What to know before you file for Social Security & Medicare
Are you thinking about filing for Social Security benefits and/or Medicare? Here are some helpful points to help you do a self-check to ensure your application process goes smoothly, so that you can avoid hiccups, and maximize your benefits.
Check your earning history
You will need 40 quarters of earned wages to receive Social Security benefits. Your first step is to log into ssa.gov and download a copy of your Social Security statement then check page two of the statement for your earnings record. See this link for a sample statement.
Things to watch out for:
1. If you noticed missing earnings or incorrect earnings in any given year, correct it with Social Security as much as possible. This is important in determining your eligibility toward the 40 quarters of credit as well as the benefit amount that you will be receiving in the future.
2. If you are legal immigrants who have not earned enough work credits in the U.S., you may still qualify for benefits by utilizing the Totalization Agreements that the US has set up with several countries. This means your earnings history in a foreign country may help you meet the 40 quarters of credit requirement mentioned above. Check this link for the list of countries that have agreements with the U.S.
Check to see if your personal situation might affect benefits
If you are married, you are entitled to the higher of your own benefits or 50% of your spouses’ benefits. You may be able to claim spousal benefits and delay your own.
If you are divorced and were married at least 10 years, you may be eligible to apply for your own benefit based on your ex-spouse's SS benefit amount. Your ex-spouse is not informed when you apply for or receive Spousal Benefits. Fill out the SSA-2 Form to do so.
If you lose a loved one, you may be eligible for survivor benefits. Note that you can't report a death and apply for survivor benefits online; you'll have to do this by calling Social Security.
Check to see if you might qualify for Supplemental Security Income (SSI).
If you had certain events that resulted in a one-time increase of your income two years prior to filing for Medicare, you may be subject to Income-Related Monthly Adjustment Amount (IRMAA). You may be able to request Social Security to lower your Part B and Part D premium by filing the SSA-44 Form.
You may need a Medicare supplemental plan in addition to Parts A &B; reach out to an insurance broker to check for eligibility and plan options.
Check your immigration status on file with SS
If you became a legal resident of the U.S, remember to check your immigration status with Social Security. Certain benefits are available only to citizens. Updating the citizenship records will ease the process once you apply. Here are the four steps of how to update this:
1. Prepare proof of identity and other supporting immigration documents. A driver's license and US passport are acceptable.
2. Complete Form SS-5.
3. Bring the form to your local SS office along with the required documents
4. Social security will then send you a free replacement card or make a change to your personal record. Most cards arrive 14 days after approval.
Check your personal finances & taxes
Evaluate your personal financial situation to see if delaying claiming your retirement benefits might make sense. Your benefit amount will increase by 8% each year you delay beyond reaching full retirement age, until age 70. You may consider tapping into your other financial resources first or delaying retirement in order to take advantage of the increase. However, life expectancy should be taken into consideration when contemplating the decision.
Be aware that your benefit may be reduced by earned income if you claim it before you reach Full Retirement Age.
Do some tax planning. If you have substantial income from other sources in addition to your benefit, your Social Security benefit may be subject to income taxes.
Filing for benefits is an important decision and there may be many factors that need to be considered before you start the application. We encourage you to consult with your financial advisor first.
If you wish to discuss your wealth management strategy, contact us to set up a time to speak.
Contributor
Ellen Li is a partner at Financial Alternatives and a lead advisor for many of the firm’s clients and has a special focus on financial planning. Ellen has an MSBA degree in Financial and Tax Planning from San Diego State University and she holds the CERTIFIED FINANCIAL PLANNER™ designation. She is a member of the Financial Planning Association (FPA).
