Financial Decisions to Make at Age 65

When you reach age 65, even if you have no plans to immediately retire, it’s time to start thinking about what benefits you may need in the future. Regardless of your financial situation, most retirement planning professionals would recommend applying for Medicare, the federal health insurance program for people age 65 and older (which also covers some younger people with certain disabilities and diseases).

Medicare has four components:

  • Medicare Part A (Hospital Insurance) covers inpatient hospital care, hospice care, residency in a skilled nursing facility, and some home health care.
  • Medicare Part B (Medical Insurance) covers some doctors’ services, preventive care, outpatient services, and medical supplies.
  • Medicare Part C (Medicare Advantage Plan) is a comprehensive plan through a private company that covers all benefits under Part A and Part B. Most of these plans offer prescription drug coverage, too, and they tend to cover more costs than federally funded Medicare.
  • Medicare Part D (Prescription Drug Coverage) covers prescription drugs. Part D coverage is offered by Medicare-approved private companies and insurers.

If you’re already receiving Social Security retirement benefits when you turn 65, your enrollment in Medicare is automatic, and you’ll receive a Medicare insurance card in the mail that shows what coverage you have.

Who Should Enroll, and When

The Social Security Administration recommends people sign up for Medicare Part A three months before their 65th birthday, regardless of whether they want to receive benefits. If you don’t sign up within your initial enrollment period – which is your birth month, and the three months before and after – you may face late penalties that affect your future benefits.

Part A is the only no-cost Medicare benefit (it’s free for most people; for those who haven’t worked long enough to qualify, they can purchase Part A). You can sign up for it without losing your employer-provided health benefits, and you can use Medicare Part A to help cover any hospital costs that your other health insurance doesn’t cover.

AARP says during the initial enrollment period, people should sign up for both Medicare Part A and Part B if:

  • They’re retired/not working;
  • They have no health insurance through an employer, or through an employed spouse; or
  • They live outside the United States, are not working, and are a legal U.S. resident or citizen.

If you have health insurance through an employer and the employer has more than 20 employees, you can wait to enroll in Medicare as long as you’re still insured. When coverage or your employment ends, you have eight months to apply for Medicare.

Understanding Medicare Costs

Medicare premiums are subject to change, but for 2017, this is what you could expect to pay:

  • Part A – If you don’t qualify based on your work history, you would pay $413 monthly for this benefit. Medicare recipients must also pay certain deductibles and coinsurance.
  • Part B – Most people who receive Social Security benefits would pay about $109 per month for this benefit (the premium is based on your income), but the monthly premium cost can exceed $400. After meeting the 2017 annual deductible of $183, Medicare would pay roughly 80 percent of all Medicare-approved doctor’s fees.
  • Part C and D – Premiums vary based on coverage and providers.

Because Medicare coverage isn’t free after retirement, your retirement plan should account for how you’ll manage premiums, copayments, and deductibles.

Lusk Law, LLC, specializes in helping people prepare for the future, whether they need a succession plan for their business or guidance about legal matters that could arise in retirement. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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