Personal Finance

Turning 65? What to know when planning for Medicare, Social Security

Published

1 year ago

April 7, 2024

Business Finance News

A “silver tsunami” — with a record number of Americans expected to turn age 65 — is here.

Americans who reach that milestone age face high-stakes financial decisions.

Two of the most important choices retirees face — which Medicare health insurance coverage option to choose and when to claim Social Security benefits — come with deadlines.

And making a less-than-ideal selection may cost a retiree over their lifetime.

More than 11,200 baby boomers are expected to turn 65 every day from now through 2027, a phase that has been dubbed “peak 65.”

For many reasons, the generation entering this new life phase doesn’t have it easy.

A so-called three-legged stool of retirement planning — employer pensions, personal savings and Social Security — has largely gone by the wayside as many private-sector employees no longer have traditional pensions that may provide income throughout retirement, according to recent research from the Alliance for Lifetime Income.

Meanwhile, about 40% of households will not be able to maintain their pre-retirement standard of living due to insufficient retirement income, according to the Center for Retirement Research at Boston College.

New survey reveals most Americans are stressed about their finances

Choosing Medicare coverage comes with trade-offs

Turning 65 ushers in a key milestone — eligibility for Medicare coverage.

Ideally, beneficiaries should sign up for all parts of Medicare the month before that birthday to avoid coverage gaps, according to a recent retirement report by J.P. Morgan Asset Management.

That coverage may come in the form of “original” Medicare — through Parts A and B, for hospital and medical insurance, as well as optional additional coverage through Part D drug coverage or medigap private insurance plans.

Alternatively, retirees may opt for private Medicare Advantage plans that may include prescription drug coverage and possibly also vision, dental and hearing.

Beneficiaries may revisit their coverage each year during open enrollment periods.

“It can be very confusing for people to sort through all of their options and try to figure out what the differences are across plans, but also what options will work for them over the next year and work well over the longer term as well,” said Gretchen Jacobson, vice president of Medicare at the Commonwealth Fund.

Today’s beneficiaries need to brace themselves for rising health-care costs.

A beneficiary who is 65 in 2024 and covered by original Medicare faces $542 in monthly costs on average, according to J.P. Morgan’s research. By 2054, when that beneficiary is 95, that may go up to $1,484 per month, J.P. Morgan said.

That’s based on an annual 6% health care inflation rate, which J.P. Morgan calls a “prudent” assumption.

In comparison, inflation is up 2.8% annually, based on the latest read of the Federal Reserve’s key inflation gauge, the personal consumption expenditures price index.

The monthly outlay for beneficiaries covered by Medicare Advantage is much lower, according to J.P. Morgan’s estimates. Someone turning 65 in 2024 may spend up to $427 per month for Medicare Advantage premiums and out-of-pocket costs. By 2054, when they are 95, that may climb to up to $990.

Based on the numbers, Medicare Advantage may seem like a better deal. But experts say there are trade-offs to consider.

New enrollees who opt for Medicare Advantage may later want to switch to original Medicare. But it may be difficult getting medigap coverage, depending on the state you’re in and your health status, said Sharon Carson, retirement insights strategist at J.P. Morgan Asset Management.

Having original Medicare also gives you more providers to choose from, as all providers who accept Medicare generally take original Medicare, Carson said. Consequently, retirees who split their time between two states tend to opt for original Medicare.

Because Medicare Advantage enrollees have no supplemental coverage, they should set aside more money for surprise out-of-pocket costs, Carson said.

Moreover, while retirees may opt for Medicare Advantage for the additional coverage those plans may provide, many people don’t actually use benefits such as dental, vision, fitness or over-the-counter medication coverage, recent research by the Commonwealth Fund found.

“They should also consider whether they will actually use those benefits, or if perhaps there’s a different plan that offers benefits they’re more likely to use,” Jacobson said.

Claiming Social Security early means taking a 30% cut

Americans who turn age 65 in 2024 have a Social Security full retirement age of 66 and 10 months.

For those who reach that age next year and thereafter, the full retirement age is 67, per changes enacted decades ago that are being gradually phased in.

