Social Security Changes in 2019

Every year, the Social Security Administration makes a few changes to the program. The changes are intended to help retirees keep pace with inflation while, at the same time, maintaining the program's solvency.  It can be a difficult balancing act which does not always achieve its goals.

In 2019, beneficiaries can expect to get the largest cost-of-living increase in several years, which is wonderful news for the millions of people who depend on Social Security to cover all or most of their living expenses.  Even better, the cost-of-living increase should not get eaten up by an increase in Medicare premiums, which has happened in the past. However, this is not the only change we can expect to see in 2019.  Below is a list of some of the most significant changes to Social Security in 2019.

Largest Social Security Increase in Years

For many people, the most significant important change will be the 2.8 percent cost-of-living increase.  This means the average monthly payment will rise to $1,461 and the average married couple with receive $2,448 per month, if both of them receive benefits.  For those of you who have not begun to collect, this gives you an idea of what to expect.  For those who are already collecting, this will help you determine how your benefits compare with those of other recipients.

A Small Increase in Medicare Part B Premiums

In 2018, the Social Security COLA was so small that it was entirely eaten up by the increase in Medicare premiums for many beneficiaries.  Next year, the increase in Medicare Part B premiums is so small that things should be much better for most people.  The premiums are going to increase to $135.50 in 2019 from $134 in 2018.  This $1.50 increase in premiums is unlikely to have a negative impact on many Social Security beneficiaries.

However, there were some people whose Medicare premiums were less than $134 in 2018 because
they did not get a large enough raise last year to cover their increase in Medicare premium.  For those people, their Medicare premium this year could be greater than $1.50 and, therefore, might take all or most of their Social Security increase.

You could also have a large increase in your Medicare premiums for another reason, and that is if your income went up significantly last year.  Sudden increases in retirement income, because of an unusually large IRA withdrawal or windfall, can cause your Medicare premiums to increase dramatically and retirees should consult their tax attorney and take into consideration all of the financial consequences of a large IRA withdrawal or income increase. However, the Medicare premium increase should only apply to the year following the increase in income, unless it is permanent or continues for several years. This will only apply, however, to people who have a very large increase in their retirement income.

An Increase in the Maximum Social Security Benefit

If you have been fortunate enough to earn a high income during the 35 best years of your working career, the maximum amount of Social Security you could receive in benefits has increased.  For those people at the top of the income range who retire at age 62, they could receive up to $2,209 a month; at age 65 they could receive up to $2,757; and at age 70 they could receive up to $3,770.

Workers will Have Slightly More Income Subject to Taxation

If you are still working, you will see a small increase in the amount of your income which will be, subject to Social Security taxes.  The 2019 maximum taxable earnings will rise from $128,400 to $132,900.  Workers will be pleased to know that the tax rate itself will not change from its current rate of 12.4 percent, split evenly between employee and employer.

Normal Retirement Age will Increase by Two Months

Workers who want to collect their full Social Security benefits will need to work two months longer.  If you are turning 62 in 2019, your full retirement age will be age 66 years and six months.

You Can Earn More if You Work while Collecting Social Security

Many people find they need to continue to work and earn extra income, even after they begin to collect their Social Security benefits.  If you are under your full retirement age, collecting Social Security and working at the same time, the amount you can earn without having your benefits reduced will rise from $17,040 to $17,640.  You can earn more than that, but if you do, the Social Security Administration will withhold $1 for every $2 you earn above the $17,640 limit.

You should also know that if you reach your full retirement age in 2019 and earn over $46,920 in the months leading up to your retirement, Social Security will withhold $1 for every $3 you earn in excess of $46,920, but just for that one year.

Once you reach full retirement age, you can earn as much as you want without having your benefits reduced.  Today, we are seeing many people continue to work, either in their previous career or in a new career, for years after reaching full retirement age.

New Calculations for Your Social Security Benefits

Without going into complicated mathematical calculations, the government is making a few slight tweaks to how they calculate your past earnings, inflation adjusted.  These numbers are used to determine how much people will receive in benefits when they claim their Social Security, so the changes will benefit people who have not yet begun to collect.

Be Aware of More Changes Which Could be Coming

After the election, it is likely that Social Security and Medicare could be put on the cutting block by Congress.  Because of the 2018 income tax changes, government revenues have dropped dramatically and the deficit is increasing rapidly.  Some factions in Congress are proposing dramatic changes to these two programs which could result in cuts to both Social Security and Medicare.

