Friday, January 17, 2020

401(k) Plans... Social Security... Delayed Retirement Credits... Medicare

Only about half of all American workers have access to a 401(k) plan. I'm fortunate enough to be one of those that is building his 401(k) each month toward my retirement years -- which are approximately 12 to 15 years away. The average retired Social Security recipient in the United States receives $1,461 per month, which is not very much. For 2020, the Social Security cost of living adjustment is expected to be around 1.8 percent. For those who have not financially planned toward their retirement years, the road can look pretty challenging.

I qualify to take my full retirement at age 67, which is 12 years from now (April 2032). However, if I delay on taking my Social Security benefits until age 70, then I will receive approximately 8 percent more for each year delayed... for a total of 24% more money at age 70. Many people don't realize that. You don't have to take your Social Security when you reach the full retirement age of 67, but there is no additional delayed retirement credits by waiting past age 70 to take Social Security. Generally, you should apply for your Social Security retirement benefits four months before you want your benefits to begin.

Regardless of your 401(k) or Social Security benefit, you should sign up for Medicare at age 65. Medicare is the United States' health insurance program for people age 65 or older. The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care. Medicare has two parts -- A and B:

Hospital insurance (Part A) helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care, and hospice care. Most people age 65 or older are eligible for free Medicare hospital insurance (Part A) if they have worked and paid Medicare taxes long enough. You should sign up for Medicare hospital insurance (Part A) 3 months before your 65th birthday, whether or not you want to begin receiving Social Security retirement benefits.

Medical insurance (Part B) helps cover medically necessary doctors’ services, outpatient care, home health services, and other medical services. Part B also covers many preventive services. Anyone who is eligible for free Medicare hospital insurance (Part A) can enroll in Medicare medical insurance (Part B) by paying a monthly premium. Currently, the standard Part B premium is $135.50 per month.

To apply for Social Security benefits, most people simply have to provide their social security number; birth certificate; most recent W-2 forms; and, the name of your bank and your account number so your benefits can be directly deposited into your account. Documents need to be either original or certified copies by the issuing office.

By the way, the income you receive from your 401(k) or other qualified retirement plan does not affect the amount of Social Security retirement benefits you receive each month.

I first started earning money nearly 40 years ago -- in 1981 at the age of 16. You're never too young to start planning toward your retirement years and I would encourage anyone currently earning an income to try and set aside money each month toward the day when you'll permanently exit the workforce.

Keep Reaching For Life's Mileposts,

Paul Staso