Planning for Healthcare Costs in Retirement: Why Medicare Isn’t Enough

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

When most people picture retirement, they imagine travel, hobbies, and more free time—not skyrocketing healthcare bills. Yet, one of the biggest financial surprises retirees face is how much they’ll actually spend on medical expenses.

Many retirees dramatically underestimate their healthcare costs in retirement, even though this is the stage of life when most people access the healthcare system the most. While it’s common to pay off your mortgage leading up to retirement, it’s not uncommon for healthcare costs to replace your mortgage payment in retirement.

In this article, we’ll cover:

• Why Medicare isn’t free—and what parts you’ll still need to pay for.

• What to consider if you retire before age 65 and don’t yet qualify for Medicare.

• The difference between Medicare Advantage and Medicare Supplement plans.

• How prescription drug costs can take retirees by surprise.

• The reality of long-term care expenses and how to plan for them.

Planning for Healthcare Before Age 65

For those who plan to retire before age 65, healthcare planning becomes significantly more complicated—and expensive. Since Medicare doesn’t begin until age 65, retirees need to bridge the coverage gap between when they stop working and when Medicare starts.

If your former employer offers retiree health coverage, that’s a tremendous benefit. However, it’s critical to understand exactly what that coverage includes:

• Does it cover just the employee, or both the employee and their spouse?

• What portion of the premium does the employer pay, and how much is the retiree responsible for?

• What out-of-pocket costs (deductibles, copays, coinsurance) remain?

If you don’t have retiree health coverage, you’ll need to explore other options:

• COBRA coverage through your former employer can extend your workplace insurance for up to 18 months, but it’s often very expensive since you’re paying the full premium plus administrative fees.

• ACA marketplace plans (available through your state’s health insurance exchange) may be an alternative, but premiums and deductibles can vary widely depending on your age, income, and coverage level.

In many cases, healthcare costs for retirees under 65 can be substantially higher than both Medicare premiums and the coverage they had while working. This makes it especially important to build early healthcare costs into your retirement budget if you plan to leave the workforce before age 65.

Medicare Is Not Free

At age 65, most retirees become eligible for Medicare, which provides a valuable foundation of healthcare coverage. But it’s a common misconception that Medicare is free—it’s not.

Here’s how it breaks down:

• Part A (Hospital Insurance): Usually free if you’ve paid into Social Security for at least 10 years.

• Part B (Medical Insurance): Covers doctor visits, outpatient care, and other services—but it has a monthly premium based on your income.

• Part D (Prescription Drug Coverage): Also carries a monthly premium that varies by plan and income level.

Example:

Let’s say you and your spouse both enroll in Medicare at 65 and each qualify for the base Part B and Part D premiums.

• In 2025, the standard Part B premium is approximately $185 per month per person.

• A basic Part D plan might average around $36 per month per person.

Together, that’s about $220 per person, or $440 per month for a couple—just for basic Medicare coverage. And this doesn’t include supplemental or out-of-pocket costs for things Medicare doesn’t cover.

NOTE: Some public sector or state plans even provide Medicare Part B premium reimbursement once you reach 65—a feature that can be extremely valuable in retirement.

Medicare Advantage and Medicare Supplement Plans

While Medicare provides essential coverage, it doesn’t cover everything. Most retirees need to choose between two main options to fill in the gaps:

• Medicare Advantage (Part C) plans, offered by private insurers, bundle Parts A, B, and often D into one plan. These plans usually have lower premiums but can come with higher out-of-pocket costs and limited provider networks.

• Medicare Supplement (Medigap) plans, which work alongside traditional Medicare, help pay for deductibles, copayments, and coinsurance.

It’s important not to simply choose the lowest-cost plan. A retiree’s prescription needs, frequency of care, and preferred doctors should all factor into the decision. Choosing the cheapest plan could lead to much higher out-of-pocket expenses in the long run if the plan doesn’t align with your actual healthcare needs.

Prescription Drug Costs: A Hidden Retirement Expense

Prescription drug coverage is one of the biggest cost surprises for retirees. Even with Medicare Part D, out-of-pocket expenses can add up quickly depending on the medications you need.

Medicare Part D plans categorize drugs into tiers:

• Tier 1: Generic drugs (lowest cost)

• Tier 2: Preferred brand-name drugs (moderate cost)

• Tier 3: Specialty drugs (highest cost, often with no generic alternatives)

If you’re prescribed specialty or non-generic medications, you could spend hundreds—or even thousands—per month despite having coverage.

To help, some states offer programs to reduce these costs. For example, New York’s EPIC program helps qualifying seniors pay for prescription drugs by supplementing their Medicare Part D coverage. It’s worth checking if your state offers a similar benefit.

Planning for Long-Term Care

One of the most misunderstood aspects of Medicare is long-term care coverage—or rather, the lack of it.

Medicare only covers a limited number of days in a skilled nursing facility following a hospital stay. Beyond that, the costs become the retiree’s responsibility. Considering that long-term care can easily exceed $120,000 per year, this can be a major financial burden.

Planning ahead is essential. Options include:

• Purchasing a long-term care insurance policy to offset future costs.

• Self-insuring, by setting aside savings or investments for potential care needs.

• Planning to qualify for Medicaid through strategic trust planning

Whichever route you choose, addressing long-term care early is key to protecting both your assets and your peace of mind.

Final Thoughts

Healthcare is one of the largest—and most underestimated—expenses in retirement. While Medicare provides a foundation, retirees need to plan for premiums, prescription costs, supplemental coverage, and potential long-term care needs.

If you plan to retire before 65, early planning becomes even more critical to bridge the gap until Medicare begins. By taking the time to understand your options and budget accordingly, you can enter retirement with confidence—knowing that your healthcare needs and your financial future are both protected.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

Why isn’t Medicare enough to cover all healthcare costs in retirement?
While Medicare provides a solid foundation of coverage starting at age 65, it doesn’t pay for everything. Retirees are still responsible for premiums, deductibles, copays, prescription drugs, and long-term care—expenses that can add up significantly over time.

What should I do for healthcare coverage if I retire before age 65?
If you retire before Medicare eligibility, you’ll need to bridge the gap with options like COBRA, ACA marketplace plans, or employer-sponsored retiree coverage. These plans can be costly, so it’s important to factor early healthcare premiums and out-of-pocket expenses into your retirement budget.

What are the key differences between Medicare Advantage and Medicare Supplement plans?
Medicare Advantage (Part C) plans combine Parts A, B, and often D, offering convenience but limited provider networks. Medicare Supplement (Medigap) plans work alongside traditional Medicare to reduce out-of-pocket costs. The right choice depends on your budget, health needs, and preferred doctors.

