As an entrepreneur, you need to be familiar with your health care and retirement options. It’s easy to focus only on the present and avoid thinking too far into the future, but that will mean you might not be prepared when you start to reach your golden years. Preparing for retirement should be a process that starts today.
Two of the most confusing parts of aging is Social Security and Medicare. These government programs are changing every year, and they seem to become increasingly complicated. You need to start by familiarizing yourself with the basics so you can make smart choices about your future today.
Understanding Medicare
First, let’s talk about the federal program known as Medicare. This program is for those 65 and older, and it’s divided into four parts. Each part covers a different aspect of health care for retirees, and the costs are typically lower than traditional health insurance. There are also flexible options under Medicare Advantage, and many seniors choose to purchase additional supplemental plans to cover all costs.
Here is an overview of each of the parts of Medicare:
- Part A – This is your room and board while in a hospital or inpatient treatment center.
- Part B – Similar to traditional healthcare through your employer, this covers outpatient treatment, office visits, and lab testing.
- Part C – Also known as Medicare Advantage, Part C is an option to opt out of Part B and purchase a plan from a private insurance provider. Part C is more flexible in coverage and cost.
- Part D – This is your prescription drug coverage. The amount covered changes each year, and there are different plan options based on your location.
To qualify for Medicare, you need to enroll starting three months before your 65th birthday or within three months after. Once you miss this Medicare enrollment period, you’ll be subject to additional fees. Begin researching the different plan options now so you can anticipate costs and prepare.
Understanding Social Security
Social Security is another federal program in which those who paid into the Social Security system over their working years are eligible for benefits. These monetary benefits are calculated based on a worker’s previous earnings and then restated into today’s wages. In order to be eligible for Social Security, you need to be at least 61 years and 9 months old. You also need to have not applied already for retirement benefits.
The application can be completed online or at your local office. However, you’ll need to apply four months prior to when you want these benefits to begin since it can take this long to process your application. Social Security is a great way to protect yourself against running out of money in your retirement, but it shouldn’t be your only source of retirement income.
Know the Limits
It’s never too early to begin preparing for retirement. While Medicare and Social Security are valuable systems for protecting those entering their golden years, it’s not a complete safety net. There are limits to both programs that can leave you without coverage or funds in case of an emergency. Let’s outline some of the biggest limits to both programs.
Medicare Limits
- Only “medically necessary” treatments are covered
- There are annual coverage limits on extended hospitalization, therapy services, and skilled nursing care
- Dental, vision and other supplemental coverage are not included under traditional Medicare
- You’ll still need to pay 20% of the Medicare-approved amount for services after meeting your deductible
Social Security Limits
- If you choose to accept benefits while still working, your earnings are reduced until you reach full retirement age
- Your social security benefits might still be taxed in your retirement
- Trends suggest that social security benefits will dry up in the next few decades
Preparing Your Finances
It’s up to you to make sure you’re ready to face your golden years responsibly. Too many Americans fail to prepare while they’re still working, and this leads to catastrophic results once you’ve stopped working.
Everyone deserves to have a relaxing retirement without worrying about running out of money. Make sure you understand Medicare and Social Security so you can anticipate costs before you reach retirement.
