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Preparing for Retirement and What You Need to Know About Medicare
Retired couple laughing on a couch

It’s important to factor health care costs into your future retirement planning, and choose the Medicare plan that makes the most financial sense for you.

When you retire, you can get Medicare health insurance a few different ways. Two of these ways are:

  • Original Medicare, Part A and Part B
  • Private insurance such as a Medicare Advantage plan or Medicare Part C

Typically, American citizens or permanent residents for five continuous years become eligible for Medicare when you turn 65 years or older, or if you qualify by disability. You may also qualify for Medicare at any age if you have end-stage renal disease requiring dialysis or a kidney transplant, or amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease.

Original Medicare

Generally, Premiums for Original Medicare, Part A and Part B, are similar for most beneficiaries.

Medicare Part A, or hospital insurance, is premium-free if you worked for ten years paying Medicare taxes, otherwise, you may have to pay a monthly premium. Use the Medicare Eligibility and Premium calculator to determine if you qualify for premium-free Medicare Part A.

Medicare Part B, or medical insurance, requires a monthly premium. Premiums can vary for a variety of factors, including income levels, and may also be deducted from your Social Security benefits.

Medicare Part A and Part B cover necessary medical needs, including surgeries, treatment for serious illnesses, recoveries from illnesses, and some preventative care. Original Medicare doesn’t cover most prescription drugs, or routine dental and vision care, and you might need to pay out-of-pocket costs such as premiums, deductibles, copayments, and coinsurance.

Medicare Supplement Insurance Plans

For help paying out-of-pocket costs not covered by Original Medicare, you can sign up for a Medicare Supplement insurance plan, also known as Medigap.

Medigap is available through private insurance companies. These plans come in ten standardized policies, and offer a variety of coverage options for out-of-pocket costs associated with Medicare. Medigap does not cover prescription drugs, so you many also need Medicare Part D.

You can sign up for Medigap during the Open Enrollment Period, which begins when you’re 65 years old, and are enrolled in Medicare Part B.

Medicare Advantage Plans – Medicare Part C

Medicare Advantage plans provide Medicare benefits through a private insurer. These plans take the place of Medicare Part A, Part B, and often Part D coverage.

There are a variety of plan options available with Medicare Part C:

  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)

These plan premiums differ according to the plan and insurance company you choose, and can cover:

  • Routine dental care
  • Vision benefits
  • General wellness coverage

You must continue paying your monthly Medicare Part B premium when you join a Medicare Advantage plan. If you choose a Medicare Advantage plan, you are not able to have Medigap coverage. Medigap policies sold after January 1, 2020, are not allowed to include prescription drug benefits.

Medicare Part D Prescription Drug Coverage

Prescription drug coverage is an optional benefit, and you have the choice to enroll in either a Medicare Part D Prescription Drug Plan, or a Medicare Advantage Prescription Drug plan. Private insurance companies offer both of these types of plans.

If you don’t obtain Medicare prescription drug coverage when you are first eligible, you may be subject to a late-enrollment penalty. The penalty typically applies if you go without credible drug coverage for 63 consecutive days or more, after the Initial Enrollment Period ends.

In addition, you might need to pay an income-related monthly adjustment if your income from two years ago was above a certain limit, as reported on your IRS tax return. After you enroll in Original Medicare, it can be beneficial to sign up for Medicare Part D.

Enrollment Periods

It's important to be sure you’re enrolling in Medicare on time when planning your retirement, otherwise, you may be subject to late-enrollment penalties and additional healthcare costs.

Initial Enrollment Period

Your initial enrollment period for Medicare (all four parts) begins three months prior to the month you turn 65 years old, and lasts until the end of the third month after your birthday – a total of seven months.

You can also sign up between January 1st and March 31st of each year for coverage that begins on July 1st.

It’s important to be sure you’re enrolling during the proper time, otherwise you could face permanently higher premiums – unless you qualify for a special enrollment period.

Special Enrollment Period

If you are still have adequate health insurance when you turn 65 through your employer, or a spouse’s employer, you may qualify for a special enrollment period. You generally won’t be subject to late-enrollment penalties if you delay enrollment because you have other health coverage.

You may qualify for a Special Enrollment Period that lasts for eight months after you retire and your employer coverage ends. You will have to enroll in Medicare during this time to avoid a late-enrollment penalty.

If your group health plan or employment on which it is based, ends during your initial enrollment period, you do not qualify for a Special Enrollment Period.

Other Enrollment Periods

  • Open enrollment for Medicare Advantage and prescription drug coverage is yearly on October 15th to December 7th.
  • New annual Medicare Advantage open enrollment is each year from January 1st to March 31st, during which time you can switch to traditional Medicare from an MA plan and join a Medicare prescription drug plan for drug coverage.

Late-Enrollment Penalties

When you turn 65 years old, you will automatically be enrolled in Medicare. If you’re not automatically enrolled, and don’t enroll when you are first eligible, you could be subject to late-enrollment penalties.

With limited exceptions, you will need to pay the late-enrollment penalty for as long as you have Medicare prescription drug coverage.

We’re here to help with your retirement planning needs. Visit Medicare.gov to review Medicare information, and evaluate what coverage is right for you based on your financial and medical needs. Please contact us for more information, or if we can help in any way.