Some of the changes could be very subtle.  For example, there is a faction which wants to change the way future cost-of-living increases are calculated, by using a different CPI or Consumer Price Index.  Currently, they use a CPI-W, which estimates the cost of living for a typical worker.  Some groups would like the government to use a CPI-E, which considers the cost of items typically used by the elderly, such as healthcare.  This would increase the size of future cost-of-living increases.

Unfortunately, a large group in Congress have stated they want to go with a Chained-CPI, which would be devastating for many senior citizens because they would only get extremely tiny increases, or none at all, because this CPI calculation assumes the elderly will just keep cutting down on what they pay for things by purchasing cheaper items.  Since many elderly already are living on very tight budgets, the possibility of the government using a Chained-CPI is very alarming for many senior citizens.

All older Americans, whether they are retired or not, should follow the debate over Social Security carefully, because it will affect nearly everyone in the nation.  Even if you have a private pension or you are wealthy, it is likely that some people in your family will be affected by changes to Social Security.  You can learn more about the changes being discussed at the website for The National Committee to Preserve Social Security and Medicare.

If you are interested in reading more about Medicare, Social Security, financial planning, where to retire, changing family relationships, common health problems, travel and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

You are reading from the blog: http://www.baby-boomer-retirement.com

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Medicare Open Enrollment - Expert Answers Your Questions

Are you thinking about changing to a different Medicare plan or making changes to your current one?  There are certain rules regarding when you can make these types of changes. This week we have another special post from our Medicare expert, Danielle Roberts.  She is highly qualified to answer your questions about Medicare, how it works and the timing of changes you may want to make.  If you still have questions after reading this post, her contact information is in the sidebar and there is a link to her site in the "About the Author section."

 

Getting Ready for Medicare Open Enrollment

Medicare has several periods each year when beneficiaries can make important plan changes and coverage elections. However, we often find that many beneficiaries are not certain what each of these election periods is for and what they should be doing each year to review their coverage.
  

In this post, we’ll explain the upcoming windows and how you can prepare for them.

 

Medicare Open Enrollment Period vs Annual Election Period

 

Medicare uses the term “open enrollment” for multiple different election periods, so it’s easy to get them confused. We find it easiest if beneficiaries refer to the fall enrollment period as the Annual Election Period (AEP). This helps to keep the election periods straight in your mind.

The Annual Election Period begins October 15^th and goes until December 7^th. There is also a new Medicare Open Enrollment Period for 2019 which will go from January 1^st to March 31^st.  Let’s go over what changes you can make in each period because they are different.

 

Medicare’s Annual Election Period: October 15 – December 7

 

When you enroll in a Medicare Advantage plan or a Part D drug plan, you are locked in for the rest of the calendar year. You must wait until the Annual Election Period to make changes to your plan(s).

During the AEP you can switch from one Medicare Advantage plan to another and you can switch from one Part D drug plan to another drug plan. You can also switch from a Medicare Advantage plan back to Original Medicare and vice versa. 

When you make any of these changes during the AEP, your new plan goes into effect January 1^st of the following year. (If you don’t make any changes to your current plan, your current plan will auto-renew for the next year.)

 

Medicare’s New Open Enrollment Period: Jan 1 – March 31

 

Sometimes people who enroll in a Medicare Advantage plan during the AEP find that they do not like their new plan. It could be that they did not understand their coverage, or it might also be that they learned too late that one of their doctors is not in the network.

In recent years, these beneficiaries would be locked into that plan for the entire year. However, beginning in 2019, Medicare has a new Open Enrollment period from January 1^st to March 31^st that will allow beneficiaries who are enrolled in a Medicare Advantage plan to make a one-time change.

During this OEP, they can change to a different Medicare Advantage plan or they can disenroll from their Advantage plan to return to Original Medicare and elect a new standalone Part D drug plan to go alongside that coverage.

It’s important to note that if you drop your Advantage plan and decide not to enroll in a Part D plan, you can be penalized for the time you go without creditable drug coverage.

Here’s a recap:

The Medicare Annual Election period in the fall is for all Medicare beneficiaries. It is for enrolling in, disenrolling from or changing either your Medicare Advantage plan or your Part D drug plan. The last plan selection that you make prior to December 7^th will become effective January 1^st. 

The Medicare Open Enrollment Period which begins in January only applies to beneficiaries who are enrolled in a Medicare Advantage plan. These beneficiaries can either switch from one Medicare Advantage plan to another or they can switch from a Medicare Advantage plan back to Original Medicare.

You cannot switch from one Part D drug plan to another during the OEP. That’s the main difference between the AEP and the OEP.

 

Your Annual Notice of Change Letter

 

The first step to getting ready for the AEP is to review your Annual Notice of Change (ANOC). Your ANOC is a letter sent to you by your current Medicare Advantage plan or Part D drug plan.

