Planning Your Retirement: 8 Essential Steps for Enrolling in Medicare

Last Updated Jun 10, 2011 12:39 PM EDT

Finding affordable medical insurance is a critical part of your retirement planning. Once you're eligible for Medicare at age 65, insurance is more affordable and you can't be denied coverage for pre-existing conditions. But it's still complicated, and you'll need to plan carefully to make every dollar count. You'll also want to factor your premium costs into your budget for living expenses to see when you can afford to retire.

Welcome to the second half of Week Ten in my series, 12 Weeks to Plan Your Retirement. My previous post discussed how to address medical costs before age 65. This post covers eight essential steps you'll want to take as you approach your 65th birthday regarding Medicare and medical insurance; it also provides links to helpful resources.

First, you'll want to understand the four parts of Medicare:

  • Part A: hospital insurance
  • Part B: physician and outpatient coverage
  • Part C: Medicare Advantage (MA) plans
  • Part D: coverage for prescription drugs
Medicare Advantage plans (MA), or Part C, are like an HMO or PPO, and they combine Part A and Part B in order to provide you with hospital, physician and outpatient coverage. They also usually cover Part D benefits, and they often add extra benefits like vision, dental, hearing aids, and/or wellness services.

Now it's time to begin your homework.

Step 1: Check Your Eligibility
Your first step is to make sure you or your spouse has paid FICA taxes for at least 40 calendar quarters -- this qualifies you for free Medicare Part A coverage. If you haven't worked that much and don't qualify, you can purchase Medicare Part A, but it will be costly. The premium in 2011 is $248 per month if you paid FICA taxes for 30 to 39 calendar quarters, and $450 per month if you paid FICA taxes for fewer than 30 quarters. If you're close to these thresholds, you might consider continuing to work and pay FICA taxes to either reduce or eliminate your Medicare Part A premiums.

Your next step is to determine when to enroll; click to the next page for details.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.