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Social Security Social Security — It’s complicated How much do you really know about Social Security? Eventually, most people will have to make some decisions regarding their Social Security benefits. Understanding some of the issues that may arise can help you in your retirement planning. Here are some commonly asked questions. When can I receive benefits? Your “full retirement age” is the age at which you will be eligible to start receiving full (unreduced) Social Security benefits. It’s based on the year you were born. If you were born in: Full retirement age is: 1943 – 1954 66 1955 – 1959 between 66 and 67 1960 and later 67 You can start collecting benefits as early as age 62. However, your benefits will be reduced a fraction of a percent for each month before your full retirement age. Can I delay collecting Social Security benefits? You can postpone signing up for Social Security until after your full retirement age. If you delay taking benefits, your benefit will increase by a certain percentage, depending on your date of birth, until you reach age 70. If you were born in 1943 or later, your benefits will increase by 8% each year you delay taking benefits until you reach age 70. For example, if you were born in 1960 and decide to postpone taking benefits, your benefit will increase 8% per year up until age 70. Here’s how it’s calculated: If you start receiving benefits at age: Multiply your fullretirement benefit by: 67 100% 68 108% 69 116% 70 or later 124% How are my benefits calculated? To be eligible to receive Social Security benefits, you need to work and pay Social Security taxes. You can earn up to four “credits” for each year you work. You need at least 40 credits to receive benefits. In 2014, you must earn $1,200 to get one Social Security work credit and $4,800 to get the maximum four credits for the year. When you retire, your Social Security benefit will be based on the 35 years you earned the most money. Keep in mind, however, that there is a maximum benefit amount. For example, the maximum monthly benefit for a worker retiring in 2014 at full retirement age is $2,642. The average monthly benefit is $1,294. Will I have to pay taxes on my Social Security benefits? Depending on your income, a portion of your Social Security benefits may be taxed. Your income includes half of your Social Security benefits plus any wages, self-employment income, dividends and interest (including tax-exempt interest), and any other income you earn. If you file a federal tax return as an individual, you may have to pay income tax on up to: - 50% of your benefits if your income is between $25,000 and $34,000 - 85% of your benefits if your income is more than $34,000 If you file a joint federal tax return, you may have to pay income tax on up to: - 50% of your benefits if your income is between $32,000 and $44,000 - 85% of your benefits if your income is more than $44,000 What if I work part-time during retirement? If you retire early and then decide to go back to work after you start receiving Social Security benefits, earning too much could reduce your benefits. In 2014, if you earn more than $15,480 and are under your full retirement age, your benefits will be reduced $1 for every $2 you earn above that limit. There is a different limit and benefit reduction formula for the year you reach full retirement age, and only amounts earned before the month you reach full retirement age count. Beginning the month you reach your full retirement age, there is no limit on earnings.

What is Medicare? Medicare is a federal government-sponsored health insurance program intended to help people 65 or older pay their medical bills. (People younger than 65 who have certain disabilities may also be eligible.) The program covers some, but not all, medical expenses; and it is important to know that Medicare does not cover most long-term care costs. Medicare is a “pay as you go” system similar to Social Security that is financed by a 2.9% payroll tax, half (1.45%) paid by workers and half by their employers, as well as by monthly premiums deducted from Social Security checks. Unlike Social Security, however, there is no upper income limit above which earnings are not taxed for Medicare. While you apply for Medicare through the Social Security Administration, it is run by the Centers for Medicare and Medicaid Services, a division of the U.S. Department of Health and Human Services. As a beneficiary, however, you deal mostly with the private insurance companies that actually handle the claims at your local level. The amount Medicare pays is based on the average “reasonable and necessary” cost for the specific care you need — in the area of the country where you receive it. So Medicare benefits are not based on your financial resources or ability to pay. Key take away - Like Social Security, Medicare is an earned benefit that many qualifying retirees depend on to help pay for at least a portion of their health care. Medicare Coverage Choices Most people get their Medicare health care coverage in one of two ways. 1. Original Medicare Plan - Choose Part A (hospital), Part B (medical) and Part D (prescription drug) coverage from the government and buy a Medigap insurance policy from a private provider. This strategy offers you greater choice of doctors; however costs may be higher than in Medicare Advantage Plans. 2. Medicare Advantage Plan - Choose Part C (which includes Part A and Part B coverage) from a private provider like an HMO or PPO. Many of these plans also include Part D, but if your provider’s plan does not, you may choose to receive Part D from the government. Generally you must see doctors in the plan, however your costs may be lower than in the Original Medicare Plan, and you may get extra benefits. Key take away - your costs vary depending on your plan, coverage and the services you use.