Recent Developments. Social Security & Medicare Updates for Financial Advisors. Agenda

Transcription

1 Social Security & Medicare Updates for Financial Advisors Sue Denny Cincinnati Public Affairs Specialist ext (fax) Agenda Recent Developments my Social Security Account Spouse Benefits Filing for Benefits How Non Covered Government Pensions Affect Social Security When to Start Social Security Benefits Resources for Financial Planners Medicare Affordable Care Act Recent Developments 1

2 1.7% Cost of Living Adjustment (COLA) for 2015 Maximum retirement benefit = $2,663/month for worker retiring at FRA, up from $2,642 Taxable maximum increases to $118,500 About 10 million more workers will pay higher taxes Annual earnings limit increases to: $15,720 if < FRA $41,880 the year you attain FRA* *No earnings limit once you reach FRA 2015 Medicare Rates Most people pay no premium for Part A Part A Hospital Deductible = $1,260 per 60 day benefit period Standard Part B Premium = $104.90/month* Part B Annual Deductible = $147* *Unchanged from medicare costs/ costs at a glance/costs at glance.html Social Security Solvency Annual Social Security Board of Trustees Report released July 28, 2014 projected: OASDI Trust Funds will be depleted in 2033 (unchanged from last year) 77 percent of benefits will still be payable at that time DI Trust Fund will be depleted in 2016 (unchanged from last year) 81 percent of benefits will still be payable 2

3 Benefits for Same Sex Couples In June 2013, Supreme Court ruled Section 3 of Defense of Marriage Act (DOMA) unconstitutional. Social Security is processing some applications for same sex couples and paying benefits. If you think might be eligible for Social Security or Medicare benefits, apply right away to preserve your filing date. sexcouples/ SSA Resumes Automatic Social Security Statements SSA announced in September 2014 the agency has resumed periodic mailings of Social Security Statements: Every 5 years from age 25 to 60 for those who are not receiving Social Security benefits and are not registered for a my Social Security account After age 60, every year if not on benefits my Social Security Account Your Online Account... Your Control... my my Social Security is an easy to access, easy to use portal to view and update some of your own Social Security information. 3

4 my Social Security Services If you don t get benefits, you can: View, save, and print your online Social Security Statement If you get benefits, you can: Get an instant benefit verification letter Check benefit and payment information Change your address and phone number Start, stop or change direct deposit Who Can Create a my Social Security Account? You must be at least 18 years old and have: A valid address A Social Security number A U.S. mailing address If You Are Locked Out Wait 24 hours and try again, will get different questions. After 3 strikes you will be locked out and must visit a Social Security office with ID. Social Security will not ask Experian questions and will provide activation code to complete online registration. 4

5 Spouse Benefits Dependent Spouse Benefits Worker and spouse must both be at least age 62 (unless spouse is caring for worker s child younger than 16). Worker must have filed for retirement for spouse to collect. Spouse benefit may be reduced by amount equal to full retirement benefit spouse earned on his/her own work record. Divorced Spouse Benefits Couple must have been married at least 10 years. Both must be at least 62. Divorced spouse must be unmarried to file. Can file if divorced 2 years if worker is at least 62 but not entitled

6 Benefit Amount for Spouse or Ex Spouse Under FRA: Spouse receives higher benefit amount based upon own record OR worker s (if worker has filed for benefits) Wait until FRA: Spouse may be able to collect spouse or ex spouse benefit while earning delayed retirement credits on own work record Benefit = 50% of worker s benefit regardless of worker s age when s/he began benefits No advantage delaying spouse benefits past FRA Spouse/Ex Spouse Receives Less than 50% Before FRA If spouse collects any benefits before full retirement age, amount is reduced If full retirement age = 66, spouse benefit at: Age 65 = 46% Age 64 = 42% Age 63 = 37.5% Age 62 = 35% Exception: Spouse benefit = 50% of worker s full benefit, regardless of age, if spouse is taking care of retired worker s child younger than 16 or disabled and receiving benefits. Surviving Spouse Benefits Age 60 or, if disabled, as early as 50 At any age if caring for child of worker younger than age 16 or disabled before age 22 Benefit amount based on worker s full benefit, including delayed retirement credits Divorced widow(er) eligible if marriage lasted at least 10 years Remarriage after age 60 does not affect benefits of widow(er), including divorced widow(er). 6

7 Factors Affecting Widow(er) Benefit Amount Benefit amount reduced if taken before FRA Age = 71.5% Age = % Age = % 75% if taking care of child/disabled adult child. If widow(er) waits until FRA for benefits, s/he will generally collect 100% of what deceased was drawing at his/her death or what s/he would have drawn at FRA. If deceased worker was receiving reduced benefits, survivor benefits are based on reduced amount. Filing for Benefits Preferred Option File for retirement, spouse, disability or Medicare only at Other Options Filing for Benefits Schedule in office or telephone appointment at Least Desirable Option Walk in to office. Why wait in line when you can go online? 7