How much should retirees expect to pay for Medicare premiums?
In 2025, the standard Medicare Part B premium is around $185 per month, while a basic Part D plan averages about $36 monthly. For a married couple, that’s roughly $440 per month for both—before adding supplemental coverage or out-of-pocket expenses. These costs should be built into your retirement spending plan.

Why are prescription drugs such a major expense in retirement?
Even with Medicare Part D, out-of-pocket drug costs can vary widely based on your prescriptions. Specialty and brand-name medications often carry high copays. Programs like New York’s EPIC can help eligible seniors manage these costs by supplementing Medicare coverage.

Does Medicare cover long-term care expenses?
Medicare only covers limited skilled nursing care following a hospital stay and does not pay for most long-term care needs. Since extended care can exceed $120,000 per year, retirees should explore options like long-term care insurance, Medicaid planning, or setting aside savings to self-insure.

How can a financial advisor help plan for healthcare costs in retirement?
A financial advisor can estimate future healthcare expenses, evaluate Medicare and supplemental plan options, and build these costs into your retirement income plan. At Greenbush Financial Group, we help retirees design strategies that balance healthcare needs with long-term financial goals.

Special Tax Considerations in Retirement

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

You might think that once you stop working, your tax situation becomes simpler — after all, no more paychecks! But for many retirees, taxes actually become more complex. That’s because retirement often comes with multiple income sources — Social Security, pensions, pre-tax retirement accounts, brokerage accounts, cash, and more.

At the same time, retirement can present unique tax-planning opportunities. Once the paychecks stop, retirees often have more control over which tax bracket they fall into by strategically deciding which accounts to pull income from.

In this article, we’ll cover:

• How Social Security benefits are taxed

• Pension income rules (and how they vary by state)

• Taxation of pre-tax retirement accounts like IRAs and 401(k)s

• Developing an efficient distribution strategy

• Special tax deductions and tax credits for retirees

• Required Minimum Distribution (RMD) planning

• Charitable giving strategies, including QCDs and donor-advised funds

How Social Security Is Taxed

Social Security benefits may be tax-free, partially taxed, or mostly taxed — depending on your provisional income. Provisional income is calculated as:

Adjusted Gross Income (AGI) + Nontaxable Interest + ½ of Your Social Security Benefits.

Here’s a quick summary of how benefits are taxed at the federal level:

While Social Security is taxed at the federal level, most states do not tax these benefits. However, a handful of states — including Colorado, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont — do impose some form of state tax on Social Security income.

Pension Income

If you’re fortunate to receive a state pension, your state of residence plays a big role in determining how that income is taxed.

• If you have a state pension and continue living in the same state where you earned the pension, many states exclude that income from state tax.

• However, with state pensions, if you move to another state, and that state has income taxation at the stateve level, your pension may become taxable in your new state of domicile.

• If you have a pension with a private sector employer, often times those pension payment are full taxable at both the federal and state level.

Some states also provide preferential treatment for private pensions or IRA income. For example, New York excludes up to $20,000 per person in pension or IRA distributions from state income tax each year — a significant benefit for retirees managing taxable income.

Taxation of Pre-Tax Retirement Accounts

Pre-tax retirement accounts — including Traditional IRAs, 401(k)s, 403(b)s, and inherited IRAs — are typically taxed as ordinary income when distributions are made.

However, the tax treatment at the state level varies:

• Some states (like New York) exclude a set amount – for example New York excludes the first $20,000 per person per year — from state taxation.

• Others tax all pre-tax distributions in full.

• A few states offer income-based exemptions or reduced rates for lower-income retirees.

Because these rules differ so widely, it’s important to research your state’s tax laws.

Developing a Tax-Efficient Distribution Strategy

A well-designed distribution strategy can make a big difference in how much tax you pay throughout retirement.

Many retirees have income spread across:

• Pre-tax accounts (401(k), IRA)

• After-tax brokerage accounts

• Roth IRAs

• Social Security

Let’s say you need $70,000 per year to maintain your lifestyle. Some of that may come from Social Security, but you’ll need to decide where to withdraw the rest.

With smart planning, you can blend withdrawals from different accounts to minimize your overall tax liability and control your tax bracket year by year. The goal isn’t just to reduce taxes today — it’s to manage them over your lifetime.

Special Deductions and Credits in Retirement

Your Adjusted Gross Income (AGI) or Modified AGI doesn’t just determine your tax bracket — it also affects which deductions and credits you can claim.

A few important highlights:

• The Big Beautiful Tax Bill that just passed in 2025 introduces a new Age 65+ tax deduction of $6,000 per person over and above the existing standard deduction.

• Certain deductions and credits, however, phase out once income exceeds specific thresholds.

• Your income level also affects Medicare premiums for Parts B and D, which increase if your income surpasses the IRMAA thresholds (Income-Related Monthly Adjustment Amount).

Managing your taxable income through careful distribution planning can therefore help preserve deductions and keep Medicare premiums lower.

Required Minimum Distribution (RMD) Planning

Once you reach age 73 or 75 (depending on your birth year), you must begin taking Required Minimum Distributions (RMDs) from your pre-tax retirement accounts — even if you don’t need the money.

These RMDs can significantly increase your taxable income, especially when stacked on top of Social Security and other income sources.

A proactive strategy is to take controlled distributions or perform Roth conversions before RMD age. Doing so can reduce the size of your future RMDs and potentially lower your lifetime tax bill by spreading taxable income across more favorable tax years.

Charitable Giving Strategies

Many retirees are charitably inclined, but since most take the standard deduction, they don’t receive an additional tax benefit for their donations.

There are two primary strategies to consider:

1. Donor-Advised Funds (DAFs) – You can “bunch” several years’ worth of charitable giving into one tax year to exceed the standard deduction, then direct the funds to charities over time.

2. Qualified Charitable Distributions (QCDs) – Once you reach age 70½, you can donate directly from your IRA to a qualified charity. These QCDs are excluded from taxable income and count toward your RMD once those begin.

Final Thoughts

Retirement opens up new opportunities — and new complexities — when it comes to managing taxes. Understanding how your various income sources interact and planning your distributions strategically can help you:

• Reduce taxes over your lifetime

• Preserve more of your retirement income

• Maintain flexibility and control over your financial future

As always, it’s wise to coordinate with a financial advisor and tax professional to ensure your retirement tax strategy aligns with your goals, income sources, and state tax rules.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

How are Social Security benefits taxed in retirement?
Depending on your provisional income, up to 85% of your Social Security benefits may be subject to federal income tax. Most states don’t tax these benefits, though a few—including Colorado, Minnesota, and Utah—do.

How is pension income taxed, and does it vary by state?
Pension income is typically taxable at the federal level, but state rules differ. Some states exclude public pensions from taxation or offer partial exemptions—like New York’s $20,000 per person exclusion for pension or IRA income. If you move to another state in retirement, your pension’s tax treatment could change.

