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February 3rd, 2020
Working Past 65 Can Affect Your Social Security Benefits and Medicare Premiums
Why age 65? Why is that such a pervasive number when thinking about retirement?
My assumption is that it first appeared in documented action in 1935. That’s when Congress passed the Social Security Act, designed to pay workers age 65 or older a monthly stipend from amounts they would pay into the system. I suspect it existed before then in some form or fashion but at that point, it became ingrained in our society as the age of retirement.
Since 1983 when the last major revision of the Act happened, it has evolved, along with the concept of retirement, as life expectancy has grown. Add to that the effect of income inequality which is seen as a manifest shrinkage of the middle class. Until then, that was most of us. The net effect has seen millions more of us keep working long after reaching age 65, if one has the capacity and ability to do so.
Research from Aspen Institute indicates that one in five seniors in America lives in poverty. In my lexicon, that means someone age 65 or older. Those folks are heavily dependent on monthly Social Security retirement benefits, and Medicare, to help them get from one month to the next. And to survive with dignity.
Pensions as the primary source of retirement income have almost vanished. At one time, a huge percentage of us worked for one employer for much of our lives and were rewarded with a retirement pension that we could plan on to pay our bills when we retired. Social Security was thought as an ancillary benefit.
Now, for those one in five seniors, it’s their primary source of money. That is putting immense pressure on local governments up to the federal government to come to terms with it and fulfill society’s promises to itself. From day one, there’s been a mandate to care for the elderly. It’s what humans do across the planet.
A recent report from a unit of TransAmerica, a large financial organization, included this item: 84% of women who plan to work in retirement say their motivation is a financial necessity. What are your expectations about your future retirement?
Last year an associate of mine happened to meet an 84 year old woman. She was working for a meal delivery company, driving around town from 6 pm to about 11 pm, by herself, earning a minimum wage plus tips. She told my associate she could not survive without working. My reaction to that is mixed. Happy that she can do that, but appalled that she has to.
So, back to the title attached to these thoughts. The Social Security Administration (SSA) now says your Full Retirement Age (FRA) is 67 thought it may be less depending on your date of birth. Remember, when it started almost 90 years ago, it was 65. You can start as soon as age 62, but my advice is to not do that unless you absolutely have to.
Not only will your monthly benefit be much less, but you’ll have to suffer a shrinkage if you earn above certain income levels. Mind you, you’ll get that back but it’ll be spread over your lifetime after you reach your FRA. By then inflation might mean your purchasing power with those recovered dollars is meaningless. Not to mention it will be forfeit if you die too quickly.
Right now I have absolutely no idea how much you earn today, how old you are, how well you’ve managed to accumulate funds specifically to help you pay for retirement. But if you’re like most people, retirement is a hypothetical, something that will maybe happen sometime in the future. I understand that. It’s a hard thing to grasp and make yourself think about.
Medicare is the overall ‘health insurance plan’ put in place by the federal government to help seniors pay the medical industry when professional help is needed. And unless you die quickly, you will need it.
Some of it has been pre-paid, with a percentage of what has been deducted from your paycheck for the past how ever many years. Some of it has not been paid for. That part appears as a deduction from your Social Security retirement benefits every month. This year, 2020, it’s jumped to almost $145 per month. However, if your earned income exceeds $87,000, the price jumps to $202.40 every month.
So, how much debt do you have? If you have a lot, are now “retired”, and a health crisis happens, which could be about you or someone you love, how will you handle it? Going back to that notion that one in five seniors in America lives in poverty, will that now be you?
To summarize, retirement is not always what it’s supposed to be. You have to be aware of the evolving dynamics that will influence how the rest of your life plays out. At some point it may be to your advantage to take an online course to help you come to terms with all these unknowns.
Tony Kendzior, CLU, ChFC
Got a question for Tony? Go to the "Retirement Talk with Tony" thread in our forums.
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