Medicare: 3 things to consider before 65

Illustration depicting two people walking with two paths in front of them

Choosing your retirement health care coverage is an important decision — but it can feel complicated. As you learn about the Medicare enrollment process, here are three things to keep in mind about the federal health insurance program:


1. Medicare doesn’t cover all health care costs

Medicare is a valuable program for many retirees, but it wasn’t designed to cover health care expenses in full. While doctor visits and routine medical and emergency services are covered, Medicare 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 four parts of Medicare and what they cover:

  • 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.


2. Missing the initial Medicare enrollment window may result in penalties

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.

If you don’t enroll during this initial period, you may face penalties for late enrollment. The Medicare program doesn’t send reminders.

If you are still working at age 65 and have employer-sponsored insurance, you may be able to enroll late in Medicare without penalty. Review the details of your situation carefully, and keep in mind that COBRA coverage does not exempt you from the penalty.


3. Your income prior to enrollment will affect how much you pay

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.

In the years before retirement, it’s important to be aware of how your income could impact your Medicare prices. If you’re near the threshold, your advisor can help identify strategies to reduce your modified adjusted gross income.

If you currently have Medicare coverage and 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.


Retire confidently with the help of your advisor

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. Our “Understanding Medicare” guide can also help you navigate your retirement health care choices.


Download our Medicare guide

Choosing your retirement health coverage is an important decision that can be complicated. This guide will help you to understand Medicare and the choices available to you.