Incorporating Medicare Into Your Retirement Planning

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Medicare and retirement planning

While you might be excited for your upcoming retirement, the prospect may seem a little scary, too. You’ve probably devoted decades of your life to working hard, and you want to know that your golden years will be financially secure and comfortable.

One of the most important aspects to planning for retirement is estimating what your health care will cost. Once you turn 65, you’re eligible for Medicare, a health insurance program available through the federal government. If you plan on working past your 65th birthday and have group health insurance through your employer, you might be able to wait to enroll in Medicare. If you work for a small business, you will most likely be required to enroll upon turning 65.

Parts A and B, or Original Medicare (the federal government program), cover hospital stays and doctor visits, respectively. Part C refers to a Medicare Advantage plan that can be purchased from CDPHP® and replaces Parts A and B. It usually provides additional benefits that Original Medicare doesn’t offer. Prescription drug coverage, or Part D, can also be part of a Medicare Advantage plan or can be purchased separately. Here’s a quick breakdown of what your costs may be with Original Medicare:

Part A: Inpatient hospital costs, skilled nursing facilities, home health care visits, and hospice care
Premium: Usually none
Deductible: $1,216 (each benefit period)
Copayments: Additional charges per day based on the benefit

Part B: Doctor visits, outpatient services, preventive care, some home health visits
Premium: $104.90/month (based on income)
Deductible: $147
Coinsurance: 20% of Medicare-allowed amount

Part D: Prescription drug plan
Premium: Varies by plan and depends on your income

How does this add up? Original Medicare coverage will cost about $2,500 per year, without taking prescription costs into account.

To help supplement your costs and coverage, you have the option to purchase a Medicare Advantage (Part C) Medicare plan. You can apply for Medicare Part C through a private insurer like CDPHP. Medicare beneficiaries may also enroll in a CDPHP plan through the CMS Medicare Online Enrollment Center. In addition to the benefits you get through Original Medicare, a CDPHP Medicare plan provides extra coverage that helps you keep your costs down and stay healthy.

Use the Find My Plan tool to compare your options and make the most cost-effective choice for your needs. Most CDPHP plans include preventive health benefits, low copays, specialist visit copays, dental/vision/hearing coverage, and donut hole coverage, in addition to other benefits and programs. You can also decide whether or not you require prescription drug benefits.

Medicare Coverage and Income
Your monthly Medicare Part B and D premiums could be higher if your income is higher, even if this coverage is offered through a Medicare Advantage plan. The IRS provides your modified adjusted gross income (from your tax return) from two years ago to Social Security. If that figure is more than $85,000 (if you’re an individual or married and filing separately) or $170,000 (if you’re married and filing jointly), then you will pay an income-related monthly adjustment amount, which means you’re paying more for your Medicare Part B and D coverage, in addition to your monthly Part D plan premium. See Medicare.gov for more information.

The good news is that Medicare doesn’t count distributions from health savings accounts, Roth IRAs or 401(k) plans, proceeds from a reverse mortgage, income or loans from cash-value life insurance, or some annuity distributions as income.

If you need assistance with paying for your prescriptions, programs are available, including the Medicare Extra Help program and New York State EPIC.

Planning Ahead
Whether you’re a financial risk-taker or are more conservative about your savings, health care costs during retirement are inevitable. The key is understanding how much you should expect to pay per month and per year during your retirement years so that you’re able to budget accordingly. If you have questions about incorporating Medicare into your retirement budget, consult a trusted financial adviser or ask a CDPHP representative and we will be happy to get you the answers you need.

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