to receive Social Security after age 70, however there is no financial benefit of doing so).

That’s a difficult question and will depend on your goals, risk-tolerance level, income, tax position, personal situation and other factors that may be unique to your current and anticipated financial position. You can claim Social Security as early as age 62, but it may be to your benefit to put off filing for benefits as long as possible (pun intended).

By delaying you can maximize your monthly payments. But you may want to do further analysis.

Here are some key factors that you may want to consider:

Q: How’s your and your family’s health history? A: If you have a reasonable expectation of living decades past retirement, postponing benefits to get a bigger payment could prove important to your long-term financial stability. But if you turn 62 and you are in poor or debilitating health, or you have a genetic predisposition to certain illnesses, or otherwise have a pessimistic view of your future, you may decide it makes more sense for you and your family to get what you can, while you can.

Q: How long do you expect to be gainfully employed? A: Many older workers are being nudged into early retirement as companies downsize, and they wind up spending their last working years in the gig economy or other odd jobs. If you are one who did not plan appropriately for you golden years and you find yourself struggling to pay your monthly expenses, filing for Social Security at age 62 or before your FRA and taking lower benefits may be what you need to make ends meet. Just be sure to take into consideration inflation, rising property taxes, rising insurance rates and other factors that may be unique to you and the environment in which you live, into serious consideration.

Still, there are strong arguments for waiting as long as you can, and you want to use caution and do careful analysis of the choices available:

Filing earlier locks you into a lower benefit on a “permanent” basis. You are not entitled to 100 percent of the benefit calculated from your earnings history unless you apply at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958 and rising two months annually to age 67 over the next few years).

Continuing to work does not reduce your benefits once you reach full retirement age. Before your full retirement age, you are subject to earnings limits that could trigger withholding from your Social Security payments and from those of your spouse and children if they are collecting benefits on your work record.

From full retirement age until age 70, you can earn delayed retirement credits that can boost your eventual benefit by two-thirds of 1 percent for each month of delay — and increase survivor benefits for your spouse, if you die first.

Survivor, Spousal & Dependent Support

after you transition your spouse and/or dependents could receive–survivor benefits

after 10 years of marriage and you divorce–your “former spouse” could be entitled to benefits–divorced spouse benefits

dependents may be entitled to receive social security benefits based off of your work record–dependent benefits

Other family members may be entitled to benefits that you have earned through the Social Security program during your working years.

Social Security “survivor’s benefits” are paid to widows, widowers, and dependents of eligible workers and this benefit is particularly important for “young families with children” and the benefit amount would be based on your earnings, if you were to transition after accumulating a work history.

If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if certain conditions are met.

Generally, you must be married for one year before you can get spouse’s benefits. However, if you are the parent of your spouse’s child, the one-year rule does not apply.

The same is true if you were entitled (or potentially entitled) to certain benefits under Social Security or the Railroad Retirement Act in the month before the month you got married. A divorced spouse must have been married 10 years to get spouse’s benefits.

You can apply for benefits by going online and completing the application for benefits.

Regardless of when you claim Social Security benefits, the sign-up age for Medicare is still 65. You can’t enroll earlier, except under very narrow circumstances, and you may incur hefty fees for signing up later. There is a “time-period window” (roughly a 6-month period near the time of your 65th birthday) that must be met in order to sign up and receive Medicare!

How does a Reduction in Benefits work?

It depends on the year you were born and how long until you reach full retirement age, abbreviated as FRA. That’s the age at which you would collect 100 percent of the monthly benefit payment that the Social Security agency calculates from your lifetime earnings history.

Retirement benefits are designed so that you get the full benefit if you wait until full retirement age, which is 66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and gradually rising to 67 for those born in 1960 and afterward. If you file early, Social Security reduces the monthly payment by 5/9 of 1 percent for each month before full retirement age, up to 36 months, and 5/12 of 1 percent for each additional month.

Suppose you were born in 1962 and will turn 62, the earliest age to claim retirement benefits, in 2023.

Filing at 62, 60 months early, permanently reduces your monthly benefit by 30 percent and if you would have been entitled to $2,000 a month at full retirement age, you will get $1,400 if you start benefits when you turn 62.

Here’s what the reduction would be in subsequent years.

Age 63: 25 percent

Age 64: 20 percent

Age 65: 13.3 percent

Age 66: 6.7 percent

In essence, by starting early you would forfeit roughly 5% to 7% or more in guaranteed returns a year, depending on the year you decided to start receiving your benefits.

