Understanding Medicare

Have you thought about health care in your retirement years? Health insurance in your senior years is something you need to plan for when you stop working a full-time job with benefits. In 2016, the average person with Medicare spent $5,460 out of their own pocket annually (Kaiser Family Foundation). Hospitalizations or medical procedures will cost much more. Most of us don’t think about these issues until we hit that magic number of 65 and are eligible for Medicare. This is the health insurance program for people 65 and older. There are some exceptions to qualify early, but that is not the focus of this article. 

There are four parts to Medicare:

  • Part A – your hospital insurance; 
  • Part B – your medical insurance, which covers outpatient services like your doctor visits and lab work;
  • Part C – Medicare Advantage, which I will explain later in this blog; and
  • Part D –  your prescription drug coverage. 

You have a seven-month window to sign up for Medicare (three months before you turn 65, the month of your birthday and three months after). You should receive something in the mail prior to 65 from the Social Security Administration about Medicare enrollment. If not, I suggest you contact them. For most people, there is no charge for Part A. Part B will have a monthly premium which currently is $144.60 (or higher depending on your income). 

This enrollment period is when you need to make a decision. Do I want traditional Medicare (Parts A and B) or Medicare Advantage (Part C)? Medicare Part C or Medicare Advantage plans are health benefits from a private insurance company that is approved by Medicare. These plans operate like a HMO or PPO. About 34% of Medicare beneficiaries sign up for Part C (Kaiser Family Foundation). You will need to decide what best meets your personal needs. Medicare Part C will cover hospital, medical and sometimes dental and vision services too. Each plan is different so you really need to shop around.

The other aspect you need to consider if you enroll in Parts A and B is a Medigap policy. Because Parts A and B typically cover 80% of the costs of medical care — the Medigap policy fills the financial gap. There are several different types of Medigap policies, so let me direct you to some resources. Medicare has a site (How to compare Medigap policies) that provides a comparison of the different plans. This is the short version. The detailed explanation of Medigap policies is called, Choosing a Medigap Policy.

Finally, you have Part D, your prescription plan. Part D is offered by private insurance companies, so you will have options. In some cases, it is included in your Medicare Advantage plan or your Medigap plan. 

There are exceptions to everything I just shared. For example, if you are still working, you can keep your work insurance.  I want to share with you some resources so you can make the best decisions for your own situation. There is also a program called SHIP (Senior Health Insurance Program).  Your SHIP representative can answer all of your questions about Medicare. 

Additional Resources

4 Strategies To Reach Savings Goals 

Saving money, improving your financial life, and building wealth all start when you set a goal and implement a plan to reach that goal. 


Make a Plan

Those with a savings plan are twice as likely to save successfully.  That is where America Saves can help. Savers are guided on how to reach savings and debt reduction goals when making a commitment to yourself to save with the America Saves Pledge. To learn more about how you can save and sign-up to take the pledge visit the America Saves website www.americasaves.org. Complete the Pledge and America Saves will send you short emails and text reminders, resources, and tips to keep you on track toward your savings goal.  

Save Automatically

Automatic savings means you have a process in place to save at regular intervals, whether that is monthly, weekly, or daily. You can instruct your employer to withdraw a certain amount from your paycheck each pay period and transfer it to a retirement or savings account (or both). You can also contact your bank or credit union to set up an automatic savings by transferring a fixed amount from your checking account into your savings account each month. Saving automatically becomes a part of your budget and acts as a safety net for unexpected situations and emergencies. 

Retirement Insurance Pension Saving Plan Benefits Travel ConceptPay Off High-Interest Debt

Paying down debt, especially loans or credit cards with high interest rates, can lead to extra money every month for saving. Prioritize paying debt with double-digit interest rates and increase your payments over the minimum due. For example, if you have a $3000 credit card balance at 19.8%, and you pay a minimum balance of 2%, it will take 39 years to pay off the loan and cost more than $10,000 in interest charges. 

Save for Retirement

Retirement savings is a top priority for many savers.  Saving now for retirement will ensure that you have enough money to enjoy a comfortable standard of living when you stop or reduce the number of hours you work. You may be able to save for retirement at your workplace through a 401(k) plan, which has many benefits including direct deposit from your paycheck. If your employer doesn’t offer a retirement plan, you can still save for retirement, by putting money in an Individual Retirement Account (IRA).