Take the time to look into Medicare before you hit 65 — this guide can help.
Preparing for retirement
Well before you turn 65, you need to start thinking about your healthcare costs in retirement. Many employers are doing away with health benefits for their employees who retire. So if you're thinking about retiring early, you may need to come up with a plan to cover your health care expenses.
With COBRA, you can actually extend your health insurance coverage for 18 months after you leave your job. And although the application can be relatively easy to apply for, the premium for this type of continuation coverage often comes with a very high price tag. A more affordable choice may be to find and pay for a private plan. However, it's in your best interest to do some shopping to compare coverage, rates, deductibles and coinsurance before deciding on a policy.
A lot of retirees are surprised to find out that Medicare only covers about 80% of healthcare costs, which means you will have to find another way to cover the remainder.
In addition, Medicare also doesn't cover assisted living facilities — so if you're concerned about the potential need for more long-term care, you‘ll need to plan for that, as well. Many retirees use Health Savings Accounts (HSA) to offset those rising costs.
Working with a knowledgeable financial professional can help in planning your healthcare needs before you reach retirement age.
Signing up for Medicare coverage
You don't have to wait for your 65th birthday to sign up for Medicare. You can sign up starting three months before the date. This is often advised by the Social Security Administration (SSA) because it can take time to go through the paperwork. If you wait, your coverage might be delayed and you might even face higher premiums.
You'll also want to take a look at the different types of coverage available to you. Medicare has four coverage parts:
- Part A — This is known as hospital insurance. It covers most stays at hospitals, skilled nursing facilities and hospice care.
- Part B — This is your medical insurance, covering costs such as doctors' visits, preventive care, medical equipment, outpatient services, tests and x-rays. If you want this coverage, you'll have to pay a premium.
- Part C — This is also called Medicare Advantage. It's a federally subsidized health insurance plan which allows private health insurance companies to provide Medicare benefits to individuals. These plans offer the same benefits as traditional Medicare parts A and B, but typically have their own rules and coverage restrictions.
- Part D — This is prescription drug coverage.
If you or your spouse are still working, and are on health insurance through your current employer, then you may be able to delay your coverage without penalties.
Something else to consider is your employment after you retire. You might also take on a part-time job or decide to try out a new career. However, keep in mind that there's the potential that extra income could trigger higher premiums if an income threshold is reached.
Make the best choice for your needs
When it comes to signing up for Medicare, it's important to consider the costs, both short- and long-term.
Medicare insurance covers a lot of healthcare services, but it doesn't cover everything. Also, depending on which plan you choose, you'll have different costs, ranging from monthly premiums to other coverage costs.
You'll want to consider all of these factors. If you know you're going to spend a lot of time in your retirement outside the country, for instance, you might want to factor that into your choice, as well.
Regardless of which path you choose, look at your needs, health and budget in order to make the best decision for you.