Brush up on Social Security and Medicare

For most people, Social Security is the bedrock of retirement income. And Medicare is likely to be the primary source of health coverage. So understanding how and when to start taking advantage of these programs will help you maximize benefits and positively impact your retirement lifestyle.
Social security basics

Who can claim Social Security?

Here are the basic guidelines; however, eligibility rules vary. For example, benefits may also be available for children, spouses, and former spouses. Survivor benefits (benefits for widows, widowers, surviving unmarried children, dependent parents) may also be available.
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You are at least 62 years of age.
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Worked 10 years (40 quarters) or longer and had Social Security taxes withheld.
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Your spouse (or ex) worked and you qualify for benefits on his/her record.
Income percentage

Percentage of monthly income that Social Security benefits represent for retirees.

Source: Social Security Administration, April 2, 2015  1
Benefits level

Timing for claiming benefits

Nearly half of Americans file for Social Security as soon as possible, at age 62. It’s a move that could drastically reduce the total amount of benefits you could otherwise receive over your lifetime, and over the lifetime of a surviving spouse. Here’s why timing is everything.
Source: Social Security Bulletin 2014  2

Early claiming

You can collect Social Security as early as age 62. However, benefits will be reduced by as much as 25% to 30% depending on when you were born. Benefits gradually increase each year from age 62 until full retirement age is reached.

Full retirement age

The age you’re able to claim full benefits varies according to the year you were born. It’s 66 for those born between 1943 and 1954, and gradually increases to 67 for those born in 1960 or later.

Delayed claiming

Doing so can increase benefits 24% to 32% depending on your Full Retirement Age. You must claim Social Security by age 70.
And delayed benefits payable to a surviving spouse can increase significantly, as well.
When to claim

The right age to claim all depends on you

Delaying a claim for as long as possible makes sense for some, but there are cases where early retirement is the better option.
Claiming earlier

Reduces monthly benefits and makes sense when:

  • Life expectancy is shorter
  • Income is needed for immediate cash flow
  • Qualifying for additional family benefits
  • Employing certain strategies that can enhance benefits for couples
Claiming later

Increases monthly benefits and makes sense when:

  • Life expectancy is longer
  • Working longer
  • Spousal, or surviving spouse, benefits need to be maximized
  • Looking for tax savings options and increased portfolio longevity
Most claim early

73% of current retirees get reduced benefits because they file before full retirement age.

Source: Social Security Administration, April 2015  3
Claiming strategies

Three common Social Security strategies

Get the timing right, and you may boost monthly benefits for yourself and a spouse or dependent.
Consider these strategies.

Delayed Retirement

Waiting to claim on your own record provides delayed retirement credits for each year after full retirement age (FRA). If you were born in 1943 or later, potential benefits increase by up to 8% per year, up to age 70.

File and Suspend

Claim benefits at FRA and suspend the claim in order to accrue Delayed Retirement Credits

Deemed Filing

Once your spouse reaches his/her FRA, they would be entitled to receive the higher of their primary benefit and spousal benefit unless they choose to delay filing on their own record until as late as age 70 to take advantage of Delayed Retirement Credits.
Max Spousal Benefit

If you collect on a spouse or ex-spouse’s record, you can receive up to half of the amount to which he or she is entitled.

Source: Social Security Administration, Sept. 25, 2015  4
Tax Considerations

Taxes are still in play

Be aware of the impact that Social Security benefits may have on your federal — and possibly state — taxes.

Provisional Income Formula

A special three-tiered formula determines how much of your benefit must be included as income. This is calculated by adding 50% of your Social Security benefit to your Modified Adjusted Gross Income.

Some of your Social Security may be taxable

Depending on your income, up to 85% of your Social Security benefits could be included as income for tax purposes.

A bracket bump

Combining your income with Social Security could push you into a higher tax bracket. Incorporate Social Security strategies into your financial planning to reduce your tax burden and increase portfolio longevity.
Taxable income schedule

The more you make, the more your benefits could be taxed.

There are some exceptions. For example, higher Social Security benefits can also create tax savings opportunities, by application of the IRS Provisional Formula or by timing and amount of withdrawals from other taxable accounts correctly.
Taxable Income Table
Source: Social Security , October 2015

Some situations can make you ineligible for benefits

Certain employers, such as the federal government, pay a pension instead of withholding Social Security taxes. Make sure you understand the impact if you have that kind of pension and are also eligible for Social Security from other jobs.

