No matter your age, net worth, or goals, Medicare and Social Security are federal programs that can be important elements in your retirement strategy. But people often are confused about how each program works and can help protect them. In this blog, we offer a high-level overview of what Medicare and Social Security include — and provide tips on why we think each program is worth paying attention to.
Understanding Medicare
What does it include?
Medicare is public health insurance that includes four types of coverage:
- Part A – hospital insurance
- Part B – medical insurance
- Part C – private Medicare insurance
- Part D – drug insurance
You automatically get Parts A and B when you sign up for Medicare. Parts C and D are optional, should you want to extend the coverage you have.
When can you sign up?
You can receive coverage once you turn 65 years old. Some people with disabilities and certain illnesses can receive Medicare if they’re younger than 65.
What do we suggest?
As people get closer to retirement, we often encourage clients to get Medicare. Private healthcare is expensive in the U.S., and Medicare can be a cheaper insurance option that helps cover you and manage increasing health costs. Also, remember to revisit your coverage every year to make sure that your insurance still reflects your needs.
Where can you learn more?
To learn more about Medicare, visit Medicare.gov. You can also get a free copy of the Medicare & You handbook on the agency’s website.
Understanding Social Security
What does it include?
Social Security provides retirement, disability, and survivors benefits, and often becomes a major part of people’s retirement income. Since the benefits are indexed for inflation, the purchasing power remains protected.
When can you sign up?
The earliest you can start receiving Social Security benefits is 62 years old. However, if you are able to wait longer, you will receive a larger monthly payment. Your benefits amount increases between 62 and your full retirement age (currently 67), so delaying your payment can be beneficial. And if you wait until 70 to start your benefits, your benefit amount will be higher because you will receive retirement credits for each month you delayed filing for benefits.
The age you’re eligible to receive your maximum benefits depends on your birth year. (Use this retirement calculator that the Social Security Administration provides to find your full retirement age.).
What do we suggest?
We encourage people to wait until their full retirement age to take Social Security. Further, if you’ve been divorced and remarried (whether once, twice, or more), you should be aware of how this will affect Social Security payments to spouses or your payment from an ex-spouse. Multiple families and multiple spouses create some complexities when calculating payments. So, you’ll want to talk with a financial advisor about your situation. (Side note: We can help!)
Where can you learn more?
To learn more about Social Security, visit SSA.gov. You can also find additional resources on their publications page.
The Takeaway
Thoroughly planning for retirement requires you to do address a variety of factors, like your income needs, lifestyle goals, and more. While Social Security and Medicare won’t completely protect you in retirement, they can be a critical and helpful factor in your financial strategies. If you’d like to talk about how Social Security and Medicare fit into your retirement planning, we’re ready to help. Contact us at (619) 713-5950 today!