This letter states all changes that your current insurance carrier is making for the following year. It lists changes in monthly premiums, copays, coverage, deductibles, and drug formularies. You will want to review this thoroughly to ensure you make the right decision during the AEP.

 

Medigap Open Enrollment

 

To add to the confusion around the term “open enrollment,” there is also a one-time Open Enrollment period for Medigap plans.

The Medigap Open Enrollment is a one-time window that begins with your Part B effective date. During the six months directly after your Part B effective date, all Medicare beneficiaries have a one-time chance to enroll in a Medigap plan without having to answer health questions. This is a “use it or lose it” enrollment period. Once it has passed, it does not recur again.

This does not mean that later you cannot attempt to change your Medigap plan. In fact, Medicare beneficiaries can apply for new Medigap plans anytime throughout the year. However, unless you live in a specific state with different rules or have a guaranteed issue window because you are leaving employer group health coverage, you will have to answer health questions whenever you apply for a Medigap plan outside of your one-time Medigap open enrollment period. Depending on your answers and your medical record, you could be denied coverage for a new Medigap plan.

 

Get Ready with A Medicare Broker

 

Working with a Medicare broker can take the stress out of the decision making. A broker can evaluate each of your plan options in your area and explain any applicable rules. This will help you have more confidence in your choice.

About Guest Post Author, Danielle Roberts:  This guest post was written by our Medicare expert, Danielle Roberts, one of the co-founders of Boomer Benefits and a frequent contributor to this blog.  As always, we greatly appreciate her willingness to share her expertise and her ability to calmly explain these difficult-to-understand issues in clear terms.

If you want to learn more about Medicare, Social Security, where to retire, financial planning, and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  morguefile.com

Save Social Security Now and Protect our Retirement

With millions of Americans going to the polls during the next few weeks, it is important for all of us to ask our candidates how they stand on preserving Social Security and Medicare.  These issues are of paramount importance to retirees and people who hope to retire in the coming years.  Fortunately, there are specific steps which Congress could take to boost and protect Social Security, according to the National Committee to Preserve Social Security and Medicare, a non-partisan organization which promotes workable solutions to preserve Social Security indefinitely.  Their suggestions are listed below.

If you are dependent on Social Security or expect to be collecting benefits in coming years, you will want to ask your candidates how they stand on these issues and then vote in a way which will protect your financial security now and in the future.

How to Boost Social Security Now and Preserve It in the Future

1.  Congress could gradually eliminate the cap on Social Security payroll contributions.  Currently, only the first $118,500 in wages are subject to Social Security payroll withholding.  Gradually lifting this cap would solve almost all of the problems we have with the future insolvency of the Social Security Trust Fund.

2.  The Social Security Administration could slowly increase the payroll contribution rate by 1/20th of one percent over the next 20 years, so that after 20 years it will only have been increased by one percent.  This will help strengthen Social Security for our children and grandchildren.

3.  Slightly boost contributions to Social Security by treating all salary reduction plans the same.  This means that payroll taxes would be collected on the money which goes into flexible spending accounting, HSAs, or dependent care plans, just as it on 401(k)s.

4.  Boost the current basic benefit for all current and future retirees by $50 to $70 a month.  This may not seem like much, but many Social Security beneficiaries did not see a meaningful increase in their benefits for several of the past few years.  This would help the millions of Americans who depend on Social Security for all or most of their retirement income.

5.  Give Social Security credits to unpaid caregivers.  Currently, people who have been out of the workforce to care for young children, elderly parents, or disabled family members are never able to catch up for the years they lost while out of the workforce.  As a result, they receive significantly less in Social Security benefits when they reach retirement age.  Providing these unpaid caregivers with five years of Social Security credits could help boost their benefits and protect caregivers from poverty in their later years.

6.  Use a better calculation for Social Security's annual cost of living adjustment.  Currently, the Social Security Administration uses the CPI-W, which is based on the spending habits of urban wage earners.  However, it would be more fair to switch to the CPI-E, which is based on the spending habits of the elderly, who spend more on certain expenses such as medical care.  This would make it easier for senior citizens to keep pace with inflation.  We especially DO NOT want the chained-CPI which would be the worst possible choice for senior citizens and would cause even more of them to fall into poverty.

Ask Candidates About Other Issues of Importance to Retirees

If you attend a candidate forum or town hall meeting, which I hope you will, other questions you will want to ask the candidates are about Medicare and Medicaid.  You may also want to read last week's blog post titled, "Vote for Lower Prescription Drug Prices." which explains how Congress could lower the cost of our prescriptions with a few changes to the law.  Also ask your candidates about the following important issues:

* Do you want to expand Medicaid or do the opposite and make it more difficult to qualify for it?
* Do you want to protect people with pre-existing conditions from losing their insurance?
* Do you believe in the "age tax" which is when consumers pay higher insurance rates based on their age?

