Government Programs

Due to the importance of Social Security and Medicare to most American retirees, we felt it necessary to provide some basic information for these programs. 1. Social Security and Medicare The U.S. Social Security Program was enacted in 1935. Currently, more than 45 million people, or one of every six Americans, collect a Social Security benefit each month. Although Social Security was never intended to be a retiree’s only source of income, it provides 50 percent or more of total income for two-thirds of the beneficiaries and 90 percent of all income for 30 percent of the beneficiaries. During your employment years, you paid FICA taxes for which you earned social security credit. The number of credits needed for benefits depends on your year of birth. If you were born in 1929 or after, you need 40 credits and people born prior to 1929 need fewer credits (34-39). The FICA or social security taxes that are paid are dispersed into three trust funds: *Old Age and Survivors Insurance (OASI), which funds retirement survivor/dependent benefits; *Federal Disability Insurance, which pays benefits to people who have become disabled and to their families; *Federal Hospital Insurance, which pays for services under Medicare’s hospital insurance. In 1999, the Social Security Administration (SSA) began mailing statements to all workers age 25 and older, who are not yet receiving benefits. The statements include your annual earnings and estimates of your future monthly retirement, disability, and survivor’s benefits. You should review these statements to ensure that the annual earnings posted throughout your earning years are accurate, as they are the basis for your benefit calculations. Contact the SSA with any questions about the statements, or if you have not received a statement. The earliest age to begin collecting social security benefits is 62.However, if you elect to begin benefits at 62, benefits will be lower than if you begin at a later age. Nearly half of those eligible for benefits begin at age 62. This decision is personal depending on your financial circumstances but, your SSA statement reflects the estimated monthly benefits for ages 62, 65, and 70 to help with this decision. In 2000, earnings limits triggering benefits reductions were eliminated for social security recipients age 65, or older. This is quite positive since recent surveys reflect that more and more people expect to work longer into their retirement years. There are some income limitations for those younger than 65. Social Security benefits are not automatic; you must apply at least three months before you wish benefits to begin.

2. Medicare Medicare, the health and hospitalization insurance for the elderly and disabled, is available to almost all Americans. It is administered by the Health Care Financing Administration (HCFA), but SSA offices take Medicare applications and assist with filing claims. Also, Medicare premiums are deducted from your Social Security benefits checks. Medicare offers hospital and medical insurance beginning at age 65 and again, you must apply for the program. Failure to apply at age 65 can cost you higher premiums later on. Even if you are covered by private insurance, you should still register for the Medicare insurance. Many private insurance carriers and companies require that people they cover to enroll in Medicare. The private insurance and Medicare plans are then integrated for your coverage. Medicare Hospital Insurance assists with cost of: *Inpatient hospital care *Skilled nursing facility care *Home health care *Hospice care Medicare Medical Insurance helps pay for: *Doctor services *Outpatient hospital services *Home health visits *Diagnostic x-ray, laboratory services *Necessary ambulance service *Other medical services and supplies What Medicare doesn’t cover: *Custodial care *Dentures and routine dental care *Eyeglasses, hearing aids, related exams *Nursing home (except for skilled nurse) *Prescription drugs *Routine physical exams/related tests The Medicare hospital insurance is free to those who are eligible for Social Security benefits.