For many people, understanding the ins and outs of retirement programs like Medicare and Social Security can feel like learning a new language — but decoding what they have to offer can help you get valuable support in your future.
To put it simply, Medicare provides healthcare coverage and Social Security offers financial benefits, but they work together to support you in retirement. Here’s what you need to know about these two programs, including eligibility, benefits and costs, and how to coordinate both programs.
Social Security: Your foundation for retirement
Social Security and Medicare benefits are designed to support people as they age, but they serve different purposes. Social Security acts as your financial support in retirement, providing you with a steady source of income once you leave the workforce.
What is Social Security?
Social Security is a federal program designed to provide financial assistance to:
- People in retirement
- People with certain disabilities
- Spouses, children, and survivors of those covered.
Social Security acts as a financial safety net for millions of Americans, ensuring that once you reach retirement age, you still have a partial income to rely on. Supplementing your Social Security income with personal savings, pensions, or retirement accounts like 401(k)s and IRAs is typically recommended.
How do I qualify for Social Security?
Qualifying for Social Security depends largely on your work history, birth year, and how long you’ve paid Social Security taxes on your income. To be eligible, you’ll need to have earned a certain amount of “work credits” for each year between ages 21 and 62.
Credits are based on your annual income; you can gain up to four credits per year. The money it takes to earn a credit each year increases since people typically make more as they age. In 2024, it takes $1,730 to earn one credit.
The minimum credits you need depend on certain factors like the benefits you’re collecting, when you were born, and if you have a disability. Generally, you’ll need 40 credits to qualify, which usually amounts to 10 years of work.
There is no “right time” to start collecting Social Security benefits; it’s all about what works best for your circumstances. If you’re eligible, you can opt to collect partial benefits at age 62, but if you wait until full retirement age — 66 for those born before 1958 and 67 for those born after — you should qualify for 100% of your benefits.
When you’re ready to apply for your Social Security benefits, you’ll need information like:
- Social Security number
- Verification of your earnings
- Work history for the past 5 years
- Past and current marriages
- Direct deposit information
- Names of dependents
You can apply online or call the Social Security Administration to schedule a phone or in-person appointment. In your application, you’ll pick a month when you’d like to start getting your benefits. It’s a good idea to schedule this at a time where you’ll avoid a gap in income. If you’re approved, the month you choose is when your first check should arrive.
Once you submit an application, you can check its status here.
Estimating your benefits
You can use the Social Security Administration’s calculator to better estimate your potential benefits. You’ll have to create or sign into your Social Security account or answer a few questions to prove your identity.
If you want to plan in more detail, you can use other Social Security resources like the Retirement Age Calculator, Earnings Test Calculator, and Benefits for Spouse Calculator.
Medicare: Your health insurance in retirement
If Social Security is your financial safety net in retirement, then Medicare is your healthcare safety net. The federal health insurance program helps cover the cost of care for people 65 and older or with certain disabilities and conditions, and there are multiple parts of Medicare that cover different things.
These parts include:
- Original Medicare, which consists of Parts A and B and covers eligible inpatient and outpatient services
- Part C or Medicare Advantage, an alternative to Original Medicare that combines Parts A and B with additional benefits through private insurance plans
- Medicare Part D which covers the cost of prescription drugs
- Medicare Supplement, which can be bought from a private insurance company to fill in the coverage gaps of Original Medicare
Medicare costs
The cost of your Medicare coverage will depend on the plans you enroll in and your specific needs. Each month, you’ll pay a premium to keep your policy active.
Medicare monthly premiums:
- Medicare Part A: Free for most people, as long as you or a spouse paid Medicare taxes long enough while working. If you don’t qualify for premium-free coverage, you may have to pay $278 or $505 monthly in 2024, depending on your work history.
- Medicare Part B: $174.40 per month in 2024, but may be higher depending on your income. This amount can change annually.
- Medicare Part C, or Medicare Advantage: Costs vary, but the average is $18.50 in 2024. You may also still need to pay the Part B premium.
- Medicare Part D: Costs vary, but the average is $55.50 per month in 2024.
- Medicare Supplement: Costs vary, but premiums can range from $30-$40 to several hundred.
In addition to your premium, you can also expect to pay your deductible and coinsurance.
Your deductible is the fixed out-of-pocket amount you must hit for covered services before your healthcare provider starts to pay. Once you’ve hit your deductible, you may have to pay a fixed percentage of the overall cost for remaining medical services or procedures throughout the year, which is known as coinsurance.
Your deductible and coinsurance will vary depending on the plans you’re enrolled in. It’s a good idea to check your plan and take note of the cost breakdown for each.
How does Social Security work with Medicare?
Knowing how Social Security and Medicare work together can help you make informed decisions about your finances and healthcare — and take some of the stress out of navigating both programs.
When does Medicare start with Social Security?
If you’re already receiving Social Security benefits at least four months before you turn 65, you should be automatically enrolled in Medicare Parts A and B. Typically, you won’t have to take any action, and you should get your Medicare card in the mail three months before your 65th birthday.
If you’re not receiving Social Security, you’ll need to actively enroll in Medicare during your Initial Enrollment Period. This window starts three months before your 65th birthday and lasts three months after for a total of seven months.
How are Medicare premiums deducted from Social Security?
If you receive Medicare and Social Security, your Medicare Part B premium should be automatically deducted from your monthly Social Security benefit — so you don’t have to worry about making manual payments or enrolling in autopay. Keep in mind that if premiums increase, this will affect the size of your Social Security check.
When you start receiving Medicare benefits, you should receive quarterly bills if you aren’t enrolled in Social Security. If you enroll in Social Security later, your Medicare premium should be deducted from your Social Security check.
Tips for a Smooth Transition
Figuring out Medicare and Social Security on top of navigating retirement in general can be overwhelming. Here are some tips to help you manage the shift and maximize your Social Security and Medicare benefits.
1. Start planning as soon as you can
It’s never too early to start planning for retirement — and even if you get a late start, any extra time helps. If you’re able, take some time to research your Social Security and Medicare options a few years before you reach retirement age. That way, you can better understand your eligibility, potential benefits, and deadlines and make carefully thought-out decisions when the time comes.
2. Enroll on time
If you want to coordinate your Social Security and Medicare benefits, you’ll need to know when you’re eligible for each.
Social Security benefits can be claimed at age 62, but you can usually increase your monthly payments if you wait until your full retirement age, which is between 66 and 67, depending on your birth year. If you aren’t already claiming Medicare for a disability, you’ll become eligible in the three months before your 65th birthday.
3. Review your coverage
Choosing Medicare coverage can be overwhelming, especially with so many different options. Start by thinking over your current health conditions, preferred doctors and providers, and whether you need coverage beyond what Original Medicare offers.
It may help to work with a licensed insurance provider who can explain each plan’s offerings and costs, and then compare and contrast the options based on your specific needs. You can even use your Social Security estimate — or benefits statement, if you already receive it — to adjust the final cost of your Part B premiums.
4. Stay informed
Medicare and Social Security can change over time, so it’s important to be informed about updates to both, whether it’s premiums, benefit calculations, or new policies. Get in the habit of regularly checking the Social Security Administration and Medicare websites for news and updates, and consider signing up for newsletters or alerts from both agencies.
Navigating the complexities of Social Security and Medicare can seem daunting, but with a clear understanding of how these programs work separately and together, you can create a safety net for your financial and healthcare needs. Remember, support is available to help guide you through the process — don’t hesitate to reach out for help when needed.
