As you move towards retirement, it’s important to get the most out of your healthcare income. Learn about your options and wise choices you can make to ensure the best outcome possible below.
No.1: Know when and how to sign up for Medicare
Knowing when to sign up for Medicare is extremely important. If you sign up late, it may cost you more than you’re willing to spend.
According to medicare.gov, your eligibility for Medicare begins at age 65. You can sign up anytime within the three months leading up to your 65th birthday, during the month of your birthday, or within the three months that follow.
“That’s your seven-month-long “Initial Enrollment Period” (IEP). Miss it and you may face more-expensive premiums for the rest of your life. Specifically, your part B premiums — which cover medical services, but not hospital services — can rise by 10% for each year that you were eligible for Medicare, but didn’t enroll.” (Selena Maranjian, The Motley Fool)
If you didn’t get the chance to enroll during that period, you can still enroll during the general enrollment period. The dates are from January 1 through March 31 of each year. Your coverage won’t begin until July, and the late penalty might apply (Medicare.gov).
“Many people won’t end up penalized because they didn’t know about the deadline, though — because if you’re already receiving Social Security benefits as you approach 65, you’ll likely be automatically be enrolled in Medicare. You’ll know this has happened because you’ll receive your Medicare card in the mail three months before your 65th birthday. The most common age when people start collecting Social Security is 62, and many people also start at 63 and 64, so the majority of retirees won’t face this penalty peril.” (Selena Maranjian, The Motley Fool)
If you’re still working, with employer-provided healthcare coverage, at age 65, or if you’re serving as a volunteer abroad, you may be able to avoid the penalty and be able to skip the deadline (Medicare.gov).
No. 2: Prepare to spend a lot on healthcare expenses in retirement
According to an article from AARP.org, “Fidelity Investments, which has been tracking retiree health care costs for more than a decade, estimates that a 65-year-old couple retiring this year will need $240,000 to cover future medical costs. That doesn’t include the high cost of long-term care. Nor does it take into account additional costs you may incur if you decide to take — or are forced into — early retirement before your Medicare kicks in.”
Even with no other costs, paying premiums and deductibles for Medicare Parts A,B, and D can be extremely disheartening for seniors in retirement. Check the costs below:
Part A covers inpatient hospital costs, stays in skilled nursing facilities, home health care visits and hospice care. Most beneficiaries pay no premium for Part A, but there is a deductible of $1,184 this year for inpatient hospital stays.
Part B, which covers doctor visits, outpatient services, preventive care and some home health visits, does charge a premium, and in 2013 the standard monthly premium is $104.90 — or $1,258.80 for the year. The deductible is $147.
Part D, the drug plan that had more than 32 million beneficiaries enrolled in 2012, charges an average monthly premium of about $40 — or $480 a year.
Put it all together and you’re looking at $3,069.80 a year for basic Medicare coverage, assuming you meet your hospital deductibles.
“As you plan and save for retirement, be sure to factor healthcare costs into your future budget. Even for the covered services above, deductibles and 20% co-pays will generally apply, and those costs can add up.” (Selena Maranjian, The Motley Fool)
Sources: The Motley Fool, AARP.org, Medicare.gov