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How to get timing right on filing for Social Security, Medicare

The Savings Game

Several readers have sent me excellent questions and I will answer a few of them this week. 

Which way to go?

A 61-year-old widow wrote that she is still working, needs more income and is wondering whether she should apply for Social Security survivor benefits or for benefits she earned with her own work record. She would receive more benefits for her work record than she would receive in survivor benefits. She intends to keep working.

At her age, if she were to apply for Social Security survivor benefits or benefits based on her work record, either benefit would be discounted, because she has not reached her full retirement age.

If she applies for widow’s benefits only, she could continue to work and she could apply for her Social Security benefits based on her work record later. If she waits until her full retirement age, her benefits based on her work record will be much higher and will not be reduced.

If she postpones applying for benefits after reaching her full retirement age, her benefits based on her work record would increase 8 percent per year.

Unfortunately, some Social Security Administration representatives do not tell widows and widowers that survivor benefits are independent from Social Security benefits based on their work record.

Many widows and widowers apply for whichever benefit is higher, not knowing that they have the option to wait until full retirement age or longer, in order to receive a larger benefit later that is not discounted.

The widow who wrote has been eligible for survivor benefits since reaching age 60. After discussing her situation with me, she decided to apply for survivor benefits, even though it was discounted, and intends to wait until her full retirement age (perhaps later) to apply for her benefits based on her work record.

Medicare Part B uncertainty

A 64-year-old woman wanted to know whether she should apply for Medicare Part B when she reaches age 65. She is eligible for Part A at no cost based on her work record. Her husband is still working, and his employer offers health insurance to both of them.

He intends to keep working for a few more years after his spouse turns 65, and her health care will remain covered as long as her husband remains employed. She is concerned that if she did not apply for Part B when she reached 65, she would be penalized later when she applied.

I touched base with some of the Medicare experts I regularly consult and confirmed that she would not be penalized for waiting to apply for Part B of Medicare after her husband left his position. There is a special enrollment period for individuals and family members when an individual stops working and is no longer covered by health insurance.

That period is during the eight-month period that begins the month after employment ends or the coverage ends, whichever happens first. (See page 21 of “Medicare &You 2018,” a government publication.)

Based on this information, the reader intends to wait until her husband stops working and she is no longer covered by his employer before applying for Medicare Part B.

Risk to a bond portfolio

A reader with a large position in bonds wrote to say he is concerned that his bond portfolio will drop in value as long as the Federal Reserve continues to increase interest rates.

I agree. As long as the Fed was increasing interest rates, the value of his bonds could fall in value. When interest rates increase, the value of bonds decrease. I suggested that to protect his bond portfolio, he should avoid holding too high a percentage of long-term bonds and should invest in shorter durations, as long as the Fed was increasing interest rates.

I also suggested that if he expected that he had to redeem any of his bonds in the next year or so, that he should transfer that portion of his portfolio into short-term holdings, such as Treasury bills and/or short-term bond funds.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.

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