The figures above represent the reduction if you start benefits as soon as possible upon reaching the designated age. The benefit decrease is calculated based on months, not years, and each month that you wait beyond your 62nd birthday lessens the reduction.

If you claim benefits early but continued to work, your monthly payment could be cut further, depending on your income. However, that reduction is not permanent and you may be able to recover.

All care in the accuracy in the data above was pursued, however the above data cannot be guaranteed as changes occur over time and the data obtained cannot be guaranteed.

What is the Maximum Benefit that I could receive?

You receive the highest benefit payable on your own record if you start collecting Social Security at age 70.

Once you reach your full retirement age, or FRA, you can claim 100 percent of the benefit calculated from your lifetime earnings. Again, the full retirement age is 66 and 6 months for people born in 1957, 66 and 8 months for those born in 1958 and for those born in 1959, 66 and 10 months.

It will incrementally increase to 67 over the next few years, however if you were to hold off a few years, you could earn delayed retirement credits that increase your eventual benefit — by two-thirds of 1 percent for each month you wait.

For example, if you were born in 1958, your reach full retirement age between September 2024 and August 2025. If you put off filing for Social Security until you turn 70, you’ll get 40 months of delayed requirement credits, good for a bump of nearly 27 percent over your full retirement benefit.

If the benefit you’re entitled to at FRA is $1,800 a month, at 70 your benefit would bump up to about $2,280 a month.

Here’s how that $1,800 full benefit could grow for you if you decided to wait:

Year of birth	Full retirement age	Benefit at 70
1954	66	$2,376 (132% of full retirement benefit)
1955	66 and 2 months	$2,352 (130.67%)
1956	66 and 4 months	$2,328 (129.33%)
1957	66 and 6 months	$2,304 (128%)
1958	66 and 8 months	$2,280 (126.67%)
1959	66 and 10 months	$2,256 (125.33%)
1960 or later	67	$2,232 (124%)

At age 66 and 8 months you would receive a benefit of $1,800 a month, however if you waited to age 70, you could pocket $2,280 monthly–a difference of $480 a month, which could go a long way if you were in financial position and health condition to hold off a few years.

Keep Points

You can claim benefits later than 70, but there’s no financial reason to do so as delayed retirement credits stop, and your payment tops out once you attain age 70.

From age 67 to age 70 you can earn “delayed retirement credits” which can increase the benefit amount that you would receive.

What is the maximum amount that I can receive if I contribute a substantial amount to the system?

The most an individual who files a claim for Social Security retirement benefits in 2024 can receive per month is:

$2,710 for someone who files at 62

$3,822 for someone who files at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958).

$4,873 for someone who files at age 70 (Maximum Monthly Benefit Possible for anyone in 2024)

To add more clarity, the average Social Security retirement benefit in October 2023 was $1,796 a month, while the average disability benefit for 2023 was $1,489 a month.

You would be eligible for the maximum benefit if your earnings equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of your working life.

The maximum taxable income in 2024 is $168,600 and the figure is adjusted annually based on changes in national wage levels (wage adjustments), and thus the maximum benefit changes each year.

Also be aware that the maximum benefit is not the same as the maximum family benefit. The most a family can collectively receive from Social Security (including retirement, spousal, children’s, disability or survivor benefits) on one family member’s earnings record differs from the maximum benefit amount for an individual mentioned above. That amount is generally, about 150 to 180 percent of your full retirement benefit.

Can I stop and later restart receiving my Social Security benefits?

Yes, within limitations. If you are in your first year of collecting retirement benefits, you could apply to Social Security for a “withdrawal of benefits” if you started early, say age 62.

If you later got an unexpected windfall such as an inheritance, lottery winnings, or a pay raise or higher-paying job, you could theoretically be in a position to wait until you are older and you can collect a larger benefit if you do so within 12 months of the date you first claimed your benefits.

You start the process by filling out Social Security form SSA-521. and sending the completed form to your local Social Security office, preferably by certified mail.

If you opt for a stop (withdrawal), Social Security will treat it as if you never applied for benefits in the first place, and you will have to repay every dollar you’ve received including the following:

Your monthly retirement payments.

Any family benefits collected by your spouse or children, who must consent in writing to the withdrawal.

Any money withheld from your payments by Social Security — for example, to pay your Medicare premium.

If you’ve been getting retirement benefits for more than a year, the “window for withdrawal” has closed for you!

