Financial Planning for Seniors on Medicare

by Joe Borowiec

Medicare, the national health insurance program for seniors over the age of 65, is an essential resource for many older adults, and without it, a large portion of the population would suffer from a lack of access to affordable medical care. In 2018 alone, nearly 60 million beneficiaries received Medicare coverage, and that number is expected to grow in the coming years.

While most older Americans take advantage of Medicare, not all of them grasp the nuances of the program: According to a survey by the Nationwide Retirement Institute, 7 in 10 participants reported they wished they better understood their coverage.

Understanding Your Medicare Options

Once you enter retirement and no longer receive a steady paycheck, your financial situation will change dramatically—for better or for worse. These changes will affect everything from everyday spending to long-term savings, so it’s helpful to take stock of your financial needs and assess all your Medicare options before making any definitive decisions about your coverage.

Traditional Medicare is offered in different coverage tiers or parts. For example, Part A includes hospital coverage and Part B covers doctor visits and other outpatient care. An additional component known as Part D covers prescription drugs and can be added at a separate cost.

For seniors seeking to ease the burden of month-to-month expenses, Medicare Advantage is often an appealing option. This form of Medicare coverage typically comes with lower premiums and often includes Parts A, B and D. Some private insurers will bundle dental, vision and hearing benefits into Medicare Advantage packages, as well, making them an attractive offering for seniors who desire comprehensive coverage.

Though Medicare Advantage is easier on your wallet in terms of premium payments, it lacks something that traditional supplemental plans have plenty of, and that is flexibility. With traditional Medicare, you are at liberty to seek care from virtually any provider in the nation, usually without the need for a referral or prior authorization.

Medicare Advantage limits your freedom of choice by requiring you to seek care only from doctors or hospitals included in your plan’s network. This stipulation can inadvertently cause your coverage to cost you more in the long run if your preferred providers aren’t covered in-network.

Weighing the Pros and Cons

Factors such as your age, overall health and retirement status play a primary role in determining which type of insurance coverage will satisfy your needs. Medicare Advantage, for instance, may be a good option if you’ve recently retired and want to save money upfront on monthly bills. Those suffering from a chronic condition, on the other hand, will likely benefit from traditional Medicare coverage given the built-in flexibility these plans offer.

It can be useful to consider other ways to reduce costs and increase your post-retirement net worth, too. Getting rid of assets that you no longer need can boost your financial standing so you can afford things like healthcare and everyday expenses.

Lots of seniors find they can save money by selling their unneeded or unwanted life insurance policies on the secondary market. These transactions are known as life settlements, and the money you receive can help you better plan for upcoming healthcare expenditures.

In order to qualify, you must be at least 65 years old and own a term, whole or universal life policy with a face value of $100,000 or more. Your policy type, size and scope, as well as your age and overall health status will play a role in determining your settlement.