How to Plan for Your Retirement on Medicare

Because of the high degree of financial ambiguity in today’s world, it’s wise to plan for your retirement. It's even wiser to ensure that Medicare is part of the equation when you retire as there can be costs and considerations that can create complications along the way.

Healthcare is one of the biggest expenses for senior citizens. While Part A of Medicare is free for most individuals once they reach the age of 65, there are other variables. Other parts of Medicare can be pricey, depending on the plan and location, and this can lead to snowballing costs.

There are premiums for Medicare Part B, for instance, and supplemental insurance carries costs along with any prescription drug coverage. There are also out-of-pocket costs that have to be accounted for.

Remember to Budget

For one reason or another, many people neglect to budget for Medicare as they near retirement. Leaving the workforce can leave a lot of individuals feeling adrift in terms of healthcare coverage. In some situations, this is because employers have been footing the majority of the healthcare expenses while a chunk of the costs come directly from paychecks.

Because some healthcare plans are covered “automatically” in this fashion, it can be easy to forget that the money does indeed have to come from somewhere. And because of this, working people often forget that they have to budget for healthcare as they enter retirement.

The Premium Rundown

When it comes to retirement, premiums are the biggest issue. In most cases, there are a few different premiums that come up when budgeting Medicare.

First, there is Medicare Part B. This carries a monthly premium, which rises with income levels. These premiums depend on financial particulars, like whether or not customers are enrolling for the first time or whether Social Security plays a role in general benefits. Most recipients have premiums deducted from Social Security benefits.

Second, Medigap. This helps pay for some out-of-pocket costs not covered by Medicare’s original plan. Medigap is designed to complement original Medicare coverage and can be obtained through private insurance companies. Signing up for Medicap should be done during open enrollment periods, which start for those enrolled in Part B by the time they reach the age of 65. There are several factors associated with Medigap premiums, like the insurance company’s rates and the location of the customer.

Third, there are Medicare Advantage plans. These are designed for those who wish to have additional benefits not covered by original Medicare plans. This includes prescription drug coverage, dental care, vision, and other sorts of coverage not typically associated with basic Medicare plans.

Finally, there is Medicare Part D coverage. This is prescription drug coverage and can be also found in Medicare Advantage plans. This insurance is purchased from private companies and should be bought upon first eligibility to avoid late-enrollment penalties. The premiums for Part D coverage vary by provider and location, plus they may include income-related monthly adjustments based on taxation results.

How to Cut Costs

Obviously, premiums can lead to a lot of financial tension upon retirement, which is why it’s important to know how to cut costs.

The first thing to do is to budget. Get things down in writing, either on actual paper or on a computer program so that things can be itemized line by line. Factor in healthcare costs so that monthly budgeting is done to make allowances for surprises and known premiums. When customers see things down in writing, recognizing the actual costs becomes easier.

With costs documented, address concerns. Looking after one’s health is one of the best things one can do in order to keep healthcare costs down. This starts with eating well and maintaining a good body weight. Getting regular exercise is also important. Keeping out of hospitals and expensive doctor visits is the best way forward, as an ounce of prevention really is worth a pound of cure.

Finally, knowing the options is a vital way to get a leg up on understanding and planning for premium costs. Seek advice from insurance brokers and check out online calculators to get as much information as possible. Use open enrollment periods to take advantage of shifting plans and don’t be afraid to ask questions.

Always ask questions!