Building Your Bridge To Medicare Part 2
In Part 1 of this series, I discussed how folks who retire before age 65 can bridge the gap between leaving their employer-subsidized health care plans to reaching eligibility for Medicare.
Today, I want to talk about the Medicare options that become available once you do turn 65.
That’s right – I said “options,” plural.
Many new retirees are surprised to find that Medicare is not a simple, free, one-size-fits-all health care solution. There are crucial decisions that both you and your spouse will have to make to secure the coverage that makes the most sense during your golden years.
If you take my advice and talk to a health care professional about your options, you should be prepared to discuss these key topics:
No More Group Coverage
Maybe the single biggest difference between Medicare and your old health care plan is that Medicare covers you and your spouse separately. That means if you retire at 65 but your spouse is younger, he or she will need to review some of the bridge options I discussed back in Part 1. Or, if you’re healthy and happy at your job, you might consider working a couple extra years, building up your nest egg and Social Security contributions, until your spouse turns 65 as well.
Once you and your spouse are both 65, you’ll each select a plan that works for your individual health care needs and your retirement budget.
Breaking Down the Plans
Broadly speaking, you have two options when you move to Medicare: you can select what’s commonly referred to as Original Medicare (Medicare Parts A and B), offered by the Federal Government, or you can select a Medicare Advantage plan (Medicare Part C) offered by a private insurer but approved by the government. Here’s how these plans work:
Medicare Parts A and B
Medicare Part A covers hospital stays and some in-home nursing care and hospice services. Doctors’ fees are not covered, and that’s where Medicare Part B comes in. Part B covers your doctor visits and services like testing, X rays, medical equipment, and mental health.
When you sign up for Medicare, you’re automatically enrolled in Part A, and eligible for some very useful free preventative services. Take advantage!
Some of those payroll taxes deducted from your paycheck while you were still working covers the cost of Medicare Part A for most folks. However, you do have to pay an annual deductible ($1,340 for 2018) before Medicare kicks in for hospitalization costs. Some folks choose to buy a Medicare Supplement (Medigap) plan to help cover some of those costs.
Part B is optional. So if you retire and your younger, still-working spouse has an employer-subsidized health care plan available, you might consider jumping on that plan, taking Part A, and delaying Part B until you both retire. If you do sign up for Part B, there’s a monthly premium to pay that’s based on your income level and whether or not you’re taking Social Security. And after you hit your deductible ($183 for 2018), you pay 20% of the Medicare-approved amount for doctor’s services. Just keep in mind that if a doctor charges more than the Medicare-approved amount, you will be responsible for the difference.
Medicare Part C
Also known as Medicare Advantage, this is insurance you buy from a private insurer that includes Parts A and B, and in many cases, vision, dental, and some prescription drug coverage. You have to enroll in Part A to be eligible to sign up for a Part C plan.
While Medicare Part C plans are usually less expensive than paying for Medicare Part B, they’re also more restrictive than Original Medicare. You’ll have to make sure that your preferred doctors and any essential specialists are covered by the HMO or PPO you sign up with.
Medicare Part D
This is an optional plan for folks who need prescription drugs. Again, many Medicare Advantage plans include some drug coverage, but you’ll have to check with the insurer if the medicine you need is covered.
Retirees who need Part D can look forward to some cost relief. Starting in 2019, folks with Part D plans will only have to pay 25% of their brand-name prescription drug costs once they hit a certain threshold, rather than the thousands of dollars many used to pay in the so-called “donut hole” gap.
Know Your Options
If reading this blog has you feeling a little overwhelmed, don’t worry, you’re in good company. Medicare is a huge conversation topic when we’re working with clients at Keen Wealth. The choices you and your spouse make once you turn 65 don’t just affect your health, they affect your financial planning as well.
We’re always happy to introduce our clients to good, reliable health care pros who can talk them through all their Medicare options. Give us a call if you’d like some help setting up that conversation. And once you’ve made the transition to Medicare, circle back to your fiduciary advisor at Keen Wealth so we can review how your new health care plan fits into your retirement goals.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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