Retirement And Medicare, Part One

Retirement And Medicare, Part One

by Jan 17, 2019Retirement Planning

As you approach age 65 – and, presumably, retirement – there is action required from you as it relates to Medicare. As a reminder, Medicare is a federal program that provides hospital insurance and some medical insurance to older Americans and those under sixty-five with certain disabilities.

Medicare is comprised of four different parts, A through D. Medicare parts A and B are sometimes called “original Medicare” and provide the bulk of the plan’s medical coverage.

Medicare Part A

Medicare Part A provides coverage if you’re ever admitted to the hospital. Part A also provides limited coverage for skilled nursing services and long-term care hospital stays and hospice service.

Medicare Part A has no monthly premiums. This coverage is “free” to you because over the course of your working career you paid taxes for this coverage. Because of this, you should “opt in” for at least Part A, at minimum.

Medicare Part B

Medicare Part B provides coverage for your more mundane medical needs (i.e. preventative care including checkups, lab tests, X-rays, mental health services, flu shots, etc.) as well as basic medical equipment including crutches, canes, oxygen equipment, wheelchair/scooters, and ambulance services.

There are, however, certain health-related items not covered by Medicare Parts A or B. These items include:

  • Dental care
  • Eye exams
  • Glasses and contact lenses
  • Hearing aids
  • Dentures
  • Chiropractic care
  • Prescription drugs

The cost of Medicare Part B is correlated to your household monthly income. The standard or base premium for 2019 is $135.50/month, not including co-pays for office visits. If you are collecting Social Security, that amount would be deducted from your monthly benefit. If you are not yet collecting Social Security, you will receive a monthly invoice for the premium.

For calculating your actual premium, Medicare looks at your Modified Adjusted Gross Income (MAGI) from two years ago. Based upon that figure, your premium could be higher than $135.50/month.

For example, if you are single and file an individual tax return, or are married and file jointly, the following rates apply:

Medicare 2019 MAGI Chart

How Retirement Affects Medicare

When you retire, obviously your income will be substantially less than it was while you were working. Because Medicare looks at your income from two years ago to calculate your premium, this might cause concern.

The good news is that Medicare allows you to adjust your income down (and therefore decrease your premium) if any of the following circumstances apply:

  • You married, divorced, or became widowed
  • You or your spouse stopped working or reduced your
    work hours
  • You or your spouse lost income-producing property
    because of a disaster or other event beyond your control
  • You or your spouse experienced a scheduled
    cessation, termination, or reorganization of an
    employer’s pension plan
  • You or your spouse received a settlement from
    an employer or former employer because of the
    employer’s closure, bankruptcy, or reorganization

Retiring qualifies as having “stopped working or reduced your work hours”. Requesting that your income be adjusted requires submitting a form (SSA-44 a “life changing event”) along with all the pertinent documentation to prove that you have, in fact, stopped working.

Next Week: Retirement And Medicare, Part Two. Check back for a look at Medicare Part C and D and how they can impact your retirement plans.

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