When you’re saving for retirement, it’s natural to focus on the things you’re looking forward to doing, whether it’s traveling, spoiling your grandchildren or making the world a better place. The aches, pains and medical expenses associated with aging may not be top of mind. However, healthcare is one of the most significant and underestimated expenses for retirees and you need to plan head.
Medicare, a federal program that provides healthcare coverage for Americans 65 and older, is a resource that can help. Unlike Medicaid, which is a public assistance program for those in financial need, Medicare eligibility is based on age, so even the high net worth use it. With an understanding of your unique situation and Medicare’s sometimes complicated rules and regulations, your Luma Wealth advisor can help you create a strategy to cover healthcare expenses that minimizes potential Medicare surcharges and enables you to concentrate on enjoying your retirement.
Important things you need to know about Medicare include:
1 WHEN TO APPLY
Generally, the Initial Enrollment Period (IEP) for Medicare begins three months before the month you turn 65 years old and continues for seven months after that. However, if you already receive Social Security benefits, enrollment is automatic. If you are still working and would like to delay signing up, in some cases you can do so without penalty (if your employer has more than 20 employees). After you retire, you’ll have eight months to sign up.
It’s a good idea to review your plan every year after you’ve enrolled in Medicare as your health needs or plan details may have changed. You can make changes during the Open Enrollment which runs from October 15th 2018 to December 7th 2018 for 2019 coverage.
2 YOU CANNOT MAKE HSA CONTRIBUTIONS AFTER YOU’VE ENROLLED IN MEDICARE
A health savings account (or HSA) is a great way to save for healthcare expenses because contributions are pre-tax and do not expire, your savings can be invested, and (qualified) withdrawals are tax free.
However, after you have enrolled in Medicare Part A and Part B you can no longer make HSA contributions. Plan ahead by working with your advisor to ensure you’ve made adequate HSA contributions before applying. In some instances, there may be a workaround opportunity for continued contributions, for example, if your spouse remains HSA eligible. Your Luma Wealth advisor can guide you on your particular situation.
3 THERE MAY BE COVERAGE GAPS
There are some healthcare expenses Medicare does not cover. For example, (with a few rare exceptions) it does not cover healthcare costs incurred outside of the U.S. Neither does it cover dental, routine vision care and eyewear, hearing aids or custodial care. Also, in some situations, you may want more than what is covered, such as greater level of personalized care. Your Luma Wealth advisor can help you identify coverage gaps and options for supplemental plans and long-term care insurance policies.
4 MOVE UP TO A HIGHER INCOME BRACKET AND YOURPREMIUM WILL INCREASE
The amount of premium you pay is affected by your Modified Adjusted Gross Income (which is your total income earned through wages, capital gains, interest income, etc., with some deductions, including student loan interest and IRA contributions added back in). The calculation is based on your most recent tax return.
It is important to note that there are income brackets that trigger an Income Related Monthly Adjustment Amount (IRMAA). A high-income year can move you into a higher Medicare cliff bracket resulting in an increased annual premium. Your advisor can help you plan in advance for income and tax minimization strategies that may reduce your premium.
5 YOUR LUMA WEALTH ADVISOR CAN HELP
Work with your Luma Wealth advisor to make the most out of Medicare. Your advisor can help you determine the best time to apply, create a cash flow plan for financing coverage, identify and fill gaps in your coverage, and provide tax planning strategies to keep you from creeping into a higher cliff bracket.
If you’re approaching age 64, speak to your Luma Wealth advisor about making the most out of Medicare and achieving all of your wealth goals. For more information, call Luma Wealth, toll free, at 866-995-6191, email firstname.lastname@example.org or visit our website.