As we near retirement, most people generally sign up for Medicare, a federal health insurance program for people ages 65 or older or younger people with disabilities. As you may have guessed, when you retire you lose access to an employer-sponsored health plan, meaning you’ll want to sign up for Medicare. And while it’s important to know that you’re not required to sign up for Medicare when you turn 65, you will incur late enrollment fees for delaying.[1]
There are various resources available, both on our website and elsewhere, to aid you in learning about the different types of Medicare, knowing when to sign up, and more. However, one important facet of Medicare is knowing how much it costs and budgeting as such. Today, we’ll be going over a few tips to help you prepare for budgeting for Medicare costs.
Know Your Premiums
For most, Medicare Part A costs $0. Medicare Part B on the other hand, had a monthly premium of $174.70 in 2024 for those with a modified adjusted gross income of $103,000 or less. The more you earn, the higher your premium. This caps at $594 for those who earn $500,000 or more. [2]
Medicare Part D – which covers prescription drugs – is free for those who earn $103,000 a year or less, but premiums will go up for those earning more.
Before signing up for Medicare, you should know how much your premiums will likely be based on how much you’ll earn in retirement. Keep in mind that any Social Security benefits earned will be used included in your modified adjusted gross income, too.
Know if You Have an Out-of-Pocket Maximum
Your out-of-pocket maximum depends on your Medicare plan. Traditional Medicare does not have an out-of-pocket limit for covered services. However, if you have Medicare Advantage, you will have an out-of-pocket maximum. In 2024, this number was $8,850 for in-network services and $13,300 for in-network and out of-of-network services combined. Keep in mind, though, that these limits only apply to Part A and B services.[3]
Find Ways to Reduce Your Monthly Expenses
This is a staple of budgeting for any situation. Reducing your monthly expenses can help you save tremendously. To start, you’ll want to create a budget and track your spending. Looking back through the bank statement of a previous month where you spent a typical amount can be helpful in determining what categories you’re overspending on.
Take up a Part-Time Job
If your finances are feeling strained, it may be wise to consider getting a part-time job after retirement. This can help supplement any financial issues you may be facing and provide something to keep you busy with in your free time. In addition to this, working after retirement has been linked to retention of mental sharpness, fewer health issues, and any added benefits of social contact with others.[4]
Understand Any Variable Expenses That May Occur
While budgeting is important, even the best laid plans can fall apart. Understanding that your budget may need room for variable expenses is crucial to staying afloat. Set money aside for personal emergencies or expect the unexpected and plan accordingly.
Seek the Advice of a Financial Professional
Finally, if you’re unsure of where to start or have any further questions that weren’t addressed in this article, consider seeking the advice of a financial professional or Medicare Insurance agent.
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reputable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete.
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[1] “Avoid late enrollment penalties.” Medicare.gov, n.d. https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties. Accessed 24 Sep 2024.
[2] “2024 Medicare Parts A & B Premiums and Deductibles.” Centers for Medicare & Medicaid Services, 11 Oct 2023. https://www.cms.gov/newsroom/fact-sheets/2024-medicare-parts-b-premiums-and-deductibles/. Accessed 24 Sep 2024.
[3] Freed, Meredith et. al. “Medicare Advantage in 2024: Premiums, Out-of-Pocket Limits, Supplemental Benefits, and Prior Authorization.” KFF, 08 Aug 2024. https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2024-premiums-out-of-pocket-limits-supplemental-benefits-and-prior-authorization. Accessed 24 Sep 2024.
[4] “Working After Retirement.” WebMD, n.d. https://www.webmd.com/healthy-aging/working-after-retirement. Accessed 24 Sep 2024.
