By The Galecki Financial Management Team
Medicare planning is a crucial component of the retirement journey. However, navigating the complexities of Medicare can be overwhelming, especially given the wide range of plans and options available. Understanding nuances and making wise choices is essential for pursuing a financially solid retirement.
In this article, we explain the importance of effective Medicare planning and share valuable insights to help you navigate this integral part of your golden years.
What Is Medicare?
Medicare is a federal health insurance program for persons 65 years of age or older and those with disabilities. Although it is not intended to cover everything, it is vital in helping to pay for healthcare expenses in retirement. Part of being ready for retirement is knowing exactly what it covers and what it doesn’t.
Traditional Medicare Explained
Let’s start with an explanation of Traditional Medicare and how it’s bundled. Traditional Medicare is essentially a package that includes Part A and Part B, with the optional add-on of Part D.
Here’s a summarized explanation of each part:
Part A: Covering hospital services, Part A is free for you if you or your spouse paid Medicare payroll taxes for at least 10 years while you were employed. If you didn’t, you can still obtain coverage by paying a monthly fee.
Part B: Covering doctor visits and other outpatient services, Part B has a monthly cost, even if you or your spouse paid Medicare payroll taxes.
Part D: An optional add-on that covers drug expenses, Part D has a monthly premium.
Many seniors supplement their Traditional Medicare coverage with Medigap insurance from private insurance firms. Medigap helps with Medicare expenses like copayments, coinsurance, and deductibles. Certain treatments not covered by Part A or Part B are also covered by some Medigap policies; however, these plans usually do not include services like dental, vision, and hearing visits. Medigap policies are also referred to as Medicare Supplement policies.
Medicare Advantage Explained
Also referred to as Part C, Medicare Advantage is a commercial health insurance option that is provided by Medicare-approved businesses as an alternative to Traditional Medicare. Medicare Advantage combines Parts A and B and often adds Part D.
Medicare Advantage plans might pay for extra services like dental, vision, and hearing exams, but it depends on the specifics of each plan, so it’s important to thoroughly review the facts of each coverage.
Medigap policies cannot be combined with Medicare Advantage. Also, if you initially enroll in a Medicare Advantage policy, you have one year to change back to Traditional Medicare. If you switch back to Traditional Medicare after that one year, you won’t automatically qualify for a Medigap policy and might face further underwriting.
What Is IRMAA?
Regardless of whether you have Traditional Medicare or Medicare Advantage, you might have to pay an additional amount added to your Part B premium known as an Income Related Monthly Adjustment Amount (IRMAA).
Put simply, if your modified adjusted gross income as reported on your IRS tax return from two years ago is above a specific amount, you pay the usual Part B premium amount plus an IRMAA charge. The 2025 IRMAA premiums are not yet posted, but below is a chart of the Part B 2024 brackets and premiums.
Source: Galecki Financial Management
There is also an IRMAA on Part D, if you elect that coverage:
Source: Galecki Financial Management
What Is Medicare Open Enrollment?
Those who are currently enrolled in Medicare have the opportunity to review and change their plan selections during the open enrollment period. Each year this typically takes place from October 15 to December 7. During this window of time, you can:
- Switch to a Medicare Advantage plan from Traditional Medicare (or vice versa).
- Change between Medicare Advantage policies.
- Sign up or change Medicare Part D prescription medication coverage.
- Switch between Medigap policies.
Any changes you make during the open enrollment period take effect on January 1st the following year.
It’s important to check your Medicare coverage options at this time to verify that you have the most affordable and suitable plan for your needs.
We Can Help
Have you attempted to navigate the complexities of Medicare planning on your own, only to become overwhelmed and confused? We’re here to help. We have trusted resources we can refer you to, to help guide you in your Medicare selection process.
Not only does our team at Galecki Financial Management have the knowledge and experience to walk you through Medicare’s nuanced rules, we provide personalized financial planning services on a Fee-Only basis, which means we are always—and only—looking out for your best interests.
To schedule a meeting, call (260) 436-8525 or email [email protected].
About Galecki Financial Management
At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re Fee-Only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.
