Clients Edging Toward 65 Need Guidance On Financial Impact Of Medicare

For your clients who are 64 going on 65, it’s time to have “the Medicare talk.”

The decisions your clients make about Medicare when they turn 65 can have a lasting impact on their health-care costs in retirement. And your clients must make these decisions when they are only beginning to become familiar with a very complex program, so there’s a lot of room for error.

For instance, if your clients don’t time their Medicare enrollment correctly, they could find themselves paying a late-enrollment penalty every month of every year that they have Medicare for the rest of their lives. If they miss their Medigap open enrollment period, they may never be able to purchase a Medigap policy without undergoing medical underwriting.

That’s why it’s crucial to make Medicare planning an integral part of the service you provide to your clients. Schedule a discussion about Medicare with your clients who are approaching age 65. The goal would be to help your clients make a successful transition to Medicare, so that a lower proportion of their retirement income ends up going toward health-care costs. These often become issues for those who think if they work past 65 with employers’ benefits, they don’t have to worry about Medicare.

Advisors’ Medicare Checklist For Clients Turning 65
Here’s a checklist of dos and don’ts to review with your client during your discussion.

1. Avoid late-enrollment penalties by coordinating Medicare correctly with other insurance.

Medicare adds steep penalties to Part B and Part D premiums if someone enrolls late without following the rules for deferral. A common way that people trip up, and end up with penalties, is by failing to coordinate Medicare correctly with other health insurance they may have.

Your clients who are already retired at age 65 will need to sign up for Medicare at age 65 -- even if they have other insurance coverage. Retiree plans typically require members to sign up for Medicare as soon as they are eligible. Likewise, if your clients have COBRA coverage or a private plan or coverage through the health insurance marketplaces, they cannot delay their enrollment in Medicare without facing penalties.

Your clients who are still working at age 65, or who have a spouse who works, may be able to delay enrollment in Part B without penalty if they are covered by a group health plan based on current employment, as long as they work for an employer with 20 or more employees. If your clients have this option (and they should check with their benefits administrator), they will need to assess whether the employer plan or Medicare provides the most cost-effective coverage.

2. Protect the Medigap open enrollment period.

In most cases, it’s not a good idea for your clients to sign up for Part B as secondary insurance if they plan to stay on an employer’s health plan after age 65. Here’s why: The day they sign up for Part B, the clock starts ticking on their open enrollment period for Medigap supplement insurance.