To Ensure Income Stream, Plan Ahead for Retirement

Elderly persons must be particularly alert to the federal programs Social Security, Medicare, and Medicaid

Considering federal and state income benefits for the elderly seems almost an anomaly in Denver. After all, this city - with its bike trails, mountain resorts, and packed local sports arenas - represents America's infatuation with youth.

But what happens if an older person, here in the Mile High City or elsewhere, has put off retirement planning or has only a limited amount of income available from private-pension plans? What if a young family has an elderly person living with it who needs costly long-term financial assistance?

According to Timothy Casserly, of law firm Burke and Casserly in Albany, N.Y., and an expert in legal issues for the elderly, it is important to put together an income plan for all elderly people.

Consider all income

The plan should encompass their savings accounts, revenue streams - such as retirement checks and personal and household assets - and government-income benefits.

The three benefit programs the elderly must be particularly alert to are Social Security, Medicare, and Medicaid, according to Mr. Casserly, who addressed the recent conference here of the National Endowment for Financial Education, a nonprofit institution promoting ethical and academic standards for financial advisers.

Casserly gives several reasons why financial assets and government benefits must be coordinated: to offset potential taxes, including estate taxes; to develop strategies to enhance a person's monthly income stream; to create a succession plan for older persons who may own a business; and to enable an older person to qualify for full benefits from Medicaid, if necessary.

Creating coordinated income and retirement plans will become increasingly necessary as the huge baby boomer generation enters its retirement years.

Moreover, long-term care, if necessary, can be enormously expensive. For example, nursing-home care in the eastern United States can cost between $50,000 and $100,000 a year, Casserly says.

Look at income-assistance programs

Thus, it is important that the elderly and their adult children understand the three main benefit programs:

*Social Security: This is the federal government's "retirement" program for working Americans. (Actually, it is an income-transfer program from younger workers to older persons.) Full benefits currently begin at age 65, providing a person is a "fully insured worker." But starting in 1999, the government will begin to push back the retirement age, until it reaches 67 in the year 2022.

To be fully insured, a person must have worked 40 or more quarters. To determine your current eligibility, as well as your prospective benefits, you can call Social Security at 1-800-772-1213. The office will send you a form to fill out. If you are past 60, the office will determine benefit levels over the telephone.

Starting this year, Social Security automatically sends out a detailed schedule of future benefits to all persons 60 years of age or older who are listed on the office's computer system but not yet receiving benefits.

While a person can retire as young as 62, each month of early retirement results in a benefit decrease, up to a maximum of about 20 percent. Conversely, you can increase your benefit levels up to a maximum of 20 percent if you take later retirement, such as at age 70. The trade-off, Casserly says, is that early retirement can mean more checks. Later retirement means larger checks.

Other family members can also qualify for benefits based on the retiree's Social Security standing, including younger children, a spouse, and even a divorced spouse, provided the earlier marriage lasted at least 10 years.

One important point to remember: For a person who retires before age 65 but returns to the work force, earnings above certain federally defined limits will result in a loss in benefits.

Thus, if he retires before age 65, excess earnings will result in a reduction of $1 in benefits for every $2 in excess earnings above $8,160 in 1995, Casserly notes.

For a person retiring at the normal retirement age (65) but who has not yet reached 70, every $3 in excess earnings above $11,280 in 1995 will result in a loss of $1 in benefits. Benefits are not reduced because of earned income when the insured worker is 70 or older.

*Medicare: This is the federal government's health-insurance program for all Americans. Coverage begins at age 65.

*Medicaid is the federal-state health-care program for the financially impoverished. Benefits are based on need. What is important to know, says Harley Gordon, a partner with Gordon & Friedler, a Boston-based law firm specializing in estate planning and Medicaid issues, is that to qualify for Medicaid assistance a person or married couple must reduce their total financial assets to certain defined dollar levels.

That's why advice from a professional, such as a lawyer specializing in the elderly, can be important. While people often associate Medicaid just with the very poor, Mr. Gordon says, most elderly people seeking assistance "are in the middle class."