The Biggest Surprise About (My) Retirement

My “retirement” isn’t even a year old—and for the most part, it’s played out pretty much as planned.  There was, however, an area that caught us a bit flat-footed.

For us (and this has very much been a joint effort between me and my wife), that surprise was…Medicare. 

Don’t get me wrong; to date the coverage has compared favorably with what we had pre-retirement—mostly because we coupled “standard” Medicare with a Medicare Advantage plan (which has actually provided some nice enhancements over our pre-retirement coverage). 

That said, here are some things we’ve learned along the way that we either didn’t know or hadn’t thought about “before”:

Medicare isn’t free. 

Well, technically speaking, some of Medicare comes without additional premiums/cost, at least if you’ve worked at least 10 years and paid into that system. 

There are two “core” parts to Medicare; what are affectionately referred to as Part A (hospital coverage)—which is “free” (in that your historical payroll deductions fund it) and Part B (medical insurance, which covers outpatient care, services from doctors and health care providers, some preventative services)—which, like your current health insurance, has premiums that you have to pay.  More on that in a minute.

While certainly of benefit, those coverages won’t replace everything covered by the health insurance you’ll have carried pre-retirement (those are likely included in what are called Part C (vision, hearing, dental, and Part D (prescription drug coverage). The bottom line here is that your post-retirement spending plans need to include something for health insurance (more precisely, your Social Security benefit will be reduced by that amount). You can find out more at: https://www.medicare.gov/basics/costs/medicare-costs

You (may) need to apply for Medicare before you “take” Medicare.

Once you start receiving Social Security benefits, you are automatically enrolled in Medicare A. But if you work past age 65 (as I did) and don’t start taking Social Security (like me), then you have to sign up for Medicare—even if you’re still working, have insurance, and don’t plan to use Medicare (this will, of course, confuse your current health care providers, at least momentarily. Everyone assumes when you turn 65, you’re on Medicare). 

There’s a seven-month initial enrollment period that begins three months before the month you turn 65 and ends three months after your birthday month. Now, there are some exceptions to that timing, but—the bottom line is, you’ll likely find it to be less complicated to sign up around your 65^th birthday, and then you don’t have to worry that you’ll run afoul of deadlines that can cost you a lot later on.

There are no Medicare “family” plans.

You may be accustomed to choosing workplace health insurance based on the needs of your family, or at least you and your spouse. For years I have “delegated” that responsibility to my wife, who has always had a better sense for the family doctors and our coverage needs. But we each had to sign up for Medicare separately (though we did “coordinate”).

That said, there can be complications if you are retiring at a different time than your spouse, particularly if you’ve shared coverage under a family plan. We had planned to let my wife (who is the same age, though she maintains that the five-month differential in our dates of birth makes her younger) go on Medicare while I continued with my workplace plan. Now, there is a process that allows for this, but it’s a bit of an exception and—well, we got close to the deadline, and rather than have coverage at risk, we just waited until we could both switch at the same time.

Your Medicare premiums are based…on your income.

One of the biggest surprises (to me, anyway) was to find my Medicare health insurance premiums were based on income. And if you’ve filed jointly, BOTH of your premiums are based on your adjusted gross income (AGI). But that wasn’t the biggest surprise… 

Your Medicare premiums are based on your income…from two years ago.

When it comes to figuring out your income for establishing your Medicare premiums, you might expect that a government agency would turn to an official government record of your income—and that turns out to be your AGI, as noted above. The jaw-dropper (this was the biggest surprise) was that it was our AGI from TWO YEARS AGO. 

Now, mind you, we’ve planned our retirement income needs just fine—but my AGI this year is going to be significantly less than it was when I was employed full time. And that makes a BIG difference in those monthly Medicare premiums. 

Fortunately, there is an appeals process—and even more fortunately, with my wife’s persistence we were able to rectify that situation BEFORE the first premium came due. It’s something you’ll want to get a jump on, as gathering the data/proof, getting it to Social Security—not to mention getting it to the attention of someone at Social Security—can be time consuming. For more information on that process, see https://www.ssa.gov/medicare/lower-irmaa or on the issue here.

The bottom line is that you want to start thinking about Medicare BEFORE you start filing for it. 

- Nevin E. Adams, JD