However, once you reach full retirement age (66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and rising two months per year to 67 for those born in 1960 and later), there’s a second option:

You can request a suspension of benefits!

During a suspension, you accrue delayed retirement credits that were mentioned earlier, which will increase your monthly retirement benefit when you start collecting again.

You can ask Social Security to reinstate your benefits at any time prior to turning age 70, and if you don’t ask for reinstatement by age 70, the agency will do it for you!

Be aware that:

If you change your mind about a withdrawal of benefits, you have 60 days from the date Social Security approves your withdrawal to cancel the request.

The SSA-521 includes a question asking if you want to keep “Medicare” benefits. You can if you want to, however if you don’t, there are numerous implications both for any health care benefits you’ve already received and for re-enrollment in Medicare at a later date. You can review these implications in the Social Security publication “If You Change Your Mind.”

You don’t have to hand in your notice when you start getting retirement benefits, as there is “no requirement” that you stop working.

But continuing to draw income from work might reduce the amount of your benefit if you claim Social Security before you reach full retirement age (FRA), the age when you qualify to collect 100 percent of the maximum benefit allowed from your earnings history.

To reiterate, Full Retirement Age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year, until it settles at 67 for those born in 1960 and later. Prior to FRA, Social Security doesn’t consider you fully “retired” if you make more than a certain amount from work, and it will deduct a portion of your benefits if your earnings exceed that limit.

The earnings caps are adjusted annually for cost-of-living adjustments (COLA), and they differ depending on how close you are to full retirement age.

If you are receiving benefits and working in 2024 but not due to attain FRA until a later year, the earnings limit is $22,320. You lose $1 in benefits for every $2 earned over the cap. So, if you have a part-time job that pays $30,000 a year — $7,680 over the limit — Social Security will deduct $3,840 in benefits or roughly $125 a month, from your social security check.

Suppose you will reach full retirement age in 2024. In that case, the earnings limit is $59,520, with $1 in benefits withheld for every $3 earned over the limit that applies until the date you hit FRA! Once you attain age 70 and onward, there is no benefit reduction, no matter how much you earn–once you hit age 70, the sky is the limit as far as your earnings are concerned as it relates to your Social Security benefits.

In fact, Social Security increases your monthly benefit at that point so that over time you recoup benefits you lost to the prior withholding.

If you receive wages, earnings-limit calculations are based on your gross pay; if you’re self-employed, Social Security counts your “net income” only. The Social Security pamphlet “How Work Affects Your Benefits” and its Retirement Earnings Test Calculator can provide you with more details.

Key points

The earnings cap applies only to income from work. The cap does not count investments, pensions, annuities or capital gains.

If your Social Security payments are reduced because you earned income above the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.

The earnings cap and rules also apply to the work income of people receiving spousal, children’s and survivor benefits.

Your monthly Social Security payments may be subject to federal, state and possibly local income taxes. If you are collecting both benefits and work income, you may want to increase your withholding to avoid a big tax bill and penalties in April.

It may be wise to consult your tax advisor prior to electing to receive your benefits, if possible, as all tax situations are unique and experienced tax professionals can see through blind spots and areas of taxation that are nuanced and you may not be aware of.

Will my benefits increase if I continue to work?

It very well could. It will all depend on how much you’re making now and how much you’ve made working in years past.

Social Security uses your “lifetime average” for monthly income, as calculated from your 35 highest-earning years and adjusted to reflect historical wage trends, as the basis for your benefit calculation.

Even if you’ve already claimed your benefits, Social Security annually recalculates this average, factoring in any new income from work.

If your current earnings fall into your top 35 earning years, your monthly average will rise, and so could your benefit!

What is the recalculation time period?

The Social Security Administration recalculates your retirement benefit each year after getting your income information from tax documents. If you have a job, employers submit your W-2s to Social Security; if you are self-employed, the earnings data comes from your personal tax return that you would file during the tax season.

Social Security will take any work income from that tax year and figure it into your benefit calculation.

That calculation is based on the average monthly income from the 35 best-paid years of your working life (as indexed for historical United States wage trends, a process similar to adjusting for inflation). If your recent earnings make the top 35, it will increase the monthly average and your benefit payment will increase!

You can call Social Security at 800-772-1213 to ask about how your anticipated earnings might change your benefit.

What is the payment schedule?