What taxes apply to withdrawals from pre-tax retirement accounts?
Distributions from Traditional IRAs, 401(k)s, and similar pre-tax accounts are taxed as ordinary income. Some states offer exclusions or partial deductions, while others tax these withdrawals in full. Understanding your state’s rules is essential for accurate tax planning.

What is a tax-efficient withdrawal strategy in retirement?
A tax-efficient strategy blends withdrawals from different account types—pre-tax, Roth, and after-tax—to control your annual tax bracket. The goal is not just to lower taxes today but to reduce lifetime taxes by managing income across multiple years and minimizing required minimum distributions later.

What new tax deductions or credits are available for retirees?
The 2025 tax law introduced an additional $6,000 deduction per person age 65 and older, in addition to the standard deduction. Keeping taxable income lower through smart planning can also help retirees preserve deductions and avoid higher Medicare IRMAA surcharges.

How do Required Minimum Distributions (RMDs) impact taxes?
Starting at age 73 or 75 (depending on birth year), retirees must withdraw minimum amounts from pre-tax retirement accounts, which increases taxable income. Performing partial Roth conversions or strategic withdrawals before RMD age can help reduce future tax exposure.

What are Qualified Charitable Distributions (QCDs) and how do they work?
QCDs allow individuals age 70½ or older to donate directly from an IRA to a qualified charity, satisfying all or part of their RMD while excluding the amount from taxable income. This strategy helps maximize charitable impact while reducing taxes in retirement.

How to Maximize Social Security Benefits with Smart Claiming and Income Planning

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

For many retirees, Social Security is a cornerstone of their retirement income. But when and how you claim your benefits—and how you plan your income around them—can have a major impact on the total amount you receive over your lifetime. With updated Social Security thresholds, limits, and rules, there are new opportunities to optimize your claiming strategy and coordinate Social Security with your broader financial plan.

In this article, we’ll cover:

• How Social Security benefits are calculated and funded

• Four ways to increase your Social Security benefit amount

• How income and taxes affect your benefits

• The impact of Medicare premiums and income planning

• How delaying Social Security can create opportunities for Roth conversions

• What to know about the earned income penalty if you claim early

• Answers to common Social Security claiming questions

Maximizing Social Security During the Working Years

The foundation for a strong Social Security benefit starts during your working years. Understanding how the system works helps you make informed decisions about your career, income, and retirement planning.

How Social Security Is Funded and Calculated

Social Security is primarily funded through payroll taxes under the Federal Insurance Contributions Act (FICA). In 2025, workers and employers each pay 6.2% of wages (for a total of 12.4%) up to the taxable wage base, which is $176,000 in 2025. Any earnings above that amount are not subject to Social Security tax and do not increase your benefit.

Your benefit is based on your highest 35 years of indexed earnings—meaning each year’s income is adjusted for inflation to reflect its value in today’s dollars. If you worked fewer than 35 years, zeros are included in the calculation, which can significantly reduce your average and therefore your monthly benefit.

Key takeaway: Once your annual income exceeds the taxable wage base, additional earnings don’t raise your future Social Security benefit. However, working longer can still increase your benefit if you replace lower-earning years or zeros in your 35-year average.

Four Ways to Increase Your Social Security Benefits

1. Fill in or Replace Zero Years

If you have fewer than 35 years of work history, each missing year is counted as zero. Even one extra year of income can replace a zero and raise your benefit.

Example: If you worked 32 years and earned $80,000 annually in your final three years, adding those years could significantly boost your benefit calculation.

2. Delay Claiming to Earn Higher Benefits

You can claim Social Security as early as age 62, but doing so permanently reduces your benefit—up to 30% less than your full retirement age (FRA) amount. For those born in 1960 or later, FRA is 67.

If you wait past FRA, your benefit grows by 8% per year up to age 70, plus annual cost-of-living adjustments (COLAs).

Example:

• Claiming at 62: $1,400/month

• Claiming at 67: $2,000/month

• Claiming at 70: $2,480/month

That’s a $1,080 per month difference for waiting between the ages of 62 and 70.

3. Maximize Spousal and Dependent Benefits

Spousal and dependent benefits can be valuable for married couples or retirees with young children.

• Spousal Benefit: A spouse can claim up to 50% of the higher earner’s FRA benefit, provided the higher earner has already filed.

• Divorced Spouse Benefit: You may qualify if the marriage lasted 10 years or longer, and you haven’t remarried prior to age 60.

• Dependent Benefit: Retirees age 62+ with children under 18 may receive additional benefits for dependents.

Planning tip: For individuals who plan to utilize the 50% spousal benefit and/or the dependent benefit, the path to the optimal filing strategy is more complex because the spouse and dependents cannot receive these benefits until that individual has actually turned on their social security benefit, which, in some cases, can favor not waiting until age 70 to file.

4. Understand Survivor Benefits

If one spouse passes away, the surviving spouse receives the higher of the two benefits. This makes it especially beneficial for the higher-earning spouse to delay claiming to age 70, maximizing the survivor benefit and providing long-term income protection.

How Social Security Benefits Are Taxed

Up to 85% of your Social Security benefits may be taxable, depending on your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits).

• Single filers: Taxes begin at $25,000 of combined income

• Married filing jointly: Taxes begin at $32,000 of combined income

If you don’t need Social Security to cover living expenses right away, delaying benefits can not only increase your future income but may also help manage taxes by controlling your income levels in early retirement.

Medicare Premiums and Income Planning

Once you reach age 65, you’ll typically enroll in Medicare Part B and D, and your premiums are based on your Modified Adjusted Gross Income (MAGI). Higher income means higher premiums under the Income-Related Monthly Adjustment Amount (IRMAA) rules.

Because Social Security benefits count as income for these purposes, timing your claiming strategy can help you manage Medicare costs.

Roth Conversions: Turning Delay into an Opportunity

Delaying Social Security creates a window for Roth conversions—moving money from a traditional IRA to a Roth IRA at potentially lower tax rates before Required Minimum Distributions (RMDs) begin at age 73 or 75.

Benefits of Roth conversions include:

• Paying tax now at potentially lower rates

• Reducing future RMDs

• Potentially reduce future Medicare premiums

• Creating a tax-free income source in retirement

• Leaving tax-free assets to heirs

Coordinating your claiming strategy with Roth conversions can improve long-term tax efficiency and enhance your retirement flexibility.

Claiming Early? Know the Earned Income Penalty

If you claim Social Security before full retirement age and continue to work, your benefits may be temporarily reduced.
In 2025, the earnings limit is $23,400. For every $2 earned over the limit, $1 in benefits is withheld.

In the year you reach FRA, a higher limit applies: $62,160, and only $1 is withheld for every $3 earned above that.
Once you reach full retirement age, the penalty disappears, and your benefit is recalculated to credit any withheld amounts.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQ)

How are Social Security benefits calculated?
Social Security benefits are based on your highest 35 years of indexed earnings, adjusted for inflation. If you worked fewer than 35 years, zeros are included in your calculation, which can reduce your benefit.

