Q. I am 76 years old. I have followed your column in the business pages for many years. After losing nearly 50 percent of my assets after 9/11 I followed your suggestions about TIPS. I am happy to say that my IRA and savings accounts have remained steady and even gained back some of their losses.
I recently read that Medicare premiums are slated to rise to $120 a month in 2013, and to $247 a month in 2014. Is this true? If so, why has no one made it known to the voting public? This would mean that almost one-third of my Social Security check will go to Medicare. Worse, I still have to pay $292 a month for my Medigap policy.—P.P. from Lockhart, TX
A. Don't believe everything you read on the Internet. The standard premium this year is $99.90, up only slightly from $96.40 in 2008. You have received one of the many totally unfounded chain emails about future Medicare premiums. Don't take my word for it: Read this careful explanation on the politifact website: www.politifact.com/truth-o-meter/statements/2011/oct/27/chain-email/medicare-premiums-going-due-obamacare-chain-e-mail/
Most retirees don’t know that the system has a safeguard built in, the hold-harmless provision.
In any single year the increase in the Medicare premium cannot be greater than the increase in your Social Security benefit. This doesn't protect you from having Medicare premiums absorbing a larger percentage of your Social Security benefit over time, but it does protect you from large increases in any single year. This provision is why Medicare premiums were frozen for existing Social Security recipients in the recent years of zero benefit increase.
Q. About 3 or 4 years ago, I sent you an email and asked if I was eligible for Social Security widow's Benefits. You told me I was and I immediately applied for them and was receiving roughly $926 per month for a year or more. I then turned 62 and my financial advisor strongly suggested that I go ahead and take my Social Security early rather than wait. My social security check at that time (roughly 3 years ago) was $1,646 a month. I did as he suggested and therefore lost my $926 in Widow Benefits but picked up my own Social Security of $1,646. If I had waited until 66 it would have been $2,279 and at 70 - $3,066.
I can't help but wonder if I did the right thing. It just doesn't seem right to me but the investment advisor ran some spreadsheets and claims it was the right decision. What do you think? Did I do the right thing? If not, should I pay back what I have received and wait it out? —M.W., by email
A. There is no final calculus for this because the decision depends on your assets and other income, your life expectancy and the condition of the markets.
Generally speaking you will benefit by each year of delay, even if you spend assets equal to the benefits you defer, because spending the assets will buy you a greater income than what you could buy in the private life annuity market with the same amount of money.
Unless you have a life-shortening health condition, the odds of benefiting are also very good. You would recover the income lost through deferral, in real terms, in about 12 years and the life expectancy of a woman at age 62 is about 21 years. This perspective assumes you are trying to maximize your lifetime income and have minimal concern about leaving an estate.
The best argument for taking the increased benefit early is situational. Our finances are most damaged when we sell assets in a depressed market. The need to make withdrawals in a bad market is the kind of thing that can start an irreversible downward spiral of financial assets. Your financial advisor may have been considering this when he made the suggestion, particularly if he did it in 2008 or early 2009 when stock prices were sinking fast. The Standard & Poor’s’ 500 Index fell about 37 percent during 2008 and fell still further into early 2009.
While the option to change your mind about benefits, pay them back and reset to a new level still exists, it is now limited to a 12 month time period. So that option is closed for you.