By Joe Delaney
Preparing for retirement is not a single daunting task, it is dozens of daunting tasks! One of the most infamous is signing up for Medicare.
Health care coverage is a vital part of any conversation about retirement. Few events threaten your wealth stability more than health problems that are not sufficiently covered by a robust insurance policy.
Below is a 12-question quiz about Medicare. Once you know the answers, you’ll be one step closer to being prepared to enter retirement.
1. When and how do you sign up for Medicare?
You first become eligible for Medicare at age 65. You can enroll by visiting a Social Security office or going online to www.medicare.gov.
2. How long do you have to enroll when you turn 65?
You have a seven-month window to enroll in Medicare. The month you turn 65 is the middle of that window, with three months before and three months after. You will know when you’re nearing the enrollment period because you’ll be flooded with mail, not just from the Social Security Administration but from private insurers offering supplemental plans.
3. Do you enroll when you’re 65 if you’re still working?
If you continue working past the age of 65, you can retire at any time, at which point an eight-month window to enroll begins. There are exceptions, however; for example, if the company you work for has fewer than 20 employees, the seven-month enrollment window will begin three months before the month you turn 65 even if you are working.
4. What happens if you miss the enrollment window?
The penalty for signing up late for optional parts of Medicare (B and D) is increased premiums. You will pay 10% more in premiums for every year you delay enrollment in Part B and an additional 1% per month you delay enrollment in Part D.
5. Does enrolling in Social Security benefits have anything to do with Medicare?
IF YOU ENROLL IN SOCIAL SECURITY FIRST: You are automatically enrolled in Medicare Part A when you begin drawing Social Security, which will take effect when you turn 65. If you have already been drawing Social Security when your seven-month window begins, enrollment in both Parts A and B is automatic. If you don’t want Part B you have to decline it.
IF YOU ENROLL IN MEDICARE FIRST: The reverse is not true; you will not automatically begin receiving Social Security benefits when you enroll in Medicare if you indicate this is what you want to do on your application. This is the course we often recommend, because the benefit amount increases nicely (about 8% per year) up to age 70.
6. What is the difference between Medicare Parts A, B, C and D?
- Part A = coverage for hospital inpatient care, skilled nursing care, some types of home health and hospice care.
- Part B = most services not included in Part A, including doctor services and outpatient care.
- Part C = not really a separate part, Part C is actually Parts A and B, and often D as well, administered through private insurance, a.k.a. Medicare Advantage plans.
- Part D = prescription drug coverage.
7. Will your premiums be paid by Medicare payroll taxes?
Part A is, but consumers pay a monthly premium for Parts B and D. Consumers also pay for Medicare Advantage plans, which are often less expensive.
8. What’s the difference between Medicare Advantage and original Medicare?
Most providers across the U.S. will accept Medicare; it is practically universal. By contrast, Medicare Advantage plans steer you toward preferred providers. They will either require you to utilize providers in the network to receive any benefits, or will at least offer far less coverage out of network. Take care to ensure all your providers are within the network before enrolling in this option.
9. How much of your healthcare costs will be covered by basic Medicare?
Basic Medicare pays 80% of covered expenses. There is no OOP (out-of-pocket) cap.
10. How do you get supplemental insurance?
Medicare supplement plans, a.k.a. Medigap policies, are administered by private insurance companies. There are 10 approved Medigap policies insurers can sell, which are designated by letters A through N (not to be confused with Parts A through D). These policies do have OOP caps.
11. Do these supplemental plans cost the same no matter where you buy them?
No. A 2013 study revealed the most popular plan, supplemental Plan F, ranged from $155 to $197 per month across most states. It pays to shop around and review costs and benefits to determine which package is most appropriate for you.
12. Do you have to stick with the plan you first choose for the rest of your life?
No. Open enrollment is October 15th through December 7th every year, at which time you can and should examine your coverage to make sure you have the best plan for you.
These are not just questions for insurers. Here at Lifeguard Wealth we believe holistic wealth management requires strength in four areas: wealth enhancement, wealth transfer, wealth preservation and charitable planning. Medicare is an essential part of that wealth preservation component.
That’s right up our alley. Talk to usabout how Medicare fits into the retirement planning puzzle today.
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