Will I Be Able to Afford Medicare?
The shortest and most honest answer is “I don’t know”. But I know this doesn’t help you answer the most pressing questions weighing on your mind as you approach retirement age. Am I ready? Or Should I delay my retirement? And most of all—how am I going to afford health care without my employer insurance?
So here’s what I am going to do. Using my 20+ years of experience working with retirees, I am going to lay out a framework for what to expect when it comes to Medicare expenses. These will just be “in-the-ballpark” figures, but I believe they will help you come to a decision. You just might find that Medicare falls squarely into your budget.
So let’s get started with some good news.
Medicare Part A (Inpatient Care) Is Free
As long as you’ve paid into Social Security for at least 10 years, social security will return the favor with no associated Part A premium.
The Associated Part B (Outpatient Care) Monthly Premium is $134.00
This figure is adjusted for high income, but most people don’t fall into the high-income category. $144.60 will be your monthly premium unless you make $87,000 per year or more as an individual or $174,000 filing jointly.
From this point, the cost of Medicare is heavily affected by which path you take. You can boil down all the madness into two basic choices: Medicare Advantage or Original (traditional) Medicare.
The Traditional Medicare Route
If you choose the Traditional Medicare route, you will want Medicare Supplement Insurance to fill in the gaps of what Medicare doesn’t cover. Otherwise, there will be no limit to your out-of-pocket spending. The premiums for a Medicare Supplement range from $45-146 per month. However, we often recommend a plan G, which typically costs $110 per month. This is a fairly standard premium. It puts into perspective what you can expect a Medicare Supplement Plan to cost.
To cover your medications, you will also need a Part D prescription drug plan, which will cost in additional premium anywhere between $14 to $128 monthly. The average cost for a drug plan is $42 in 2020. The out-of-pocket costs associated with Part D vary greatly depending on your medications. It is impossible to estimate without knowing your specific situation.
The Medicare Advantage Route
Offered as an alternative to Traditional Medicare, Medicare Advantage is often the cheaper option when it comes to premiums. They are offered for prices within the range of $0-163 monthly with the average premium being approximately $23 per month. The Part D prescription drug plan is almost always rolled into the plan.
Caution: Check For Possible Out-of-pocket Costs
At first glance, it looks like the Medicare Advantage route is the obvious choice. But this fails to take into account the risk of out-of-pocket costs. With a Medicare Supplement (only available with Original Medicare), the maximum out-of-pocket (for Medicare approved expenses) is only $198 annually for Plan G. However, in an advantage plan, it is more of a pay-as-you-go approach. There are less monthly premiums; but copays, coinsurance, and deductibles are much higher. The potential out-of-pocket for an advantage plan can be as a high as $3500-6000 per year or more!
The Costs At a Glance
So there you have it! This should give you a good idea of what Medicare costs for the average 65-year old. But—as I said before—the cost of Medicare is different for every person. If you are still concerned about being able to afford Medicare, contact us for a free consultation. We will assess your financial and health situation to find an overall plan that meets your needs, concerns, and pocketbook. Ensuring you a successful and secure transition into retirement is our number one priority.
There are a lot circumstances that may prevent you from retiring. But I believe that the affordability of health insurance shouldn’t be one.
Disclaimer: Numbers are based on Ohio 45365.
Turning 65 soon and not sure what to do? Our next workshop is quickly approaching on June 25. Click here to sign up for our free Medicare workshop. No high-pressure sales pitches here, just in-depth discussion about the ins and outs of Medicare!
About the Author
Ready to retire and unsure what to do next? Get our "Introduction to Medicare” eBook to start to make sense of Medicare and your options.