Rio Grande Credit Union
Rio Grande Credit Union

Retirement Tips

It is never too early to begin thinking and planning for your retirement.

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Medicare is the federal health insurance program that you are automatically enrolled in at the age of 65. Medicare can also cover someone under the age of 65 who has certain disabilities. Medicare is funded by a 1.45 percent tax on your earnings along with another 1.45 percent paid by employers. If you’re self-employed, you pay a 2.9 percent tax. The Medicare deduction on your paycheck might say FICA-HI, or “Federal Insurance Contributions Act — Health Insurance.”

The ABCDs of Medicare

The first four letters in the alphabet designate the four forms of Medicare coverage:

Part A (Hospital)

Provides coverage if you're hospitalized. If you paid into the Social Security pool for at least 10 years, then you don’t have to pay any premiums.

Part B (Outpatient)

Provides coverage for doctor appointments, preventative services including procedures to prevent illness or detect it at an early stage and any services or supplies you need to diagnose or treat a medical condition. You must pay a monthly premium. In 2016, the base premium amount is $121.80. If your adjusted gross income is above $85,000, or $170,000 for married couples filing jointly, then you’ll pay a higher premium that adds at least 40 percent to your cost. You can opt out of Part B coverage, but there's often a penalty fee you’ll have to pay if you decide to enroll later on — unless you're currently covered by an employer’s plan, in which case you can enroll later for free.

Part C (Medicare Advantage)

Also known as Medicare Advantage, these are private health insurance plans run through Medicare. You must already be enrolled in Part A and B to be eligible for Part C coverage.

Part D (Prescription drug coverage)

Is comparable to Part A and B, but each plan differs in what it costs and what its coverage includes. Plans vary widely in terms of cost, copayments, deductibles and medications covered. If you're in a Part C plan that includes prescription drug coverage, then there’s no need to buy Part D.

Medigap Insurance

Medicare covers a lot, but it doesn’t cover everything. To fill the gaps in your Medicare coverage, you can purchase Medigap insurance from a private insurance company. You can also use your Medigap policy to cover Medicare expenses, such as annual copays and deductibles, for Part A and Part B coverage. If you already have a Medicare Advantage (Part C) plan, it's illegal for anyone to sell you Medigap insurance, unless you are switching back to original Medicare Part A and B coverage.

It can take time to compare Medicare option plans, so it’s important that you research your options with careful consideration. After all, your health will depend on it.