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.
U.S. President Donald Trump points as he attends the annual Friends of Ireland luncheon hosted by U.S. House of Representatives Speaker Mike Johnson (R-LA) at the U.S. Capitol in Washington, D.C., U.S., March 12, 2025.
Evelyn Hockstein | Reuters
As Republicans wrestle with funding their massive spending and tax package, President Donald Trump is eyeing a possible tax hike for the highest earners.
The idea, which lacks Republican support, could return the top federal income tax rate to 2017 levels for some of the wealthiest Americans.
In a phone call Thursday, NBC reported, Trump pressed House Speaker Mike Johnson, R-La., to raise the top income tax rate on the wealthiest Americans and close the so-called carried interest loophole. The proposal would revert the 37% rate to 39.6% for individuals making $2.5 million or more per year, to help preserve Medicaid and tax cuts for everyday Americans.
More from Personal Finance:
How many consumers are preparing for an economic hit
Why Americans think real estate, gold are the best long-term investments
Trump tariffs sparked ‘uptick’ in I bond interest, advisor says. What to know
Trump on Friday expressed openness to the tax hike on the wealthiest Americans in a Truth Social post, noting he would “graciously accept” the tax increase to “help the lower and middle income workers.”
“Republicans should probably not do it, but I’m OK if they do!!!” he wrote.
Enacted by Trump, the Tax Cuts and Jobs Act, or TCJA, of 2017 created sweeping tax breaks for individuals and businesses. Most will sunset after 2025 without an extension from Congress.
The TCJA temporarily dropped the highest income tax rate from 39.6% to 37%. For 2025, the 37% rate kicks in for single filers once taxable income exceeds $626,350.
How Trump’s idea compares to historic rates
If signed into law, a top 39.6% income tax rate would return wealthy taxpayers to pre-TCJA levels from 2013 to 2017. Before that, the top rate was 35% during most of the early 2000s, according to data collected by the Tax Policy Center. The highest top rate was 94% from 1944-1945.
However, this data doesn’t reflect how much income was subject to top rates or the value of standard and itemized deductions during these periods, the organization noted.
Trump’s tax package faces a ‘math issue’
With control of Congress, Republicans can pass legislation through a process known as “reconciliation,” which can sidestep the Senate filibuster with a simple majority.
However, there’s still disagreement about what should be included in the multi-trillion-dollar bill and how to finance it.
Lawmakers face “a pretty simple math issue,” with many proposals not covering the cost, Yale Budget Lab president and law professor Natasha Sarin told CNBC’s “Squawk Box” on Friday.
“We’re not getting anywhere close to the type of revenue increases we need,” she said.
Brendon Thorne | Bloomberg | Getty Images
Some Americans believe real estate and gold are the best long-term investments. Advisors think that’s misguided.
About 37% of surveyed U.S. adults view real estate as the best investment for the long haul, according to a new report by Gallup, a global analytics and advisory firm. That figure is roughly unchanged from 36% last year.
Gold was the second-most-popular choice, with 23% of surveyed respondents. That’s five points higher than last year.
To compare, just 16% put their faith in stocks or mutual funds as the best long-term investment — a decline of six percentage points from 2024’s report, Gallup found.
The firm polled 1,006 adults in early April.
Financial advisors caution that this preference is likely more about buzz than fundamentals. Be careful about getting caught up in the hype, said certified financial planner Lee Baker, the founder, owner and president of Claris Financial Advisors in Atlanta.
Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida, agreed: “People are always chasing what’s hot, and that’s the stupidest thing you could do.”
Here’s what investors need to know about gold and real estate, and how to incorporate them in your portfolio.
Why gold and real estate are alluring
Baker understands why people like the idea of real estate and gold: Both are tangible objects versus stocks.
“You buy a house, you can see it, feel it, touch it. Your investment in stocks perhaps doesn’t feel real,” said Baker, a member of CNBC’s Financial Advisor Council.
While the preference for gold grew this year, the share of Gallup respondents who think it’s the best long-term investment is still below the record high of 34% in 2011. Back then, gold investors sought refuge amid high unemployment, a crippled housing market and volatile stocks, Gallup noted.
Gold prices have been trending upward this spring. Spot gold prices hit an all-time high of above $3,500 per ounce in late April. One year ago, prices were about $2,200 to $2,300 an ounce.
Real estate has also drawn more interest in recent years amid high demand from buyers and accelerating prices. The median sale price for an existing home in the U.S. in March was $403,700, according to Bankrate. That is down from the record high of $426,900 in June.
Why stocks are the better bet
While real estate and gold are two assets that can appreciate in value over time, the stock market will generally grow at a much higher rate, experts say.
The annualized total return of S&P 500 stocks is 10.29% over the 30-year period ending in April, per Morningstar Direct data. Over the same time frame, the annualized total return for real estate is 8.78% and for gold, 7.38%.
McClanahan also points out that unlike gold and real estate, stocks are diversified assets, meaning you’re spreading out your cash versus concentrating it into one investment.
“When you talk about stocks, you’re not talking about one big asset,” she said. “You’re talking about thousands and thousands of companies that do different things.” McClanahan is also a member of the CNBC FA Council.
While the tangibility of gold and real estate may provide a sense of comfort, it also makes them illiquid, or difficult to cash out, McClanahan said.
How to include gold, real estate into your portfolio
If you are among the Americans that want exposure to real estate or gold, there are different ways to do it wisely, experts say.
For real estate, financial advisors say investors might look into real estate investment trusts, also known as REITs, or consider investments that bundle real estate stocks, like exchange-traded funds.
