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Medicare Government Shutdown

What Happens to Medicare During Government Shutdown?  As you’ve surely seen on the news, heard on the radio, or read in the paper, the United States government is facing a spending crisis. At the time of this article being written, lawmakers in Washington have until October 30th to pass a spending bill or the federal government will shut down, and many of the essential programs our citizens rely on will shut down with it.

People are, reasonably, worried. Many of those people are older retirees who rely on Social Security and Medicare for their income and healthcare services. Since the federal government is in charge of these programs, people wonder, what happens to them during a government shutdown?

The Good News

Here’s the good news: “Checks will continue to go out,” according to Bill Sweeney, who is the senior vice president of government affairs at the AARP.  Mandatory spending include Social Security benefits.  These continue to go out to their beneficiaries. As far as Medicare goes, everything should continue mostly as normal. People with Medicare can continue to seek healthcare services.   Providers continue to get paid. Where this comes into question is based on how long a government shutdown, should there be one, continues. Medicare beneficiaries, Medicaid beneficiaries, and those enrolled in the Affordable Care Act could still use their coverage, and their doctors and providers could continue to submit bills and get paid.

If a shutdown lasts a long time, it is more and more likely to affect those benefits. Medicare beneficiaries are most likely to feel an effect from a shutdown if the shutdown lasts a month or more. For the government shutdown looming at the time this article was written, Medicare has funding available for the next full three months, regardless of whether or not a spending agreement is reached before the October 1st deadline.

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When To Take Social Security Benefits

Although it may seem like a very black-and-white decision, the age at which to take social security benefits can depend heavily on a beneficiary’s life circumstances.  Individual situations determine when to take social security benefits.

Some people may start taking their benefits as early as age 62, while others may wait until full retirement age (or 70 years old). A general rule of thumb is that waiting longer to take the social security benefits makes more sense for many people. However, rules of thumb don’t cover everyone. Some factors to consider when making this decision are cash needs, life expectancy, marital status, and employment status.

Generally, the decision to wait or to take these benefits can be broken down like so.

When to take Social Security – It may be helpful to take benefits earlier if:

1. The beneficiary is no longer working and needs the social security benefits to make ends meet.

2. They are in poor health and may not survive to their full retirement age.

3. The beneficiary is a lower-earning spouse and their higher-earning spouse can wait to take their benefits at a later date.

Consider taking benefits later if:

1. The beneficiary is still working and makes enough to make their benefits taxable.

2. If either the beneficiary or their spouse is in good health and they expect to exceed the average life expectancy, it makes more sense to wait for increased benefits.

3. The higher-earning spouse can ensure that their surviving spouse receives higher benefits by waiting to take their social security benefits until they have reached their full levels.

Overall, it is typically beneficial to wait as long as one can to take social security benefits because of how they increase when delayed. At age 70, when the benefits are at their maximum, those who are in good health will find this the most opportune time to take the benefits. Of course, every situation is different and speaking to a trusted financial advisor is really the way forward for anyone who is questioning this choice.

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Here are some common mistakes people make regarding Social Security.  If you have more questions or concerns, please call or email Edward Crowe at 203-796-5403 or email at Edward@Croweandassociates.com

1. Waiting past age 66 to file

Even if you don’t intend to collect benefits until after age 66, don’t forget to file by the time you reach full retirement age. If you don’t wish to collect at that time, simply indicate that you want to suspend your benefits so they can keep growing.

Failing to file by 66 negates the possibility of earning a full lump-sum repayment if you later decide you’d rather have collected those suspended benefits (such as might occur if you suffer health problems in your late 60s). In that scenario, the lump-sum option will award you all you would have collected to that point at once, but this works only if you filed on time.

In addition, using a “file-and-suspend” strategy can also allow your spouse to begin collecting benefits while you continue working.

2. Waiting past age 70 to collect

There is a financial incentive for seniors to delay collecting Social Security past their full retirement age. For each year they wait, their benefits get a bump of between 5.5% and 8%. However, there are no additional benefits for waiting past age 70. At that point, any further delay in collecting simply means money lost.

3. Neglecting spousal benefits

Social Security offers several options for spousal benefits, so don’t miss this opportunity to bring in some extra cash if you or your spouse is eligible. For example, if you are collecting benefits and your spouse is at least 62 and isn’t collecting benefits, your spouse is eligible for a separate spousal benefit. The beauty of this arrangement is that it doesn’t diminish your benefits in any way.

4. Forgetting former spouses

After a divorce, the last thing you may want to remember is your former partner. However, if you were married to someone for 10 years and have been divorced for at least two, you are eligible to collect a spousal benefit from the relationship, provided both of you are eligible to collect benefits. However, this only works if you are unmarried when you file to collect.

In addition, when that former spouse dies, you can begin to collect his or her full level of benefits — just as you would with a current spouse.

5. Assuming you and your spouse should file at the same time

Filing for Social Security doesn’t have to be an all-or-nothing proposition for couples. In fact, using a so-called hybrid strategy can be an effective way to maximize Social Security benefits that the two of you receive. One spouse can file for benefits at a younger age while the other waits until later to maximize benefits.

6. Waiting too long to collect if you already have health problems

filing at age 62 is a common mistake, but it can be a smart move for those with serious or chronic health conditions. If you don’t reasonably expect to live into your 70s, filing early may increase your overall payout.

7. Dying without warning

Remember the bit about later applying for a lump-sum repayment if you deferred your benefits? It doesn’t work if you’re dead. That means your family will be left out in the cold on those deferred earnings if you don’t collect them before you die. While this sin is harder to avoid than the others, making sure to file by at least age 66 can help make you more prepared.