What You Need to Know About Medicare Costs

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Welcome to Money Monday with Suze, a weekly newsletter designed to inspire your financial life and give you actionable insights from the World’s Personal Finance Expert. Like what you’re reading? Subscribe and share with your friends. Let’s dive in…

Whether you are nearing 65, or an adult child of someone who will soon be eligible for Medicare, I want you to be clear-eyed about how much healthcare will cost you in retirement.  

You do know Medicare is not free, right?

Most everyone pays a monthly premium for Part B of Medicare. Part B covers your doctor appointments, exams, and tests. The premium is set by the government each year. For 2021, an individual with modified adjusted gross income below $88,000 and married couples with joint income below $176,000 pay $148.50 per person per month. If your income is higher, your premium will be higher. 

Part B is just the start. Depending on the type of Medicare plan you choose—Original Medicare or Medicare Advantage—you are likely going to want to add complementary policies to cover expenses not part of Medicare Part B. That includes prescription drug coverage. If you choose Original Medicare, it’s also smart to purchase a Medigap policy to cover the 20% of tests and doctor visits that Medicare Part B doesn’t cover. (You don’t have the 20% issue with Medicare Advantage, but the tradeoff is that MA works like an HMO: coverage is limited to the doctors, testing facilities and hospitals that are part of your MA network.) 

The upshot is that even with Medicare, retirees still need to budget for out-of-pocket costs. According to a government report, the average out-of-pocket cost for people at least 65 years old is more than $6,800. And that’s just in today’s world. If you aren’t retiring for 5, 10 or more years you know darn well those costs will be even higher. 

That works out to more than $500 per month, per retiree. All the talk about saving for retirement sometimes glosses over the fact that one of the reasons you need to double-down on your savings is because health care is going to take a chunk of your monthly retirement income.  

For my younger friends reading this, I hope that is helpful motivation to make sure you are saving enough for a secure retirement.  

And for everyone, exercising and eating well can help a lot too. Sure, there are plenty of illnesses that come out of left field. But you and I know there are also plenty of ailments that can be avoided or better controlled with a commitment to healthier habits. And a healthier you just might have lower healthcare costs. 

For those of you nearing retirement who now realize your healthcare expenses will be higher than you expected, please stand in your truth. If you find yourself stressed about your financial security, ask yourself what you might do other than worry. Would working a bit longer than planned help you? How would your financial picture change if you downsized sooner than later? Maybe take another careful spin through your spending to see if there are some “wants” you can scale back or eliminate. You may be near retiring, but you always have the power to change whatever you want. 

What will retirement look like to you? Are you thinking about what it will feel like in that first year? That point in time when you will no longer be working, and have the freedom to build your days, weeks, and months to your own desires. 

Suze Orman says you also need to focus on the length of your retirement – that it could last 25 to 30+ years. And the key to making sure you’re financially secure for your entire retirement is to make sure that from the beginning you are standing in your retirement truth. 

Before you retire, she would like you to think through the long-term issues that will give you the most security possible for decades, not just the first year.:

· Inflation. The price of food, of your Medicare Part B premiums, of your rent, or property tax, all rise over time. Over a 25-year period if inflation averages 3% a year, what costs you $1,000 a month today will cost you more than $2,000. Will you have the income to cover the cost of inflation over the years? 

·  Social isolation. Many are eager to stay in their current home through retirement. You love it. It may hold so many memories - where you raised a family, and where loved ones still gather. But is it easy for people to visit you, and for you to get out to visit them? If it’s a longish drive are you confident an 80-year-old you, or 90-year-old you, could get a taxi or rideshare to meet up with friends (and vice versa)? This is very important to consider now, while you’re able to make the best decisions possible. And, social isolation is a retirement risk you want to plan ahead for. 

· Home fit. If you need to climb multiple stairs to get into your home, and then a staircase inside the home, you need to consider how that might become too demanding for a much older you. At a minimum, you should consider any interior renovation necessary to create a bedroom and bathroom on the entry-level of your home. You want to do that now, not after something happens later and you realize you can’t use the stairway for a while. Renovations take time. You should also consider where and how you might be able to create ramp access into your home.  

If you are ready to seriously consider those retirement realities today, it will help you make smart decisions that will make your retirement more secure. Making a move today that reduces your living costs and makes it easier to stay socially connected will reduce not just your stress, but will also reduce the worry of your adult kids. 

Scammers are always looking for ways to steal your identity and your money! The latest scams are emailing you about a bill due or a phone call about your Medicare insurance. Don't fall for it; it's a scam. Delete the emails and hang up the phone.

It's important to always guard your Medicare Number and check your Medicare Summary Notice (MSN) for errors. Only give your Medicare Number to participating Medicare pharmacists, primary and specialty care doctors, or people you trust to work with Medicare on your behalf. Remember, Medicare will never call you to verify your Medicare Number. 

Visit Medicare.gov/fraud for more information on protecting yourself from fraud and reporting suspected fraud.