Are you quickly approaching retirement age? If so, you likely have a number of decisions on your plate. You may need to decide how you will generate income in retirement and what kind of budget your assets and income can support. You also may face decisions like whether to downsize or if you want to work part time.
One important set of decisions involves your health care. Specifically, you’ll need to decide how best to structure your Medicare coverage. Medicare is a valuable tool for American retirees. It generally covers hospitalizations and doctor visits, but, depending on your selections, it could cover other expenses as well.
You are automatically enrolled in Medicare when you file for Social Security benefits, assuming you have reached age 65. However, you’ll be automatically enrolled only in traditional Medicare, not in any of the supplemental or additional options.
You’ll have to evaluate your health care needs and your budget to determine which options are right for you. Below are a few things to consider as you start the decision-making process:
Medicare doesn’t offer family plans.
Medicare coverage applies to the individual, not the household. That may come as a big surprise if you’re transitioning from employer coverage. Most employer plans offer options to cover spouses and dependents. That’s not the case, though, with Medicare.
This is important, because it means you and your spouse will need to think about your needs individually. You may have a need for prescription drug coverage, while your spouse may not have many prescriptions. Your spouse may need a supplemental form of protection for vision or hearing, while that may not be important for you. Both of you should consider your individual needs, not your household needs.
There may not be a cap on out-of-pocket expenses.
Most employer plans have a firm cap on out-of-pocket expenses in a given year. That’s not the case with traditional Medicare coverage. Medicare will cover 80 percent of your costs, but there’s no limit on the amount of your remaining 20 percent.
In fact, Fidelity estimates that the average 65-year-old couple will spend $260,000 in retirement on health care above and beyond Medicare coverage.1 You could limit that number and get a cap on out-of-pocket costs by using a Medicare Advantage plan, in which a private insurer bundles Medicare coverage with supplemental protection.
Consider scheduling treatment now.
You may have a surgery or some other procedure you’ve been putting off. If you’re still covered by employer insurance, you may want to go ahead with that procedure now instead of waiting until after you retire.
One reason is the uncapped out-of-pocket expenses mentioned above. Another is that your preferred specialist may be available under your current plan but unavailable once you transition to Medicare. Review your needs and consider getting treatment before you enroll in Medicare.
Not sure how to plan your Medicare coverage? Let’s talk about it. Contact us at J. Harris Financial. We welcome the opportunity to help you analyze your needs and develop a strategy. Let’s connect today.
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