Basics of Social Security and Medicare

Did you know that strategically combining your Social Security and Medicare benefits is essential for your financial planning? Learn the details of these two programs before your final push toward retirement.

What is Social Security?

Social Security is considered one of the most successful programs providing protection to retirees, survivors, and the disabled since its establishment in 1935. Over 68 million people currently receive some form of benefit, making it a vital source of income for many families, especially during retirement. For 20% of American retirees, Social Security is their only source of income, and for 33%, it makes up 90% of their household income.

How does Social Security work?

To qualify for program benefits, you must earn 40 credits of eligible work covered under the program to receive retirement and/or Medicare benefits. Once you earn the required credits, you receive lifetime coverage.

To qualify for a credit in 2026, a worker must earn $1,890. Each quarter counts as one credit. The income needed to earn one credit is recalculated every October based on a set formula. The benefit is based on the 35 highest-earning years of employment.

The Full Retirement Age (FRA) depends on your birth date, and it is 67 years for those born in 1960 or later. Claiming benefits before the FRA causes a permanent reduction, while waiting can boost your benefit each year until age 70. After age 70, no additional credits are given for delaying benefits.

How is the benefit calculated?

The total Social Security contribution rate is 15.3%, split between the employee and employer, to fund retirement and Medicare benefits. In 2026, the maximum taxable earnings are $184,500. The benefit, known as the Primary Insurance Amount (PIA), considers your full retirement age, indexed average monthly income, and income history. This formula may be updated periodically.

Who is eligible to receive the benefit?

Along with you, as a retired worker, some of your family members might be able to claim benefits based on your record if they meet specific criteria.

Spousal benefit

• Your spouse can claim benefits based on your record if you have been married for at least a year.
• You cannot access the spousal benefit until you file for your retirement benefit.

A spouse can receive up to 50% of the worker’s benefit if they claim it at full retirement age. If claimed earlier, the amount will be permanently reduced.

In the event of a divorce (ex-spouse)

• In case of a divorce, if the marriage lasted 10 years or more, your ex-spouse may qualify for benefits based on your work contributions.
• To qualify for this benefit, the claiming ex-spouse must be at least 62 years old and unmarried.
• If your ex-spouse claims this benefit, it will not affect the benefits you receive as a worker or those received by your other family members who are getting benefits.

Survivors (if you, the worker, die before reaching the claiming age)

• The surviving spouse can receive the full worker’s benefit at their full retirement age. They may qualify for a reduced benefit starting at age 60, or at age 50 if they are disabled. They also qualify if they support children of the deceased worker who are under 16 or have a disability and are entitled to benefits.
• Unmarried children may qualify if:
  • They are younger than 18 years old.
  • They are between 18 and 19 years old and still attending elementary or high school.
  • They are over 18 years old and have had a disability that began before they turned 22.
• Parents: If, at the time of your death, you were providing 50% or more of your parents’ support, they may qualify for survivor benefits.

Can I receive Social Security benefits while continuing to work?

• Some people choose to keep working after reaching full retirement age, whether to earn extra income, start a second career, or pursue a passion like launching their own business.
• Regardless of the reason, some people choose to start receiving their retirement benefits at age 62 while still earning income. If you have not yet reached full retirement age, there is an income limit that can temporarily reduce your benefits. This limit varies by year and should be considered if you plan to keep working. Once you surpass the income limit, Social Security will deduct $1 for every $2 of the amount over the limit, and these thresholds may change under certain conditions.
• Once you reach full retirement age, there are no limits on your earnings, but remember that you still need to pay into Social Security based on those earnings. After your income is credited, Social Security may recalculate your benefit if you request it.

What do I need to know about Medicare?

Planning to cover your medical expenses helps keep your financial plan on track. During retirement, you will face 90% of your lifetime medical costs.

At age 65, you can enroll in Medicare, which covers Part A (hospital insurance), Part B (medical services), and Part D (prescription drugs). The initial enrollment period begins three months before your 65th birthday and continues until four months after. It’s important to enroll on time to avoid a penalty that could increase your premium by 10% for each year you’re late. If you’re still working and your employer offers a qualifying health plan, you have an additional eight-month window to enroll after leaving your job.

There are also options through local providers called Medicare Advantage (Part C), where you can combine Parts A, B, and D into a single plan. After reviewing all options individually, the best choice will depend on your health needs.

Retirement is a financial goal that shouldn’t be left up to chance. Planning for this stage of life will boost your chances of achieving a financially secure retirement and reaching the goals you’ve worked so hard for.

You’re not alone on this journey. For more details or assistance with available options, our team of experts is ready to help. To schedule an appointment, call Popular One at 787-281-7272, Monday through Friday from 8:00 a.m. to 5:00 p.m. or email us at popularone@popular.com.