Social Security and Medicare play a major part in retirement planning. It is important to know the benefits and the rules.
Let’s start by looking at Social Security. Here are some basic facts that you should know:
- To be eligible for Social Security you must have paid Social Security tax for 40 quarters (10 years of work).
- Full Retirement Age (FRA) is the age at which you become eligible for full retirement benefits from Social Security. FRA is determined by your year of birth, with the FRA increasing above 65 for people born after 1937. For example, if you were born in 1959, your FRA is 66 and 10 months, and if you were born in 1960 or later, your FRA is 67. You can view the table showing the FRA for your birth year here. Note: Even though your FRA for Social Security benefits may not be age 65, you should still sign up for Medicare three months before you attain age 65.
- Regardless of your FRA, you can begin receiving Social Security benefits at age 62, but benefits will be reduced, and there are earned income limitations.
- If you decide to work longer than your FRA, your benefit will increase automatically by a certain percentage from the time you reach your full retirement age until you start receiving your benefits or until you reach age 70. The percentage varies depending on your year of birth. For example, if you were born in 1943 or later, 8 percent a year will be added to your benefit for each year you delay signing up for Social Security beyond your full retirement age until age 70.
Three months before you want to retire, contact the Social Security Administration. You can apply online, by phone or in person at your local Social Security office.
Spousal Social Security Benefits
For married couples, planning when to begin drawing your or your spouse’s benefit is very important.
- The spouse with the higher benefit is considered the primary earner.
- The spouse of the primary earner can take their own benefit or 50% of the primary earner’s benefit, whichever is larger. The primary earner must be drawing their benefit for the spouse to take the 50% benefit. This amount may be reduced depending on the spouse’s age when he/she commences the benefit.
There are options for couples around the decision of when and how to begin Social Security benefits, such as delaying taking one spouse’s benefit to take advantage of the increase in the benefit. Special rules apply to Social Security benefits paid to widows and widowers. Consult with the Social Security Administration or a financial planner to determine what is right for you.
If you were married for 10 years or more and at least age 62 and single, you can collect spousal Social Security benefits based on your ex-spouse’s work record. Also, if you and your ex-spouse have been divorced for at least two years and you are both at least age 62, your former spouse can commence benefits even if you are not retired. If this applies to you, consult with the Social Security Administration about your options for taking the spousal benefit. Note, there may be reductions in the benefit and earned income limitations if you take the spousal benefit before your FRA.
Medicare is a federal health insurance program for people age 65 or older and who are U.S. citizens or permanent residents, and you (or your spouse, who is living or deceased, or former spouse) receive or are eligible to receive Social Security benefits. Like Social Security, people pay Medicare taxes on their earnings while they work and become eligible at age 65 if they have paid the tax for at least 40 quarters (10 years of work).
- Some people with disabilities qualify for Medicare coverage earlier than age 65. See www.medicare.gov for more information.
Medicare coverage is offered in four “Parts”, each with its own coverage area and rules:
- Hospital insurance (Part A) helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care.
- Medical insurance (Part B) helps pay for services from doctors and other health care providers, outpatient care, home health care, durable medical equipment, and some preventive services. Part B is optional and has a monthly fee that is dependent upon your income level.
- Medicare Advantage plans (Part C) are available in many areas. People with Medicare Parts A and B can choose to receive all of their health care services through a single provider under Part C.
- Prescription drug coverage (Part D) helps pay for the costs of prescription drugs.
See www.medicare.gov for more detailed information.
IMPORTANT NOTE: When you first become eligible for Medicare hospital insurance (Part A), you have a seven-month period (your initial enrollment period) in which to sign up for medical insurance (Part B). If you’re eligible at age 65, your initial enrollment period begins three months before your 65th birthday, includes the month you turn age 65, and ends three months after that birthday. If you don’t enroll in Part B and you should have, there could be penalties.
Special enrollment period for people covered under an employer group health plan
If you’re 65 or older and covered under a group health plan, either from your own or your spouse’s current employment, you may have a “special enrollment period” in which to sign up for Medicare Part B. This means that you may delay enrolling in Medicare Part B without having to wait for a general enrollment period and paying the penalty for late enrollment. There are limits, so we strongly advise you to contact the Centers for Medicare & Medicaid Services (CMS) for more information. The rules allow you to:
- Enroll in Medicare Part B any time while you have a group health plan based on current employment; or
- Enroll in Medicare Part B during the eight-month period that begins the month after the employment ends or the group health coverage ends, whichever happens first.
You can’t enroll using a special enrollment period if your employment or the employer-provided group health plan coverage ends during your initial enrollment period.
Medicare Supplement Insurance
There are many gaps in Part A and Part B coverage, with the lack of prescription drug coverage a key gap. Thus, individuals on Medicare often purchase Medicare supplement insurance, also called Medigap.
- If you are a beneficiary of one of The Church Pension Fund’s defined benefit or defined contribution retirement plans, you may be eligible for a Medical Trust Medicare Supplement Health Plan. You can find out more information here.
- Clergy and their eligible spouses may be eligible for a Medicare supplement subsidy based on their earned years of Credited Service at retirement.
- - Clergy who work after retirement (regardless of whether their retirement benefit is suspended) and are otherwise eligible for active medical coverage will not be eligible to participate in a Medicare Supplement Plan offered by The Episcopal Church Medial Trust. This would mean that the cleric would no longer be eligible to receive the financial assistance that CPF provides for the purchase of post-retirement health benefits (the Medicare Supplement Subsidy) for so long as the cleric continues to be eligible for active medical coverage. Contact your diocesan administrator to find out if your employer qualifies for the Secondary Payer Small Employer Exemption (SEE) plans.
- If you are not eligible for the Medical Trust’s Medicare Supplement Health Plans and/or wish to compare the Medical Trust’s Medicare Supplement Health Plans with others offered in your area, go to the Medicare website for more information about the different Medigap plans and to find information on Medigap policies offered in your area.
The Centers for Medicare & Medicaid Services, a division of the U.S. Department of Health and Human Services, has overall responsibility for administering the Medicare program and sets standards and policies. The Social Security Administration (SSA) processes requests for Medicare and Medicaid coverage. More information can be found online at www.medicare.gov.
Tips & Resources - Social Security and Medicare
For clergy, be sure that the Social Security Administration is recording your self-employment income from your Form SE and not just your federally taxable income.
Health benefits are offered through plans maintained by Church Pension Group Services Corporation (doing business as The Episcopal Church Medical Trust), 19 East 34th Street, New York, NY 10016.
This material is for informational purposes only and is not intended to be professional medical advice or treatment. Always seek the advice of a healthcare professional with any questions about personal healthcare status and prior to making changes in approaches to diet and exercise. This material is not a guarantee of coverage under any Episcopal Church Medical Trust health plan.
This material is for informational purposes only and is not intended as investment, tax, financial, legal or other advice. Your personal decisions should be based on the recommendations of your own professional advisors.
Unless otherwise noted, websites referenced herein that are outside the www.cpg.org domain are not associated with The Church Pension Fund and its affiliates (collectively, the Church Pension Group) and the Church Pension Group is not responsible for the content of any such websites.