If you're nearing retirement, you may be worried about covering the cost of healthcare. It's estimated that the average 65-year-old male will spend a whopping $143,000 on healthcare throughout retirement, as per Fidelity, while the average 65-year-old woman is looking at $157,000. And a big part of that stems from the unavoidable costs you'll incur under Medicare.
Contrary to what you may have been led to believe, Medicare is by no means free (though Part A, which covers hospital care, is generally free for enrollees). As such, it pays to do whatever you can to reduce your costs under it. Here are some steps you can take to save on Medicare -- and keep more of your retirement income and savings for yourself.
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1. Enroll on time
Your initial Medicare enrollment window begins three months before the month of your 65th birthday, and it ends three months after that month. So all told, you get seven months to enroll.
If you don't sign up on time, you'll risk surcharges on your Part B premiums for going too long without coverage, so it's important to avoid that trap. If you're still working at age 65 and have access to a group health plan, worry not -- you'll have a chance to enroll later on and avoid that penalty. But otherwise, pay attention to your enrollment window to avoid higher Part B costs on a lifetime basis.
2. Choose the right drug plan
If you're sticking with original Medicare, you'll need a Part D drug plan. And the choice you make in that regard could have you paying less than you would for another plan.
That said, don't just choose the drug plan with the lowest premium. Rather, do your research to figure out which plan offers the best coverage for the medications you take.
All Part D plans group drugs into tiers that dictate how much you pay for them. Pay attention to where your specific medications fall so you don't get stuck with a massive out-of-pocket bill.
3. Consider an Advantage plan
Medicare Advantage is an alternative to original Medicare that could end up being a more cost-efficient choice for you. As is the case with Part D, there are different plans you can choose from, so you'll need to do your research and figure out what makes the most sense.
One benefit of signing up for an Advantage plan is that you'll typically get coverage for services like dental care, eye exams, and hearing aids, all of which original Medicare will not pay for. Furthermore, some Advantage plans offer supplemental benefits that could save you additional money, so it pays to shop around and see what choices are available in your area.
4. Take advantage of no-cost services
As a Medicare enrollees, you're entitled to a number of no-cost services every year, like a physical and certain screening tests. It pays to take advantage of those services, because often, keeping tabs on your health can prevent minor issues from escalating into bigger, more expensive ones.
Are you ready for Medicare?
The cost of healthcare under Medicare tends to catch seniors by surprise. Now that you know what you may be in for, you can start budgeting ahead of time. Another good bet is to sock money away for future healthcare costs in a health savings account, provided you're eligible. You'll need to be enrolled in a high-deductible health insurance plan to qualify.
The beauty of funding a health savings account is that your money will never expire. As such, you can contribute throughout your career, carry those funds into retirement, and then use them to cover your Medicare premiums, deductibles, and any other expenses you're liable for.