The full retirement age is the point when retirees stand to receive 100% of the benefits they’ve earned.

But they may claim as early as age 62, though if they do so they will receive reduced benefits.

For those turning 65 now, that amounts to a benefit cut of around 30%. So if their full retirement age benefit is $1,000 a month, they will receive a $700 monthly check for life if they instead decide to claim at age 62.

Beneficiaries who delay even longer — up to age 70 — stand to receive a benefit increase of 8% per year for every year they delay claiming past full retirement age.

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“The best financial asset you can have is a higher Social Security annuity,” said Teresa Ghilarducci, a labor economist and retirement security expert.

“It’s inflation indexed and guaranteed for life,” she said.

Yet only about 8% of beneficiaries wait until age 70 to claim, according to Ghilarducci, a professor at The New School for Social Research and author of the book “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy.”

“Everyone should know that you have a penalty if you collect before 70,” Ghilarducci said.

However, most people do not delay benefits that long simply because they can’t, she said.

They may be forced out of work early and need to dip into Social Security to supplement their income when retirement savings fall short. Or they may be working but have taken a job that pays a lot less and make up for those missing wages with their Social Security checks.

Those who can’t delay their Social Security benefits for years can still increase their lifetime benefit income by delaying for just a few months, Ghilarducci said.

“Do whatever you can to bridge to a higher Social Security benefit amount,” Ghilarducci said.

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Personal Finance

Where seniors face the longest drives

Published

3 hours ago

June 2, 2025

Business Finance News

A Social Security Administration office in Washington, D.C., March 26, 2025.

Saul Loeb | Afp | Getty Images

A new Social Security Administration policy will require nearly 2 million additional beneficiaries to visit the agency’s offices each year to change their direct deposit information, according to agency estimates.

That’s often not a quick trip: Nearly one-quarter of seniors live more than an hour away from their local Social Security field office, according to a new analysis from the Center on Budget and Policy Priorities. Meanwhile, half of seniors need to drive for at least 33 minutes without traffic to get to their Social Security office.

The policy change will lead to more than 1 million hours of travel per year, according to the nonpartisan policy and research institute.

Why more people need to visit Social Security offices

The Social Security Administration said the new direct deposit requirements would curb fraud, which it said it’s been working to root out in coordination with the Trump administration’s so-called Department of Government Efficiency.

Since 2023, the agency has experienced a “marked increase” in allegations of direct deposit fraud, a Social Security Administration official said via email.

In March, SSA implemented enhanced fraud protection for direct deposit changes. Between March 29 and April 26, the enhanced fraud protection flagged more than 20,000 Social Security numbers where phone direct deposit requests failed security measures that check for multiple fraud indicators.

Of the direct deposit transactions flagged, 61% to 72% of individuals never resubmitted their requests, a “strong indicator” that many of those attempts may not have been legitimate, according to the SSA official.

The agency estimates $19.9 million in losses were avoided as a result of the enhanced safety measures.

However, advocates say the change is an overreaction, given the scale of such fraud. The Social Security Administration has said about 40% of direct deposit fraud comes from phone calls attempting to change direct deposit information.

In early 2024, anti-fraud officials at the agency told The New York Times that about 2,000 beneficiaries had their direct deposits redirected over the prior year. By those estimates, that would mean just 800 of those people experienced direct deposit fraud by phone, according to Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities. Yet the agency is now requiring about 2 million elderly and disabled individuals to visit its offices to prevent such fraud, she said.

To help ensure benefit payments are not misdirected, the Social Security Administration has tightened beneficiaries’ ability to change their bank information over the phone.

As of April 28, individuals who want to change their direct deposit information will need to log into or create a personal My Social Security online account and obtain a one-time code before they call the agency’s 800 number.

Individuals who cannot use online or automatic enrollment services will need to visit a local field office to verify their identity in person. While the agency encourages those individuals to make an appointment, it is also possible to walk in for direct deposit changes.

Individuals who want to change their direct deposit information may also use automatic enrollment services through their bank. To do so, individuals need to contact their bank directly. Not all financial institutions participate in this process, according to SSA.