Apart from any earnings-based calculations, Social Security makes an annual cost-of-living adjustment (COLA) to your benefit based on inflation, if any. The COLA for 2024 will be 3.2 percent, boosting the average retirement benefit by $59 a month starting in January. COLA review and adjustments are done annually by the Social Security Administration.

Social Security pays benefits in the month following the month for which they are due. For example, the January benefit that you are entitled to would be paid in February.

For most beneficiaries, the payment date depends on your birth date since changes that were made in 1997 went into place. If you are receiving payments on the record of a retired, disabled or deceased worker (for example, spousal or survivor benefits), that person’s birthday sets the schedule for the payments that you would receive.

Here’s how it works in a nutshell:

If the birthday is on the 1st through the 10th, you are paid on the second Wednesday of each month.

If the birthday is on the 11th through the 20th, you are paid on the third Wednesday of the month.

If the birthday is on the 21st through the 31st, you are paid on the fourth Wednesday of the month.

The Social Security Administration adopted this staggered schedule in June 1997. Prior to that, all benefit payments went out on the third day of the month, but that became untenable as the number of beneficiaries grew to a level that made it impractical to pay out on a single day.

Most people who started receiving benefits before May 1, 1997, are still paid on the third of the month.

The third is also the monthly pay date for these groups of Social Security beneficiaries:

If you have a desire to move to Costa Rica or live anywhere abroad you can still receive your Social Security payments on the 3rd day of the month.

Those enrolled in Medicare Savings Programs, which provide state financial help for paying Medicare premiums continue to receive their payments on the 3rd day of the month.

Those who collect both Social Security and Supplemental Security Income (SSI) benefits. If you were in this group, you would get your SSI on the first of the month and your Social Security on the third day of the month.

Social Security has an online calendar showing all the payment dates for 2024 and is updated annually.

Key points

Social Security no longer pays benefits by check. You can receive benefits by direct deposit or via a Direct Express debit card.

Those who receive Social Security Benefits receive payment based on the birth date of the retired, disabled or deceased person, or a set date determined by the Social Security administration which is generally the 3rd day of the month.

If a scheduled payment date falls on a weekend or federal holiday, payments are made on the first preceding day that isn’t a Saturday, Sunday or holiday.

Medicare payments

Medicare consists of:

Part A Hospital

Part B Utilizing Outpatient Coverage

Part C Medicare Advantage

Part D Prescription Drugs

An easy way to remember what each part of Medicare covers (which can be difficult for some) is to use the following system:

When you think of part A think of coverage that allows you to go to “A” Hospital

When you think of part B think that you will “Be” getting health coverage or utilizing outpatient coverage

When you think of part C think that you are buying “Coverage” for Medicare Advantage

When you think of part D think that you are going to get prescription “Drug” coverage

Medigap Insurance coverage fills in the gaps where you would possibly have out of pocket expenses and deductibles, and it can be purchase by you if you select Medicare–and decide not to buy into Medicare Advantage coverage.

Another way of looking at it is part A is Hospital Coverage and possibly free, Medicare is part B, Medicare Advantage is part C, and part D is coverage for Prescription Drugs, whether you have Medicare or Medicare Advantage!

Or yet another way to look at it is you must get over the HUMP with your Medicare–and you do so by realizing that part A is Hospital coverage, part B is Utilizing outpatient coverage, part C is Coverage for Medicare Advantage, and part D is Prescription Drug coverage.

Now that you have a system that you can use to distinguish all parts of Medicare and MA, let’s discuss Medicare in greater detail.

If you elect traditional Medicare, you will pay for parts B, D and Medigap, and you could be surprised by the premiums. You have just learned and fully understand that part B covers outpatient care and has a monthly deductible ($174.70 in 2023), and there is also a deductible for every hospital visit on part A ($1,632 in 2023).

Part A: generally, you will qualify for hospital coverage if you have worked in the United States and have paid Medicare taxes (provides hospital coverage up to 60 days and a high deductible could be involved).

Part B: outpatient care is similar in scope to health insurance and in 2024 had a payment of $174.70 per month and the coverage will subject you to the benefits test if your modified adjusted gross income is over $103,000 single or $206,000 married filing joint.

Part D prescription drug coverage premiums averaged $50.50 in 2023, however drug and other coverage varies. Often purchased through a private insurer.

Medigap coverage kicks in when there is a “gap in coverage” when you use part B and D, for example you could use the coverage to pay the part A and D deductibles mentioned above!

