6 FAQs about Medicare

Mature African American couple sitting at the table working on their finances together

Planning for health care in retirement can help you be better prepared to handle the expected and unexpected costs — and Medicare is a significant part of that planning.

If you don’t know where to start, your financial advisor can help you understand the financial aspects of retirement health care and provide personalized advice based on your financial goals and unique situation. In the meantime, here are answers to six frequently asked questions about Medicare:

1. When should I enroll?

Most individuals become eligible for Medicare at age 65. There is a seven-month window for initial enrollment, which begins three months before the month of your 65th birthday and runs through three months after your birthday month. For example, the initial enrollment window for a July 15 birthday is April 1 – Oct. 31.1

2. What if I enroll late?

If you don’t enroll during your initial window, you may face penalties for late enrollment. It’s important to know that the Medicare program doesn’t send reminders.

If you have employer-sponsored insurance, you may be able to enroll late in Medicare without penalty. Be sure to review the details of your situation carefully, and keep in mind that COBRA coverage does not exempt you from the penalty.1

3. Why should I think about health care in retirement now?

The majority of U.S. workers and retirees feel confident about their ability to pay for medical expenses in retirement.2

  • 65% of workers are confident they’ll have enough to pay for medical expenses in retirement.
  • 77% of retirees are confident they’ll have enough to pay for medical expenses in retirement.

However, health care costs in retirement can be substantial. According to a recent estimate, for the average couple with median prescription drug expenses to have a 90% chance of covering their health care costs in retirement, they will need $296,000 in savings reserved for medical expenses.3 Your advisor can work with you to create a plan that factors in projected medical costs in retirement, including potentially needing to pay for long-term care.

4. What will Medicare cover?

Medicare is a valuable program for many retirees, but it wasn’t designed to cover health care expenses in full.3 For example, it doesn’t cover vision, hearing or dental, and there is limited coverage for nursing home and other long-term care options. In some cases, premiums and copays for covered services may become significant.

Here are the parts of Medicare and what they cover1:

  • Part A: Inpatient care in a hospital or skilled nursing facility.
  • Part B: Doctor visits, routine medical services (e.g., flu shots) and emergency medical services.
  • Part C, or Medicare Advantage:
    • Private insurance companies provide Medicare Advantage — the equivalent of Parts A and B coverage, combined — often along with some preventive services, vision and dental coverage.
    • An alternative is traditional Medicare with supplement insurance called Medigap. A Medigap policy helps pay some of the health care costs that Medicare Parts A and B don’t cover, such as copayments and deductibles.
  • Part D: Prescription drug coverage. Private insurance companies administer these plans, which you can purchase in tandem with Medicare Parts A and B.

5. What if I retire early?

If you retire before you qualify for Medicare benefits — which is typically at age 65 — you can’t enroll in Medicare until you become eligible.

To bridge the gap between the time you retire and when you become eligible, you’ll need to consider health care coverage through other solutions like private insurers. This will not affect your Medicare eligibility or benefits when you become eligible, but associated costs to bridge the gap can have a significant financial implications in retirement.

6. How much will Medicare cost?

Your income is a primary factor in how much you will pay for Medicare premiums. In general, the higher your income two years prior to enrollment, the more you will pay for Medicare premiums. Your premiums will also be higher if you haven’t paid into the Medicare system for a designated period of time.1

If your income goes down because of a life-changing event — marriage, divorce or death of a spouse, for example — you can contact the Social Security Administration to request a reduction of your Medicare premium.

Have more questions about retirement health care? Your financial advisor is ready to help.

Your financial advisor provides personalized financial advice to help you achieve your retirement goals, including how to plan for health care and other costs. Your conversation may cover a number of questions, including:

  • When do you plan to retire?
  • Will you have employer-sponsored insurance (from you or your spouse) when you turn age 65?
  • What is your estimated income two years prior to the time you enroll in Medicare?
  • Have you thought about Medicare Parts A and B with a Medigap supplement versus Medicare Advantage plans?
  • Are you aware of tax strategies that may help you manage your retirement income to reduce Part B and Part D surcharges known as Income Related Monthly Adjustment Amounts (IRMAA)?
  • Should you consider long-term care insurance?

Given the costs and milestones for Medicare enrollment, it’s important to discuss your situation and Medicare choices with a financial advisor well before you retire.