Debunking 3 Medicare myths and examining the ways you can avoid falling for common Medicare mistakes.

As you approach retirement, it’s easy to feel overwhelmed with the various decisions you need to make, especially when it comes to Medicare. In this post, I want to focus on three major Medicare myths that can lead to costly mistakes. Understanding these myths will help you navigate Medicare with confidence, helping you avoid unnecessary expenses and headaches.

One of the most widespread misconceptions is that Medicare is free. In fact, 72% of Americans believe this myth, and they’re often surprised when they reach 65 and realize that Medicare does indeed come with costs.

It’s true that Medicare Part A—which covers hospital insurance—is typically premium-free, as long as you or your spouse have paid Medicare taxes for at least 10 years. However, Medicare Part B, which covers doctor visits and outpatient care, does come with a monthly premium. As of now, that premium is roughly $175 per month. For many, that’s an unexpected expense.

Remember, Medicare is designed so that your taxes help cover about 80% of the costs. The remaining 20%, including premiums, is your responsibility. So, don’t be caught off guard when you’re faced with Medicare expenses as you enter retirement. Properly planning for those costs will ensure that you’re financially prepared when the time comes.

Here’s another big myth: the idea that everyone pays the same amount for Medicare. Roughly half of Americans are under the impression that Medicare premiums are uniform, but that’s not the case.

Your Medicare premiums, specifically for Medicare Part B and Medicare Part D (prescription drug coverage), can vary based on your income. The government looks back at your income from two years ago to determine whether you’ll need to pay more through what’s called an Income-Related Monthly Adjustment Amount (IRMAA). For example, if you’re a couple and your income was above $206,000, or if you’re single and your income exceeded $103,000, you’ll end up paying extra for Medicare.

Now, before you panic, understand that this extra cost is only temporary. It’s calculated based on your income from a specific year—two years ago—and it only affects you for that one year. Afterward, it resets. So, if you had an unusually high income due to a one-time event, such as selling a property or receiving a large bonus, you won’t be stuck paying higher Medicare premiums forever.

In some cases, you can even appeal the extra charges if your circumstances have changed. For example, if you’ve recently retired, lost a spouse, or experienced a significant decrease in income, you can file for an adjustment. This is something we help our clients with regularly, and we’ve seen many successful appeals. So, if you get hit with an IRMAA notice, don’t worry—there are ways to address it.

This myth can be particularly dangerous because it leads to a lack of planning for long-term care needs. Many people believe that Medicare will cover long-term care in a nursing home, but that’s not the case.

Medicare does cover short-term stays in a skilled nursing facility if you’re expected to recover after an illness, surgery, or injury. However, this coverage is limited to up to 100 days, and it only applies to situations where you are expected to improve.

On the other hand, if you need ongoing assistance with daily activities—like bathing, dressing, or managing a declining memory due to dementia—that’s where long-term care comes in. Unfortunately, Medicare doesn’t cover this type of care. You’ll either need to pay for it out of pocket, purchase a long-term care insurance policy, or, in some cases, qualify for Medicaid after depleting your assets.

Given that long-term care can be one of the most significant expenses in retirement, it’s crucial to plan ahead. Understanding that Medicare won’t cover these costs will help you prepare and ensure that you’re not left in a financially vulnerable position later in life.

Now that you’re aware of these three Medicare myths, you’re in a much better position to avoid costly mistakes. Here are some steps you can take:

Once you understand the facts, limitations and cost of Medicare, you can adjust your retirement plan to make sure you’re getting the benefits you need as you plan for your future.

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