With Medicare, physicians and hospitals would have to submit claims to parts A, B, D and Medigap, where applicable individually, whereas with Medicare Advantage the claim would normally go to just one provider.

Medicare recipients could also possibly get financial assistance from Medicaid or other assistance programs if they qualified.

Medicare Advantage (part C) —the “competitor to Medicare” offers coverage for parts A, B and D, and coverage and costs varies by provider. The coverage provided is similar to that of an HMO or PPO and provider costs and coverages that vary from provider to provider, so it is best to shop around.

In either plan, Medicare Advantage (MA) or Medicare “pre-existing conditions” will be covered!

Star Ratings by AARP could also be helpful when considering plans!

If you are signed up for both Social Security and Medicare Part B — the portion of Medicare that provides standard health insurance or outpatient care — the Social Security Administration will “automatically deduct” the premium from your monthly benefit.

The standard Part B premium for 2024 is $174.70 a month, an increase of $9.80 from the 2023 rate. Medicare Part A, which covers hospitalization, is free for anyone who is eligible for Social Security, “even if” they have not claimed Social Security benefits yet.

If you are getting Medicare Part C (additional health coverage through a private insurer, also known as Medicare Advantage) or Part D (prescription drugs), “you have the option” to have the premium deducted from your Social Security benefit or to pay the plan provider directly yourself.

Part D is also subject to a means test, similar to part B!

If you want the deduction from your Social Security income, you will have to contact your part C or D provider to arrange it!

Keep points

If you are enrolled in Part B but not yet collecting Social Security, you’ll be billed quarterly by Medicare. You can pay electronically or by mail. The Medicare fact sheet “Pay Part A & Part B Premiums” has details on your options.

People with low incomes and limited financial assets may qualify for Medicare Savings Programs that can help with Part B premiums. These are federally funded but run by the states. In 2023, income limits to qualify for the programs in most states ranged from $1,235 to $1,660 a month for individuals and $1,663 to $2,239 a month for married couples (the thresholds are higher in Alaska and Hawaii). The 2024 limits will be posted on the Medicare website once they are announced.

If you “are receiving benefits” from SSA, the Social Security Administration will “automatically sign you up at age 65” for parts A hospitalization and B outpatient care of Medicare.

Medicare is operated by the federal Centers for Medicare & Medicaid Services, but Social Security handles enrollment. Social Security will send you sign-up instructions at the beginning of your initial enrollment period, three months before the month of your 65th birthday, however mistakes and delays can occur, therefore you want to act within the 6-month window of your 65th birthday if you have a need for Medicare as you are now aware of the enrollment process.

Medicare Part A covers basic hospital visits and services and some home health care, hospice and skilled-nursing services. If you are receiving or are eligible to receive Social Security retirement benefits, you do not pay “premiums” for Part A.

Medicare Part B is similar to standard health insurance and carries a premium. The base rate in 2024 is $174.70 a month. Higher-income individuals pay more depending on the amount of their modified adjusted gross income.

You can “opt out” of Part B — for example, if you already have what Medicare calls “primary coverage” through an employer, spouse or veterans’ benefits and you want to keep the primary care that you already have.

Check with your current insurance provider to make sure your coverage meets the standard. Opting out will not affect your Social Security status, but you might pay a penalty in the form of permanently higher premiums if you decide to enroll in Part B later.

If you want to enroll in Medicare Part C (also known as Medicare Advantage, an “alternative to Part B” that is provided by private insurers, you must sign up on your own. The same goes for Medicare Part D, prescription drug coverage. You can find more information in Social Security’s “Medicare” publication and AARP’s Medicare Made Easy guide, or you can call Medicare at 800-633-4227.

Key points

If you are living abroad or are outside the United States when you become eligible for Medicare, contact the nearest U.S. embassy or consulate to request an enrollment form.

You can only enroll in Medicare at age 62 if you meet one of these criteria:

You have been on Social Security Disability Insurance (SSDI) for at least “two” years.

You are on SSDI because you suffer from amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease (The two-year requirement is waived in this case).

You suffer from end-stage renal disease.

Otherwise, your initial enrollment period for Medicare begins three months before the month of your 65th birthday. For example, if you turn 65 on July 14th, 2024, the enrollment window opens on April 1st and closes on November 1st, 2024.

If you “are receiving” Social Security benefits, the Social Security Administration, which handles Medicare enrollment, will send you an information package and your Medicare card at the start of the sign-up period. You’ll be automatically enrolled in Medicare Part A (hospitalization) and Part B (standard health insurance) in the month you turn 65.