What are the main ways to increase your Social Security benefits?
You can boost your benefit by replacing “zero” earning years, delaying your claim up to age 70 for an 8% annual increase past full retirement age, and coordinating spousal or survivor benefits strategically. Working longer and earning more during high-income years can also improve your benefit calculation.

How does delaying Social Security affect taxes and Medicare premiums?
Delaying benefits can help you manage taxable income in early retirement and avoid higher Medicare premiums triggered by the IRMAA income thresholds. This window can also allow for Roth conversions, which reduce future Required Minimum Distributions (RMDs) and create tax-free income in later years.

How are Social Security benefits taxed?
Up to 85% of your benefits may be taxable depending on your combined income (adjusted gross income + nontaxable interest + half of your benefits). Taxes begin at $25,000 for single filers and $32,000 for married couples filing jointly. Managing income sources can help minimize these taxes.

What is the earned income penalty for claiming Social Security early?
If you claim before full retirement age and continue working, benefits are reduced by $1 for every $2 earned above $23,400 in 2025. In the year you reach full retirement age, the limit increases to $62,160, and only $1 is withheld for every $3 earned over that amount. The penalty ends at full retirement age, when your benefit is recalculated.

What are spousal and survivor Social Security benefits?
A spouse can claim up to 50% of the higher earner’s full retirement benefit once that person has filed. If one spouse passes away, the survivor receives the higher of the two benefits. This makes it especially advantageous for the higher earner to delay claiming to age 70 to maximize long-term income protection.

How can Roth conversions complement Social Security planning?
Performing Roth conversions in the years before claiming Social Security or reaching RMD age allows retirees to shift pre-tax funds into tax-free accounts at potentially lower tax rates. This strategy can reduce future taxable income, manage Medicare premiums, and increase retirement flexibility.

Social Security Claiming Strategies: Early vs. Delayed Benefits Explained

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

For many retirees, Social Security ends up being the single largest and most reliable income source in retirement. It is inflation-protected, provides survivor benefits, and lasts for life. Yet, many people cost themselves hundreds of thousands of dollars in lifetime income by claiming too early—or by ignoring the tax and spousal rules that make timing so important.

This article explores two common paths for claiming Social Security, the tax and survivor strategies that matter most, and how to build a decision framework that balances both the math and the emotional realities of retirement.

The Two Paths: Early & Active vs. Delay & Fortify

There is no one-size-fits-all answer to Social Security timing. Instead, retirees can think of two primary paths:

Path A: Early & Active (Claiming at 62–65)

• Works best for those with health concerns or shorter life expectancy.

• Provides cash flow to enjoy active early retirement years.

• Can unlock additional benefits, such as spousal add-ons or child benefits.

• Trade-off: Lower lifetime income and reduced survivor benefits.

Path B: Delay & Fortify (Claiming at 67–70)

• Higher earner delays to 70, maximizing both their lifetime benefit and the survivor benefit for their spouse.

• Serves as “longevity insurance,” providing a larger, inflation-adjusted check for life.

• Opens the door for Roth conversions to reduce future required minimum distributions (RMDs) and future Medicare premiums.

• Trade-off: Requires income from working or pensions, or drawing down on assets in the meantime

Path A: Early & Active (Claiming at 62–65)

For many retirees, claiming Social Security early feels like “getting what’s yours” after decades of paying into the system. And in some cases, it’s absolutely the right move. This path prioritizes flexibility and cash flow in the early years of retirement — often before traditional pensions, investment income, or part-time work fully kick in.

Let’s unpack when and why early claiming can make sense, and the trade-offs to watch out for.

Works Best for Those with Health Concerns or Shorter Life Expectancy

Social Security benefits are designed around actuarial averages. The longer you live, the more a delayed claim pays off. But if you have health concerns, a family history of shorter life expectancy, or simply want to maximize income during the “go-go” years of retirement, claiming early can be a rational and emotionally satisfying choice.

For example, a retiree who claims at 62 will receive about 70–75% of their full retirement age (FRA) benefit. While that’s a reduction, the earlier payments can add up over time if the individual doesn’t live into their 80s or 90s.

Rule of thumb: If you expect your life expectancy to be shorter than the early 80s, claiming before FRA may result in higher total lifetime benefits.

Provides Cash Flow to Enjoy Active Early Retirement Years

Many retirees want to travel, pursue hobbies, or help family members financially in their 60s while they’re still healthy and energetic. Social Security can serve as a predictable income base that helps fund this period — reducing the need to withdraw heavily from investment accounts during market downturns.

Consider a 63-year-old couple who wants to take advantage of early retirement while waiting for their portfolio to grow. Claiming one spouse’s benefit early might provide enough monthly income to bridge the gap and protect long-term assets.

Tip: Early claiming can work well as part of a “phased retirement” approach — easing out of the workforce while still maintaining a reliable income stream.

Can Unlock Additional Benefits, Such as Spousal Add-Ons or Child Benefits

Claiming early sometimes unlocks access to auxiliary benefits that wouldn’t otherwise be available. For instance:

• A non-working spouse can start claiming a spousal benefit once the higher-earning spouse files for Social Security.

• Dependent children under age 18 (or 19 if still in high school) may also qualify for benefits if a parent begins claiming.

This strategy can create a multi-benefit window, where the total family income from Social Security exceeds what the primary earner would receive alone — especially valuable for families still supporting dependents or paying for college.

Trade-Off: Lower Lifetime Income and Reduced Survivor Benefits

The biggest drawback to early claiming is mathematical: reduced monthly checks for life. Claiming at 62 permanently cuts benefits by roughly 25–30% compared to waiting until full retirement age. For married couples, this also means a smaller survivor benefit for the spouse who lives longer.

Over a 20- or 30-year retirement, that difference can add up to hundreds of thousands of dollars in lost income. It can also limit flexibility later in life when expenses like healthcare and long-term care rise.

To visualize this, here’s a simple comparison:

Path B: Delay & Fortify (Claiming at 67–70)

If the Early & Active path is about maximizing flexibility and early retirement enjoyment, the Delay & Fortify strategy is about building strength and security for the long haul. Delaying your Social Security claim allows your benefit to grow each year, providing powerful longevity insurance and boosting survivor protection for your spouse.

This path often works best for retirees who expect to live into their 80s or beyond, have other income sources to draw from in the meantime, or want to use the delay window for tax-efficient planning.

Higher Earner Delays to 70, Maximizing Both Their Lifetime Benefit and the Survivor Benefit for Their Spouse

For married couples, Social Security isn’t just an individual decision — it’s a household one. The higher-earning spouse’s benefit often becomes the survivor benefit for the remaining spouse.

