Sexagenarians face big health, financial choices heading into retirement.
When it comes to signing up for Medicare and Social Security, what older employees don't know can hurt them.
While Medicare and Social Security are two separate programs, there are some similarities.First, each is aimed at providing older Americans with some sense of medical and financial security. Second, employees pay a tax into each in what amounts to a group health and pension plan. And third, every person's situation is different, so a cookie-cutter approach toward the programs can't be taken. There is plenty of free information out there and experts who can guide you toward crafting a path that works best with your situation.
However, thoughts about either program typically don't enter our thoughts until we're a little older, grayer and less likely to continue working, voluntarily or elsewise.
“Absolutely, you should start looking at (Medicare) before you turn 65,” says Semanthie Brooks, an executive council member of Columbus-based AARP Ohio, referencing the age when most of the population can first sign up for Medicare.
So, what should you do as the time arrives? Maybe the first step is learning the basics.
Sixty-five is the age when most people are eligible to sign up.
The government allows three months before a 65th birthday until three months after to do so. There is also an annual open enrollment period from Oct. 15 through Dec. 7 when people receiving Medicare benefits offered by private insurers in contract with the government can enroll or change their plans.
Four sections comprise the 53-year-old health benefit:Part A refers to hospital insurance that covers a swath of services including hospital care, some nursing home care, hospice care and home-health services. There are no premiums attached in most instances. Part B pays for some doctor, hospital, ambulance and outpatient services, plus X-rays. A monthly premium is attached. If you bypass signing up for Part B when first eligible, you could endure fees and penalties that will increase the premium for the rest of your days on Medicare. However, those who have health insurance through a job or a spouse's job when they turn 65 may qualify for a Special Enrollment Period that allows them to avoid the Part B late penalty. Part C, or Medicare Advantage Plan, lets private insurers, approved by Medicare, provide the benefits. HMOs and PPOs are examples of this. Medicare pays a portion of your healthcare costs and insurer premiums are involved. There are some 3,000 different advantage plans offered in Ohio. Part D is outpatient prescription drug insurance and is generally offered through Medicare Advantage plans. You also can purchase a standalone plan.
Together, Parts A and B are referred to as Original Medicare.
There are additional options such as Medicare Supplement Insurance (Medigap), that takes care of costs not covered by Original Medicare, and Medicare Mutual Savings Accounts in which all costs are paid for by Medicare once a person reaches a yearly deductible. In other words, there's a lot to know beforehand for an older employee.
For instance, if you've signed up for Medicare and work for a company of no more than 20 employees, your claims are paid initially by the government program and then your employer's health plan kicks in. It's reversed when there are more than 20 employees. Also, making contributions to your Health Savings Account will come to an end once you're enrolled. You can still use HSA funds to pay for medical expenses, but you can't add a penny more.
You also might wonder how much responsibility your employer shoulders in keeping you abreast of options. Not much, and in fact they may want you to sign up for Medicare and get off the company's medical plan, says Tom Waggoner, president of the employee benefits firm AccBen-USI Insurance Services in Dublin.
“There are a lot of employers who have employees over 65 with cancer or a critical illness of some sort,” he says. “They would love to move them onto a Medicare supplement plan, but that is illegal. An employer cannot incentivize, request (to) or help an employee move to a supplement plan. Meanwhile, the government wants them to stay on employer-based coverage because it doesn't cost it anything.”
So while a company's HR department won't be much help, online sites including medicare.gov,aarp.organd theMedicare resource center through the Ohio Department of Insurance (insurance.ohio.gov/consumer/pages/consumertab2.aspx) are good places to start.
Brooks encourages people to approach Medicare with preparedness, adding that not very many do their homework. “The average person (signs up) for Medicare and then selects a Medigap plan because her neighbor says it's good.”
She and Andy Haggard conduct information sessions to help older adults navigate their way through Medicare.
“A lot of people are really lost and don't know where to begin,” says Haggard, of the community education and outreach division at Central Ohio Area Agency on Aging, whose sessions attract about 100 attendees each.
Social Security Benefits
Social Security is often referred to as the third-rail of politics, meaning politicians who touch it get shocked into oblivion. It also is a labyrinth of rules and mathematical formulas incorporating the complexity of an M.C. Escher lithograph.
You can begin collecting monthly benefits as early as age 62, but you'll see 20 to 30 percent less over your lifetime than if you wait until FRA, or full-retirement age. For people born in 1960 or later, FRA is 67, and 66 for those born before 1960. Further, there's an annual 8 percent monthly benefit increase for each year beyond FRA until age 70, when the increases stop.
Financial planners like Mark Coffey and Ben Skinner of Summit Financial in Columbus say benefits are always included in a wealth strategy. A few top-of-mind issues to ponder when approaching age 62:Are there other income resources like a savings account or IRA that could delay taking benefits until at least FRA? If there is a good outlook on health status and more than 10 years life expectancy, think about waiting until FRA. “The health of the individual is probably the second most important thing to consider,” Coffey says. There are machinations of spousal benefits that could mean higher benefit amounts should one spouse die. Skinner says the scenarios require one spouse who is turning at least 66 and the other 62.
Craig Lovelace is a freelance writer.