If you do not do your research on Medicare you find yourself making mistakes that could turn out to be rather costly. Lets take a look at how to avoid these mistakes.
Medicare can be expensive for many seniors, so avoiding financial mistakes is crucial in your retirement. Sadly, there are costly Medicare mistakes that you can make. Understanding the different parts, costs, and enrollment periods is a great way to start your Medicare journey. Gaining all the Medicare knowledge you can before you turn 65 is essential to your financial success in retirement.
Before enrolling in Medicare, you must understand what Original Medicare will cost you. Most people assume Medicare is free because they’ve paid into the program while they worked in the U.S. However, the Medicare tax you pay through payroll only helps fund your Part A premium. As long as you worked at least 40 credits in the U.S., you qualify for premium-free Part A.
However, if you don’t have 40 credits, you’ll have a monthly premium for Part A, which varies depending on your number of credits.
Additionally, everyone pays a monthly Medicare Part B premium unless they qualify for Medicaid. It’s even possible to pay more than the standard Part B premium if you had a higher income from two years prior.
Not saving for Medicare premiums
It’s never too early to start saving for your retirement. Considering you likely won’t have a steady income once you retire, it’s essential to have money put away to help cover your costs. You’ll want to understand that your Part B premium will be deducted monthly from your Social Security check. If you aren’t receiving Social Security benefits when you enroll in Medicare, they will mail you a quarterly bill.
It can be challenging to save for a quarterly bill, especially if you are unaware that’s how they require payment. Understanding what you can expect from your Medicare bill is a way to avoid financial struggles.
Failing to pay Medicare premiums
While you don’t have to worry too much about missing a Medicare premium payment if you receive Social Security benefits since it’s automatically deducted, you could miss a payment if you receive a quarterly bill. You risk losing your Medicare coverage if you don’t make your premium payments.
In addition to potentially not having coverage, you will have to wait for an enrollment period to re-enroll and incur a late enrollment penalty. You’d pay that penalty each month on top of your Medicare premium.
It’s crucial to ensure you pay your monthly premiums for coverage.
Not enrolling in a Medigap plan or Advantage plan
You’re sadly mistaken if you think Medicare covers 100% of your hospital and medical costs. While Medicare does cover a good portion of your expenses, it doesn’t cover your costs completely. For example, Medicare Part B covers 80% of your approved medical bills. You are responsible for the remaining 20%, with no cap on those costs.
However, you can enroll in a Medigap or Medicare Advantage plan to help limit your expenses. A Medigap plan will pay secondary to Original Medicare and cover those gaps for you.
An Advantage plan is an alternative way to receive your Medicare benefits. The Advantage plan determines your cost-sharing, so it won’t necessarily be 80/20, but Advantage plans include a maximum out-of-pocket limit. This means the plan will cover you at 100% for the rest of the year once your approved costs reach that amount.
These options help you from financial devastation if you were to go through extensive hospital and medical services.
Not enrolling in drug coverage
It can be surprising to many that Original Medicare does not cover most prescription medications. While some medications can fall under Part B, most medications you’d get from a pharmacy will actually fall under Medicare Part D.
Medicare Part D plans are standalone drug plans you can purchase for drug coverage with Medicare. You would buy a plan from a private insurance company, which means it has a separate premium you’ll pay each month.
You won’t need a Part D plan if you have creditable coverage from an employer, retiree plan, the VA, or an Advantage plan that includes drug coverage.
Not enrolling during the necessary enrollment period
If you fail to enroll in Medicare during the correct enrollment period, you could face lifelong penalties. For example, if you miss your Initial Enrollment Period surrounding your 65th birthday month and don’t have creditable coverage from an employer, you will accrue a late enrollment penalty.
That penalty is 10% of the standard base premium for every 12 months you go without Part B or creditable coverage. It is a lifelong penalty, so knowing when to enroll is vital to avoid making this mistake.
Failing to learn about IRMAA
If you don’t know about IRMAA (Income Related Monthly Adjustment Amount), you’ll want to learn about it. Suppose your modified adjusted gross income from two years prior was above a certain threshold. In that case, you’ll pay more for Medicare Parts B and D. While you can appeal this if your income has since changed, you’ll want to know about this potential premium increase to prepare for it.
Be prepared for Medicare
Medicare mistakes can cost you financially. Being prepared before you enroll in Medicare is key to avoiding these mistakes. Work with a reputable Medicare broker who can guide you through this process and help you learn Medicare’s do’s and don’ts.
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