By waiting to claim until age 70, the higher earner locks in delayed retirement credits that increase benefits by roughly 8% per year after full retirement age (up to age 70). That means a benefit that would have been $2,000 at age 67 could grow to about $2,480 per month by age 70 — a 24% increase for life.

That higher benefit continues for as long as either spouse is alive, making this strategy especially valuable for couples where one spouse is expected to live well into their 80s or 90s.

Example:
If one spouse claims early at 62 and the other delays to 70, the household creates a blend — immediate income now, and a larger, inflation-protected income base later that acts as a financial safety net for the survivor.

Serves as “Longevity Insurance,” Providing a Larger, Inflation-Adjusted Check for Life

Delaying Social Security is sometimes compared to buying an annuity — but without the fees or market risk. It’s an inflation-adjusted income stream that continues for life, backed by the U.S. government.

For those with strong health and longevity in their family history, this can be one of the best “investments” available, because the increase in monthly income provides protection against outliving assets in later years.

Breakeven point: Typically, the math favors delaying if you live past your early 80s. But beyond the numbers, many retirees value the peace of mind that comes with knowing they’ll always have a larger, guaranteed income base, no matter how long they live.

Opens the Door for Roth Conversions to Reduce Future RMDs and Medicare Premiums

One of the less-discussed advantages of delaying benefits is the tax planning window it creates. Between retirement (often mid-60s) and age 70, retirees may have lower taxable income, creating an opportunity to do Roth IRA conversions at favorable tax rates.

Here’s why this matters:

• Converting pre-tax assets to Roth reduces future Required Minimum Distributions (RMDs) at age 73/75.

• Lower RMDs can help manage Medicare premiums, which are based on income (IRMAA thresholds).

• Roth income in retirement is tax-free, helping stabilize cash flow and protect against rising tax rates.

Strategy in action:
A retiree might use withdrawals from cash or taxable accounts to fund living expenses while converting portions of their traditional IRA to a Roth during those pre-70 years. Then, when Social Security finally starts, their taxable income is lower — improving long-term tax efficiency.

Trade-Off: Requires Income from Working or Pensions, or Drawing Down on Assets in the Meantime

The biggest hurdle in delaying Social Security is bridging the income gap. If you retire at 65 but delay claiming until 70, that’s five years of expenses that must be covered by savings, part-time work, or other income sources.

For some retirees, this is perfectly manageable. For others, it may mean drawing down more from investment accounts — which can be uncomfortable, especially during volatile markets.

The key is to view this period as a trade-off by drawing down on a larger portion of your retirement assets now for a higher guaranteed income stream later on. Many financial plans model this “bridge strategy” explicitly, showing how a few years of portfolio withdrawals can result in higher lifetime income and stronger survivor protection.

Building a Decision Framework: Balancing the Math and the Mindset

Choosing when to claim Social Security is part math, part mindset. The best decision balances financial optimization with personal goals and health considerations.

A helpful framework:

1. Start with longevity assumptions. Estimate based on family health and lifestyle.

2. Assess your income bridge. Can you fund living expenses until 67–70 without stress?

3. Run the household math. Model joint benefits, survivor income, and tax implications.

4. Weigh the emotional factors. Early claiming often feels more secure and immediate; delaying feels more strategic and protective.

5. Revisit regularly. If you’re 62 and unsure, you don’t have to decide today — claiming flexibility exists year to year.

The right Social Security claiming strategy isn’t about “winning” a mathematical breakeven test — it’s about creating confidence and control in retirement.

The Bottom Line

Social Security is one of the most valuable, inflation-protected income sources you’ll ever have. Taking the time to make a thoughtful, data-driven claiming decision can add tens or even hundreds of thousands of dollars to your lifetime benefits.

But just as importantly, it can bring peace of mind — knowing your retirement income is designed to support both your financial goals and your life priorities.

If you’re approaching retirement, consider running multiple claiming scenarios or working with a financial planner to build a customized Social Security plan that fits your household.

Because in the end, smart Social Security planning isn’t just about maximizing a benefit — it’s about maximizing the life you can live in retirement.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What are the main differences between claiming Social Security early versus delaying benefits?
Claiming early (ages 62–65) provides immediate income and flexibility but permanently reduces monthly benefits by up to 30%. Delaying to age 70 increases benefits by 8% per year after full retirement age and strengthens survivor protection for a spouse.

When does it make sense to claim Social Security early?
Early claiming can make sense for retirees with health concerns, shorter life expectancy, or those who need income to support active early retirement years. It can also unlock spousal or dependent benefits sooner. However, it reduces lifetime and survivor benefits, so it’s best suited for households prioritizing flexibility over long-term income maximization.

What are the advantages of delaying Social Security until age 70?
Delaying benefits boosts lifetime and survivor income, provides inflation-adjusted longevity protection, and can create a valuable tax-planning window. Those extra years often allow retirees to perform Roth conversions at lower tax rates and reduce future Required Minimum Distributions (RMDs) and Medicare premiums.

How do spousal and survivor benefits factor into Social Security claiming decisions?
For married couples, the higher earner’s benefit often becomes the survivor benefit. By delaying their claim to age 70, the higher earner ensures the surviving spouse receives a larger, inflation-adjusted income for life—providing greater long-term financial stability.

What is the breakeven point for delaying Social Security?
Generally, if you live beyond your early 80s, delaying your claim tends to produce higher lifetime benefits. However, the optimal strategy depends on personal health, family longevity, and income needs during the delay period. Financial modeling can help identify the most efficient approach.

How can delaying Social Security support tax and Medicare planning?
The years between retirement and claiming benefits often provide a “low-income window” ideal for Roth conversions. This can lower future RMDs and taxable income, helping retirees stay below the IRMAA thresholds that trigger higher Medicare premiums.

How should I decide which Social Security claiming strategy is best for me?
The right approach balances math and mindset—combining life expectancy estimates, income bridge options, household tax impact, and emotional comfort. Working with a financial planner to test multiple claiming scenarios can clarify which path offers the best balance of income security and lifestyle freedom.

2025 Retirement Planning: 7 Smart Purchases to Make Before You Stop Working

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Most retirees spend decades saving and investing, only to face one of the hardest transitions at the finish line: shifting from saver to spender. At Greenbush Financial Group, we often hear clients say they wish they had spent more strategically before retiring—not less. By making key purchases while you still have earned income, you can reduce stress, avoid costly surprises, and give yourself permission to fully enjoy retirement.

This article covers seven smart spending decisions to consider before leaving the workforce, along with the tax and planning angles that can make them even more effective.

Medical and Dental Work Before Medicare

Healthcare costs can spike in retirement, and Medicare doesn’t cover everything—especially dental, vision, and hearing. It’s often wise to complete major procedures while you’re still working.

• Max out your Health Savings Account (HSA) during your last high-income years. HSAs offer triple tax benefits—deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified expenses.

