While there is no shortage of things to prepare for in retirement, it’s critical to also address your health needs and concerns by crafting a comprehensive health care strategy. There are various ways to accomplish this, with Medicare being the most important for many Americans.
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Medicare generally provides health insurance for most people age 65 and older, and others who have received Social Security disability benefits for at least 24 months, have end-stage renal disease or have amyotrophic lateral sclerosis (also known as Lou Gehrig’s disease). Medicare is similar to Social Security, since it is a federal program that you have paid into throughout your career. Just like Social Security, you want to maximize this benefit in retirement.
Medicare is split into four parts:
- Part A: Hospital insurance – covers the costs of health care at medical facilities. Offers coverage for medically necessary inpatient care at hospitals, skilled nursing facilities, hospices and some home health services.
- Part B: Medical insurance – covers the costs of health care outside medical facilities. Offers coverage for doctors’ services, hospital outpatient care, mental health and some preventative health care services.
- Part C: Medicare Advantage (MA) plans – policies you can purchase from certain private insurance carriers that provide the same (or more) coverage as Parts A and B.
- Part D: Prescription drug coverage offered through private Medicare-approved insurance companies.
Many people with Part A do not pay a premium because they have already paid enough into the system. As with Social Security, a certain portion from each one of your paychecks is deducted to pay for Medicare. When you’ve had Medicare tax withheld from you or your spouse’s pay for at least 40 calendar quarters, then you may be be eligible for free Part A coverage.
The monthly premium associated with Part B is set according to income level, although most people will pay a standard monthly premium amount and a small yearly deductible. Individuals who have an annual income greater than $85,000 and couples who have a joint annual income greater than $170,000 will have an extra charge added to their premium due to their high income level. Parts C and D are provided via private insurance companies so the monthly premiums of these policies depend on the extent of their coverage and can vary between companies.
Enrollment in Parts A and B is automatic for anyone who is 65 years old and already receiving Social Security, diagnosed with ALS or under age 65 and receiving disability benefits. For individuals eligible for Medicare but who do not qualify for automatic enrollment, they can sign up to receive Parts A and B during an enrollment period.
If you don’t plan on filing for Social Security when you turn 65, it’s important to enroll for Parts A and B during the three months prior to your 65th birthday. Failing to do so could delay your coverage and may result in late penalty fees.
Parts C and D, on the other hand, are offered through private insurance companies, which means if you decide you want this coverage type, you must purchase one of these policies during an enrollment period. Keep in mind that if you don’t sign up for Part D when you’re first eligible, your premiums may be subject to penalty.
To learn more about Medicare plans, contact us at (715) 355-4445.
We are not affiliated with, or endorsed by, the Social Security Administration or any other government agency.