Are you turning 65 this year? Congrats! While 2020 has been a pretty terrible year, you’ve still hit a major milestone. To make sure this year and the many years that follow are amazing, you need to take these smart steps on Social Security, Medicare, long-term care insurance and more. You’ll be glad you did.
1. Make a Social Security plan
If you were born in 1955, you already know that you haven’t quite hit what the Social Security Administration has deemed your Full Retirement Age. You can start receiving benefits now, but unless you wait until you hit 66 years and two months of age, you’ll receive a reduced benefit. Frustratingly, that benefit will stay reduced for the rest of your life!
While receiving benefits early can reduce your payments, the flip side is also true. If you’re still working or have savings that will allow you to wait a bit on receiving benefits, your eventual payments will be higher. If you can wait until your 70th birthday to start receiving benefits, each payment will be 30.7% higher than what it would have been when you were 66 years and two months old.
Everyone’s financial situation is unique, but before you turn 65, it pays to have a plan for how you’re going to approach Social Security.
2. Get ready for Medicare
Starting three months before the month you turn 65, you can enroll in Medicare. You can also sign up in your birthday month and the three months following your 65th birthday. If you’re already receiving Social Security benefits, you’ll be automatically enrolled in Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). Otherwise, you can apply for coverage online, over the phone, or in person at a Social Security office.
If you and/or your spouse are still working and receiving medical insurance from your employer’s group plan, you can choose to hold off on enrolling in Medicare Part B for now — but if you decide you want coverage later, you may have to pay higher premiums as a penalty. It’s worth sitting down with your spouse and figuring out the enrollment plan that best fits your needs.
Note: if you work for a small employer with fewer than 20 employees, Medicare is primary, so you need to enroll in both Medicare Parts A and B during your initial enrollment period as you turn 65.
If you get this wrong, you will later have to pay a 10% penalty for every year that you waited to enroll. This penalty is added to your Part B premiums, so you’ll pay it for as long as you are enrolled in Part B.
3. Medigap or Medicare Advantage?
Medicare is great, but it’s not going to cover all your medical expenses. You’ll still be responsible for copayments and deductibles just like on your employer’s group health plan, and they can add up quickly and have no limit.
To offset these expenses, you could enroll in a Medicare Supplement (Medigap) insurance policy. Offered by a private insurance company These plans come in a variety of shapes and sizes, so you can find one that’s perfect for you.
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Medicare Advantage (Part C) is an alternative to Original Medicare (Parts A & B) that is offered by private insurers. It must cover everything that Original Medicare covers.
Most Medicare Advantage plans offer additional features, such as vision, dental, and prescription drug coverage (Part D). Some plans offer various types of wellness benefits such as discounted gym memberships and weight loss counseling.
4. Pick the right Medicare Part D plan
Unlike your old employer health insurance, Medicare doesn’t cover the cost of your prescription drugs. However, you can opt in to a Medicare Prescription Drug Plan (Part D) that will help cover the cost of your drugs.
Like with medigap coverage, you’ll need to compare the structures of deductibles and copayments in the available Part D plans to pick the one that’s right for you. It’s worth getting a headstart on this planning — as with Part B, there can be a penalty if you don’t sign up for a Part D plan now and change your mind down the road.
5. Consider long-term care insurance
When we’re in our early 60s, it’s easy to assume we’ll never need to utilize long-term care options like home health nurses, assisted living, or nursing home care. But if we do end up needing this sort of assistance down the road, it can be expensive. About half of people turning 65 will eventually require long-term care, and without a long-term care policy, the average out-of-pocket expense is $140,000.
With a potential expense like that, it’s worth investigating if a long-term care policy is right for you. And if you’re turning 65 this year, you may want to make a decision sooner rather than later. Your premium will jump on your birthday, and the annual premium for a 65-year-old person can be 8 to 10% higher than what a 64-year-old would pay.
6. Start unlocking new travel deals
Turning 65 means more than just insurance choices. Whether you’re taking a much-deserved tropical getaway or making a quick trip to visit your grandchildren, you may be entitled to a new travel discount. Delta, American, and United all offer senior discounts on selected flights. You may have to call the airline instead of booking your ticket online, but it’s worth investigating. One thing to remember, though: Since airlines are constantly running specials and deals, the senior fare may not always be the cheapest one. Do a quick online search for a regular ticket so you can compare.
If traveling by train is more your speed, you can still save. Amtrak offers a 10% discount for riders 65 and over on many of its routes.
7. Get a property tax break
Medicare doesn’t have to be the only birthday gift you get from the government. If you own your home, you may be entitled to a property tax break once you turn 65. These deductions and discounts vary from state to state and municipality to municipality, but they can add up.
Residents of New York State can cut their homes’ assessed value for tax purposes by up to 50% depending on their income. In Texas, homeowners 65 and over can receive a $10,000 exemption from their homes’ assessments. In Chicago, taxpayers over 65 can save an average of $750 in property taxes on homes they occupy. Check with your local tax assessor to see if your 65th birthday entitles you to any new property tax breaks.
8. Visit the doctor
Even if you’re in good health and feeling fine, it’s worth taking a few hours to visit the doctor for a physical and routine screenings for conditions like diabetes and certain forms of cancer. The Centers for Disease Control and Prevention recommends that adults 65 and older receive the pneumococcal vaccine, so be sure to ask your doctor about that.
9. Get your legal ducks in a row
Your 65th birthday is a major landmark. Use it as an opportunity to make sure all your important legal paperwork is in order. Review your will, powers of attorney, and advance directives for medical care to make sure that everything still reflects your current wishes. If you haven’t already drawn up this important paperwork, it’s not too late. Now is the perfect time to catch up! It may not be the most exciting task, but you’ll get peace of mind knowing that you’re ready for anything.
10. Make an inventory
The previous step should help you sleep a little easier, but you can do one more thing to help your children or spouse sort out your affairs in the event you pass away suddenly. Make a list of your bank, brokerage, and retirement accounts and put it somewhere safe. If you have a financial advisor or accountant, include their contact info so your family can get in touch if necessary. Make sure to note any safety deposit boxes you might have, too. Having this info in one comprehensive place will be a huge help for everyone during a tough time.
11. Check in on your retirement
Even if you don’t plan on retiring this year, your birthday is a great reminder to check in on your retirement accounts. Are your assets allocated in a way that lines up with your target retirement date and lifestyle? If so, great! If not, this could be a good opportunity to rebalance your portfolio. Talk to your financial advisor about the best way to proceed.