Retirement Income Toolbox

April 15, 2018

The following is a summary of another great article from Investment News .com Feb 2018 by Mary Beth Franklin.  

Timing key for benefits enrollment

Mistakes in signing up for Social Security, Medicare could be costly

Sometimes the most important advice someone can give is, “Don’t do it!”

For example, an individual asked a recent question regarding collecting benefits on her ex-husband’s earnings record now, at 65, and later switching to her own larger benefit.

If the individual chose to take Social Security now at age 65 they would be forced to claim their own benefit.

Any time someone files for benefits before their full retirement age and they are entitled to both their own Social Security retirement benefit and a benefit as a spouse or ex-spouse, they are “deemed” to file for all available benefits.  Social Security will pay the higher of the two amounts, starting with their own benefit and layering any excess spousal amount on top of it if it’s larger than their own.  In addition, benefits claimed before full retirement are permanently reduced for early claiming.

Plus, individuals who claim any type of Social Security benefit – whether retirement, spousal or survivor – before full retirement age are subject to earnings restrictions if they continue to work.

“Wait until you reach your full retirement to file a restricted claim for spousal benefits and collect half of your ex’s full retirement age benefit amount,” was advised by Ms. Franklin.  In the meantime, your own benefit will continue to grow by 8% a year between ages 66 and 70.  At that point, you can switch to your own maximum benefit.

Dwindling Group

The individual referenced above is among a dwindling group of Americans who are eligible to claim only spousal benefits on their current mate or their ex-spouse at age 66 and defer claiming their own retirement benefit until it is worth the maximum amount at age 70.  To file a restricted claim for spousal benefits, they must be born on or before Jan 1, 1954.  People born after that date will never have this option.  Whenever they claim Social Security, they will be paid the highest amount to which they are entitled at that age. 

Another married couple recently told the author (Mary Beth Franklin) the husband planned to enroll in Medicare Part B at 70 when he retires in July.  The couple was sure that the husband would not be subject to a delayed-enrollment penalty of 10% a year for every year he was eligible to enroll in Medicare but didn’t because he was covered by his wife’s group health insurance.

When asked, the couple disclosed the wife had retired from the federal government 10 years earlier and her Federal Employee Health Benefits plan does not qualify as credible health insurance to avoid a Medicare late-enrollment penalty.  Only group health coverage from an existing employer qualifies.

In theory, the husband could be facing a 50% penalty for delayed enrollment every month for the rest of his life if he signed up for Medicare five years after he was eligible and hadn’t had creditable insurance in the interim.

In summary, timing can be very critical to your future Social Security benefits and/or Medical costs.  Take the time to do the research or ask a qualified individual before making any decisions that could affect you the rest of your life in these matters.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual planning.  Situations discussed are for illustrative purposes only, and will be different for each individual’s situation.

This information is not intended to be a substitute for specific individualized Social Security advice. We suggest that you discuss your specific issues with someone that is qualified to give Social Security planning advice.