In the meantime, consider looking into other options for health insurance to bridge the gap until you are Medicare-eligible if you lack insurance and have not reached the age to receive Medicare. Depending on your financial and marital situation, these might include Medicaid, private insurance through the Affordable Care Act marketplace or coverage through your spouse’s workplace plan or your own employer’s work plan.

Key point

If you are not yet on Social Security when you turn 65, you will need to enroll in Medicare yourself!

How to enroll

You can enroll online, by phone at 800-772-1213, or by visiting your local Social Security office. Local offices fully reopened in 2022 after being closed to walk-in traffic for more than two years due to the COVID-19 pandemic, but Social Security recommends calling in advance and scheduling an appointment to avoid long waits.

You should proactively be aware of the enrollment deadlines, as Social Security will not sign you up automatically at 65 for “traditional Medicare” — Part A (hospitalization) and Part B (health insurance) — as it typically does for people already collecting Social Security benefits!

In this situation, you’ll have to enroll yourself, either online or by contacting Social Security.

Always remember that Medicare and Social Security are “two separate programs” however the Social Security Administration runs enrollment for traditional Medicare!

You can enroll in Medicare parts A, B and D (prescription-drug coverage) as early as three months before the month you turn 65 or as late as three months after your birthday month which is called your initial enrollment period. For example, if your 65th birthday is May 15th, 2024, the initial enrollment window is open from February 1st until August 31st, 2024.

Here’s why you need to be on top of your deadline:

If you don’t sign up during those seven months, you may be subject to a permanent surcharge once you do enroll. You’ll find more information on sign-up periods in Medicare publications about enrolling in Part B and Part D.

Part A is free if you qualify for Social Security, even if you have not claimed benefits yet, however Part B carries a premium and in 2024, the standard Part B premium is $174.70 a month; it goes up for beneficiaries with MAGI (income) above $103,000 for those who file an individual tax return, and MAGI of $206,000 for a married couple filing jointly.

If you are not yet receiving Social Security benefits, you will have to pay Medicare directly for Part B coverage. Once you are collecting Social Security, the premiums will be deducted from your monthly benefit payment.

If you “decide to purchase” a Part D prescription-drug plan, it’s best to do so during your initial enrollment period; and as mentioned previously, you may pay a higher premium, permanently if you fail to sign up in a timely manner.

Your Part D provider cannot deny coverage even if you are in poor health or have a preexisting condition. You can choose between paying Medicare directly or having Part D costs deducted from your Social Security payment.

Key points

The Medicare eligibility age of 65 no longer coincides with Social Security’s full retirement age (FRA) — the age when you qualify for 100 percent of the Social Security benefit calculated from your lifetime earnings. FRA was long set at 65 but it is gradually going up: It’s 66 years and 6 months for people born in 1957, 66 and 8 months for those born in 1958, 66 and 10 months for those born in 1959 and will settle at 67 for those born in 1960 or later.

Always remember that even if you don’t elect for Social Security at the earliest time possible, you can still sign up for Medicare at 65 as long you are a U.S. citizen or lawful permanent resident. You will have to pay Medicare directly for all coverage, including Part A (unless you or your spouse are among the small number of state and local government employees who paid Medicare taxes but not Social Security taxes; in this case, you may be able to get Part A for free).

Managing Medicare enrollment

For most people, Medicare eligibility starts at age 65 and “if you’re receiving Social Security retirement benefits” at that time, SSA will send you a Medicare enrollment package at the start of your initial enrollment period, which begins three months before the month you turn 65. This point cannot be over-emphasized and is repeated here yet again due to the importance of you understanding this deadline. If you are not on Social Security, you want to still know that you must sign up by age 65 if you desire the coverage!

For example, if your 65th birthday is July 15, 2024, this period begins April 1.

On your 65th birthday, you’ll automatically be enrolled in parts A and B. You have the right to opt out of Part B, but you might incur a penalty, in the form of permanently higher premiums, if you sign up for it later.

If you have not yet filed for Social Security benefits, you will need to apply for Medicare yourself!

You can do so any time during the initial enrollment period, which lasts seven months (so, for that July 15 birthday, the sign-up window runs from April 1 through Oct. 31). If you do not enroll during that period, you could face late fees if you do so later.

You’ll find comprehensive enrollment information in SSA’s “Medicare” publication and links to application forms on the Social Security website.

