NerdWallet's Smart Money Podcast - Medicare Confusion? Get the Facts Before It Hits You (or Your Parents)

Episode Date: September 25, 2024

Learn how to reassess Medicare coverage during open enrollment and get the latest on interest rates, home sales, and stock prices. How can you know if you have the right amount of Medicare coverage? How can you change your Medicare coverage? Hosts Sean Pyles and Anna Helhoski dive into the latest findings on Medicare coverage from a new NerdWallet survey conducted by the Harris Poll. Personal Finance Nerd Elizabeth Ayoola joins to discuss what Medicare enrollees can do if they’re unsure whether they’ve chosen the right plan. The Nerds explain what Medicare users can do to reassess their coverage during open enrollment, which starts October 15, and how to navigate special enrollment periods when life changes occur. In addition to the Medicare survey, Sean and Anna cover key financial headlines from the week, including the Federal Reserve’s decision to lower interest rates, the latest trends in home sales trends, and what the new SEC rules that will allow stock prices to be quoted in half-cent increments mean for the average trader. NerdWallet's free retirement calculator will tell you where you are now and how much you need to save to reach your retirement savings goal: https://www.nerdwallet.com/calculator/retirement-calculator In their conversation, the Nerds discuss: Medicare open enrollment, interest rate cut, home sales trends, Medicare coverage, stock market changes, housing market news, real estate trends, special enrollment period, stock market updates, interest rate impact, mortgage rates, retirement planning, healthcare costs, financial headlines, Fed interest rate decision, real estate market, Medicare options, retirement savings, Medicare advantage, stock market tips, financial news, and retirement income. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. We'll go deep into a single topic and then leave you with the latest money headlines. Today, we're digging into what people think about their Medicare coverage with findings from a new NerdWallet survey conducted in July by the Harris Poll. That's right, Sean. And there were a few findings from the report that are key indicators of sentiment. Today, we're speaking with Elizabeth Iola, a personal finance writer here at NerdWallet

to discuss the result. Elizabeth has over 10 years of experience writing for outlets including Debt.com, Essence Magazine, and PopSugar. Her work has also been featured of experience writing for outlets, including Debt.com, Essence Magazine, and PopSugar. Her work has also been featured in the Associated Press, NASDAQ, the Washington Post, and others. Elizabeth, welcome to Smart Money. I'm happy to be here. It's one of my favorite places to be. Let's start with how people are generally feeling about their Medicare coverage. The report found that most people are satisfied, but they're not sure if they chose the right coverage. What's going on there? You got it, Ana. Well, like you said, about a third of people surveyed aren't sure that they have the right coverage for their

situation. And that could mean several things. Now, for one, it could be that they aren't clear about the coverage they do have, which is easy to misunderstand considering how complicated Medicare can be. So maybe they end up going to use Medicare benefits and then they realize they're unsatisfied with the cost, the coverage, or maybe the providers or pharmacies aren't in their network. A second reason that people may be unsure about their coverage could be due to changes in their finances or their health status, meaning coverage that once was adequate isn't anymore. Okay, so what can Medicare enrollees do if they're not sure they chose the right coverage? Can you explain what their options are?

Well, lucky for enrollees, Medicare isn't static, and that means they can still change their plan. So there are two primary periods when people can change their plans, and that's during open enrollment and also during special enrollment periods. Now, speaking of which, open enrollment is fast approaching. It starts October the 15th and it ends on December the 7th. So listeners who this applies to should mark their calendars. All right, so now let's start with open enrollment. Enrollees can change their Medicare health plans and prescription drug coverage during this particular time. More specifically, they can do four things, which include, stay with me, number one, they can join,

drop, or switch their medical advantage plans. Number two, they can switch from a Medicare advantage to original Medicare plan. Number three, they can switch from original Medicare to Medicare advantage. And number four, enrollees can also join, switch, or drop to another Medicare drug plan. And Medicare drug plans, FYI, are also called Medicare Part D if they have original Medicare. As a bonus one that no one asked me for, enrollees may be able to switch their Medigap plan if they're within their six-month Medigap open enrollment period. I know that was a mouthful. I hope you guys are still following. Now moving right on to special enrollment. Some things that qualify enrollees to change plans during special enrollment periods include qualified life events like moving, losing coverage, getting married, or having a baby. The

timeframe that you can make a change with special enrollment depends on the life event, but changes have to be made within a certain timeframe. Let's move on to a big concern people seem to have, whether or not there will be a Medicare and Social Security fund in the future. Listeners, for context, a report this year from the Social Security and Medicare Board of Trustees estimates that the Medicare trust fund will be depleted by the year 2036 and the Social Security fund will be depleted by 2035. So it seems like people have a right to be concerned, especially young people. Exactly. And I'm not saying whether I'm young or not, but I definitely was concerned when I saw the headline. Now, this is a valid concern, especially since there are a chunk of people

who hope to rely on these resources during retirement. Now, the truth is it's hard to predict what will happen to both Medicare and Social Security in the future, but people should keep in mind that while things may look bleak right now, this year, the Medicare insolvency date was pushed back five entire years from the previous report, thanks to factors like more income from payroll taxes and also lower than expected expenses from last year. So although the prospect of the Medicare Part A hospital insurance fund running out in 2036 and Social Security running short on funds in 2035 is alarming, it does show progress is being made. I also want to point out that there may be confusion about the entire Medicare running out when in reality it's Medicare part A that could be impacted.

