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Many Americans rely on Social Security and Medicare, but what makes these programs so essential? This month, we’ll take a look at some of the facts about Social Security and get some straightforward answers about Medicare, too.
Social Security provides financial protection for workers and their families when earnings are lost due to retirement, disability or death.
The program is incredibly important for many people’s wellbeing, but it’s often misunderstood. Let’s take a look at nine key facts about Social Security.
Benefits will be paid out to about 64 million people in 2020—that’s roughly one out of every five people.
In addition to retirement benefits, Social Security also provides benefits in the event of disability or death.
Currently, workers and their dependents account for 74% of benefits being paid. Another 16% of benefits are received by disabled workers and their dependents, with the remaining 10% being paid out to survivors.
The average worker’s monthly Social Security retirement benefit in 2020 is $1,503.
Benefits are adjusted annually using the cost-of-living adjustment (COLA) in order to keep pace with projected inflation.
With factors such as an aging population, longer life expectancies and lower birth rates all greatly affecting Social Security, it’s important that the program is adjusted each year to allow for the continued payment of future benefits.
Effective in December 2019, there was a 1.6% COLA increase.
Currently, 2.8 workers pay Social Security taxes for each one person collecting benefits. Workers’ taxes are matched by employers to help fund the program.
The most recent figure on the administrative cost of running the program was just 0.7% of total expenses.
Once benefits start, they are paid monthly. These payments can be direct deposited into a bank account, too, for faster access.
The payments can help minimize the impact of possible financial losses, including:
For 70% of single people age 65 and over (50% of married couples), Social Security accounts for at least 50% of their income.
For 45% of single people (21% of married couples), it’s 90% or more of their income.
In total, more than nine out of 10 people age 65 and over receive Social Security benefits.
Medicare is a federal health insurance program covering approximately 60 million people age 65 and over, as well as many disabled people.
Understanding the ins and outs of Medicare can get confusing at times, so here are the answers to the top five most frequently asked questions about Medicare.
A: Medicare consists of four separate parts.
A: Generally, people age 65 and over who are eligible for any type of monthly Social Security benefit are eligible for Medicare Parts A and B.
You may qualify for Medicare before age 65 if: you were entitled to Social Security disability benefits for two years; have amyotrophic lateral sclerosis (Lou Gehrig’s disease); or have end-stage renal disease (kidney failure) and require dialysis or a kidney transplant.
A: No. Medicare eligibility begins on the first day of the month when you reach age 65. Although the retirement age to receive Social Security benefits is scheduled to rise to age 67, the age for Medicare eligibility is not.
If you’re still working, you should continue your coverage through your employer group health insurance. If you’re not working, health insurance coverage can be purchased separately until Medicare begins at age 65.
A: There are three typical ways to get into Medicare coverage.
A: The standard Part B monthly premium increased to $144.60 in 2020.
This applies to current, new, and high-income Medicare beneficiaries and for people whose Medicare premiums are paid by Medicaid. The income-related Part B premium applies to roughly 7% of the current enrollees and is based on the 2018 federal income tax return filing status and adjusted gross income.
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