TRAILER

Welcome to episode 79 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This part 1 of a 2 part series on Medicare. Medicare is a significant part of every single American’s retirement planning. Knowledge of Medicare is critical to making the most of your retirement. In this episode I’ll share what you need to understand about Medicare and in Episode 80 airing on February 15th, I’ll share the Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding Medicare enrollment.

In this episode...

• Rising Healthcare Costs [1:53]
• Medicare Basics [2:57]
• Importance of Annual Medicare Reviews [12:03]

MAIN

In Episode 79 of the One for the Money podcast, I shared how the first wealth is health. I also shared the importance of exercise and nutrition and how they can increase not only one’s life span, but their health span, which is the years one has good health. Because healthier retirees incur fewer health related expenses it really is in retirees long term financial interest to INVEST in their health because health care related expenses in retirement are WAY higher than what most people anticipate.

In fact last August, the investment company Fidelity released its Fidelity's latest Retiree Health Care Cost Estimate, which surveyed retirees. Most individuals surveyed expect their share of health care related expenses in retirement to be ~ $75,000 retirement (or $150k per couple), but current retiree healthcare expense data shows that each individual should expect to pay $165,000 or $330k/couple in retirement for health care expenses. That is more than double what people estimate they will have to shell out. Now these estimates assume that these individuals have health care coverage through Medicare. This might have many scratching their heads wondering what Medicare actually pays for. Quite a lot actually, it’s just that health care is incredibly expensive especially as one ages.

I’ll first explain what Medicare is and what it takes to be eligible before explaining why health care costs in retirement are still expensive even with Medicare.

Medicare is health insurance for retired Americans. According to usdebtclock.org, the the US government spent ~ $1.8 Trillion dollars on Medicare/Medicaid in 2024 which accounts for over 25% of the annual Federal budget.

Some of Medicare is paid for through payroll taxes. Employees pay 1.45% of their income and employers pay another 1.45% of their employees income to the government to help fund Medicare and Medicaid. These are part of the Federal Insurance Contributions Act or (FICA) taxes that we pay on our income. Social Security is funded with a tax of 6.2% paid by the employee and another 6.2% paid by the employer. However this is only paid on the first $176,100 of income. Any income earned above that level is not subject to the SS tax, and that’s because there is an upper limit on the social security benefit one could receive. However, the 1.45% medicare tax has no income limit so whether a person earns income of $10,000 or $10 million the Medicare taxes are applied to the entire amount.

Now Medicare has been around for a long time.

In 1935: President Franklin D. Roosevelt’s New Deal included the Social Security Act, which provided retirement benefits but did not include health insurance. Efforts to include health coverage in the program were unsuccessful due to political opposition.

By the 1960s, about half of Americans over 65...