According to the 2024 Medicare trustees report, the trust fund would only be able to cover 89% of Medicare costs with incoming tax revenue. Now for people who are hoping to rely on Medicare and social security during retirement, it really is important not to spend too much time worrying and more time focusing on what you can control. One thing that may be in within people's control is how much they save towards healthcare expenses. That said, the likelihood of both programs becoming non-existent, in my opinion, is unlikely. But Social Security and Medicare are both popular programs with politicians, right? Is it likely that those funds will be saved through policy changes, even if it's an 11th hour type of save? so much could happen within that time. I mean, so we could see a multitude of responses to the issue of low funds for both programs, which could range from increasing taxes, increasing the eligibility age, or a bump in healthcare costs to mention a few scenarios. The survey found that 30%

of Americans think social security alone will provide enough income for them to live comfortably through retirement. But if social security is your only plan for retirement, would you say it's not the most secure one to have long term? I love this question. So there isn't a one size answer for this because everyone's expenses and financial snapshot is going to look different in retirement. I think the ideal thing to do is get an estimate of how much social security income you're projected to get during retirement, and then measure that against how much income you need to live comfortably during retirement. Now, after doing that math, you'll know whether it's

ideal to live solely on your social security income or whether you need a plan B. So let's just put an example out there, right? So let's say you'll be getting about $1,907 a month. By the way, that is the average payment of Social Security in January 2024. So let's say you're getting that amount during retirement from Social Security, but after checking how much your monthly expenses will cost, you find that you need at least $2,500 a month during retirement. That means that you need to save more money to supplement your social security income. Ultimately, it never hurts to have more than you need for retirement considering risk factors like changes in your health, increases

in the cost of living, and outliving your savings, which I might add is a real thing. So in terms of how to go about estimating your social security benefit, consumers can do that using a tool on ssa.gov. So if you are not math savvy, you don't have to worry about all those calculations. To find out how much you need to live comfortably during retirement, consider the cost of basic expenses during retirement, like housing, healthcare, food, and leisure. And then you can use a retirement calculator like the one we have on nerdwallet.com to run the numbers and help factor inflation. The calculator will tell you where you are now and how much you need to save to reach your retirement savings goal. And we'll include a link to that retirement calculator in today's show notes. Elizabeth, what advice would you give

to those whose only plan for retirement is social security benefits? Well, the biggest thing I would say is to consider saving more so that you're not at the mercy of social security and its changes, if possible. So think about creating a healthcare bucket for retirement, just like you have a bucket for emergencies, hopefully. Some common savings vehicles people can save money for healthcare in the future include a tax-advantaged retirement account like a 401k, an IRA, health savings accounts, or a traditional brokerage account. Well, Elizabeth, thank you for joining us today. It's always a pleasure. Up next, a few money headlines from the last few days. So, Sean, since we spent quite a bit of time talking about it last week,

how about we update folks on what the Federal Reserve's Open Market Committee ended up doing with interest rates? Yeah, for those who didn't hear, the Fed decided to bring down the benchmark federal fund rate by half a percentage point. It was the more aggressive option of the two they were expected to mull over, the other being just a quarter percentage point cut. And it was the first cut since interest rates started going up in March of 2022. So this has all kinds of ramifications on the economy and potentially on your wallet. It could take a little while for the impact of a cut to show up in the wild, but it's possible you'll see credit card interest rates go down, along with interest rates on cars. Mortgage rates were already dropping. On the saver side, yes, some of those high-yield savings accounts rates of, say, 5.25% have likely already started dropping. You can check your account details.

But that doesn't mean you should just move all of your money out of those accounts. Anything above 4% is still way more than savers were able to get from those accounts for years. Anna mentioned mortgage rates, and they have indeed been dropping. But that doesn't appear to be helping the housing market, at least not just yet. The National Association of Realtors reports that sales of existing homes dropped two.5% from July to August. And sales were down 4.2% from the same time a year earlier. Here's one reason people may not be snapping up the homes that are for sale. Prices just keep going up and up. The median price of an existing home rose 3.1% from August of last year to $416,700. That was the 14th consecutive month of year-over-year price increases. So when might the housing market pick up? Well, the NAR's chief economist said the mortgage market has already priced in the Fed's rate cut,

so mortgage rates might not be moving much for a while. But he noted that the inventory of available housing was up 0.7% from July to August. So expensive houses, but at least more of them? At least a few. And finally, Anna, it's time to split pennies. Are these those pennies you can flatten to an oval at tourist attractions? Are we now cutting them in two? Only virtually, and only in the stock market. The Securities and Exchange Commission approved a new rule that will mean stock prices can be quoted in half-cent increments.

The hope here is that this makes stock trades a bit more competitive. Yeah, so the way stocks trade, there is, of course, the buyer and the seller. And there's someone in between those two, a middleman or middlewoman, executing the trade. Those folks in the middle take nibbles out of every stock trade. In Wall Street speak, this is called the tick size. It's basically a transaction fee. And by making it possible to price stocks by half a penny, that means investors might get to keep just a little bit more for

themselves, depending on the value of the stock that's being traded. Now, most people like us, folks who invest in the stock market through their retirement and college savings funds, won't notice a difference. Changes aren't scheduled to go into effect until November of next year. And Sean, no word on whether at some point we can ask a half penny for your thoughts. I'd like the full penny, please. And that's it for this week's money news. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373.

That's 901-730-NERD. Or email us a voice memo at podcast at nerdwallets.com. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. Today's episode was produced by Tess Vigeland and myself and edited by Rick Vanderkneife. Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.