In addition, you may want to ask them about other retirement questions such as:

* Do you believe in improving automatic retirement savings programs for people who do not have a 401(k) available to them through their jobs?
* How do you feel about taxation of retirement income and Social Security?
* What do you think should be done to strengthen pension funds?
* What can be done to protect senior citizens from being victims of fraud and scams? 

Several of the above issues, especially those regarding Medicare, Medicaid, and Social Security, will probably be dealt with simultaneously in one package deal.  As a result, it is important to ask the candidates of both parties in your area how they plan to deal with these problems.  The more you know, the easier it will be to make an informed decision when you vote.

Rather than voting based on a political party, vote to protect the programs which you will depend on during your retirement.  In other words, vote for your self-interest and to protect the senior citizens in your family. That is a perfectly reasonable and legitimate reason to decide how you will vote, rather than automatically voting for one party or the other.  In addition, follow up with your Senators and representatives after the election to make sure they continue to work towards keeping their promises! 

One way to follow what your members of Congress are doing is to follow a non-partisan site like Countable.us, which will send you daily updates on votes being taken in Congress and will let your know how your Senator and the representative from your district voted.  It is a free and easy way to stay informed about issues important to you.

You can get more information about the issues, register to vote, or apply for an absentee ballot at:  votingtool.aarp.org

You can also learn more about important issues at:  countable.us, votesmart.org, RealClearPolitics.com, Ballotpedia.org and PolitiFact.com.

Learn more about preserving Social Security and Medicare at:  https://www.ncpssm.org/ 

If you would like more information about Medicare, Social Security, common medical problems as you age, financial planning, where to retire, travel and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

You are reading from the blog:  https://www.baby-boomer-retirement.com

Photo credit:  Google.com/images

Vote for Lower Prescription Drug Prices

Rising prescription drug prices continue to be a major concern for both patients and health insurers, including those who deal with Medicare.  According to AARP, the average retail price for prescription drugs taken to treat chronic conditions has risen to approximately $13,000 a year.  How much of that is paid by the patient depends on their medical insurance or Medicare drug plan.

When the Kaiser Family Foundation polled patients about their medical priorities, lower prescription drug prices were at the top of the list.  This is understandable, since Americans pay the highest drug prices in the world and, according to AARP, the prices are increasing at a rate 10 times faster than inflation.

The key to changing this situation is electing the right people both to the Senate and the House of Representatives.  It is extremely important that we vote for candidates, regardless of political party, who will stand up to the drug industry.  Organizations like the National Committee to Preserve Social Security and Medicare endorse candidates from both major political parties when they show they are willing to work towards the goal of passing laws which will strengthen and improve both Social Security and Medicare.  Lowering prescription drug prices is an important key to saving Medicare.

What do we need to ask candidates when we attend town halls and candidate forums?

Shrinking the Medicare Drug Plan Doughnut Hole

The good news is that many current members of BOTH parties in Congress have shown a willingness to take some steps towards protecting senior citizens from rising drug prices.  There is now a bi-partisan agreement under consideration to close the doughnut hole in 2019 for brand-name drugs and to close the doughnut hole in 2020 for generic drugs.  However, the pharmaceutical industry has lobbied against this deal, so it is important to know how the candidates in your area stand on this issue.  You may want to also ask if they take donations from pharmaceutical companies, because that could influence their votes and cause them to side with their donors rather than patients.

Negotiating Medicare Drug Prices

Currently, federal law does not allow Medicare to negotiate with pharmaceutical manufacturers for lower drug prices, despite the fact that the federal government is the largest purchaser of drugs in the United States.  Many experts believe changing this rule would make a significant difference in lowering drug prices and only Congress can make this change.  Ask candidates in your area if they support allowing Medicare to negotiate lower drug prices.

Allowing the Safe Importation of Prescription Drugs

Americans are often warned about the dangers of importing drugs from online pharmacies in foreign countries, and that danger has been covered in the past on this blog.  Unregulated orders from unknown foreign sources can be a serious concern, since buyers may not know if they are ordering from a legitimate source or if the drugs they are receiving are actually what they believe them to be.  However, the federal government could allow patients to safely order drugs from authorized foreign suppliers in places such as Canada and the European Union, and this could save some patients a significant amount of money.  If this interests you, ask your candidates where they stand on this issue.

