Personal Finance
Turning 65? What to know when planning for Medicare, Social Security
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.
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.
“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.
Hinterhaus Productions | Getty Images
As investors digest the latest bond market sell-off, advisors have tips about portfolio allocation amid continued market volatility.
Typically, investors flock to fixed income like U.S. Treasurys when there’s economic turmoil. The opposite happened this week with a sharp sell-off of U.S. government bonds, which dropped bond prices as yields soared. Bond prices and yields move in opposite directions.
Treasury yields then retreated Wednesday afternoon when President Donald Trump temporarily dropped tariffs to 10% for most countries but increased levies on Chinese goods. That duty now stands at 145%.
As of Thursday afternoon, Treasury yields were down slightly.
Still, “there’s a massive amount of uncertainty,” Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania’s Wharton School, told CNBC.
More from Personal Finance:
See if you qualify for the $1,400 IRS stimulus check before the deadline
What college savers need to know about their 529 accounts as market roils
Why the stock market hates tariffs and trade wars
Experts closely watch the 10-year Treasury yield because it’s tied to borrowing rates for products like mortgages, credit cards and auto loans. The yield climbed above 4.5% overnight on Tuesday as investors offloaded the asset. As of Thursday afternoon, the 10-year Treasury yield was around 4.4%.
Kevin Hassett, director of the U.S. National Economic Council, told CNBC on Thursday that bond market volatility likely added “a little more urgency” to Trump’s tariff decision.
As some investors question their bond allocations, here’s what advisors are telling their clients.
Take the ‘proactive approach’
Despite the latest bond market sell-off, there hasn’t been a recent shift in client portfolios for certified financial planner Lee Baker, owner of Apex Financial Services in Atlanta.
“I’ve been taking a proactive approach” by shifting allocations early based on the threat of future tariffs, said Baker, who is also a member of CNBC’s Financial Advisor Council.
With concerns about future inflation triggered by tariffs, Baker has increased client allocations of Treasury inflation-protected securities, or TIPS, which can provide a hedge against rising prices.
Consider ‘guardrails’
Ivory Johnson, a CFP and founder of Delancey Wealth Management in Washington, D.C., has also been defensive with client portfolios.
“I’ve used instruments to give me guardrails,” such as buffer exchange-traded funds to limit losses while capping upside potential, said Johnson, who is also a member of CNBC’s FA Council.
Buffer ETFs use options contracts to provide a pre-defined range of outcomes over a set period. The funds are tied to an underlying index, such as the S&P 500. These assets typically have higher fees than traditional ETFs.
Take a ‘temperature check’
With future stock market volatility expected, investors should revisit risk tolerance and portfolio allocations, Baker said.
“This is a good time for a temperature check,” he said.
Market turmoil has happened before and will happen again. If you can’t stomach the latest drawdowns — in stocks or bonds — this is a chance to shift to more conservative holdings, Baker said.
“We’re not selling because I’m concerned about the market,” he added. “I’m concerned about comfort level.”
People shop at a grocery store in Manhattan on April 1, 2025, in New York City.
Spencer Platt | Getty Images
The impact of President Donald Trump’s tariff agenda and resulting trade war will translate to higher consumer prices by summer, economists said.
“I suspect by May — certainly by June, July — the inflation statistics will look pretty ugly,” said Mark Zandi, chief economist at Moody’s.
Tariffs are a tax on imports, paid by U.S. businesses. Importers pass on at least some of those higher costs to consumers, economists said.
While economists debate whether tariffs will be a one-time price shock or something more persistent, there’s little argument consumers’ wallets will take a hit.
Consumers will lose $4,400 of purchasing power in the “short run,” according to a Yale Budget Lab analysis of tariff policy announced through Wednesday. (It doesn’t specify a timeframe.)
‘Darkly ironic’ tariff impact
Federal inflation data doesn’t yet show much tariff impact, economists said.