Paying Medicare premiums

If you are drawing Social Security benefits, your Medicare Part B premiums are deducted from your monthly payments. If you’re not getting benefits, you’ll receive bills from CMS (almost all Medicare beneficiaries pay no premiums for Part A because they worked, and paid Medicare taxes, long enough to qualify for the program).

The standard Part B premium paid by most Medicare enrollees is $174.70 a month in 2024. The rate rises with the beneficiary’s income, going up in steps for individuals with incomes greater than $103,000 in 2024 and married couples who file taxes jointly and have a combined income of more than $206,000 in 2024.

Social Security determines whether you will pay a higher premium based on income information it receives from the IRS!

If your income is high enough, Social Security will impose what is called an Income Related Monthly Adjustment Amount (IRMAA) or means test on Part B outpatient care and Part D prescription drugs.

Although this surcharge is unknown to many prior to signing up for Medicare, it can add up and can be hundreds of dollars on a monthly basis for some recipients. If your income tier (MAGI) is from $103,000 to $129,000 in 2024, everyone in that tier would pay the same annual surcharge. For MFJ the tiers start at MAGI of $206,000.

Therefore, if you are a high-income household and your spouse were to transition, you could fall into the single tax bracket (and the tier of $103,000 to $129,000) and a monthly surcharge could be added to your monthly payment, even though your household actually had a reduction in income.

The determination as to whether you will face this surcharge is based on your AGI (line 11 amount on form 1040 that does not go into the calculation of your MAGI or modified adjusted gross income) so charitable contributions or donations, mortgage deduction, taxes and medical deductions would not be of benefit with the exception of a QCD (Qualified Charitable Deduction) in which you can donate up to $100,000 annually and count it toward your RMD (distributions that must begin at age 73 according to the SECURE Act 2.0.

Unlike cash, a QCD will keep the donation out of your gross income (it is an above the line deduction in tax jargon–goes on schedule 1 adjustments) and thus “lower your MAGI” so you could possibly avoid (the IRMAA adjustment) the surcharge.

Strategies that you can use to avoid or minimize the surcharge imposed by the Income Related Monthly Income Adjustment Amount:

*Consider a ROTH conversion

News flash–withdrawals from a ROTH IRA don’t count toward IRMAA

*Contribute more to your Retirement plans

You can lower your above the line income (IRS form 1040 line 11 and above) by contributing the maximum amount or at the very least an increased amount to your retirement plan or IRA account(s) and thus fall below the $103,000 threshold for singles, or $206,000 threshold, if you file as married filing jointly.

*Use tax-gain harvesting

By harvesting you sell your stock, mutual fund, etf etcetera, that is outside of your retirement account and buy it back immediately to “reset” your basis. You would pay taxes on the gain in the year you harvested. And by doing so the higher cost basis will reduce your taxes once you sign up for Medicare.

*Set up a Qualified Charitable Donation

As mentioned above, by setting up a QCD you can take an above the line deduction and reduce the amount of you MAGI, so your income won’t reach the threshold set by IRMAA (Income Related Monthly Adjustment Amount).

*Defer taking Social Security

You have up to age 70 until Social Security benefits make the most sense to take for many, and by delaying Social Security won’t count toward IRMAA.

*Compare your premiums between Medicare and Medicare Advantage

Medicare Advantage may give you the coverage that you need and might be cheaper than Medicare. With Medicare you must pay separately for Parts A, B, D and Medigap and that along with the coverage that you desire could tilt the scales as to which one to choose.

*Appeal the surcharge

You can appeal if your income is significantly lower than it was 2 years ago. SSA uses a 2-year lookback to determine current year surcharges. If you were to start receiving Medicare in 2024, they would look at your 2022 MAGI to determine if IRMAA was applicable for 2024. Other grounds to appeal include life changing events such as retirement, death of a spouse, divorce, loss of pension and other life changing events that the agency could possibly accept if it appeared reasonable in their eyes.

*Use your imagination to find other ways to avoid the surcharge

The surcharge is not necessarily permanent and if you can find ways to reduce your income some in future years, you may be able to avoid this surcharge altogether. You may want to take the surcharge early because you know you can avoid it later. Likewise, you may want to find ways to avoid the surcharge early and pay it later. The surcharge is a year-to- year charge and you want to use the creativity that you have to find ways to eliminate this charge–when possible.

Key points

People with disabilities may qualify for Medicare before age 65 in many instances. If you are receiving Social Security Disability Insurance (SSDI), Social Security will enroll you automatically in Parts A and B after you have been drawing benefits for two years.