8 Revised Office Hours Local SSA offices open to public Monday, Tuesday, Thursday and Friday 9 a.m. 3 p.m. except federal holidays. Local SSA offices open to public 9 a.m. noon Wednesdays. Teleservice hours remain unchanged: 7 7 Monday Friday at Automated services available 24 hours a day. How Non Covered Pensions Affect Social Security How Non Covered Government Pensions Affect Social Security When pension is from work not covered by Social Security, two laws may affect Social Security benefit: Windfall Elimination Provision (WEP) applies with 40 Social Security credits and a non covered pension benefit guaranteed. Government Pension Offset (GPO) affects spouse/widow(er) benefit amount. wep 8

9 Windfall Elimination Provision (WEP) With 40 credits, worker will receive Social Security retirement benefit. Social Security benefit will likely be computed using a modified formula due to non covered government pension (OPERS, STRS, SERS, Ohio Police & Fire, CSRS). Worker and spouse may qualify for premium free Medicare Part A if worker paid Medicare tax on non covered government earnings. Social Security Statement for Government Workers With 40 credits, Statement will show retirement benefit estimates. Otherwise, Statement lists how many credits worker has earned. Statement will show non FICA earners if they have enough earnings for Medicare. Most people with non FICA pensions have to use two step process to estimate Social Security retirement benefits. Estimating Social Security Benefit with WEP Reduction Benefit estimates on Social Security Statement and online Retirement Estimator do not reflect WEP reduction. For quick estimate, if FRA benefit is: $816/month or more, subtract $408 $815/month or less, multiply by.445 For a more accurate estimate, use online WEP calculator. 9

10 Government Pension Offset (GPO) Only applies to Social Security spouse/widow(er) benefits. Reduces Social Security spouse/widow(er) benefit by 2/3 of non covered pension. calc.htm Spouse Benefit Computation with GPO Tom s Social Security spouse benefit from wife, Ann (1/2 of her $2,300 monthly benefit) = $1,150 2/3 of Tom s $2,100 OPERS pension = $1,400 Tom s monthly Social Security spouse benefit = $0 Tom is in total offset. No spouse benefits due. Widow(er) Benefit Computation with GPO Tom s Social Security monthly widower benefit from deceased wife, Ann = $2,300 2/3 of Tom s $2,100 OPERS pension = $1,400 Tom s monthly Social Security widower benefit = $ 900 Tom was in total offset while wife was alive but is due a partial widower benefit if spouse predeceases him. 10

11 When to Start Social Security Benefits When to Start Receiving Benefits The right age to retire is an individual decision. Use online planning tools to help make the best decision. Besides the my Social Security account, use online Retirement Estimator. Online Retirement Estimator Quick, convenient, and secure financial planning tool popular, too! Provides immediate and accurate retirement benefit estimates based on behind the scenes earnings history. Can create What if.? scenarios based on different ages and earnings. Supplements Social Security Statement. 11

12 Factors to Consider Health Health insurance Family history of longevity Plans for working in retirement Current and future cash needs Other sources of income Potential benefits for dependent(s) Potential eligibility on someone else s record Projected life expectancy When a Worker Nears Age 62 with Dependents Worker should discuss early benefit options with SSA since earnings limit increases if dependent benefits for spouse, minor/disabled adult children are payable: Minor children may be due a benefit = 50% of worker s amount until age 18 or 19 if still in high school. Benefits can continue for Disabled Adult Child if impairment(s) occurred before 22, child is unable to work, and is unmarried. Retirement May be Longer Than You Think Most people underestimate life expectancy. 1 out of 4 65 year olds will live past 90 and 1 out of 10 will live past age 95. Get rough estimate of how long you might live. 12

13 Basic Options Continue to work without taking benefits Continue to work but take benefits Allows dependents to collect benefits Some survivors benefits may be due Even if some retirement benefits are withheld due to earnings, your benefits will increase at FRA For non covered workers, no reduction in Social Security until receiving both Delay benefits Increase worker s benefit Maximize survivors benefits Strategy: Withdraw Application If you change your mind within 12 months of starting benefits, you may choose to withdraw application. You must repay all benefits you and any dependents received. Allows you to file for higher benefits at a later date. Expect processing delays. Strategy: Start Stop Start Withdrawing application is not permitted if 12+months has passed. Current Social Security beneficiaries may suspend benefits at FRA and restart at later date to earn delayed retirement credits. Or, worker can take benefit early to allow spouse to collect spouse benefit. Then, worker may suspend benefits at FRA to earn DRCs, restart them later. 13

