This is the first installment in a series of blogs where I will address some strategies to help extend the life of your nest egg after retirement.
If you’re already retired, you may think your work is done. You’ve strived to build up your nest egg, you’ve decided on an appropriate health-insurance coverage plan, and you’ve drafted a sensible withdrawal strategy for your savings.
Even if you’ve checked the above tasks off your list doesn’t mean your retirement planning is finished, however. Instead of automating your post-retirement strategies, it’s wise to revisit them each year to insure they are still appropriate for your situation.
This week I’d like to address the importance of doing a yearly checkup on your Medicare coverage.
You can sign up for Medicare as soon as you become eligible, regardless of what month it is. But each year, you have the option of making changes to your Medicare Advantage and prescription drug plan during open enrollment. Open enrollment for 2016 is coming right up: from Oct. 15 to Dec. 7.
During that period, you can switch from original Medicare to Medicare Advantage, or vice versa. You can also switch from one Medicare Advantage plan to another, or from one Medicare Part D (prescription drug coverage) to another, or drop your Medicare Part D coverage altogether. Many retirees can also choose to buy so-called Medigap policies that provide coverage above and beyond what is offered through Medicare. Click here to read a previous blog I wrote about the specifics of Medicare.
There’s also a Medicare Advantage disenrollment period (MADP) that runs from Jan. 1 to Feb. 14 each year. During this time, Medicare Advantage enrollees can opt to switch back to original Medicare, and can then sign up for Medicare Part D as well.
The window to make changes to your Medicare plan is shorter than it used to be, so don’t delay on figuring out whether your specific coverage needs to be altered this year.
Obviously if you’re happy with your Medicare benefits you don’t have to change anything, but it's advisable for all retirees to review what they have, as the plans themselves change year to year.
As you probably already know, health-care costs make up a significant portion of your budget as a retiree, especially in later years. In 2013, financial experts estimated a 65-year-old couple retiring would need a total of $240,000 to cover future medical costs. Of course the exact amount can vary quite a bit depending on how healthy you are, whether you receive any employer-provided retiree benefits, and other factors.
Add it all up, and you need to get serious about stashing away some money today to help cover your health costs in retirement. Even when you are covered by Medicare and any other health insurance, you still are going to have to pay for some costs, including premiums, deductibles, co-pays and–most importantly for many retirees–prescription drugs.
Bottom line: Talk to a financial and/or insurance professional about whether you’re on the best Medicare plan for your personal situation. By reviewing your plan each year and adjusting it accordingly, the potential savings could help sustain your nest egg throughout your golden years.