It’s that time again. No, we’re not talking about football season. Rather, it’s almost Medicare open enrollment season. This is your only time to change your coverage, so it’s important that you research your options ahead of time and are ready to make decisions during the short enrollment window.
If you’re like many retirees, you may be looking for ways to reduce your premiums. Health care is a major expense for many seniors. Even though Medicare covers a wide range of costs, it doesn’t cover everything. In fact, Fidelity estimates that the average 65-year-old couple will spend $260,000 in retirement on out-of-pocket health care costs.2 Much of that figure includes premiums.
The good news is there are steps you can take to manage your premiums and keep them in check. Below are three tips to implement before the enrollment period. By taking action now, you can have the information you need to make smart choices once the enrollment period opens.
Research your expenses.
You know you spend money on Medicare premiums, deductibles, copays and more. However, do you really know what your medical expenses are? If not, now is the time to dig into your bills and do some research.
Gather your year-to-date medical bills to see where you are spending money. You may be paying out of pocket for treatments that aren’t covered under Medicare, such as vision or hearing. Alternatively, you may be paying for Medicare coverage for items that you aren’t fully using, like prescription drugs.
Once you’ve estimated your costs for certain kinds of health care services, you can then determine how to adjust your coverage. You may decide to raise your deductible to lower premiums, or to pay certain costs from your health savings account rather than through Medicare coverage. It’s difficult to make those choices if you don’t fully understand your costs.
Use online tools for guidance.
Did you know you can use online tools to try out different coverage options and view ways to alter your premiums? Medicare has a tool called Plan Finder that allows you to input your own medical information to narrow down the Medicare coverage options. You can play with different inputs and variables to see how various choices affect your premiums.
The planner can also help you make choices with where you go for medical services. For example, you can compare the cost of using a physical, local pharmacy versus ordering your drugs online to see which option is less expensive.
Manage your future income.
Did you know your Medicare Part B premiums are largely influenced by your taxable income? The higher your income, the higher your premiums. You can’t do anything to change your past income, but you can manage it going forward.
For example, you can make sure you have a substantial account available for emergencies, so you don’t have to take a taxable investment distribution to cover those bills. You can also structure your income so it’s drawn from tax-advantaged accounts, like a Roth IRA. By being tax-conscious in your distribution strategy, you can actually reduce your Medicare Part B premiums in the future.
Need help planning your health care funding in retirement? Harry Hammond in Sarasota can help you analyze your needs and risks and develop an effective strategy. Let’s connect soon and start the conversation.
2https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
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