Happy 65th! You have, on average, another 20 years. Maybe you have more. One out of three of us will live to be at least 90; one out of seven to be at least 95. What happens with property taxes, Medicare and Social Security when you turn 65?
Our biggest challenge during retirement may well be living on a fixed (after inflation, a declining) income while medical costs rise – especially at the end of life. In 10 years, your Social Security will buy you 2/3rds of what it does now; in 20 less than 1/3rd. Is there any relief?
Your county Central Appraisal District can “freeze” the tax on the homestead of someone 65 or older or of a disabled person. This freeze can remain in place for up to two years while you are in a long term care facility.
Assuming that you have paid off your mortgage (and by retirement you should), you can defer property taxes until your death – taking a “loan” from the county tax assessor at 5%/year.
Six to three months before your 65th birthday, explore and apply for Medicare, the health care insurance available to Americans 65 and older and to certain disabled workers.
There are two basic types of Medicare: “traditional” Medicare, contracted out by the federal government, and Medicare Advantage, managed by insurance companies at 105% the cost to taxpayers. “Traditional” or “original” Medicare and Medicare Advantage both come with Part A (hospital Medicare), for which you have paid through payroll deductions, and Part B (doctor’s office and labs), for which you pay a premium. The premium varies with the number of years you have worked and paid for Medicare through payroll deductions and, if you have a high income, your income. With “traditional” or “original” Medicare you can choose a Medicare Supplement or “Medigap” policy which includes Part D (drugs) and a variety of other things, depending on which Medicare Supplement plan you choose. Medicare Advantage plans automatically include Part D and may have add-ons for vision and dental.
Medicare Advantage plans have lower premiums and, in addition to the add-ons, may have pilot programs such as a care manager, transportation to the doctor or grocery delivery. They have deductibles and co-pays which generally make them more expensive than traditional Medicare once you pass 70.
Traditional Medicare can come with a Medicare Supplement which eliminates co-pays, smoothing your month-to-month expenses. This can be very helpful to people on a fixed income. In addition, more doctors, hospitals and nursing homes accept traditional Medicare.
Should you take benefits early? Some people want to take Social Security retirement benefits and quit working as soon as they can, as early as age 62. Unless you have lots of other financial resources or are ill or worn out and not likely to live for many more years, this could be a big mistake.
You will receive substantially more than you would at full retirement age. You might think that you can supplement this by working part-time but that paycheck will reduce your Social Security benefits. It is likely to be for a lower hourly rate. You are also not likely to want to work forever, even part time.
Inflation eats away at your benefits. Social Security’s “chained” COLA is a joke. In 10 years, your Social Security will only buy 2/3rds of what is does today.
What if you wait until Full Retirement Age?
You will receive your full retirement benefit. In 2018 the average Social Security retirement benefit was $1,494; the maximum was $2,788.
If you do work part time, those earnings won’t count against you.
What if you wait longer?
For every year you delay benefits (up to age 70), your base benefit amount will increase by about 8%. In addition, it will grow by the “chained” COLA amount: 2% in 2018. In 2018, people who postponed got a lifetime 10% bonus.
We can’t control inflation or rising medical costs. Now that we are living much longer than when Social Security was established, shouldn’t we consider working a little longer so that we can also live well?
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Estate planning attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is active in the Texas and Austin Bar Associations. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.
She assists families of people with special needs, people planning for the retirement years and people administering estates.