What you need to know about Social Security

Because many seniors or disabled individuals do not have internet service, computers or smart phones — or if they do, may not know how to use those resources — many will likely have to make an in-person visit to their local Social Security office.

About 6 million seniors don’t drive, while almost 8 million older Americans have a medical condition or disability that makes it difficult for them to travel, according to CBPP research.

Where seniors may face longest drive times

In-person appointments may be burdensome for beneficiaries who face long travel times to get to their nearest Social Security office, according to the CBPP analysis.

In 31 states, more than 25% of seniors face travel times of more than an hour to get to their local field office.

In certain less-populated states, more than 40% of seniors would need to drive more than an hour. Those include Arkansas, Iowa, Maine, Mississippi, Montana, Nebraska, North Dakota, South Dakota, Vermont and Wyoming.

In other states, around 25% to 39% of seniors would need to travel over an hour. That includes Alabama, Alaska, Arizona, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Minnesota, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, West Virginia, Wisconsin and Virginia.

Residents of other states may also face a burden if they do not live near their closest Social Security field office.

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The analysis is a conservative estimate to help assess how much time it may cost individuals who are affected by the policy, according to Devin O’Connor, senior fellow at the CBPP.

For example, it doesn’t take into account the time spent getting an appointment to visit a Social Security office and the time spent waiting for the appointment, he said.

The CBPP’s analysis was created with information from multiple sources including the 2022 National Household Travel Survey, SSA field office location data, the OpenTimes travel time database and the Census Bureau’s 2023 American Community Survey.

The Social Security Administration has not independently validated the data, the agency said via email in response to a request for comment.

Staffing cuts may add to appointment wait times

Notably, the new direct deposit requirements come as the Social Security Administration has moved to cut its work force by about 7,000 employees, reductions that have led some of the agency’s field offices to be “understaffed,” O’Connor said.

However, while it had been reported that DOGE planned to close Social Security field offices to help curb spending, thus far that has largely not happened, he said. The Social Security Administration has denied it plans to close local field offices.

Individuals who need to visit a Social Security field office will also be confronted by long wait times for appointments. Currently, just 43% of individuals are able to get a benefit appointment within 28 days, Social Security Administration data shows.

The agency’s new policy to limit phone transactions has been scaled back. The agency had proposed limiting the ability to apply for benefits over the phone, but after it received pushback from organizations including the AARP, the agency changed that policy to limit only direct deposit transactions.

Personal Finance

How child tax credit could change as Senate debates Trump’s mega-bill

Published

4 hours ago

June 2, 2025

Business Finance News

Vera Livchak | Moment | Getty Images

As the Senate debates President Donald Trump‘s multi-trillion-dollar tax and spending package, there could be changes to the child tax credit, policy experts say.

If enacted as drafted, the House-approved bill would make permanent the maximum $2,000 credit passed via Trump’s 2017 tax cuts — which could otherwise revert to $1,000 after 2025 without action from Congress.

The highest credit would also rise to $2,500 from 2025 to 2028. After that, the credit’s top value would revert to $2,000 and be indexed for inflation.

But the Senate could have different plans, and negotiations will be “really interesting to watch,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

The proposed higher child tax credit comes as the U.S. fertility rate hovers near historic lows, which has been a concern for lawmakers, including the Trump administration.

Some research suggests financial incentives, like a bigger child tax credit, could boost U.S. fertility. But other experts say it won’t solve the issue long-term.

As the Senate prepares to debate Trump’s mega-bill, here’s how the child tax credit could change.

Republican child tax credit support

While Democrats have long pushed for a child tax credit expansion, there has also been a more recent bipartisan push for changes.

Vice President JD Vance, who formerly served as Senator of Ohio, floated a higher child tax credit during the campaign in August.

“I’d love to see a child tax credit that’s $5,000 per child. But you, of course, have to work with Congress to see how possible and viable that is,” he told CBS’ “Face the Nation.”

Sen. Josh Hawley, R-Mo., in January also called on the Senate floor for a $5,000 child tax credit. His proposal would apply the credit to payroll taxes and provide advance payments throughout the year.

“There’s some recognition here that they need do a little more,” Gleckman said.

