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Saving for Retirement

Social Security

The Social Security Administration (SSA) is a government agency that oversees government retirement benefits earned by retirees who paid into the system during their working years. Social Security benefit payments have become a safety net to individuals who have worked for a lifetime but haven't been able to save and invest enough to secure a comfortable retirement. For many people, Social Security is one of the few things keeping them from having to live with family members or work into their old age. However, Social Security is a changing minefield of rules, regulations and challenges.

For one thing, the minimum age to receive Social Security has been increased and will probably be increased in the future. While you receive your statement about three months before your birthday each year, the age range for receiving it has crept steadily upward into the high sixties. At this moment, getting your full benefit requires you to be 69 years old, but you can get a partial benefits as young as 62. To get your full Social Security benefit as of this writing, you need to submit the proper paperwork to begin receiving monthly payments at 69 years old. Soon enough, that age will go up once again. As of this writing, Social Security's Board of Trustees created a mid-range forecast of three quarters of Social Security benefits being funded over the long-term. This probable 25% shortfall could be met by increasing the retirement age, increasing taxes, quantitative easing (money printing) or other measures. Expect to see some of your benefits paid out, but don't expect to see most of them.

The second page of your Social Security statement is all about your estimated benefit. There are four main kinds of benefits you can receive from the Social Security Administration: disability, family/ survivor, Medicare and retirement. Every kind of benefit has its own section, and every section has the amount of money you could receive if you had to apply for it right now. As a general rule, if you have not been working for very long then your benefit amounts will not be very large.

The third page of your Social Security statement is about the record of your earnings. Your earnings record lists every year that you have had income of some kind that involved paying into Social Security. There is even a section in which the Administration estimates how much money you have paid into both Social Security and Medicare in total. Between the two parts, you have a fairly basic section that lists personal data and sums of money.

However, as nice as it would be to simply get your statement, briefly glance over it and then shred it, there are potential problems that can come up. If your SSA has any kind of inaccuracies, you need to make sure that they get fixed as quickly as you can. If you do not, your future income from Social Security can be reduced. And, in some cases, that reduction can be significant. If you notice an inaccuracy, you should call 1-800-772-1213 and get the matter sorted out as soon as possible. Since anything involving the government tends to move slowly, you need to stay on top of your SSA benefits. This is your money.

You should call about any discrepancy, whether the numbers are too low or too high. While having the numbers on your statement be too low can be bad for your benefit down the line, having your numbers be too high might mean that someone has been using your Social Security number. If that were the case, you would be wise to get a copy of your legally mandated free credit report at annualcreditreport. com to make sure that your information is still entirely under your control. If someone has stolen your identity, you could have some serious problems that you need to fix as soon as possible.

Fortunately, there is a great deal you can do for yourself. By reading your Social Security statement properly, you can determine your maximum benefit, potentially grow it over the years and plan your finances so that you will be able to live well on your future benefit.

Medicare

Medicare is a socialized form of insurance that is designed to protect the elderly and the disabled. While Medicare technically falls under the heading of a Social Security benefit, it is not the same as Social Security proper. However, the same basic problems that continue to plague Social Security also hound Medicare. The two agencies are both concerned with some serious issues that are affecting both the government and most senior citizens. These are not problems that can easily be conquered, but knowing about them can help you to work around them.

For one thing, the government has had increasingly large shortfalls between what is being paid into Medicare and what it needs to invest for future spending. Every year, the gap grows and the amount of money still left in the trust fund continues to diminish. Since wage growth has been slow and there are more senior citizens than ever before in the U.S., the outlook for Medicare funding in the long term is bleak. Expect the out-of-pocket costs of senior health care to increase, partially due to the fact that all health care costs have gone up and partially because Medicare is underfunded.

As nice as it would be to have all of your health care covered by a magical government agency, Medicare simply cannot do that. While it will pay for a substantial portion of your health care costs, and much of this is at a very low cost to you, there are going to be some costs. For example, if you or your spouse have not worked and contributed to Social Security for at least 10 years, your Medicare Part A is going to cost you at least $248 per month. If you have not worked at least 7.5 years and contributed to Social Security, your Part A costs are going to be $451 per month.

Medicare Part B is another matter altogether. While everyone has to pay something for this type of socialized health insurance, the costs can vary considerably. For single people who make less than $85,000 a year or couples who make under $170,000 per year, the Part B price is $99.90 per month. If you make more than the figures above, you are going to have to pay an additional premium for your Medicare Part B.

Hospital or skilled assisted living facility stays are an unfortunate part of getting older for many people, and Medicare accommodates this. As a general rule, Medicare will cover you entirely for the first 60 days of your stay. For days 61 through 90, however, there will be a daily coinsurance amount. After that, the rules get more complicated and generally a great deal more expensive. The coinsurance rates go up dramatically, and if you stay in the hospital without at least a 60-day period between visits, Medicare will not cover you under general circumstances.

Medicare Part D is an optional component of the program, and it tends to cover additional medical expenses such as your prescription medications. Part D coverage involves paying for 80% of a certain amount of your medications, and then you will hit the "donut hole" where it will not pay for anything. Beyond a certain threshold, Medicare Part D will pay for all of your additional prescription costs.

Any figures quoted today may be subject to change later on, but you do have the ability to get more up- to-date information at your leisure. You can go to MedicareInteractive.org and find out exactly what you are accountable for and what your costs are going to be at any time. 

Saving for Retirement

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