As financial advisors we provide customized wealth planning services including retirement planning. It’s important to us that our clients receive ongoing education and updates that are impactful to their wealth plans. Through RBC Wealth Management we have access to experts and we recently held two virtual seminars for our clients on the subjects of social security and Medicare. We received lots of positive feedback and we’re happy to share some of the highlights from the webinars.
Understanding Social Security Calculations
A person needs to log 10 years of work in order to qualify for a social security benefit on their own work record. The benefit is based on the highest 35 years of indexed earnings. As of 2023 the maximum social security benefit a person can receive at full retirement age is $43,524/year. You can access your benefit information by signing up at www.ssa.gov.
A cost of living adjustment of 8.7% was recently announced for 2023. This is the highest COLA since 1981.
Full Retirement Age
Full Retirement Age (“FRA”) varies based on the year you were born. If you were born 1960 and later your FRA is 67. If you were born prior to 1960 your FRA will be earlier than age 67.
Your benefit will be reduced if you start drawing prior to reaching FRA. Your benefit will grow by 8% every year you delay taking it, starting at FRA until age 70. There is no reason to delay past age 70.
Filing Strategies
Making well informed decisions about when to begin social security and how much benefit you may receive depends on several factors including whether you are married or single, your current health and life expectancy, your other sources of income in retirement, your tax situation, and how it affects your overall plan.
Your financial advisor and your RBC Wealth Plan can offer guidance to help you determine which strategy and timing is best to help you meet your financial goals.
Medicare
Medicare is available for people age 65 and older. Most people get their Medicare health care coverage using one of two basic strategies – the Original Medicare plan or the Medicare Advantage plan. The costs will vary depending on your plan, the coverage you select, and the services you use. Under the original Medicare program Part B and Part D premiums are adjusted based on your income. Your premiums can go up significantly if you’re in a higher income tax bracket.
Health Savings Account
A Health Savings Account or “HSA” can be a good tool for funding health care costs in retirement years. A HSA has tax benefits. The money is not taxed before you pay it in. The interest and earnings on the money are not taxed. Withdraws are not taxed if used for allowable medical expenses. You can contribute to an HSA until you enroll in Medicare.
Retirement planning including social security and Medicare is complex. We’re happy to provide you further guidance on these important subjects. Please let us know if you’d like more information.