Credit ‘refundability’ could change

Often, tax credits don’t benefit the lowest earners unless they are “refundable,” meaning filers can still claim without taxes owed. Nonrefundable credits can lock out those consumers because they often don’t have tax liability.

House lawmakers in January 2024 passed a bipartisan child tax credit expansion, which would have improved access and retroactively boosted the refundable portion.

While the bill failed in the Senate in August, Republicans said they would revisit the measure.

However, the child tax credit in the latest House-approved bill is less generous than the provision passed in 2024, policy experts say.

As written, the House plan provides no additional benefit to 17 million children from low-income families who can’t claim the full $2,000 credit, Margot Crandall-Hollick, principal research associate at the Urban-Brookings Tax Policy Center, wrote in May.

Why the U.S. government can't convince Americans to have more kids

Personal Finance

Social Security checks may be smaller for some as garnishments begin

Published

1 day ago

June 1, 2025

Business Finance News

T-studios2 | E+ | Getty Images

Some Social Security beneficiaries may find their June check is smaller: Starting this month, a share of people’s benefits can be garnished if they’ve defaulted on their student loans.

The Trump administration announced on April 21 that the U.S. Department of Education would resume collection activity on the country’s $1.6 trillion student loan portfolio. For nearly half a decade, the government did not go after those who’d fallen behind as part of Covid-era policies.

More than 450,000 federal student loan borrowers age 62 and older are in default on their federal student loans and likely to be receiving Social Security benefits, the Consumer Financial Protection Bureau found.

Depending on details like their birth date and when they began receiving benefits, their monthly Social Security check may arrive June 3, 11, 18 or 25, according to the Social Security Administration.

Many Social Security recipients rely on those checks for most, if not all, of their income. So people who are facing a smaller federal benefit as a result of garnishment are likely in a panic, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

But, Nierman said, “the good news is there are multiple options for borrowers to stop those payment offsets.”

Here’s what you need to know if you’re at risk of a smaller benefit.

How to challenge the garnishment

Federal student borrowers should have received at least a 30-day warning before their Social Security benefit is offset, said higher education expert Mark Kantrowitz.

That notice should include information on whom to contact in order to challenge the collection activity, Kantrowitz said. (The alert was likely sent to your last known address, so borrowers should make sure their loan servicer has their correct contact information.)

You may be able to prevent or stop the offset if you can prove a financial hardship or have a pending student loan discharge, Kantrowitz added.

With that in mind, your next step may be pursuing a discharge with your student loan servicer. That’s more likely in circumstances where you have significant health challenges.

“If they are sick or disabled, they can file for a Total & Permanent Disability discharge,” Nierman added.

Borrowers may qualify for a TPD discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.

Get current on your loans

Another route to stop the offset of Social Security benefits is getting current on the loans, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

You can contact the government’s Default Resolution Group and pursue several different avenues to get out of default, including enrolling in an income-driven repayment plan.

“If Social Security is their only income, their payment under those plans would likely be zero,” Mayotte said.

Offset is limited to 15%

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.

The offset cap is the same “regardless of the type of benefit,” including retirement and disability payments, said Kantrowitz.

The 15% offset is calculated from your total benefit amount before any deductions, such as your Medicare premium, Kantrowitz said.

When Social Security benefit isn’t enough

Many retirees worry about meeting their bills on a fixed income — with or without facing garnishment, experts said.

Utilizing other relief options may help stretch your funds while you work on stopping the offset to your Social Security benefits.

For example, there are a number of charitable organizations that assist seniors with their health-care costs. At Copays.org you can apply for funds to put toward copays, premiums, deductibles and over-the-counter medications.

The National Patient Advocate Foundation has a financial resource directory in which you can search for local aid for everything from dental care to end-of-life services.

Many older people aren’t taking advantage of all the food assistance available to them, experts say. A 2015 study, for instance, found that less than half of eligible seniors participated in the Supplemental Nutrition Assistance Program, or SNAP.

The extra money can go a long way for retirees on a fixed income, though. The maximum benefit a month for a household of one is $292. Grocery stores, online retailers and farmers markets accept the funds.