Retirement and Medicare

With retirement around the corner now is the time to plan for your financial needs

Your Social Security benefits are the foundation on which you can build a secure retirement. The three major elements of your retirement portfolio are:

  • Benefits from pensions,
  • Savings and investments, and
  • Social Security benefits.

Most financial advisors say you'll need about 70% of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living. If you have average earnings, your Social Security retirement benefits will replace only about 40%. The percentage is lower for people in the upper income brackets and higher for people with low incomes. You'll need to supplement your benefits with a pension, savings or investments.

To help you plan for retirement, the Social Security website includes a Retirement Estimator that lets you get a retirement benefit estimate based on current law and real time access to your earnings record. It also provide a Benefits Planner to help in the event of disability or loss of your family's wage earner.

Factors that may affect your retirement benefits

Your benefit amount is based on your earnings averaged over most of your working career. Higher lifetime earnings result in higher benefits. If you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.

Your benefit amount also is affected by your age at the time you start receiving benefits. If you start your retirement benefits at age 62 (the earliest possible retirement age) your benefit will be lower than if you wait until your full retirement age. If you start your retirement benefits after full retirement age, the monthly benefit may be higher due to delayed retirement credits.

Prepare for your medical needs

Medicare is a health insurance plan for people who are 65 or older and people who are disabled or have permanent kidney failure. Medicare has three parts—hospital insurance, medical insurance and prescription drug coverage. Most people have all three parts.

  • Hospital insurance, sometimes called Part A, covers inpatient hospital care and certain follow-up care. You already paid for it as part of your Social Security taxes while you were working.
  • Medical insurance, sometimes called Part B, pays for physicians' services and some other services not covered by hospital insurance. Medical insurance is optional, and you must pay monthly premiums.
  • Prescription drug coverage, sometimes called Part D, pays for prescription drugs. Prescription drug coverage is optional, and you must pay monthly premiums. However, you also may be able to get extra help paying the monthly premiums, annual deductible and prescription co-payments.
  • If you are already getting Social Security benefits when you turn 65, your Medicare (Part A and B) starts automatically. If you are not getting Social Security, you should sign up for Medicare close to your 65th birthday, if you are ready to retire.
  • If you working past age 65, it is a good idea to sign up for the free Part A during your Initial Enrollment Period and delay your enrollment into Part B until you retire. We can help you with that process.

If you are already receiving disability or survivors benefits when you apply for retirement

If you are receiving disability benefits when you reach full retirement age, nothing will change, except that your benefits will be called retirement benefits instead of disability benefits. If you are receiving survivors benefits and you also are eligible for your own higher retirement benefits, you can switch from survivors to retirement benefits as early as age 62 or as late as age 70. In many cases, widows/widowers begin receiving one benefit at a reduced rate and switch to the other benefit at an unreduced rate at full retirement age. However, if you switch, you will be paid only the higher of the two benefits, not both.