Updated: Jan 3, 2022
In years past, people retired at age 65 with full Social Security benefits and Medicare health insurance benefits. This is no longer the case. The new “full retirement age” (“FRA”) – the age that people can receive their full Social Security benefits – is age 67 for people born in 1960 or after. Claiming benefits prior to your FRA will reduce your monthly benefits significantly. Waiting to collect Social Security until age 70 provides the maximum monthly benefit amount available. This important decision also affects your spouse should you pass away and your spouse collects on your Social Security earning record.
Simply stated, the Social Security monthly benefit amount paid to you is based on your highest 35 years of earnings. So, workers who took years out of the workforce to care for a family, or help aging parents, will typically have a reduced benefit. Obviously, this affects women more than men. Open a Social Security account at ssa.gov to see your personal estimates for benefits.
Fortunately, Medicare health insurance still is available at age 65. If you do not enroll when you are eligible, Medicare will cost you more. About three months prior to your 65th birthday, you will receive Medicare information from the Social Security Administration. The information is important, as it provides critical deadlines regarding Medicare enrollment.
It sounds simple, but not everyone signs up for Medicare on time. If you don’t sign up for Medicare during the appropriate window of time, you risk a 10 percent surcharge on your Medicare Part B premiums, as well as a delay in coverage.
Medicare isn’t free health insurance. If you have paid Medicare taxes during your employment, there is typically no charge for Part A, which covers hospital and inpatient needs. But there may be a deductible or coinsurance costs or your coverage may run out if you’re in the hospital for more than 90 days. Part B, which in 2021 costs a minimum of $148.50 per month, and possibly over $500 per month depending upon your income, covers doctor visits, certain lab tests and some preventive care. Part D helps cover prescription drug costs, at typically an added premium cost, with different plans available.
Since Traditional Medicare A and B doesn’t cover everyone’s needs, it is important to decide whether it makes sense to obtain a Medicare Supplemental Policy, or, in the alternative, consider a Medicare Advantage Plan (often referred to as Medicare Part C). Again, these are important decisions as you approach age 65.
If you want to keep Traditional Medicare – which is often a good thing – there numerous Medicare Supplement plans, with varying premiums. Take the time to choose wisely and get the correct information. The premium costs may vary substantially, as does the coverage.
If you are willing to give up Traditional Medicare, you can enroll in a Medicare Advantage Plan. Medicare Advantage plans, which is often referred to as “Part C”, often bundles Medicare parts A, B and D. While the airwaves are flooded with ads for “free” Medicare Advantage plans, or how wonderful they are, that’s not quite accurate. These are not “one-size-fits all” coverage plans, and careful review will be needed to make sure you get the coverage you need, at a cost you can afford.
Once you add in deductibles and out-of-pocket costs, the total cost of a Medicare Advantage plan can be expensive. Also, your choice of doctors, rehabilitation facilities, and other services may be severely limited. Before choosing a plan, consumers need to look at the total cost and coverage—not just the monthly premiums. It is important to remember that most Americans have health issues as they age. More doctor visits, more prescriptions, and more chronic illnesses are commonplace. Often times rehabilitation facilities are required after a surgery, a fall, or other illness – and Medicare Advantage Plans limit facility choices. So, when considering a plan, think long-term, and be realistic about potential changes in health conditions.
Medicare costs vary depending on where you live. Since Medicare Parts A and B are federal programs, the costs for coverage are the same no matter where you live in the United States. However, drug plans and supplemental plans vary in price depending on your zip code. This may be an influencing factor in deciding where to live during retirement.
As you approach age 65, there are many important issues to consider.It is critical to give these issues the consideration they deserve, as they may have a real impact on your future health, well being, and financial security.