Considerations for Healthcare in Retirement in 2024 – Part 1

There are many things to consider as you lead up to your retirement date. The elation of getting to spend all of your time doing the things you love with the people you love, mixed with the worry of the complex financial landscape is a difficult emotion. One of the main points of pain for many soon-to-be retirees is the question of healthcare, particularly if you are retiring before the traditional retirement age of 65. Here, we’ll discuss your healthcare options in retirement as well as some strategies to reduce the cost of your healthcare and your taxes.

The landscape of retirement healthcare looks quite different for those above the age of 65 and those below the age of 65. In this three-part series, we’ll start in part 1 by talking about healthcare options for those above 65, then in part 2 discuss early retirees below age 65, and we’ll wrap up in part 3 by discussing some options for saving on healthcare in retirement.

Why should you read this blog series? It has two main benefits to the reader. First, you will learn how to avoid overspending on healthcare in retirement. No one wants to spend more than they need to! Many retirees find themselves wildly overpaying for health insurance simply because they don’t understand the landscape of health insurance in retirement. While it is complicated, we break it down in an easy to understand way here. Second, you will avoid over-coverage or under-coverage. Finding out what sort of coverage you need is key to ensure your healthcare needs are met in retirement. If you need assistance, you can reach out to the professionals at Farnam Financial for help!

Healthcare above 65

The magic word once you have crossed the age threshold of 65 is Medicare. Medicare can seem complicated. However, when you break it down, it is quite straightforward! If you are over the age of 65 and already receiving social security benefits, you’ll automatically be signed up for Part A and Part B, or if you are not receiving benefits yet you’ll need to sign up at ssa.gov/medicare. The ‘parts’ of Medicare can be a bit confusing. Let’s break down what each does, its benefits, and the costs associated.

Part A

Medicare Part A covers hospital insurance. This includes inpatient care in hospitals, skilled nursing facilities, hospice care, and some home healthcare. If you are eligible for Medicare, you will not have to pay a premium for Part A. If you are not eligible for Medicare, you may pay up to $505 each month in premium costs, but this doesn’t apply to most people.

For a hospital stay in 2024, you pay a $1632 deductible per benefit period, $0 for the first 60 days, $408 per day for days 61-90, and $816 per day after day 90. For skilled nursing care (also known as long-term care) you pay $0 for the first 20 days, $204 per day for days 21-100, and all costs after day 100.

Part B

Medicare Part B covers doctors’ services, outpatient care, medical equipment, and preventative services. The premium associated with Medicare Part B in 2024 ranges from $174.70 to $594.00, but you’ll only pay more than $174.70 if your income in 2022 was over $103,000 if you filed single, or $206,000 if you filed jointly.

You will pay 100% of the first $240 of your costs covered by Part B, also known as your deductible. After that, Medicare Part B will cover 80% of the costs of your healthcare with you paying for the remaining 20%. This is also known as coinsurance.

Part C

Medicare Part C, also known as Medicare Advantage plans, are healthcare plans from private insurers that have to offer coverage that meets or exceeds standards set by the original Part A and Part B of Medicare, also known as Original Medicare. The benefit of a Medicare Part C plan is reducing the high deductibles and the 20% coinsurance associated with Part A and B, as well as sometimes offering an expanded range of benefits not offered by Original Medicare. Medicare Part C often entails a much higher premium. At Farnam Financial, the vast majority of our clients choose Original Medicare, and that is our recommendation for those who are in good health and don’t have special circumstances related to their healthcare needs.

Part D

Medicare Part D covers self-administered drugs (think D for Drug). Anyone with Part A or B is eligible to participate in Part D. The cost of Part D in 2024 is an income-related amount based on your income in 2022. The maximum additional cost you will pay for Part D is $81 per month. Part D plans are administered by private insurers but regulated by Medicare. The maximum yearly deductible you might have is $545 in 2024.

Part F, G, K-N / Medigap

Medigap Plans are standardized plans that are regulated by Medicare but administered by private health insurance companies. At the simplest level, Medigap plans help you pay for your portion of costs in Original Medicare. Medicare has created an excellent chart showing us at a glance the benefits of each plan which can be seen below. Please note, most healthy people without special medical circumstances do not need a Medigap plan.

Source: https://www.medicare.gov/health-drug-plans/medigap/basics/compare-plan-benefits