If you’re approaching retirement, you likely have a number of big projects on your plate. You may be weighing your options for things like Social Security benefits, investment choices and even decisions about lifestyle.
One of your biggest decisions may be when and how to file for Medicare. Health care is likely to be a major expense in your retirement. According to a Fidelity survey, the average 65-year-old couple can expect to spend nearly $245,000 on health care expenses in retirement.1 Keep in mind, those are out-of-pocket costs. That means Medicare is likely to pick up an even larger tab.
You may be unsure of which options you should choose, when you should file for coverage and what services come with your Medicare enrollment. Below are a few important facts to guide you through the process.
You have several options to choose from.
Medicare is the general name for the system that provides health care coverage to retirees. However, there are actually several different components to Medicare coverage. You can choose the options that best fit your needs and your budget.
Traditional Medicare includes Part A and Part B. Part A generally covers hospitalization and some skilled nursing care to treat a specific condition. Part B covers other components such as lab work, ambulance costs, mental health care, costs for equipment like wheelchairs and more.
You can also choose something called Medicare Advantage, which is often referred to as “Part C.” This is a combination of Parts A and B, but it’s offered through a private insurer rather than through Medicare directly. Medicare Advantage may offer you greater access to specific doctors.
Finally, there are also Medicare Part D and supplemental policies. Medicare Part D provides coverage for prescription drugs. Supplemental coverage helps you pay out-of-pocket costs like copays, deductibles and more. You have several options available, so it’s important you consider all of them before making your selection.
Your selections aren’t permanent.
Many new retirees hesitate to choose a Medicare option because they’re afraid they’ll make the wrong selection. It’s certainly hard to know in advance which types of coverage you will need in retirement. That’s why Medicare offers an annual open enrollment period in which you can change your coverage. Your initial selections aren’t permanent. You’ll have an opportunity to change them later if you find they don’t fit your budget or they don’t give you access to certain providers. It may be wise to review your coverage annually to make sure it still fits your needs.
You don’t have to start Medicare and Social Security at the same time.
Many retirees start Medicare and Social Security at the same time, but you don’t have to. It’s possible you may start Social Security benefits while your spouse continues employment, thus providing employer-based medical coverage, or you may have some form of extended coverage from your employer after you retire.
Similarly, you may be ready for Medicare coverage but want to delay Social Security benefits. By deferring payments, you may be able to increase your potential benefits. When you enroll through Social Security, you can state whether you’re filing for Medicare, Social Security or both.
You get free health care services with your Medicare coverage.
Many retirees don’t realize they’re entitled to free services once they start coverage. For instance, you get a free physical as a form of preventive care. You may also get a vision test, a measurement of your body mass index and a screening for depression. And you may also schedule free annual wellness visits with your doctor to catch issues before they become serious.
Why does Medicare offer these free services? As you can imagine, treating a medical issue is often more costly than preventing one. Medicare wants you to be healthy and to take preventive action.
Have questions about health care and other major retirement expenses? We welcome an opportunity to help you identify your needs and develop a plan of action.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
15717 – 2016/5/31
Are you considering early retirement? If so, you’re not alone. For many Americans, early retirement is the ultimate financial dream. Making the dream a reality requires focus and disciplined saving.
Unfortunately, many workers may not be able to retire at all, let alone retire early. A recent analysis of the Federal Reserve’s 2013 Survey of Consumer Finances found that the average American couple has only $5,000 saved for retirement.1
However, if you’ve saved a significant amount of assets, it’s possible that early retirement could be in the stars for you. There are a few challenges you’ll need to address before you leave the working world though. Below are three such items. If you haven’t planned for these issues, you may want to do so before you consider retiring early.
How will you pay for health care?
Think Medicare will pay all your health care expenses? Think again. You’ll likely have significant out-of-pocket costs above and beyond Medicare coverage. According to Fidelity, the average 65-year-old retired couple can expect to spend $280,000 in retirement on things like deductibles, premiums, copays and more.2 That figure doesn’t include any potential long-term care costs.
Do you have a plan to pay for medical expenses? If you retire early, you may have to pay out of pocket or buy a private policy before you’re eligible for Medicare. Consider maxing your contributions to your health savings account (HSA) and possibly looking into a long-term care insurance policy.
How will you manage your spending in retirement?
A budget can be your most powerful financial tool in retirement. It helps you see where you spend your money, how much you can afford to spend and what changes you may need to make to stay within your income.
Developing a budget is only the first step, though. You also may want to take your retirement budget for a test drive. That’s especially true if you hope to live on a tighter spending level after you retire. Try living on that spending level for three or even six months to see if it’s feasible. If so, retirement may be a possibility.
How will you spend your free time?
Believe it or not, boredom is a serious challenge for many retirees. They struggle to transition to a free and clear schedule. Without work, they may not know how to fill their time or they may feel that they lack purpose.
Some retirees fill the void with costly activities like travel, shopping, and new hobbies. The result is that they spend too much money in the early years of retirement and leave themselves in a challenging position in the later years.
If you don’t know how you will spend your retirement, you may not be ready to stop working. Develop a plan not only for your money in retirement, but also for your time. Think about what your ideal day would look like or what activities may be meaningful for you. Consider ways to enjoy yourself without busting your budget.
Wondering if you’re ready to retire early? Contact us at Beacon Retirement Planning Group. We can help you analyze your needs and objectives and determine whether early retirement is right for you. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18087 – 2018/10/1