If you have Medicare Part D (prescription drug plan) or a Medicare Advantage plan, also known as Medicare Part C, you can elect to have the premiums deducted from your monthly Social Security payment.

The strategy that you use if you are faced with the potential of a surcharge under IRMAA will be unique to you–and your family situation as your goals, risk-level, income projections and other data will be of a personal nature. And it is you (possibly along with your advisor) who must determine the best approach to take based on what you desire to occur or not occur in your future as it relates to the surcharge.

Conclusion

Social Security, Railroad Retirement Benefits and Pension income and other retirement income are areas that you want to give proactive analysis to, as the decisions and choices that you make will be critical for a successful retirement where you can do what “you” desire during your retirement years and not be restrained due to inadequate income or poor planning.

Although pension income for many is a thing of the past, those who now or will soon receive it can use the proceeds in conjunction with their social security income and sound investment and retirement planning to live out their life with more joy and enthusiasm.

Railroad Retirement Benefits are similar in scope to the benefits that the Social Security Administration provides, however those benefits are designed to assist railroad workers and their family in retirement and in the unfortunate transition of the income earner. It is a system that is generally more generous than that of the SSA (pun intended) toward recipients and beneficiaries. If you receive, or anticipate receiving those benefits, you too want to plan appropriately and build your retirement nest egg in the best way possible, based on your ability to do so.

Now is the time that you contemplate your Social Security payment amount that you will receive and combine the monthly benefit with your other retirement benefits to determine if the number that you are now at or will soon be at, is sufficient or whether you will need to earn more income, work a few more years until ultimately retiring or taking your benefits at the earliest time possible due to financial and health concerns.

Your total monthly income must be determined upfront, that means you must combine your 401k or other pre-tax retirement income, pension income, IRA income and income that is outside of your retirement accounts to determine if you have the monthly cash flow that allows you to pay your monthly expenses, do what you desire and have funds that can last for your remaining life expectancy and beyond.

The basic questions of choosing whether Medicare or Medicare Advantage is your best choice, whether you should you start your SSB, RRB or other retirement distributions earlier, at a reduced amount, or start later at a higher level may all coincide at this time or at the time you plan to retire!

If you delay, your eventual Social Security and/or RRB payment that you could receive will keep rising, until you hit age 70.

If you elect to start your benefits today or before reaching your FRA, you can enjoy the benefits earlier, because you are concerned about whether life and the future will go your way! If you decide to wait, you may find an additional amount monthly, and for you that could be great. Your unique financial and health condition will play a large role in the approach toward your retirement funds that you choose.

The choice as to whether to choose Medicare or Medicare Advantage can be a difficult one and should be given careful analysis, possibly with the assistance of family members and other professionals.

But many other factors come into play when determining the best age for you to claim benefits, including your physical well-being, marital status, financial needs, tax position and job satisfaction, other sources of income and your life savings.

The election of when and how you will elect SSB, RRB or choosing between Medicare and Medicare Advantage must all be analyzed in a thoughtful manner from all angles.

When you combine your SSB, RRB, investment income inside and outside of retirement, retirement income whether from your 401k’s, IRA’s, 403b’s, Thrift and other retirement plans, you want to be in position where you can put yourself, your loved ones and causes that you value most that bring you the most joy at the center. And if you planned appropriately and obtained the necessary knowledge in a timely manner all of your retirement goals can come into clear focus and be attained in real time.

By simplifying the process and the way that you approach investments and retirement, you can make what you desire to happen most during your retirement years become a reality.

Other Key Points:

You receive the highest “maximum benefit payable” on your own record if you start collecting Social Security at age 70. Full retirement age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year until it settles at 67 for those born in 1960 and later.

You receive the “highest benefit payable” on your own record at FRA if you start collecting SSB or RRB at age 67. Full Retirement Age extends from age 65 for beneficiaries born before 1938, to age 67 for those born in 1960 and later. You can receive your full railroad retirement benefit starting at age 60 if you have 30 years of qualifying service. Normal full retirement age for railroad benefits is 65 or 67, depending on the year you were born.

Medicare and Medicare Advantage are often in a “state of flux” and you can expect changes (hopefully for your benefit) to occur in the future.

All the best to your SSB, RRB, Other Retirement Income & Medicare success, as it is our hope that this discussion has allowed you to valiantly perch from your retirement nest…

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