Expanded Access to Generics

There is currently a proposed bill known as the Creating and Restoring Equal Access to Equivalent Samples Act (CREATES) which would prohibit pharmaceutical companies from blocking the development of lower cost generic drugs.  Passing this bill would allow the companies which make generic drugs to force pharmaceutical companies to give them the necessary samples so they can make generic equivalents.  Ask the candidates whether or not they support this legislation.

Ban Pharmacy Gag Orders

Did you know that your local pharmacist is banned from telling you that, in some cases, you could get a drug cheaper by purchasing it without using your insurance?  AARP has introduced two bills to the Senate which would ban these gag orders.  We need to elect Senators and Representatives who will support these bills.  Ask your local candidates how they feel about these bills.

Increased Drug Price Transparency

Drug prices have been increasing at rates which are much higher than the overall rate of inflation.  AARP is calling on the government to insist that drug companies reveal how much they spend on research and development compared to the amount spent on advertising, and explain how they price their drugs.  This transparency could help prevent huge arbitrary price increases, especially when large amounts of money are going towards advertising rather than the development of new drugs.

Vote for Supportive State Legislators, Too

In addition to having Senators and U.S. Representatives who will vote to make the above changes, states governments can also do a great deal on their own to help patients who are burdened by high drug prices.  Already, 25 states have passed legislation to make pharmacy gag orders illegal.  California requires pharmaceutical companies to give two weeks notice before making any significant increase in the price of a drug.  In Nevada, diabetes drug prices cannot be raised without a detailed explanation.  Ask the candidates for your state legislature what they can do to protect patients from sky-rocketing drug prices in your state.

Vote to Save Medicare

In addition to voting for candidates who support lower prescription drug prices, it is important to know how they stand on protecting the solvency of Medicare for the remainder of your life, as well as for future generations.  The Medicare Trust Fund could fall short as early as 2026, which will create serious problems for people dependent on this healthcare insurance program, possibly shifting more costs to consumers unless changes are made. If you feel you cannot afford to spend significantly more on your medical care, ask the Congressional candidates in your district specific questions about how they would save Medicare. Someday, your life and financial security could depend on it.

Vote to Save Social Security

Closely related to saving Medicare is the need to also save Social Security.  The vast majority of retirees are dependent on Social Security for all or most of their post-retirement income. Unfortunately, the Social Security Trust Fund is expected to fall short in 2034, if nothing is done to replenish it.  That could cause Social Security benefits to fall by approximately 20 percent.  Since few, if any, people believe they can easily absorb a 20 percent decrease in their Social Security benefits, it is essential that solutions be found for replenishing the trust fund.  Next Wednesday, I will post a more detailed article on how to permanently preserve Social Security, not just for today's retirees but those in the future, as well.


Ask Candidates About Other Issues of Importance to Retirees

If you attend a candidate forum or town hall meeting, which I hope you will, other questions you will want to ask the candidates about Medicare are:

* Do you want to expand Medicaid or make it more difficult to qualify for it?
* Do you want to protect people with pre-existing conditions from losing their insurance?
* Do you believe in the "age tax" which is when consumers pay higher insurance rates based on their age?

In addition, you may want to ask them about other retirement questions such as:

* Do you believe in improving automatic retirement savings programs for people who do not have a 401(k) available to them through their jobs?
* How do you feel about taxation of retirement income and Social Security?
* What do you think should be done to strengthen pension funds?
* What can be done to protect senior citizens from being victims of fraud and scams? 

Several of the above issues, especially those regarding prescription drug prices, Medicare, Medicaid, and Social Security, will probably be dealt with simultaneously in one package deal.  As a result, it is important to ask the candidates of both parties in your area how they plan to deal with these problems.  The more you know, the easier it will be to make an informed decision when you vote.

Rather than voting based on a political party, vote in a way which will protect the programs which you will depend on during your retirement.  In other words, vote for your self-interest and to protect senior citizens in your family. That is a perfectly reasonable and legitimate reason to decide how you will vote, rather than automatically voting for one party or the other.  In addition, follow up with your Senators and representatives and make sure they work towards keeping their promises.

You can get more information about the issues, register to vote, or apply for an absentee ballot at:  votingtool.aarp.org

You can also learn more about important issues at:  votesmart.org, RealClearPolitics.com, Ballotpedia.org and PolitiFact.com.

Learn more about preserving Social Security and Medicare at:  https://www.ncpssm.org/ 

If you would like more information about Medicare, Social Security, common medical problems as you age, financial planning, where to retire, travel and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

You are reading from the blog:  https://www.baby-boomer-retirement.com

Photo credit:  morguefile.com