By Felipe Mejia, CFP®
It takes the average financial advisor years to know all that is needed to be proficient in Medicare. For the average American, it may feel like learning a new language.
Medicare has many moving parts and can be confusing and convoluted, but it is important to get it right the first time since the decisions you make today can last a lifetime. Here are some important points to consider as you approach or reach Medicare eligibility:
#1: How Do You Apply?
If you are turning 65, you have a seven-month window (three months before your birthday, your birth month, and three months after your birthday) to enroll in Medicare. There are some instances when you would not have to enroll based on employer group health coverage plan (check with your HR).
If you are taking Social Security benefits, your Medicare Part A and B card will come in the mail to you automatically. If you are not taking Social Security at the moment, you will need to sign up.
Counterintuitively, as the nonprofit Medicare Journey suggests*, you will contact Social Security and not Medicare:
You can contact Social Security at 800-772-1213 to schedule a phone call.
You can also apply online at https://secure.ssa.gov/iClaim/rib.
#2: What Will It Cost?
Original Medicare will come in two parts: Part A for hospital visits and Part B for doctor or medical expenses. Individuals age 65-plus are entitled to Part A (free medical hospital insurance) if enough credit hours have accrued. Part B can be added at this time by paying monthly.
The Part A annual deductible for 2022 is $1,555. You will have an extra premium payment if you have less than 40 credit hours or less than 10 years of eligible work history. Make sure you understand your specific extra premium costs if you have less than the eligible credit hours and are retiring early.
The Part B premium is going up. For 2021, the Part B premium was $148.50 per month. For 2022, it’s $170.10. You’ll see this increase come out of your SS check. The good news is that all Medicare beneficiaries will see a 5.9% increase in their SS checks, which equates to an average increase of $90-$100 per month more in the payment. Those beneficiaries with higher incomes will pay a higher monthly Part B premium.
To learn more, read: https://www.ssa.gov/benefits/medicare/medicare-premiums.html.
#3: Should You Enroll in Just Original Medicare?
Original Medicare Parts A and B only cover up to certain amounts. For example, Part A will pay nothing if you are hospitalized past 151 days. Part B will cover nothing for expenses considered “excess doctor charges.”
Over 10% of Medicare beneficiaries today have chosen to enroll in only Parts A and B. They may not understand the financial cost they may be imposing on themselves, and most times, it is not prudent to remain on Original Medicare alone.
Consider a Medicare supplement that fits the types of services and prescriptions that you are already using.
#4: Do You Need Part D?
Remember, D is for drugs. Many people opt out of Part D because at the time they are not taking any prescriptions and want to save on the cost of adding this supplement with the intention of adding it later if needed. The problem with this line of thinking is we cannot accurately guess when we will need to use drug coverage.
There is a Part D premium penalty that will accrue each and every month until the day you do eventually sign up for Part D. The late-enrollment penalty is an amount that’s permanently added to your Medicare drug coverage (Part D) premium.
Look into affordable drug plans early that could potentially save you thousands of dollars and that fit your circumstances and specific needs.
#5: Should You Stay on Your Employer Plan?
Like most answers in the realm of law or financial planning, it depends. Most times, it usually does make sense to stay on a group plan at 65, especially if you don’t have to take Part B. (Remember, because you must pay a premium for Part B coverage, you can turn it down).
As Medicare Journey states, oftentimes, it is cheaper to remain on your employer plan, but again, it depends. Turning 65 will not force you to take Medicare unless your employer has fewer than 20 employees. If your spouse is on your group plan, you may have to stay on your group plan to keep coverage for them. You should always check with your HR manager about Medicare enrollment before turning 65.
If you do choose to stay on your group plan, remember to enroll upon termination or retirement during your “Special Enrollment Period.”
Final Points: Do Not Follow the Crowd!
As a fee-only advisory firm, we understand that no two clients will have the same portfolio, nor will two clients ever have the same financial circumstances in which we plan for.
Applying this same thought process to your finances, never choose a Medicare plan based on a TV celebrity’s or ex-football star’s commercial encouraging you to call a toll-free number to enroll in a plan that may not be right for you.
Do not choose a Medicare plan based on what your spouse, neighbor, or friend chose. Every person is different, and there is not a “one size fits all” solution. Don’t let anyone force you to enroll in any plan if you want to take time to assess or reassess while getting a second opinion from a professional.
Our fiduciary wealth management firm in Plantation, Florida, is happy to discuss any questions you have and where Medicare planning fits in your long-term financial plans.
Schedule a complimentary consultation with one of our fee-only financial planners to discuss your personal situation.
*This material was obtained from Medicare Journey, a 501(c)(3) Not for Profit Organization from information believed to be accurate from https://www.ssa.gov/. For more information, visit the Medicare Journey webpage at https://www.medicarejourney.org/turning65. This information should not be construed as investment, tax, or legal advice.