14 Strategy: File and Suspend Worker may claim benefits at full retirement age, then suspend to: Earn delayed retirement credits by postponing benefits up to age 70 (8% increase/year). Allow dependent spouse/children to collect benefits. If spouse waits until FRA to take any benefits, may earn delayed retirement credits on own benefit. Only one member of a couple can apply for retirement benefits and suspend payments so spouse can collect. Strategy: File and Suspend May change mind up to age 70 and request payment of suspended benefits, but will forfeit DRCs and higher benefit. If no active employer group health plan, must pay Medicare Part B premium directly. Quarterly billing Automatic withdrawal from bank account with Medicare Easy Pay medicare costs/ paying parts a and b/medicare easy pay.html Strategy: Restricted Application or Claim Twice Suitable for two career couples. Lets worker collect Social Security at full retirement age first as a spouse, later on own work record. File restricted application at FRA for spouse benefit only. Later switch to own benefit (up to 32% increase). Not permitted before FRA. 14

15 Strategy: Toggle Between Survivor and Retirement Benefits Start survivor benefit as early as age 60 (50 if disabled), then switch to own retirement benefit at age 62 70; OR Take reduced retirement benefit as early as 62, then switch to survivor benefit at full retirement age. No advantage to delaying survivor benefit past full retirement age. Consult with SSA about options. Resources for Financial Planners financial planners.html Watch How Social Security Can Help You Plan for Retirement video Links to: Online applications Online Retirement Estimator Other benefit calculators Publications and forms Related retirement information Other Social Security information (SSNs, identity theft) Request a speaker 15

16 Medicare Medicare Federal health insurance program for people: 65 and older Receiving disability benefits for at least 24 months (exception: Amyotrophic Lateral Sclerosis, ALS) End Stage Renal Disease 4 Parts to Medicare 1) Part A Hospital Insurance 2) Part B Supplemental Medical Insurance 3) Part C Medicare Advantage Plans 4) Part D Stand Alone Prescription Drug Plans 16

17 Higher Income Beneficiaries Pay More for B, Prescriptions Drugs Affects about 5% of Medicare population. Annual determination based on tax return from 2 years earlier, with exceptions. May request new determination in limited lifechanging situations. Single with MAGI > $85,000, married filing jointly with MAGI > $170,000. MAGI = Adjusted gross + Tax Exempt Interest Income from line 8b on Premium for prescription drug plan (Part C or Part D) may also be higher, even with retiree health plan. Medicare Enrollment Periods Initial At age 65 Automatic if receiving benefits at 65 Special If covered under active group health insurance General January March, coverage doesn t begin until July Annual Oct. 15 Dec. 7 Apply Online for Medicare Only Must elect Medicare only and delay cash benefits. Can file for Part A only or both A and B. Allows worker to apply for Medicare on own work record (not spouse work record). Must be at least 64 and 8 months old. Do not use online application if you have ANY Medicare coverage. 17

18 Special Enrollment Period (SEP) If you delay Medicare Part B at age 65, NO penalty for delayed enrollment as long as prove you had active group health insurance and you enroll during Special Enrollment Period (SEP): Month you leave work plus 8 additional months. Wait beyond those 8 months, and you will pay a penalty. COBRA months do not factor in SEP. Start the Part B enrollment process up to 3 months in advance. Open Enrollment Period for Part C and D From Oct. 15 Dec. 7, all Medicare beneficiaries can change their Medicare health plan and drug coverage with changes effective Jan. 1: Change from original Medicare to a Medicare Advantage plan or vice versa Join a Part D plan, drop a Part D plan or switch from one Part D plan to another Switch from one Medicare Advantage plan to another Medicare Advantage Disenrollment Period is Jan. 1 Feb. 14 What you can do: Leave a Medicare Advantage Plan and switch to original Medicare; and Join a Part D plan to add drug coverage What you can t do: Switch from original Medicare to a Medicare Advantage Plan Switch from one Medicare Advantage Plan to another Switch from one Part D plan to another 18

19 Medicare Resources Medicare Ohio Senior Health Insurance Information Program Affordable Care Act Affordable Care Act (ACA) Visit or call to find information about how Health Insurance Marketplace can help. Those without health insurance Pre 65 retirees Disability applicants Disability beneficiaries in 24 month Medicare waiting period 19

20 Many Unaware of Open Enrollment Period Recent Kaiser Family Foundation poll found: 9 in 10 uninsured individuals are unaware that the ACA s second open enrollment period starts Nov. 15 2/3 of uninsured say they know little or nothing about the Marketplace More than half of uninsured are unaware of financial assistance for qualified individuals Affordable Care Act (ACA) Open enrollment for 2015 = Nov. 15 Feb. 15 You can renew your current plan or enroll in a different plan for 2015 Expanded Medicaid in Ohio If you don t have minimum essential health coverage, you may pay a fee. How the Health Care Law Affects Those on Medicare Medicare is not part of the Health Insurance Marketplace so those on Medicare should take no action. Medicare choices and benefits are unchanged. Expanded benefits include free preventive services, cancer screenings, and annual wellness visit. Those in donut hole will save money with discounts on brand name drugs. us/affordablecare act/affordable care act.html 20