• If modifications such as no-threshold showers or grab bars are medically necessary, some may qualify as itemized deductions. Proper documentation is essential.

• Map out coverage if you retire before age 65. Compare COBRA, ACA marketplace options, and potential premium tax credits.

Secure Your Next Home While Still Employed

Qualifying for a mortgage is often easier with W-2 income than retirement income. Buying or refinancing before you retire can lock in more favorable terms.

• Downsizing? Remember the §121 home sale exclusion allows couples filing jointly to exclude up to $500,000 of capital gain on the sale of a primary residence ($250,000 if single).

• Considering upgrades? Look into energy-efficiency credits under the Inflation Reduction Act. For example, the Energy Efficient Home Improvement Credit (25C) can provide annual tax credits for qualifying improvements.

Complete Major Home Repairs and Aging-in-Place Upgrades

Addressing big-ticket items before retirement reduces future cash flow stress. Common examples include:

• Roof, HVAC system, windows, and insulation

• Whole-home surge protection or backup power systems

• No-threshold showers, wider doorways, higher-seat toilets

Tackling these projects upfront means fewer disruptions—and potentially fewer withdrawals during a market downturn.

Buy a Reliable, Paid-Off Vehicle

Transportation is a non-negotiable retirement expense. Purchasing a reliable, low-maintenance car before retiring allows you to enter retirement debt-free.

• Evaluate new vs. certified pre-owned (CPO) for warranty protection.

• For those considering EVs or hybrids, federal and state incentives can significantly reduce net cost.

• Budget for a replacement cadence of 7–10 years to spread costs evenly across retirement.

Prepay for Bucket-List Travel

The early years of retirement are often called the “go-go years.” Booking major trips while you’re healthy—and locking in refundable deposits or travel insurance—helps ensure you actually take them.

• Build a “first 1,000 days of retirement” calendar to schedule must-do experiences.

• Consider paying now while your income supports larger expenses. This reduces pressure on retirement withdrawals later.

Use High-Income Years to Fund Future Spending

Your final working years often come with peak income. This creates opportunities to front-load retirement readiness:

• Roth conversions up to the top of your target bracket before Medicare enrollment can reduce future taxable income.

• Watch for IRMAA (income-related monthly adjustment amounts) at ages 63–65, which can increase Medicare premiums if income is too high.

• Consider donor-advised fund (DAF) contributions to pre-fund charitable giving while reducing taxable income.

Don’t Forget Estate and Administrative Prep

Beyond purchases, pre-retirees benefit from a final sweep of administrative tasks:

• Separate credit cards for spouses to maintain access to credit.

• Pre-need funeral planning or irrevocable funeral trusts to relieve future burdens.

• Refresh wills, POA, health care proxies, and beneficiary designations.

• Audit recurring subscriptions, timeshares, and other lifestyle costs.

Key Takeaway

Retirement is about more than accumulating assets—it’s about spending them wisely. By completing health care, housing, car, and travel purchases while still earning, you free up your retirement income for flexibility and enjoyment. At Greenbush Financial Group, we help clients not only save smart but also spend smart.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What major expenses should I plan to cover before retiring?
Common pre-retirement purchases include completing medical or dental procedures, making home repairs or accessibility upgrades, and replacing your vehicle. Addressing these while you still have earned income helps reduce financial stress once you retire and may provide additional tax benefits.

Why should I complete medical and dental work before enrolling in Medicare?
Medicare generally doesn’t cover dental, vision, or hearing care. Completing major procedures before retirement—while you still have employer coverage—can save money and simplify your transition. It’s also smart to fully fund your Health Savings Account (HSA) in your final working years for future tax-free healthcare spending.

Is it better to buy or refinance a home before retiring?
Yes, qualifying for a mortgage is typically easier when you have active W-2 income. Buying, refinancing, or downsizing before retirement can secure better terms. Couples selling their primary residence may also exclude up to $500,000 in capital gains, and certain energy-efficient home upgrades may qualify for tax credits.

Why should I replace my car before retirement?
Buying a dependable, low-maintenance car before you retire allows you to enter retirement debt-free and avoid large future withdrawals.

How can I use my final high-income years to improve my retirement outlook?
Peak earning years are ideal for strategic financial moves like Roth conversions, funding a donor-advised fund (DAF), or prepaying for future travel. These steps can help lower future taxable income, manage Medicare premiums, and enhance your flexibility in retirement.

What estate and administrative steps should I complete before retiring?
Review and update your will, powers of attorney, and beneficiary designations. Consider establishing separate credit accounts for each spouse, planning funeral arrangements in advance, and canceling unnecessary subscriptions or timeshares to streamline post-retirement finances.

How do pre-retirement purchases support a more enjoyable retirement?
Spending strategically before you stop working lets you handle big expenses with current income, freeing future cash flow for experiences and lifestyle choices. At Greenbush Financial Group, we encourage clients to view retirement not just as saving wisely—but spending wisely, too.

How to Protect Yourself from Stock Market Crashes in Retirement

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The stock market has always gone through ups and downs, but when you’re retired, a downturn can feel much scarier than when you were working. Retirement alters the way you interact with your investments, and the strategies you use to protect yourself from market volatility must also adapt accordingly.

In this article, we’ll cover:

• The difference between the accumulation years and distribution years

• Why market downturns can be so damaging in retirement

• The “irreversible mistake” retirees need to avoid

• The risk of holding concentrated positions in retirement

• Why being too conservative in retirement can also create problems

Accumulation vs. Distribution Years

One of the most important distinctions in retirement planning is understanding how your relationship with your portfolio changes once you leave the workforce.

• Accumulation Years (Working Years):
  During your career, you’re regularly contributing to retirement accounts. When the market drops, it can actually work in your favor because you’re buying shares “on sale.” Plus, you’re not taking withdrawals, so your full account balance is still in the market to participate in the rebound when it eventually happens.

• Distribution Years (Retirement Years):
  Once retired, the dynamic shifts. Instead of contributing, you’re taking money out to fund your lifestyle. When a market downturn hits, withdrawals can force you to sell at the worst possible time—locking in losses. Unlike in your working years, your portfolio might not fully recover because the assets you sold are no longer invested when the market rebounds.

This difference makes retirees more vulnerable to something called sequence of returns risk, which is the risk of experiencing poor market returns early in retirement while simultaneously taking withdrawals.

The Irreversible Mistake

We call this the irreversible mistake—waiting too long to reduce your allocation to stocks and riskier asset classes post-retirement. Once those dollars are gone, there’s no “do-over button” to replace them, and trying to recoup the losses by staying overly aggressive can be too much of a gamble.

