(You Say It’s Your) Birthday
The Second World War ended In 1945 and members of the Baby Boom generation began arriving in significant numbers soon thereafter. Boomers changed the country’s economy in many ways including providing new markets for baby books (remember Dr. Spock?) and denim fabric. Colleges were enlarged, even established, to accommodate them. Boomer’s aging has also affected the country in several ways from increased sales of reading glasses and hearing aids to requiring colleges to advertise “lifelong learning,” since the straight from high school student population has waned.
The generation embraced a smaller change too-a replacement for the traditional “Happy Birthday to You” which had been the standard since the early 1900′s. The Lennon/McCartney song which provides the title of this article was released In 1968 and quickly became the song of choice for many Boomers. I mention this because the US Census Bureau estimates that an average of 7,671 Americans turned 65 every day of 2011. Those approaching that fateful threshold have some pretty important decisions to make related to Medicare and Social Security. Since both are government programs, it may not be surprising that they are a bit complicated.
Potential Medicare recipients must sign up prior to turning 65 or face mandated delays in receiving coverage. Typically, we suggest that individuals review their options around eight weeks prior to their birthday so they can make application about a month before. There’s a lot to think about these days with four different programs available. Parts A (physician) and B (hospital) cover everyone 65 and over and there is a premium for Part B. The Bush-era addition of Part D provides drug coverage and this year there are more than 1,000 different stand-alone drug plans available. There’s been lots of griping about the “doughnut hole” (gap in coverage) but I’ve heard very few expressions of thanks for the more than $2000 per year which is now provided to help cover drug expenses. Those who truly cannot afford their Part D premiums are eligible for further assistance. Medigap policies are offered to provide supplementary coverage, capping out-of-pocket expenses in exchange for a periodic premium. Part C (known as Medicare Advantage) integrates Parts A, B & D under a single policy, with most plans providing at least some dental, vision and hearing coverage which original Medicare does not.
There are hundreds of Medicare supplement and Part C plans available and choosing the right one has become easier with the release of Medicare’s on-line tool. It allows you to enter personal information, including the medicines you take, then view a sortable list of the various plans available in your area. Medicare has been rating providers since 2007 and that data is part of the report. The process is tedious but not terribly difficult. Anyone who completes their own FAFSA forms should have no trouble doing it but it is a service that some clients prefer that we handle.
Social Security is another blessing for retirees. It was established in 1935 during the Great Depression to help alleviate poverty among the elderly. The first recipient was Ida May Fuller, who famously worked only three years under the system before collecting benefits until her death at age 100. Of course, there have been changes to the rules over the years and individuals must now work at least ten years to qualify and, for Boomers, full retirement age has been moved back to sixty-six. Benefits are calculated actuarially based on the thirty-five highest earning (not most recent) years of employment and an anticipated life expectancy of about 80. From the government’s perspective, it doesn’t matter whether you receive a smaller payment over a longer period or vice-versa.
Although it doesn’t matter to the government, the timing of Social Security benefits is very important to each individual. SS income is generally taxable so anyone who is still working should probably delay, especially since she or he would still be paying into both SS and Medicare. On the other hand, someone with reason to expect a shorter than average life span might want to begin receiving benefits sooner. There are also issues regarding coordination of spousal benefits. The lower-earning spouse is generally entitled to the greater of his or her own benefit or half of the spouse’s. This has gotten so complicated that we now use specialized software to help guide our clients through the decision-making process.
From time to time we hear concerns expressed about the solvency of the SS system. As a matter of fact, Boomers having to wait a year longer to begin receiving their full benefit is a step towards ensuring its continued viability. This is a topic I keep a close eye on but I don’t expect any major changes-the issue is just too politically sensitive with the most reliable voting bloc-retirees. Warren Buffet and others have suggested that those who are better-off should pay more or receive less. It might be worth your time to read this article from Allan Sloan to see if this is already happening.
Having opened this article with a Beatles lyric I’d like to close with one from another Boomer icon. In 1974, Bob Dylan wrote: “May you grow up to be righteous … and may you stay forever young.” That’s an impossible dream, of course, but we’d say that thoughtful planning tends to increase the likelihood of at least feeling forever young and enjoying those birthdays as they roll around.