You won't be penalized for a decision you had
no role in making
by Phil Moeller | July 16, 2019
In this week’s
column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your
Costs and co-author of the updated edition of How to Get What’s Yours: The Revised
Secrets to Maxing Out Your Social Security, answers reader’s
questions on Social Security and Medicare.
Got a question of
your own about Medicare or Social Security?
Send it to askphil@considerable.com.
Hope: I am turning 66 in
December. My former husband filed for his benefit two years ago when he was 63.
When I called Social Security to ask about the amount of my ex-spousal benefit,
I was told it would not be half of his benefit but only 30% because he had
filed for his benefit early before reaching his full retirement
age (FRA).
Is this true? It is
scary how can I be only entitled to 30% because of a decision he made that I
had no role in making. I have a low-paying job and don’t want to work until 70.
If I retire when I
turn 66, I will only get $1,100. I can’t live on that. If I wait until I’m 70
to file, I’ll get about $1,450 a month. Also, if I still have a job at 66
years, will Social Security cut my benefits because I’m still working?
Thank you for clarifying
this. I am dreading retiring!
Phil Moeller: What you were
told was incorrect. Your ex-spousal benefit at your FRA is equal to half of
your ex-spouse’s benefit entitlement at his FRA, regardless of when he actually
filed. This is called his “primary insurance amount.”
So, when you go into
the office, that is what you should tell the agency. If they continue to
disagree, get their name and phone number and I’ll call them!
Your ex-spousal benefit at your FRA is
equal to half of your ex-spouse’s benefit entitlement at his FRA, regardless of
when he actually filed.
I have more good
news! When you turn 66, you can file what’s called a restricted application for
just your ex-spousal benefit. This strategy was grandfathered into the 2015
changes to Social Security laws and is permitted for anyone who was born on or
before January 2, 1954. You qualify, albeit barely, and thus can file for the
ex-spousal benefit while deferring your own retirement filing until you turn
70.
If your own
retirement benefit at 70 is greater than your ex-spousal benefit, you will receive
an additional payment equal to the difference.
Lastly, if you do
continue to work after reaching your FRA, your earnings will not reduce your
Social Security benefits.
I hope this
information has helped reduce your dread of retirement!
Diane – Florida: My husband died in
1998 at the age of 50. I am disabled, and when I turned 50, I began receiving
survivor benefits. I was only receiving about 72% of what he would have gotten.
When I turned 66, my disability benefit was converted to a regular survivor
benefit but I did not receive any more money. Shouldn’t I now be getting 100%
of what my late husband would have been getting?
Phil Moeller: Survivor
benefits reach their maximum if the claimant waits to file until they have
reached their full retirement
age. You filed much earlier, of course, so your benefit was reduced.
This may seem unfair,
and I generally hammer Social Security for its benefit rules. But your benefit
at 50 was much increased due to your disability, and 72% is not a bad deal
given that you’ve been getting benefits for nearly 20 years.
Louis – Nevada: I’m turning 66
and will be able to receive full Social Security benefits, but I also will
continue working until I’m 70. My question is, will my Social Security monthly
benefits continue to increase because I’m still working while collecting
monthly benefits?
Phil Moeller: If you claim at
66, your benefits in future years might increase modestly if your earnings in
those years were large enough to qualify as one of your top 35 years of
earnings. Because Social Security bases benefits on 35 years of earning, a
single year’s earnings by itself would not have a large impact on your total
benefits.
If you delayed filing
at 66, your benefit would rise at the rate of 8% a year until age 70, at which
time it would reach its maximum.
So, if you are going
to keep working until you are 70 and can afford not to claim your Social
Security, you should consider not filing until later.
Navigating Medicare
and late-enrollment penalties
Laurel —
Massachusetts: My
husband is 69 and never signed up for Part B of Medicare because he has been on
my insurance since retirement. I plan on working full-time for another five
years and will still carry the insurance. Should we sign him up for Part B even
though we’ll be paying the penalties or should we stay as we are?
Phil Moeller: There will not
be a penalty if he has been covered by your active group employer plan. When he
loses that coverage (i.e., you retire or leave the job for other reasons), he
can enroll in Part B and submit this form signed
by your employer certifying that he has been covered by your plan since turning
65.
Bernie – California: I run a small
company. We have an employee who is 66 and has decided not to enroll in
Medicare because he is fearful of incurring a penalty with Medicare. We are not
pressuring him about what to do but want him to make the best decision for
himself by giving him accurate information.
Financially, he will
pay about half the premiums and increase his benefits with Medicare compared to
staying on our group plan. He is concerned about a penalty and so does not want
to consider his options. Can you explain the Medicare Part B penalty in his
case and when he would enroll in Medicare while he is still employed if he so
chooses?
There is no penalty for signing up for
Medicare at 66 if the person has been covered by your plan as an active
employee since turning 65.
Phil Moeller: There is no
penalty for signing up for Medicare at 66 if the person has been covered by
your plan as an active employee since turning 65.
When he enrolls he
needs to provide this form signed
by his employer (you) certifying he has had employer coverage since turning 65.
If he decides to enroll, he can do so immediately. You should make sure his
employer coverage stays in force until his Medicare coverage is effective.
David: I saw
your recent
discussion about Medicare penalties and noted your statement
that if an employee provided a signed form from their employer showing they
were insured, there would be no penalty for failing to enroll by age 65. My
employer provided me with a statement that our insurance doesn’t meet certain
minimum requirements and is not equivalent to Medicare, and that failure to
sign up for Medicare could result in a penalty, as well as more expensive
health care since our coverage isn’t as good as Medicare. Could you clarify
this for me?
Phil Moeller: Different
statement!
Employers are
required to certify that their plans are comparable to Medicare or else the
employee needs to get a Part D Medicare plan. There are specific requirements
for drug coverage, and I’m told that the rise of high-deductible plans has
triggered more comparability problems.
I do not know the
specifics of what your plan needs to provide to satisfy this requirement and
must assume your employer is telling you the truth about its plan. In that
case, you would need to get Medicare or later be subject to late-enrollment
penalties.
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