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.
The Social Security Administration is an American institution that helps older Americans, workers who have become disabled, and families in which a parent passes away early. This institution also maintains the Medicare program, which provides affordable health care coverage to senior citizens and people with qualifying disabilities.
If you are going to enroll in a Medicare plan or change your Medicare coverage soon, you may be interested in learning more about Social Security and Medicare. Here are the details.
The Social Security Administration issues retirement benefits and administers a number of public assistance programs. The most well-known Social Security program is the retirement benefits package that is given to workers who have paid into the program adequately. This Social Security program is effectively an insurance program that pays out to people who reach retirement age.
As of 2021, every $1,470 you earn counts for one credit, up to four credits. That amount goes into the Social Security trust funds. The money in those funds is used to pay Social Security benefits to people who are currently eligible for them. Any money paid into Social Security that is not spent remains within the fund.
The Social Security Administration also oversees the Medicare program, which provides senior citizens and disabled people with affordable health care coverage. To qualify for Medicare, you must submit an application through the Social Security Administration. There are different ways to qualify, but the most common eligibility requirement is that you must be 65 years old or older to apply.
You can also be eligible due to your disability, but in most cases you must collect Social Security disability benefits for at least 24 months before you can enroll in Medicare. If you are diagnosed with End-Stage Renal Disease or Amyotrophic Lateral Sclerosis, the wait time is much shorter. In fact, people with either disease are often eligible to enroll only a few months after their initial diagnosis.
Medicare is divided into four key parts. Each one represents a different component of the program. There is Part A hospital insurance, Part B medical insurance, Part C Medicare Advantage plans, and Part D prescription drug coverage. While Parts A and B are overseen directly by the Social Security Administration, Parts C and D involve private insurance companies.
If you have a Part C plan, you will effectively receive your Part A, Part B, and potentially Part D benefits through a single Medicare Advantage plan. These plans are not standardized, so it may be worthwhile to shop around to see what your options are. Many Medicare Advantage plans have desirable benefits that are not available with Original Medicare, so be sure to ask a local insurance agent to help you shop around.
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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