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Over 50? What you should know about Medicare, healthcare and social security

Start planning now for Medicare and healthcare costs.
Crown Business

If you're under 60, you might just give this article a passing glance. But here's a tip: If you have aging parents, friends or relatives who are increasingly turning to you for guidance with their healthcare needs, it's never too soon to start understanding Medicare and the accompanying decisions that need to be made. For help, we interviewed Carrie Schwab-Pomerantz, author of "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."

We asked Carrie to reveal the biggest mistake that people make with regard to health expenses.

"There is no question that the biggest mistake is not budgeting enough to cover medical expenses not covered by insurance. A 2012 Health Confidence Survey conducted by the Employee Benefit Research Institute predicts that a 65-year-old couple with median expenses could well spend about $300,000 on medical costs in their lifetimes. And if there are serious illnesses, this is low!" she exclaimed.

There's a perception that Medicare is automatic, and people don't need to worry about enrollment. Here's the reality: "This perception is partially correct. A person who is already receiving Social Security benefits is automatically enrolled in Medicare Parts A (hospital) and B (doctors and outpatient care) when he or she turns 65. If you’re not signed up for Social Security when you turn 65, though, you have to enroll," says Carrie.

Moreover, you or your loved one still must make decisions about Part C (Medicare Advantage) and Part D (prescription drugs). In addition, "it’s important to note that people who are not collecting Social Security at 65 have a seven-month enrollment period (extending from three months before they turn 65 to three months after) to sign up for Medicare. If they miss this window, benefits may be delayed, and they may have to pay a penalty," cautions Carrie.

And she admits that it's confusing. However: "It is essential to understand the coverage provided by Parts A, B, and D -- then fill in the necessary gaps with supplemental insurance – either a Medigap policy (private insurance) or through a Medicare Advantage Plan (otherwise known as Part C). Also, there are many variations of Part D, with different coverage and different costs," she said.

So what to do? Start planning early to understand which plan is right for you. "It is also essential to understand the costs. You have to pay a premium for Parts B, C, or D – and all have deductibles, copays, and other limitations. It’s best to map out your potential annual costs and plan your budget accordingly," she says.

If an insurance broker says she or he wants to help, be careful. "It’s always best to collect all the information you need – whether that’s from an insurance broker or other expert. Of course there is always a caveat to make sure that the advice you’re getting is objective and in your best interest. Be wary if your advisor has a personal stake in selling you a policy."

When it comes to social security, Carrie sums it up as "Timing is everything."

The longer you wait to start collecting Social Security benefits, up to age 70), the larger your monthly check. Of course waiting also means that you’ll receive fewer checks over your lifetime, so you have to carefully consider your health and anticipated longevity when you make this decision. In general, though, most people will benefit over the long-term by delaying their start date.

For example, "for a person born between 1943 and 1954, delaying the start date from age 62 to age 66 increases the monthly benefit by 33 percent. Delaying to age 70 results in an increase of 76 percent."

If you're married, Carrie notes that "spouses also have several strategies that they can use to increase their combined Social Security benefit. These strategies can get very complex, so it is best to work with a knowledgeable advisor."

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