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Money July 2015

Dollar Sense

What You May Not Know about Medicare and Social Security

By Teresa Ambord

It allows you to let the benefits build up and later take a lump sum back to the date you filed. If you file and suspend, your benefit of $2,000 per month stack up. A year later, let’s say you get hit with some unexpected expenses like the need for a new roof and other home repairs. You can then file for a lump sum of benefits going back the full year, totaling $24,000.

Will Medicare Cover a Home Health Aide?

Generally, no but it might, if you meet the requirements.

  1. You must be homebound. In other words, to leave your house you must require the use of a wheelchair or walker or other device.

  2. You have a “plan of care” approved by your doctor, showing that you need part-time skilled -nursing care or skilled-therapy services from a physical or speech therapist. Your doctor may also specify that you need a home health aide (or occupational therapist) to assist with activities of daily living such as bathing, dressing and using the bathroom. This plan of care is good for 60 days and must be renewed to remain in force.

    Note: Be aware, if you do not need skilled-therapy or skilled nursing services, Medicare will not pay for an aide to provide help with activities like bathing, dressing, etc.

  3. The home health agency you choose must be certified by Medicare. If you meet all these requirements Medicare may pay for home health care up to 28 hours per week. But Medicare will not pay for homemaker services like shopping, cleaning, and meal prep. What other options do you have if Medicare won’t cover it?
  • For low income people, Medicaid might pay. All states offer some form of Medicaid coverage for in-home care.
  • Long term care insurance or possibly a life insurance policy may pay for in-home care.
  • Veterans may be able to get coverage for in-home care in some communities. It’s called Veteran-Directed Home and Community Based Service, and it allows veterans a flexible budget to pay for in-home care. Wartime veterans and their spouses may qualify for additional in-home services, or assisted living or nursing home care. To qualify you must meet certain income and assets limits. Learn more at: va.gov/geriatrics or call 800-827-1000.

 

Did You Know Social Security Offers Lump Sum Payouts? Is It a Good Idea?

According to Jim Miller – coauthor of The Savvy Living Book and a regular contributor to the NBC “Today Show” — some seniors may want to take this option. But first, you must reach your full retirement age. If you don’t know your full retirement age, you can find out at ssa.gov/pubs/ageincrease.htm.

You need to know the upside and the downside of taking a lump sum. Here’s how Miller describes the options.

Suppose your full retirement age is 66, but you have delayed taking benefits. Now, at age 66 and 6 months, you change your mind. You can claim a lump-sum payment for those six months of benefits. If your monthly benefit is $2,000 per month, you could be eligible for a $12,000 lump sum payment. You can also take the “file and suspend” option, also available only to those past full retirement age. How does “file and suspend” work? Here’s an example. Suppose again that you’ve decided to delay taking benefits past your full retirement age of 66, and your benefit payment would be $2,000. However, you file, and immediately suspend those benefits.

Why would you do this? Because it allows you to let the benefits build up and later take a lump sum back to the date you filed. If you file and suspend, your benefit of $2,000 per month stack up. A year later, let’s say you get hit with some unexpected expenses like the need for a new roof and other home repairs. You can then file for a lump sum of benefits going back the full year, totaling $24,000.

Not bad, right? It’s like a savings account of money you never saw in the first place. So why not do this? You might choose this path, but be aware of the potential drawbacks.

  • According to Miller, by delaying your benefits, you are letting your monthly benefit build. Instead of taking a $2,000 per month payment you were due at your full retirement age of 66, the payment grows. By age 69 the payment might be $2,480, said Miller. That’s a nice raise. But if instead of filing, you take the lump sum, your benefit shrinks back to stay at the $2,000 level. This also affects the survivor benefits your spouse could receive after you are gone.
  • What else? Social Security benefits can be taxable to a degree. How much is taxable depends on your total income. If you want to calculate this, call the IRS and ask for Publication 915,. 1-800-829-3676. Or log onto irs.gov/pub/irs-pdf/p915.pdf .
  • Finally, if you are married and you choose to file and suspend your benefits you may not be able to collect spousal benefits while you delay your own benefits past full retirement age.

 

Can you have Income Tax Withheld from Your Social Security Benefits?

Withholding is voluntary. If you wish to have federal tax withheld, you need to submit a Form W-4V, and have 7%, 10% 15% or 25%. No flat dollar amounts are permissible.

Why would you do this? Some people do end up owing income tax on part (up to 85%) of their benefits, usually because they have substantial other income like wages, self-employment income) interest, dividends in addition to your Social Security. You can download the form you need at http://www.ssa.gov/planners/taxwithold.html, or ask your accountant for one.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

Meet Teresa