Happy New Year, accumulators and decumulators! Welcome back to the Functional Retirement Podcast, where we dive deep into the technical aspects of wealth, explore the philosophical side of purpose, and provide inspiration for your fitness journey. I'm your host, Thatcher Taylor, and today we're going to discuss whether Social Security and Medicare are prepared for your retirement. We'll also explore a few changes that may impact your Social Security decisions. Let's jump right in!
One of the complexities surrounding Social Security and Medicare is the understaffed administration. With recent layoffs and an increasing number of individuals turning 65, the burden on these systems is growing. To avoid potential delays and complications, it's crucial to plan ahead. Don't wait until the last moment to make decisions regarding Social Security and Medicare. Seek assistance from the Social Security Administration early on, as there may be delays in customer service. Remember, these programs are complex, so proper planning and preparation are essential.
Applying for Social Security disability benefits has become more common, but the approval process is rigorous. Only about 35% of disability claims are approved initially. If you or someone you know is considering applying for Social Security disability, be prepared to invest time and effort into the application process. The definition of disability under Social Security law is strict, requiring a severe impairment that prevents substantial gainful activity for at least 12 months. While the process may be challenging, don't get discouraged. Plan ahead, be patient, and fight for the benefits you deserve.
Every year, Social Security recipients receive a cost of living adjustment (COLA). In 2024, the COLA is expected to be 3.2%. While this may not be as significant as previous years, it's still a welcome increase. However, Medicare enrollees should be aware of the hold harmless rule, which protects monthly Social Security payments from decreasing due to an increase in Medicare Part B premiums. If the COLA is too low to offset the Medicare premium increases, it could impact your net benefits. Stay informed about these adjustments to ensure you're not negatively affected.
Inherited IRAs can have implications for Social Security benefits, especially if the beneficiary falls under the new 10-year required distribution rule. If you're the beneficiary of an IRA and need to start distributing assets, it could potentially impact your tax bill and even Medicare surcharges if your income exceeds certain thresholds. It's important to plan ahead and consider the tax implications of inherited IRAs, especially if you're in your sixties and your parents are older. Utilizing the income from an inherited IRA strategically can help protect your Social Security benefits and manage future tax obligations.
Delaying Social Security retirement benefits until age 70 can be financially challenging, especially when you no longer have a regular paycheck. One way to bridge the income gap is by tapping into home equity through a reverse mortgage. Despite the negative perception surrounding reverse mortgages, they can be a valuable tool if used properly. In 2024, the lending limit for FHA-insured reverse mortgages is increasing, providing homeowners with more options. By utilizing a reverse mortgage, you can supplement your income, delay Social Security benefits, and allow your investment portfolio to grow. This strategy can help protect against sequence of returns risk and provide a more comfortable retirement.
Navigating Social Security and Medicare can be complex, but with proper planning and understanding, you can make informed decisions. Be aware of the staffing challenges within the administration, prepare for the rigorous process of applying for disability benefits, stay informed about cost of living adjustments, consider the tax implications of inherited IRAs, and explore the potential benefits of reverse mortgages. By taking these factors into account, you can ensure that Social Security and Medicare are ready for your retirement journey.