Social Security and Medicare

September 7, 2014

Hands up if you’re close by 57 or younger and know anything meaningful about Social Security or Medicare. Come on, come on, holding them up high, so I can count.

Just as I thought! Almost no hands raised, which is why you have a primer on these two important topics today, right here, right now.

Primer, by the way, means—best definition here—“a short, informative piece of writing.” I’m not an expert in this field, but I touch it about three days a week, and when I read list serve comments about the nuances, I know I’m in an extremely complicated world.

Social Security includes retirement, family and survivor, and disability benefits. Retirement benefits kick in at full retirement, which falls between 66 and 67, depending on your birth year. Delayed retirement—with a higher monthly benefit—falls between full retirement and age 70, while early retirement—with a lower monthly benefit—can begin at age 62. (Benefits may be taxable, depending on other income.)

Family and survivor benefits are part of the drill, too. And the Social Security system also provides disability benefits, although getting Social Security disability presents many administrative challenges.

Medicare includes four parts, A, B, C, and D. Part A pays for inpatient hospital care, and some follow-up care. Part A gets funded by the 2.9% payroll tax that you and your employer pay, in equal shares. Part B pays for some doctor visits, outpatient care, and some other services.

Part C is Medicare Advantage, part of the Medicare privatization plan Congress has been implementing for the past few decades. Participants generally get some benefits through Medicare Advantage, and the program costs the government more than basic Medicare.

Part D provides prescription drug benefits. Part D provides for all participants, although Medicare Advantage plans do in some instances provide a different drug benefit.

Almost everyone first gets Medicare at age 65. Those who get benefits at an earlier age include anyone receiving Social Security disability benefits for at least 24 months and people on dialysis.

Part A is free. Part B is not, but the base cost is $104.90 per month in 2014. (Higher income participants do pay a bit more, as the program is means-tested.)

Medicare Advantage enrollees pay no less than the Part B premium. They may pay more, depending on the benefits their plan offers.

Part D also costs money. If you’ve heard the term “doughnut hole” you’re in the right realm. The plan as it was designed called for benefits up to a certain expenditure level, no benefits up to another level, and a bigger benefit thereafter. (The Affordable Care Act works toward closure of the hole.)

Here’s a link to Understanding the Benefits, a Social Security Administration publication that provides a brief and comprehensible overview of benefits, rules, etc. This publication does not suffice for purposes of making decisions about when to apply for retirement benefits, but it does provide lay people with a basic understanding of terms, plans, etc. [Note:  Many factors relate to making the best decision about when to apply for retirement benefits. Get help!]

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