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By Lee Sherbakoff, CPA/PFS™, CFP®, RICP®

It’s no secret that for many Americans, Medicare is a significant part of their healthcare plan in retirement. Through taxes assessed on earned income, Medicare earned about $900 billion in 2020 and paid benefits to over 60 million people. (1) In fact, nearly 96% of people age 65 and older are current Medicare recipients. (2)

Despite its importance, many people don’t understand Medicare or the full scope of benefits to which they are entitled. Unfortunately, not having a complete picture of the system and how your benefits work could be financially devastating. If you’ve ever tried to understand Medicare or navigate the system on your own and found yourself confused, you are the perfect candidate for a Medicare review. 

What Is Medicare?

First introduced in 1965, Medicare is a health insurance program provided by the federal government for people age 65 and older as well as disabled individuals. As mentioned, it plays a key role in covering healthcare costs in retirement, but it is not meant to cover everything. Understanding its coverage and its limitations is a crucial part of being prepared for retirement. 

Medicare is divided into four parts: Part A, Part B, Part C, and Part D. There are also supplemental coverages to consider. Here is an overview of the different options to review as you approach retirement:

  • Original Medicare is a package that includes Part A and Part B, with the optional add-on of Part D. 
  • Part A covers hospital services. If you or your spouse paid Medicare payroll taxes during your working years for at least 10 years, Part A is free for you. If you didn’t, you can still get coverage by paying a monthly premium. 
  • Part B covers doctor visits and other outpatient services. Even if you or your spouse paid Medicare payroll taxes, Part B comes with a monthly premium. 
  • Part D is an optional add-on that includes drug coverage. 
  • To help with Medicare costs such as copayments, coinsurance, and deductibles, many retirees will purchase Medigap insurance from private insurance companies to supplement their Original Medicare plan. Some Medigap plans also cover additional services not covered by Part A or Part B, but typically exclude services such as dental, vision, and hearing visits.
  • Medicare Advantage, also known as Part C, is an alternative to Original Medicare that is offered through Medicare-approved private companies. This plan bundles Part A and Part B and often includes Part D as well. Medicare Advantage plans usually cover additional services, including vision, hearing, and dental visits. Medigap policies cannot be combined with Medicare Advantage. 

Keep in mind that basic Medicare does not cover long-term care, dental care, vision care, or hearing care. If these expenses are not properly planned for, it can be detrimental to your overall retirement plan.

What to Expect

What to expect depends on which stage of the Medicare process you’re in.

If you’re a pre-retiree thinking about enrollment, you should expect to sign up in the six months surrounding your 65th birthday (three months before, the month of your birthday, and three months after). If you’re receiving Social Security benefits at that time, you will be automatically enrolled in Medicare Part A and Part B. Additional coverages like Part D, Medigap, and Medicare Advantage will have to be enrolled separately. If you’re not receiving Social Security when you turn 65, you will have to apply for Medicare through the Social Security Administration website. 

If you’re retired and already enrolled in Medicare, you should expect to review your benefit options every year. It’s a daunting task, but Medicare costs and coverage levels change annually so it’s important that you stay up to date. 

How We Can Help

If your head is spinning, you are not alone! Feeling confused and overwhelmed is a common response when our clients start to think about Medicare. That’s why we’re here to help. At The Nalls Sherbakoff Group, we help Medicare recipients feel confident in their plan decisions. If you’ve got questions about your current Medicare plan, or you’d like help navigating the enrollment process, reach out to us today. Set up a complimentary appointment by calling us at (865) 691-0898 or contacting us online.

About Lee

Lee Sherbakoff is principal and financial advisor with The Nalls Sherbakoff Group, LLC, an independent, fee-only financial planning and investment management firm. He specializes in serving pre-retirees and retirees, helping them create and execute financial plans and retirement income plans that lead to sustainable long-term, real-life returns that meet their deepest and most important financial goals and objectives. Lee has a Bachelor of Science in Finance from The University of Tennessee and a Master of Strategic Studies from the U.S. Army War College as well as the Certified Public Accountant (CPA), Personal Financial Specialist (PFS™), CERTIFIED FINANCIAL PLANNER™, and Retirement Income Certified Professional® (RICP®) certifications. Lee spent over 31 years in the U.S. Army Reserves, including serving at the Army’s highest levels on the Department of Army staff at the Pentagon and being deployed in support of Operation Desert Storm (1991) and Operation Iraqi Freedom (2008-2009). When he’s not loyally serving his clients, Lee enjoys giving back to the community and to his profession. He served as a council member of the Tennessee Society of CPAs and is a member of the American Institute of CPAs. In addition, he is past President of the Knoxville Chapter of Tennessee Society of CPAs and past President of the East Tennessee chapter of the Financial Planning Association. To learn more about Lee, connect with him on LinkedIn.

DISCLOSURES: The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.
(1) https://www.statista.com/topics/1167/medicare/#dossierKeyfigures
(2) https://www.ncbi.nlm.nih.gov/books/NBK235450/