Nearly 60 million Americans received some form of Social Security benefits in 2015, and it’s probably a safe bet many were confused during the process of applying for those benefits.
“If you spend your whole life dealing with government agencies, it’s probably not that bad, but most folks haven’t done that, so it can be very confusing,” said Linc Hobson, franchise owner of the Morton Home Instead Senior Care office, a network of in-home care services for seniors.
Pam Atkinson, a consumer economics educator with the University of Illinois Extension, agrees, particularly when it comes to Medicare. “It’s common for people to get overwhelmed. I know all this information because I teach about it, and I still get overwhelmed by all the choices,” she said.
Simply put, American workers pay taxes into Social Security, which is then paid out via benefits to people who’ve already retired, are disabled, survivors of workers who’ve died and dependents of beneficiaries. The majority of beneficiaries—about 42 million people—are retirees and their families, according to the Social Security Administration.
Workers also pay Medicare taxes on their wages, and higher-earning Americans pay an additional 0.9 percent Medicare tax on income exceeding certain six-figure thresholds.
The amount of benefits workers and their dependents receive depends on several factors, including average lifetime earnings, date of birth and the type of benefit being applied for.
“The thing I hear more than anything else is people don’t realize they need to sign up for Medicare. It doesn’t automatically kick in for you when you reach a certain age,” said Hobson. “If you don’t sign up during that initial period when you become eligible, you’ll pay a penalty, and it raises your premiums for the rest of your life.”
Signing up is easy at www.medicare.gov, but you need to do it, agreed Atkinson.
“You have a very small window around your 65th birthday,” she said. “That window is three months before your birthday month, three months after your birthday month and during your birthday month. Even if you’re still working and have insurance through your employer, you still need to sign up for Medicare or you’ll pay a penalty.”
Medicare also has open enrollment periods each year when it’s possible to sign up if you didn’t when you should have or if you want to change your coverage options. This year’s open enrollment runs from Oct. 15 through Dec. 7.
“One of the things we try to get people to think about before open enrollment is exactly what it is they need and what they can afford and what they want on their (healthcare) policies,” Atkinson said.
“Medicare doesn’t cover dental or vision. Actually, It doesn’t cover a lot,” she added. “So you can either get traditional Medicare and buy individual dental or vision or prescription drug policies, or you can roll it all into one, which is the Medicare Advantage policy.”
While everyone who’s paid into Medicare receives Part A, which primarily pays for hospital bills, for free, it does have co-pays and deductibles. Part B, which covers doctor’s visits, and Part D, which covers prescription drugs, charge monthly premiums. The Medicare Advantage plans, known as Part C, include a combination of health services.
Atkinson suggests starting with the nonprofit organization AARP when researching Medicare Advantage options. The University of Illinois Extension also has a website with information and worksheets.
“It walks people through the process step-by-step,” Atkinson said. The website is www.extension.illinois.edu/aca. Click on “Smart Choices Health Insurance Workbook” under the “Resources” tab on the left.
The SSA recommends applying for Social Security benefits about three months before the date you want benefits to start.
“Your benefits are based on when you claim them. If you claim them at age 62, the benefits won’t be as high long term as it would if you wait until full retirement age, which is between 65 and 67,” said Nate Domenighini, office manager for Home Instead in Morton.
Domenighini recommends utilizing the benefit calculator at www.socialsecurity.gov/estimator to help decide when to start benefits.
“I think we are seeing more and more senior citizens continuing to work, whether that’s a result of the economy or being bored at home. The reality is you can still receive benefits, but they can be largely impacted by how much you’re working or how little you’re working,” he said.
Dorothy, a retired schoolteacher, has been advising fellow teachers to consider taking a second part-time job to pay into Social Security to receive benefits after retirement. Teachers and railroad workers are among groups that don’t pay into Social Security and thus don’t receive benefits, although they do pay into and receive Medicare.
Dorothy worked a part-time job in retail for 12 years during her 33-year teaching career and continued to work as a substitute teacher and tutor after she retired in 2005.
“Having a little bit of Social Security will help pay for Medicare premiums,” said Dorothy, who does have a Medicare Advantage plan currently.
At 66, Dorothy is continuing to work as a tutor and plans to delay receiving Social Security to hopefully receive higher benefits later.
“The local Social Security office in Pekin was very well informed and really helped me figure out what I needed to do,” Dorothy said. “I’ve done all the major paperwork I need to do, so I can start my Social Security benefits when I’m ready.”
The SSA recommends applying for benefits online, but you can also apply by calling (800) 772-1213 or by making an appointment at your local SSA office, which is at 2801 Broadway in Pekin. The local office number is (877) 405-0499.