Retirement is just over the horizon and while most people have making ends meet during that period on their minds there is another extremely important part of aging that should be explored. Medicare! There is a 7-month initial enrollment period that begins 3 months before you turn 65, the month you turn 65 and 3 months after you turn 65. If you do not sign up during that window of time you will be penalized for late enrollment, which comes in the form of higher premiums (typically a 10% increase premiums).
The parts of Medicare are as follows:
- Part A – Hospital coverage (inpatient, home health and skill nursing)
- Part B – Medical coverage (doctor visits, outpatient and diagnostic screenings)
- Part C – Medicare Advantage (private medical plans helping cover gaps in coverage)
- Part D – Drug plan (private coverage to offset drug costs)
If you are still working and carry health coverage with your employer or still covered by your spouse’s coverage you have the option of keeping your employer coverage until you retire. You then have eight months to sign up for Medicare (to avoid penalties for late enrollment). This special enrollment period is triggered the month after the employment/health coverage ends. Medicare Part A is paid for through Social Security as long as you have met the 40 quarters of work qualification. Because of this, even with continued coverage, many people sign up for Part A anyway providing coverage overlap. Additionally, if you have a Health Savings Account, understand there are special rules regarding contributions when you enroll in Medicare (we will discuss this further in a blog in the coming months).
If you or the spouse who carries your health insurance retires before the Medicare age of 65 years old you may experience significant gaps in healthcare benefits. You will want to research and compare all of your options before making the definitive decision to retire early. There are several ways to ensure coverage during your period before Medicare kicks in such as, short-term plans, hospital plans and major medical (including the COBRA option). Medicaid is also a possibility but you would need to meet the eligibility criteria for your state.
A couple of ways to close gaps in your Medicare coverage are through Medicare Advantage/Medigap (Part C) & Drug plans (Part D). These plans are sold through private insurance companies, which is to your benefit as you can shop around and find the best coverage and price for your needs. A word of caution though, do NOT forgo establishing a Part D plan unless you have credible coverage (i.e. employer sponsored health insurance) because there is a permanent delayed enrollment penalty of 1% per month (for a total of 12% per year) for failing to enroll in a prescription drug plan during the initial enrollment period. You will be stuck paying the penalty on this coverage for the rest of your life. Don’t forget dental & vision! Medicare supplements generally only cover dental & vision in emergency or complicated scenarios. In 2018, Medicare Advantage plans cost roughly $400 per year – So if you factor in possible dental procedures, dentures, glasses etc including dental and vision in your Part C coverage can help save you money throughout retirement. One last item to note, periodically shop around for your Part C and Part D – there may be opportunities for you to save on your premium costs over time just like other subscription type services (i.e. cable or cell phone). Don’t overpay if you don’t need to.
If you have other questions about Medicare or would like to explore this topic in more detail please contact me for an appointment. Don’t delay and plan ahead – Health coverage is just as important as Financial means during Retirement!
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