For Americans approaching retirement age, Social Security and Medicare are two programs very much front-of-mind. What these two programs provide, and how they work together can sometimes be confusing. In this quick guide, we’ll review each of these important programs and see how they are related.
Social Security is a government program that provides two main benefits to eligible Americans:
Social Security also pays certain minimal death benefits and survivorship benefits in certain circumstances. All aspects of the Social Security program are administered through the Social Security Administration (SSA).
To be eligible for Social Security you must generally be:
If you meet these basic requirements, you’ll be eligible to receive retirement income at age 62, although your Full Retirement Age will usually be 66 or 67.
Besides meeting the eligibility requirements, you have to accrue retirement benefits. You do this based on your eligible earnings. The more you earn, the higher your Social Security benefits will be. Your Social Security benefit is based on the average of your 35 highest years of income. W2 wages and self-employment income count in this calculation, but income is capped at $140,208 (2021 amount).
Medicare is a government program that provides health insurance to qualifying Americans. Medicare coverage is separated into two “Parts:”
If you are eligible for Social Security benefits, you will be eligible for Medicare coverage. Most people enter Medicare when they turn 65, but there are three ways you can enter before 65:
If you’re still working or have health insurance through a spouse, you may be able to delay taking Part B until you retire or lose your coverage. In this way, you can avoid paying a Premium for Part B before you need to.
Parts A and B make up what is known as Original Medicare. Besides A and B there are two other Parts of Medicare:
Medicare Advantage plans are an alternative to Original Medicare. With Part C, you receive all of your Part A and B benefits through a private health insurance company. Many Medicare Advantage plans also provide prescription drug coverage.
Part D Prescription Drug plans are Medicare plans from private insurance companies that cover prescription drugs. In almost all cases, if you enroll in a standalone Prescription Drug Plan, you will remain in Original Medicare.
Another kind of Medicare plan is Medicare Supplement Insurance, also called Medigap. With Medigap, you stay in Original Medicare, but you have supplemental coverage from an insurance company. This supplemental coverage will cover most or all of your out of pocket expenses in Medicare. Medigap plans do not cover prescription drugs, so you will need to add standalone prescription drug coverage if you choose Medicare Supplement Insurance.
Though they are two separate programs, there is some overlap between Social Security and Medicare. For one thing, your eligibility for premium-free Part A is based on your Social Security eligibility. You need to work at least “10 quarters” to be eligible for Social Security and premium-free Part A.
Another way that Social Security and Medicare go together is that you’ll signup for Medicare through the Social Security Administration. In some cases you’ll automatically enter Medicare based on your Social Security benefits. In other cases, you’ll have to apply for Medicare, but you’ll do it through the Social Security Administration’s website.
Also, you’ll pay your Part B premiums directly through Social Security through an automatic deduction once you’re in Medicare and also receiving Social Security payments.
These two programs will be an important part of your retirement. You need to have a smart plan in place to take full advantage of them. Since you might not take both Social Security and Medicare at the same time, developing a plan may seem confusing or difficult. Working with a professional can give you peace of mind and make your life easier. Texas Medicare Advisors are experts at helping people craft successful Social Security and Medicare plans. Give us a call at (512) 900-3008 for a free consultation today.
Are you approaching retirement age? Don’t wait to brush up and learn more about the Medicare enrollment process. It’s best to be proactive when it comes to your health, so make sure you get help finding the best Medicare plan for your needs. Contact Texas Medicare Advisors to get started with a free quote.
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