So, what’s the solution? It depends on:

• The size of your retirement accounts

• The percentage of income you need to withdraw each year

• The purpose assigned to each investment account

For example, you might have a Roth IRA that you plan to leave untouched. Since you don’t need it for income, that account could stay invested more aggressively throughout retirement. On the other hand, accounts you draw from regularly may require a more balanced or conservative allocation to help weather downturns.

There’s no universal “right” equity allocation for retirees—it has to be determined account by account, based on your unique situation.

The Risk of Concentrated Positions

Another important consideration is whether you hold a concentrated position—a large percentage of your portfolio invested in a single stock or company.

• During the accumulation years, an employee may accumulate significant shares of their employer’s stock, or investors may ride the success of a single company. Since you’re still working, contributing, and have decades before tapping retirement accounts, you may be able to absorb some of that added single stock risk.

• During retirement, however, concentrated positions can pose an even bigger danger. At that point, it’s not just overall market volatility you’re exposed to, but also the unique risks of one company or business. If that single investment declines sharply—or worse, collapses—it could disproportionately impact your retirement security.

Diversifying concentrated positions before entering retirement may help reduce the risk of a single company determining the fate of your entire portfolio. Strategies such as gradually selling shares, using tax-efficient planning, or shifting portions of the concentrated holding into more diversified securities may all help manage that risk.

The Risk of Being Too Conservative

While it’s common (and often smart) to reduce risk in retirement, going too far in the opposite direction can create another set of problems.

People today are living longer—well into their 80s and 90s. That means a large portion of your retirement savings may remain invested for 15, 20, or even 30 years. If your portfolio is too conservative, you run two major risks:

1. Longevity Risk: You could outlive your savings because your money didn’t grow enough to keep pace with how long you live.

2. Inflation Risk: The cost of living rises every year. If your portfolio isn’t growing faster than inflation, your purchasing power declines over time.

For example, imagine someone retires and moves all their assets into bonds. While bonds may provide stability, they may not generate enough long-term growth to outpace inflation. Over decades, this could erode their ability to afford the same lifestyle.

Final Thoughts

Protecting yourself from stock market crashes in retirement isn’t about eliminating risk—it’s about managing it. That means:

• Reducing volatility in the accounts you rely on for income

• Avoiding the irreversible mistake of delaying the step down in risk post-retirement

• Diversifying away from concentrated positions

• Keeping enough growth in the portfolio to offset longevity and inflation risks

Every retiree’s situation is unique, and the best allocation depends on your income needs, time horizon, and goals. A thoughtful strategy that adapts as your life unfolds can help you weather market downturns while keeping your long-term financial plan on track.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

What makes market downturns more dangerous for retirees than for younger investors?
Retirees face greater risk during downturns because they’re no longer adding to their investments and must withdraw funds to cover living expenses. Selling investments during a market decline can lock in losses and make it difficult for a portfolio to recover.

What is sequence of returns risk, and why does it matter in retirement?
Sequence of returns risk refers to the danger of experiencing poor investment returns early in retirement while taking withdrawals. Negative returns early on can deplete assets faster, leaving less money invested to benefit from future market recoveries.

What is the “irreversible mistake” retirees should avoid with their portfolios?
The irreversible mistake occurs when retirees wait too long to reduce their exposure to risky assets after leaving the workforce. A severe market downturn early in retirement can permanently damage a portfolio if withdrawals and losses happen simultaneously.

Why are concentrated stock positions especially risky in retirement?
Holding too much of a single stock can expose retirees to the financial health of one company rather than the broader market. If that company’s value falls sharply, it can disproportionately harm retirement security and long-term income stability.

Can being too conservative with investments in retirement cause problems?
Yes. While reducing risk is important, overly conservative portfolios may not generate enough growth to keep up with inflation or sustain income over a long retirement. This can increase the chance of outliving your savings.

How can retirees balance growth and safety in their portfolios?
A balanced strategy often includes maintaining conservative allocations in income-producing accounts while keeping some exposure to growth assets for long-term needs. Adjusting investment risk account by account can help align stability with the potential for continued growth.

New Ways to Plan for Long-Term Care Costs: Self-Insure & Medicaid Trusts

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

Planning for long-term care has always been one of the most challenging aspects of a retirement plan. For decades, the go-to solution was purchasing long-term care insurance. But as we move into 2025, this option is becoming less viable for many families due to skyrocketing premiums and shrinking availability associated with long-term care insurance. For example, in New York, there is now only one insurance company still offering new long-term care insurance policies. Carriers are exiting the market because the probability of policies paying out is high, and the dollar amounts associated with these claims can easily be in excess of $100,000 per year.

So where does that leave retirees and their families? Fortunately, there are two primary strategies that have emerged as alternatives:

• Self-insuring by setting aside a dedicated pool of assets for potential care.

• Using Irrevocable or Medicaid trusts to protect assets and plan for Medicaid eligibility.

In this article, we’ll break down each approach, their pros and cons, and what you should consider when deciding which path makes sense for you.

The Self-Insurance Strategy

Self-insuring means you create a separate “bucket” of assets earmarked specifically for long-term care needs. Instead of paying tens or even hundreds of thousands of dollars in premiums over the years for the long-term insurance coverage, those funds stay in your name. If a long-term care event never occurs, those assets simply pass on to your beneficiaries.

The benefits:

• Flexibility—you decide how, when, and where care is provided.

• Assets remain under your control and stay in your estate.

• Avoid the risk of paying for insurance you never use.

The challenges:

• You need significant extra assets, beyond what you already need to meet your retirement income goals.

• Costs can be substantial—long-term care can run $120,000 to $200,000 per year, depending on location and type of care.

Self-insuring works best for those who have enough wealth to comfortably dedicate a portion of their portfolio to this potential risk without jeopardizing their retirement lifestyle.

The Trust Approach

For individuals or couples without the level of assets needed to fully self-insure, the next common strategy is using Irrevocable trusts (often called Medicaid trusts). These trusts are designed to protect non-retirement assets so that if you need long-term care in the future, you may qualify for Medicaid without having to spend down all your savings.

How it works:

• Assets placed into an irrevocable trust are no longer counted as yours for Medicaid eligibility purposes.

• If structured properly and far enough in advance, this can preserve assets for heirs while ensuring that Medicaid can help cover long-term care.

Important considerations:

• There is typically a five-year look-back period in most states. If assets aren’t in the trust at least five years before applying for Medicaid, the strategy can fail.

• Medicaid doesn’t cover everything. For example, around-the-clock home health care often isn’t fully covered, which limits flexibility.

The trust strategy is most effective for individuals who wish to protect their assets but recognize that care options may be limited to facilities and providers that accept Medicaid.

Which Approach is Right for You?

Ultimately, the choice between self-insuring and using a trust comes down to your financial position and your preferences for future care.

• If you value flexibility and have the assets, self-insuring is often the preferred option.

• If resources are more limited, a trust strategy can provide asset protection and access to Medicaid, even though it may reduce your care options.

