Did you know that the average 65-year-old is expected to spend $157,500 on healthcare costs in retirement? That's the latest estimate available from Fidelity. And that doesn't even include long-term care.
There are steps you can take to make healthcare less of a burden in retirement. These include padding your IRA or 401(k), or contributing to a health savings account and reserving as much of that money as possible for your senior years.
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But making smart Medicare decisions could also lead to tremendous savings on your part. Here are some savvy moves that could make a world of a difference.
1. Signing up when you're supposed to
Enrolling in Medicare on time achieves a couple of key purposes. First, it helps ensure that you have health coverage to begin with, sparing you the cost of having to cover medical expenses completely on your own. Secondly, it helps you avoid a late enrollment surcharge that makes both Part B and Part D more expensive in your lifetime.
Signing up for Medicare on time means enrolling during the seven-month period that starts three months before the month of your 65th birthday and ends three months after that month. If you miss that initial window, you generally have to wait until Medicare's general enrollment period, which runs from January 1 through March 31 every year. But having to wait to enroll could mean missing out on health coverage when you need it.
2. Knowing when Medicare Advantage makes sense
Once you turn 65 and are eligible for Medicare, you can choose between original Medicare (Parts A and B plus a Part D drug plan) and Medicare Advantage. Medicare Advantage works similarly to private insurance. You're generally limited to a specific network of providers, and you commonly need preauthorization for different services and procedures.
But you should know that Medicare Advantage plans commonly offer supplemental benefits on top of what original Medicare covers. These include dental care, eye exams, and hearing aids.
In some cases, the extended coverage you get from Medicare Advantage could result in lower healthcare costs overall. So it pays to explore your options and see if an Advantage plan is right for you. This won't be the case for everyone, but it's worth doing the research.
3. Taking advantage of open enrollment
Medicare open enrollment takes place from October 15 through December 7 each year. During this time, existing enrollees can make changes to their coverage. This includes switching Part D drug plans, switching Advantage plans, moving from original Medicare to Medicare Advantage, or dropping Advantage and going back to original Medicare.
Some seniors opt to sit out open enrollment if there's no glaring problem with their existing coverage. But researching plan choices each fall could lead to added savings.
Part D plans, for example, can change their formularies every year, leading to different out-of-pocket costs for different medications. So in some situations, switching Part D plans could mean facing less expensive copays.
It's natural to worry about healthcare bills in retirement, especially given Fidelity's daunting estimate. But if you manage your Medicare wisely, you may find that healthcare isn't as worrisome an expense as expected.
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