Every day retirees are making costly mistakes regarding their Medicare coverage. Consequences of these mistakes include late-enrollment penalties, coverage gaps, excessive premiums and out-of-pocket costs. Individuals are retiring without fully knowing how much they will pay for health care in retirement and not preparing their retirement plan for this costly expense.
So, what can you do?
An important detail to understand is that Medicare is not automatic. In fact, there are three enrollment periods you need to keep in mind. The first is your initial enrollment period which starts 3 months before your 65th birthday. The second is the “special enrollment” period and applies to workers who are over 65 and have medical coverage through an employer with more than 20 employees. The third and final period is “general enrollment” which applies to everyone over 65 who missed the initial enrollment period and are not eligible for special enrollment. Medicare is not a choice. If you are 65 and you want health insurance you must enroll. Other insurance policies you may hold are secondary to Medicare, unless as mentioned above, you work for an employer that has greater than 20 employees.
Next, understand your Medicare costs and how they are paid. Most individuals realize they will have monthly premiums, but neglect to plan for deductibles, coinsurance, co-payments and various other out of pocket costs (dental, vision etc.). Your Medicare costs are deducted from your social security benefits. If you are not receiving benefits, you will receive a bill from Medicare. In fact, you will likely receive multiple bills, one for your premium, if you are subject to an income related adjustment and another for your Part D prescription drug plan.
Finally, research your Medicare coverage choices. You have the option of Original Medicare or a Medicare Advantage plan. With original Medicare you may need to add on a medigap policy to cover costs that are not covered by parts A & B. I recommend starting with your doctor or the one you want to see. Determine what insurance they accept and find the plan that will cover them.
Failing to plan for Medical expenses in retirement is one of the most common mistakes I see. For most, health insurance is paid for by employers and is not included in a monthly budget. Also, Medicare is confusing, and it can be hard to determine what you should estimate the cost to be. A financial planner can help you estimate medical expenses appropriately, so you do not have any surprises in retirement. Schedule a retirement planning session today!