An REIT is a publicly traded company that invests in different types of income-producing residential or commercial real estate, such as apartments or office buildings.
In many cases, you can buy shares of publicly traded REITs like you would a stock, or shares of a REIT mutual fund or exchange-traded fund. REIT investors typically make money through dividend payments.
Real estate mutual funds and exchange-traded funds will typically invest in multiple REITs and in the real estate market broadly. It’s even more diversified than investing in a single REIT.
Either way, you’re exposed to real estate without concentrating into a single property, and it will help diversify your portfolio, McClanahan said.
Similar to gold — instead of stocking up on gold bullions, consider investing in gold through ETFs.
That way you avoid having to deal with finding a place to store or hide physical gold, you wash off the stress of it getting stolen or making sure it’s covered by your home insurance policy, experts say.
“With the ETF, you actually get the value of the return of gold, but you don’t actually own it,” McClanahan said.
Americans have been worried about being able to maintain their standard of living since inflation first began to spike in 2021. With renewed cost concerns after President Donald Trump implemented his tariff agenda, many people are prepared to do something about it.
A whopping 83% of consumers said that if their financial situation worsens in the coming months, they will strongly consider cutting back on their non-essential spending, according to a new study by Intuit Credit Karma, which polled more than 2,000 U.S. adults in April.
On TikTok, money saving hacks, with hashtags such as no buy, slow buy, low buy and underconsumption, have skyrocketed in popularity, especially among young adults. All are aimed at making the most of what you already have and resisting the temptation to buy more stuff, or even anything at all.
How no buy, low buy and slow buy challenges work
“No buy 2025” encourages shoppers to cut out all non-essential purchases for the year, including clothing, books, electronics and entertainment. Alternatively, low buy and slow buy advocate for a more mindful approach to buying decisions, such as following “the 48-hour rule” before making any discretionary purchases and limiting purchases altogether. The goal is to break the habit of overspending — or “doom spending” — as fears of a recession rise.
Recent data from H&R Block’s Spruce also found that 68% of Generation Z consumers reported being influenced by social media finance trends, with over one-third of them looking specifically to social media for financial knowledge. (America’s young adults are also increasingly turning to social media to express their financial dissatisfaction, making a joke of so-called recession indicators.)
Why savings challenges are so popular
To be sure, Americans are feeling the pain of higher prices, with various reports showing many have exhausted their savings and have been leaning on credit cards to make ends meet.
With sweeping U.S. tariffs now going into effect, concern is heightened about the rising cost of goods and making ends meet, especially as the economy shows signs of contracting.
“Consumers are going to have to pay for the increase in prices these tariffs are going to cause and there is no way around it,” said Eugenio Aleman, chief economist at Raymond James. “The alternative is to reduce consumption, especially in discretionary items.”
More from Personal Finance:
Is now a good time to buy gold?
Why tariffs will hurt low income Americans more than rich
What stagflation risks mean for your money
A survey by Gallup last month found that inflation, housing costs and lack of money are the most commonly cited financial challenges by U.S. adults.
According to the poll, which was conducted during a period of extreme market volatility after the Trump administration announced new tariffs on most U.S. trading partners, a record 53% of consumers said their financial situation was getting worse, while just 38% said it was getting better. Additionally, 57% worried about not being able to maintain their standard of living.
A separate report by Bankrate found that 43% of adults said money now negatively affects their mental health, at least occasionally, causing anxiety, stress, worrisome thoughts, loss of sleep and depression.
“Tariffs, inflation, higher interest rates and a recession are all forces that Americans can’t prevent, no matter how much they want to,” Sarah Foster, Bankrate’s economic analyst, said in an email. “Taking proactive steps to manage your finances can provide a sense of stability and security.”
A better way to improve your finances
Financial experts say TikTok’s latest microtrends can provide a short-term boost to help reach some savings goals, however, there is no substitute for practicing good long-term habits.
“Ignore what others are doing with their money,” said Daniel Milan, managing partner of Cornerstone Financial Services in Southfield, Michigan. “That to me is a very foundational tenet for any household.”
Milan says financial planning starts with a budget. “People don’t like that word,” he said. But rather than jumping on the latest TikTok trend, “sit down and pencil out what you actually are spending.”
Milan recommends flagging excess expenses that can be cut, considering which are “wants” or “needs.” Milan says he did this himself at the start of the year after getting married, and was able to cut out some recurring bills as well as subscription services that overlapped with his wife’s — to the tune of $800 a month.
“That type of exercise can be extraordinarily powerful from a cash flow perspective,” he said.
AI great at simple tasks but struggles with complexity
Number of ‘tariff’ mentions has soared past ‘AI’ on earnings calls
How top tax rates compare, as Trump eyes hike for wealthy
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?
-
Finance7 days agoWarren Buffett to ask board to make Greg Abel CEO of Berkshire Hathaway at year-end
-
Finance1 week agoBerkshire meeting ‘bazaar’ features Buffett Squishmallows, 60th anniversary book and giant claw machine
-
Economics1 week agoWhy does America have birthright citizenship?
-
Personal Finance1 week agoMillions of older workers lost jobs during Covid. Prospects have improved
-
Personal Finance1 week agoWhy Roth conversions are popular when the stock market dips
-
Economics1 week agoHow Donald Trump could rescue John Roberts
-
Economics1 week agoJobs report Friday to provide important clues on where the economy is heading
-
Economics1 week agoHow one Ivy League university avoided the president’s wrath