In fact, in a “darkly ironic” way, the specter of a global trade war may have had a “positive” impact on inflation in March, Zandi said. Oil prices have throttled back amid fears of a global recession (and a resulting dip in oil demand), a dynamic that has filtered through to lower energy prices, he said.
“I think it’ll take some time for the inflationary shock to work its way into the system,” said Preston Caldwell, chief U.S. economist at Morningstar. “At first, [inflation data] might look better than it will be eventually.”
But consumers will start to see noticeably higher prices by May, if the president keeps tariff policy in place, said Thomas Ryan, an economist at Capital Economics.
“Price increases take time to filter through the supply chain (starting with producers, then retailers/wholesalers, and finally consumers),” Ryan wrote in an e-mail.
Capital Economics expects the consumer price index to peak around 4% in 2025, up from 2.4% in March. That peak would be roughly double what the Federal Reserve aims for over the long term.
Food is first, then physical goods
Food will likely be among the first categories to see prices rise, Zandi said.
Because many food products are perishable, grocers can’t hold on to supply for very long. That speeds up the pass-through of higher costs to consumers, he said.
By comparison, other retailers can sell old inventory sitting in their warehouses that hadn’t been subject to tariffs, economists said. That dynamic would delay the price impact for consumers, economists said.
More from Personal Finance:
Here’s the inflation breakdown for March 2025 — in one chart
This tax strategy is a ‘silver lining’ amid tariff volatility
Why the stock market hates tariffs and trade wars
Most physical goods, such as vehicles, consumer electronics, clothing and furniture, are expected to be pricier by Memorial Day, Zandi said.
Additionally, retailers and wholesalers “won’t want to do this all at once,” Ryan said.
They’ll likely sprinkle in higher prices over time to blunt backlash from consumers, Ryan said. Consumer prices “will reflect more of the true impact of tariffs” in May and beyond, he said.
There’s also the possibility that some companies may try to front-run the impact of tariffs by raising prices now, in anticipation of higher costs, Ryan said.
It would be a gamble for companies to do that, though, Caldwell said.
“Any company that kind of sticks its neck out first and increases prices will probably be subject to political boycotts and unfavorable attention,” he said. “I think companies will move pretty slowly at first.”
Trump may change course
There’s ample uncertainty regarding the ultimate scope of President Trump’s tariff policy, however, economists said.
Trump on Wednesday backed down from imposing steep tariffs on dozens of trading partners. Kevin Hassett, director of the National Economic Council, said Thursday that 15 countries had made trade deal offers.
For now, all U.S. trading partners still face a 10% universal tariff on imports. The exceptions — Canada, China and Mexico — face separate levies. Trump put a total 145% levy on goods from China, for example, which constitutes a “de facto embargo,” said Caldwell.
Trump has also imposed product-specific tariffs on aluminum, steel, and automobiles and car parts.
There’s the possibility that prices for services like travel and entertainment could fall if other nations retaliate with their own trade restrictions or if there’s less foreign demand, Zandi said.
There was some evidence of that in March: “Steep” declines in hotel prices and airline fares in the March CPI data partly reflect the recent drop in tourist visits to the U.S., particularly from Canada, according to a Thursday note from Capital Economics.
What advisors are telling their clients after the bond market sell-off
No AI disclosure rules doesn’t mean no AI disclosures at all
Trump’s triple-digit tariff essentially cuts off most trade with China, says economist
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Accounting6 days agoOn the move: KPMG adds three asset management, PE leaders
-
Accounting1 week agoX asks Supreme Court to shield Coinbase users from IRS probe
-
Accounting1 week agoLocal firm slashes staff starting salaries
-
Economics6 days agoPresident Donald Trump says Fed Chair Powell should cut interest rates and ‘stop playing politics’
-
Economics4 days agoTexas looks set to pass America’s biggest school-voucher scheme
-
Personal Finance1 week agoMost credit card users carry debt, pay over 20% interest: Fed report
-
Personal Finance1 week agoAmid trade turmoil, ‘you do not want to time the market’
-
Economics6 days agoChina to impose 34% retaliatory tariff on all goods imported from the U.S.