Windfall Elimination Provision

When you’re eligible for a pension and Social Security benefits, and are subject to the Windfall Elimination Provision, total benefits may be reduced on a sliding scale based on years paid into Social Security.

Government Pension Offset

When you’re eligible to receive a pension and Social Security spousal benefits or survivor benefits, those benefits may be reduced by two-thirds of the amount of your monthly pension benefit.
Medicare basics

Medicare in a nutshell

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people who qualify under the Special Needs Plans (SNP’s). Medicare will help with hospitalization costs and doctor visits, but keep in mind that you’ll probably need some supplemental coverage to help pay for all your healthcare related expenses. One way or the other, it’s important to understand your Medicare, and how it fits into your long-term plan.
Parts of medicare

The building blocks of Medicare

Medicare Parts A and B work together to form traditional Medicare. Parts C and D can be supplemented or added on to increase the amount of coverage or reduce overall cost.


Covers hospital, nursing facility stays, some home health and hospice care. No annual premiums, only deductibles and copays.


Covers doctor visits, testing and routine medical services. You pay annual premiums and copays, but most preventive services are free.

Medicare Advantage Plans

Private insurance alternative that combines Parts A, B, and Part D into a single comprehensive plan. You pay premiums, copays and deductibles.

Prescription Drug Plans

Coverage through private insurers that can be combined with Parts A, B and Medigap to provide comprehensive coverage, or as part of a Medicare Advantage Plan.
It Doesn't Cover Everything

The average amount of healthcare expenses that Medicare is estimated to cover.

Medicare Supplement policies or “Medigap” are typically purchased to fill in many of the gaps in expenses not covered by traditional Medicare. It's important to note that Medicare Advantage plans, which provide comprehensive health coverage, do not (and cannot) be combined with Medigap policies.
Source: Employee Benefits Research Institute. Source: Notes, October 2013, Vol. 34, No. 10
When to enroll

One deadline you don't want to miss

If you are not already collecting Social Security at 65, you must enroll for Medicare around your 65th birthday if you want Medicare health coverage.  There’s no need to re-enroll each year, but you can review and make annual changes to your plan. Failure to enroll when first eligible could result in penalties, so be sure to understand your enrollment deadlines and coverage options.
Offsetting costs

Consider ways to help prepare for out-of-pocket expenses

Health Savings Accounts

These tax-advantaged investment accounts can be used to pay for future healthcare costs prior to taking Medicare. The first tax advantage is that contributions are tax deductible, or if made through a payroll deduction, they are pretax. Second, the interest earned is tax free. Please note that restrictions, limitations and tax penalties exist if not used properly.

Long-Term Care Insurance

This can help pay for some of the bills around personal care and healthcare assistance in the years ahead.

Flexible Spending Accounts (FSA)

Pretax deductions from your paycheck can be used to pay out of pocket health expenses. Dollars in the FSA can be carried over each year. Note restrictions, limitations and tax penalties if not used properly.


Help cover healthcare costs with an annuity designed to pay a specified amount of income for a period of years or for life.
Next Steps

Get ready for Social Security and Medicare

Get the timing right

Plan ahead to claim Social Security in the way that benefits you most.

Estimate Social Security Benefits

Explore to estimate your benefits. TIAA plan participants can log in to use the Retirement Income Planner to get a sense of how this income fits into your overall plan.

Look for ways to plan ahead

Consider long-term care and other options that may help protect your financial health from major medical expenses.
Next Steps

How TIAA can help

Lifetime income

Investigate income options that can help create lifetime income to help realize your retirement lifestyle.

Investment strategies

We can help you align your asset allocation strategy with your long-term income needs.

Don’t go it alone

We can help you create a retirement income strategy that factors in your concerns, as well as your goals.

Get in Touch

Talk with a TIAA Consultant to help you shape your overall retirement strategy and to help you consider the next steps.


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1 Social Security Basic Facts, Social Security Administration, April 2, 2015 -
2 Timing for claiming benefits. Source: Social Security Bulletin 2014
3 Annual Statistical Supplement to the Social Security Bulletin, 2014, Social Security Administration, April 2015 -
4 Social Security Benefits: Benefits for Spouses, Social Security Administration, 2015
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