Navigating the complexities of Medicare can be a daunting task. But Medicare isn’t just about medical care; it’s a significant aspect of your financial planning. And it’s important to understand how Medicare coverage works. From understanding the different parts of Medicare to optimizing your coverage while managing costs, this comprehensive guide covers everything you need to know about Medicare.
What Is Medicare?
Medicare is a health insurance program provided by the federal government for people over the age of 65 and for disabled individuals. Even though Medicare plays a key role in covering healthcare costs in retirement, it does not cover everything. Understanding the coverage and limitations of Medicare is crucial when preparing for retirement.
Medicare is divided into four parts: Part A, Part B, Part C, and Part D. There are also supplemental coverages to consider. Here is an overview of the different options to review as you approach retirement:
- Original Medicare is a package that includes Part A and Part B, with the optional add-on of Part D.
- Part A covers hospital services. If you or your spouse paid Medicare payroll taxes during your working years for at least 10 years, Part A is free for you. If you didn’t, you can still get coverage by paying a monthly premium.
- Part B covers doctor visits and other outpatient services. Even if you or your spouse paid Medicare payroll taxes, Part B comes with a monthly premium.
- Part D is an optional add-on that includes drug coverage.
- To help with Medicare costs such as copayments, coinsurance, and deductibles, many retirees will purchase Medigap insurance from private insurance companies to supplement their Original Medicare plan. Some Medigap plans also cover additional services not covered by Part A or Part B, but typically exclude services such as dental, vision, and hearing visits.
- Medicare Advantage, also known as Part C, is an alternative to Original Medicare that is offered through Medicare-approved private companies. This plan bundles Part A and Part B and often includes Part D as well. Medicare Advantage plans may cover additional services, including vision, hearing, and dental visits, but it is dependent on the terms of each plan and you will have to read the coverage details carefully. Medigap policies cannot be combined with Medicare Advantage.
- You may pay an extra charge added to your Part B premium called an Income Related Monthly Adjustment Amount (IRMAA). In short, if your modified adjusted gross income as reported on your IRS tax return from two years ago is above a certain amount, you’ll pay the standard premium amount plus an IRMAA charge. For 2024, the projected IRMAA additional premiums are:
|MAGI – Single Taxpayers||MAGI – Married Filing Jointly||IRMAA Premium (Part B)|
|$103,000 or less||$206,000 or less||$174.70|
|Between $103,000 and $129,000||Between $206,000 and $258,000||$244.60|
|Between $129,000 and $161,000||Between $258,000 and $322,000||$349.40|
|Between $161,000 and $193,000||Between $322,000 and $386,000||$454.20|
|Between $193,000 and $500,000||Between $387,000 and $500,000||$559.00|
|Greater than or equal to $500,000||Greater than or equal to $750,000||$594.00|
Keep in mind that basic Medicare does not cover long-term care, dental care, vision or hearing care. This includes Medigap supplemental coverage. You may think that you’re getting additional services when you enroll in Medigap, but that is not the case. Medigap only helps out with deductibles and copays, it will not provide additional services that Medicare does not cover. If these expenses are not properly planned for, it can be detrimental to your overall retirement plan.
What to Expect?
What to expect depends on which stage of the Medicare process you’re in.
If you’re a pre-retiree thinking about enrollment, you should expect to sign up in the six months surrounding your 65th birthday (three months before and three months after). If you’re receiving Social Security benefits at that time, you will be automatically enrolled in Medicare Part A and Part B. Additional coverages like Part D, Medigap, and Medicare Advantage will have to be enrolled separately. If you’re not receiving Social Security when you turn 65, you will have to apply for Medicare through the Social Security Administration website.
If you’re retired and already enrolled in Medicare, you should expect to review your benefit options every year. This year, Medicare open enrollment began on October 15th and remains open through December 7th. The decisions you make during this period will affect your 2024 Medicare coverage. It’s a daunting task, but Medicare costs and coverage levels change annually so it’s important that you stay up to date.
If you are already enrolled in Medicare, here is what you can do with your Medicare coverage during the enrollment period:
- If you have Medicare Parts A & B, you can switch to Part C.
- If you have Medicare Part C, you can switch back to Original Medicare or change to a different Medicare Advantage Plan.
- If you have Part D, you can switch to a different Part D plan or drop your prescription drug plan.
Don’t get this confused with the Medicare Advantage open enrollment period that occurs from January 1 to March 31, where those with Part C can change to a different Part C plan or switch to Parts A and B. Any other changes need to happen in the October-December enrollment period.
Overwhelmed? We Can Help
At SpringSource Wealth Advisors, we provide services and strategies that bring your retirement vision to life. In addition to walking you through Social Security claiming strategies and Medicare programs, we work with you to create cash flow plans, retirement income streams, and investment strategies around your risk tolerance levels.
Scott Abrahamson is Owner and Wealth Advisor at SpringSource Wealth Advisors, a fee-only fiduciary Wealth Advisor with a passion for making the retirement planning process simple. With their goals-based planning approach, SpringSource helps individuals, families, and small businesses make smart financial decisions and realize the core value of their finances: living an abundant life. As an independent CERTIFIED FINANCIAL PLANNER™ professional with over 20 years’ experience, Scott’s mission is to empower clients to reach financial freedom through exceptional, caring service. He takes time to explore each client’s core values about money and partners with them to formulate clear goals based on those values. The result is a powerful, personalized road map designed to help each client successfully navigate every life phase. Scott loves watching clients experience a sense of peace and financial independence through smart financial planning over time.
Outside of the office, he enjoys playing and coaching sports, boating, outdoor activities, spending time with family, and serving in the community. To learn more about Scott, connect with him on LinkedIn.
Chris Pawlowski is Wealth Advisor at SpringSource Wealth Advisors, a fee-only fiduciary Wealth Advisor with a passion for making the retirement planning process simple. With their goals-based planning approach, SpringSource helps individuals, families, and small businesses make smart financial decisions and realize the core value of their finances: living an abundant life. Since entering the financial planning industry in early 2013, Chris enjoys understanding his clients’ goals and working hard to formulate effective strategies for them. With the technical experience in the planning industry that puts him in a strong position to help clients through every life stage, Chris desires to empower families to reach financial freedom through exceptional, caring service.
As a Veteran who served in both the U.S. Army and the CA Air National Guard, Chris has a special passion for helping his brothers and sisters at arms in pursuing their financial goals. He holds the CFP®, Chartered Retirement Planning CounselorSM (CRPC®), and Accredited Portfolio Management AdvisorSM (APMA®) designations. Outside of the office, Chris devotes his time to his beautiful wife, Yvette, his church, and his hobbies, which include backpacking, kayaking, hiking, and enjoying time with his family and friends. He also partners with Hope World Wide, a faith-based charity organization in Portland, to serve local families in need. To learn more about Chris, connect with him on LinkedIn.
Information provided herein is provided by SpringSource Wealth Advisors, LLC. This information is for general informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Information was compiled from third-party sources believed to be reliable and accurate but cannot be guaranteed. Investment advisory services are offered through Oswego Wealth Advisors, Inc., an SEC Registered Investment Advisor. Neither SpringSource Wealth Advisors, LLC nor Oswego Wealth Advisors, Inc render any legal, accounting, or tax advice. All investments involve risk, are not guaranteed, and may lose value. We recommend that all investors consult with a qualified adviser to assess your personal situation before implementing any strategy.
Please remember to contact your advisor when your financial circumstances or objectives change. Your advisor may recommend adjustments to your financial planning and investment strategies to better suit your current situation.