Three myths about Medicare
It is vital to strategically plan for the realities of health costs in retirement.
More than six in 10 Americans worry about not having enough money in retirement, according to a 2016 Gallup Poll of American’s financial worries. Paying for health care is the top retirement concern, according to a 2014 survey by Merill Lynch and Age Wave, but less than 15 percent of those nearing retirement age have estimated how much they will spend on health care in retirement. Medicare pays for some medical costs but not all. Strategic planning now for the cost of health care later is key.
According to Informed Retirement Decisions: How to Pay for Health Care Costs lesson from the National Endowment for Financial Education, there are three common myths about Medicare and their realities.
- Myth 1: Medicare is free. The reality is Medicare is not free. Medicare premiums, deductibles, coinsurance and copayments must be paid by the policyholder. These costs for typical medical services should be considered when you estimate medical expenses in retirement. The costs at a glance for 2017 for Parts A, B, C and D show basic out-of-pocket expenses. These costs can change over time.
- Myth 2: Medicare will cover all medical costs. The reality is that Medicare does not cover everything. Some expenses not covered are long-term care, routine dental care, dentures, cosmetic surgery, acupuncture, hearing aids or exams to fit hearing aids.
- Myth 3: One can enroll in Medicare at any time. Enrollment is not automatic and there are specific rules and penalties. Generally, you have a seven-month window around a person’s 65th birthday to enroll. Individuals may apply for Medicare in three ways: online at Social Security, in-person at a local Social Security office, or by calling the Social Security Administration at 800-772-1213. One must sign up for Medicare Part A and/or Part B at this time to not be charged penalties.
Also, there is an open enrollment period each year during the fall. This year, the Medicare open enrollment period is from Oct. 15 to Dec. 7, 2017. You can make changes to your coverage for the following year after re-evaluating your personal circumstances.
It is recommended to read the Medicare & You publication for the current year to determine options and how to use Medicare insurance.
To estimate medical costs during retirement, you can use the following tools.
- Social Security Administration’s Life Expectancy Calculator https://www.socialsecurity.gov/OACT/population/longevity.html
Shows the average number of additional years a person can expect to live based only on the gender and date of birth entered.
- Living to 100 Calculator www.livingto100.com
Uses answers to questions about lifestyle and health history to provide an estimate of life expectancy based on current circumstances.
[Note that this tool requires a user to enter their email address.]
- AARP Health Care Costs Calculator www.aarp.org/work/retirementplanning/the-aarp-healthcare-costs-calculator
Estimates future health care costs — as well as how much may be covered by Medicare — based on answers to a series of questions.
A free Retirement Planning series of live online workshops will be offered by Michigan State University Extension on Wednesday evenings during September and repeated in November. Besides Medicare costs, learn valuable information about Social Security, work, savings and investments, retirement plans, housing, debt, fraud, and long-term care insurance. Registration is required to receive emails with the webinar link and resources.
Financial planning takes time, patience, and discipline. Be sure to check out Michigan State University Extension and MIMoneyHealth.org for great tips on many financial topics plus programs in the Events column.