The Key Takeaway: Plan Ahead

Whether you choose to self-insure, set up a trust, or use a combination of both, the most important factor is timing. These strategies require proactive planning—often years in advance. With costs continuing to rise and traditional long-term care insurance becoming less accessible, exploring these new approaches early can help protect both your assets and your peace of mind.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs)

Why is traditional long-term care insurance becoming less viable?
Long-term care insurance has become less practical due to rising premiums, stricter underwriting, and fewer insurers offering new policies. Many carriers have exited the market because claim payouts are large and frequent, making policies increasingly expensive for consumers.

What does it mean to self-insure for long-term care?
Self-insuring means setting aside a dedicated portion of your assets to cover potential long-term care expenses instead of paying insurance premiums. This approach offers flexibility and keeps assets under your control but requires sufficient wealth to handle potentially high annual costs.

Who is best suited for a self-insurance strategy?
Self-insuring typically works best for individuals or couples with substantial savings beyond what’s needed for retirement income. Those with enough assets can earmark funds for potential care without endangering their financial security or lifestyle.

What is a Medicaid or irrevocable trust, and how does it help with long-term care planning?
An irrevocable or Medicaid trust allows individuals to transfer assets out of their name, potentially helping them qualify for Medicaid coverage without depleting all their savings. If created properly and early enough, it can preserve wealth for heirs while enabling access to Medicaid-funded care.

What are the limitations of using a trust for long-term care planning?
Medicaid trusts must be established at least five years before applying for benefits to meet look-back rules. Additionally, Medicaid may not cover all types of care, such as full-time home assistance, which can limit personal choice and flexibility.

When should you start planning for long-term care needs?
It’s best to plan well in advance—ideally several years before care is needed. Early planning allows time to build assets for self-insuring or to structure a trust properly for Medicaid eligibility, reducing financial and emotional stress later.

Will Social Security Be There When You Retire?

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

If you’ve looked at your Social Security statement recently, you may have noticed a troubling note: beginning in 2034, the system will no longer have enough funding to pay out full promised benefits. For many Americans, this raises a big question: Will Social Security even be there when I retire?

In this article, we’ll break down:

• How Social Security is currently funded and why it faces challenges

• What the 2034 date really means (hint: it’s not “bankruptcy”)

• Why Congress is likely to act before major benefit cuts happen

• Practical solutions that could shore up the system for future retirees

• Why meaningful reform may not happen until the last minute

How Social Security Works Today

Social Security is funded primarily through FICA payroll taxes. Workers and employers each pay 6.2% of wages (12.4% total) into the system, which goes toward funding retirement benefits for current retirees.

Here’s the key point: the money doesn’t accumulate in a large “savings account” for future benefits. Instead, today’s payroll taxes go right back out the door to pay today’s beneficiaries. This setup worked well when there were many workers for each retiree, but demographic trends are changing the math.

• Baby Boomers are retiring in large numbers.

• People are living longer, so they collect benefits for more years.

• Birth rates are low, meaning fewer workers are paying into the system.

This imbalance is the root of Social Security’s funding challenge.

What Happens in 2034?

Many people think 2034 is the year Social Security “goes bankrupt.” That’s not the full story.

According to the Social Security Trustees’ report, if Congress does nothing, the system’s trust funds will be depleted by 2034. At that point, incoming payroll taxes would still be enough to pay about 80% of promised benefits.

In practical terms, this would mean an immediate 20% cut in benefits for all recipients. While Social Security wouldn’t disappear, such a cut would have a huge impact on retirees who rely on it as their primary source of income.

Why We Believe Congress Will Act

It’s our opinion that Congress will not allow benefits to be cut so dramatically. Here’s why:

• For a large portion of Americans over age 65, Social Security is the primary source of retirement income.

• Cutting benefits by 20% would potentially impoverish millions of retirees.

• Retirees also represent a powerful voting population, making it politically unlikely that lawmakers would let the system fail without intervention.

That doesn’t mean changes won’t come—but it does make drastic benefit cuts less likely.

Possible Solutions to Fix Social Security

The challenge is real, but there are several practical options available. The earlier these changes are made, the smaller the adjustments need to be. If lawmakers wait until 2034, the fixes may be more drastic. Some of the most common proposals include:

1. Increasing the Taxable Wage Base

Right now, Social Security taxes only apply to wages up to $176,100 (2025 limit). Someone earning $400,000 pays Social Security tax on less than half of their income.

• Raising or eliminating the cap would bring more revenue into the system.

• While no one likes higher taxes, it may be less painful than the economic impact of the sudden cut in Social Security Benefits starting in 2034

2. Extending the Full Retirement Age

Currently, full retirement age is 67. But Social Security hasn’t been properly indexed for life expectancy. Studies suggest that if it were, the full retirement age could be in the early 70s.

• Extending retirement age would reduce how long people collect benefits.

• This adjustment reflects the fact that Americans are living longer and the Social Security system was not originally designed to make payments to retirees for 15+ years

3. Limiting Early Filing Options

Right now, many people file early at 62, locking in a reduced benefit.

• One proposal is to require younger workers (e.g., those 50 and under) to wait until full retirement age to claim.

• This would preserve more assets in the trust over the long term.

Why Reform May Be Delayed

Unfortunately, even though the math is clear, we don’t expect Congress to make many changes before 2034. Why? Because fixing Social Security is a politically unfriendly topic.

• To save the system, lawmakers must either raise taxes or cut benefits.

• Neither of those options wins votes, which makes reform easy to push off.

This likely means the situation will get more tense as we approach 2034. If reforms aren’t passed in time, one possibility is a government bailout of the Social Security Trust, with additional money created to keep it solvent. While this could buy time, it doesn’t address the underlying funding imbalance—and could carry broader economic consequences.

How We Plan Around Social Security Uncertainty

For our clients, we don’t take a “wait and see” approach. Since we don’t know the exact fate of Social Security, for clients under a specific age, we build retirement plans that assume a reduction in benefits.

• If Social Security benefits are reduced in the future, our clients’ plans are already designed to account for the cut, meaning their retirement income won’t be derailed.

• If, on the other hand, Congress keeps Social Security fully intact, that’s fantastic—it simply means more income than we initially projected.

This conservative approach provides peace of mind and ensures that retirement strategies remain flexible no matter what happens in Washington.

The Bottom Line

Social Security faces real funding challenges, but it’s highly unlikely to disappear. Instead, it will probably undergo adjustments to ensure long-term solvency.

For retirees and pre-retirees, the key takeaway is this: don’t panic, but don’t ignore it either. Build your retirement plan with the assumption that Social Security may look different in the future. A fee-based financial planner can help you model different scenarios and build a strategy that works no matter how Congress acts.

If you’d like to explore how Social Security fits into your retirement plan, learn more about our financial planning services here.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.