3 Things 10-12-26

 Thing One

Medicare Open Enrollment Begins This Week. Are You Properly Covered?

Medicare's Annual Enrollment Period (AEP) begins October 15 and runs through December 7. During this period, Medicare beneficiaries can review their coverage and make changes for 2027, with those changes taking effect January 1. Even if you're satisfied with your current coverage, this is a good time to make sure you understand what you're paying for, what your insurance actually covers, and perhaps most importantly, what it doesn't cover.

Medicare can be confusing, largely because of its different parts and the many insurance products associated with them. Part A covers inpatient hospital care, skilled nursing facility care under qualifying circumstances, and certain other services. Part B covers physician services, outpatient care, diagnostic testing, and other medically necessary services. Together, Parts A and B are known as Original Medicare. Part C, better known as Medicare Advantage, is an alternative way of receiving your Medicare benefits through a private insurance company. Part D provides prescription drug coverage, either through a standalone policy or as part of many Medicare Advantage plans.

One of the most important things I emphasize when discussing Medicare is that Original Medicare alone generally isn't enough protection. With Original Medicare, beneficiaries are typically responsible for 20% of the Medicare-approved cost of covered Part B services after meeting the annual deductible. More importantly, there is no annual out-of-pocket maximum. A serious illness requiring extensive treatment could leave someone responsible for thousands, or even tens of thousands, of dollars in medical expenses. Certain military retirees with TRICARE for Life, and individuals with other qualifying secondary coverage, may already have adequate protection. But for most people, I strongly recommend additional coverage.

That brings us to the two primary alternatives: Medicare Advantage and Medicare Supplement insurance, also called Medigap. Medicare Advantage plans are often advertised with zero-dollar monthly premiums, although beneficiaries generally must continue paying their Medicare Part B premium. Many plans also offer attractive extras such as dental, vision, hearing, and fitness benefits. These features can be valuable, particularly for someone on a limited budget. However, zero premium doesn't mean zero cost. Depending on the plan, beneficiaries may face copayments for specialists, diagnostic procedures, outpatient surgery, hospital stays, and other services. Medicare Advantage plans do have annual out-of-pocket limits for covered medical services, but those limits can amount to several thousand dollars. Provider networks and prior authorization requirements are additional considerations.

I'll acknowledge my own preference here. For people who can comfortably afford the monthly premium, I generally favor Original Medicare paired with a Medicare Supplement plan over Medicare Advantage. The reason is straightforward: I place a high value on predictability, flexibility, and minimizing financial surprises when someone needs medical care. With a comprehensive supplement such as Plan G, beneficiaries can generally visit any physician or hospital nationwide that accepts Medicare, without the network restrictions commonly associated with Medicare Advantage plans.

And here's something that I don't believe receives nearly enough attention in Medicare advertising. With Plan G, once you've paid your monthly premiums, your primary remaining out-of-pocket expense for Medicare-approved Part A and Part B medical services is generally the annual Part B deductible. In 2026, that deductible is just $283 for the entire year. After satisfying it, Plan G generally covers the remaining Medicare-approved Part A and Part B cost-sharing. That's an extraordinary level of financial predictability, particularly when compared with plans that can require additional payments each time certain medical services are needed. Prescription drug costs, services Medicare doesn't cover, and the separate Part D premium are additional considerations, of course.

I'm not suggesting that Medicare Advantage is inherently a bad product. For many people, particularly those who cannot comfortably afford a supplement premium, it can provide meaningful protection and benefits that Original Medicare alone doesn't offer. But I do believe consumers should compare the total potential cost of their coverage rather than focusing exclusively on the monthly premium. The least expensive plan when you're healthy may not be the least expensive plan when you're sick.

One final consideration is especially important for anyone contemplating a switch from Medicare Advantage to a Medicare Supplement. Unlike Medicare Advantage enrollment, purchasing a supplement outside certain protected enrollment periods may require medical underwriting. That means an insurance company could decline your application based on your health history. The Annual Enrollment Period allows you to change Medicare Advantage and prescription drug coverage, but it does not automatically guarantee your acceptance into a Medicare Supplement plan.

As we enter this year's enrollment season, my advice is simple: understand your options, review your existing coverage, and make your decision based on more than the advertised premium. Medicare is too important, both medically and financially, to approach any other way.

Thing Two  

The Financial Advantage of Being Young

One of the greatest financial advantages a young adult has is something that can't be purchased, borrowed, or recovered once it's gone. It's time. And when it comes to building wealth, time can be every bit as important as the amount of money you invest. That's because of the power of compound interest, or more accurately, compounded investment returns.

Consider a 25-year-old who has recently graduated from college and is beginning a career. Money may be tight, but suppose this young person commits to investing just $100 per month in an S&P 500 index fund inside a Roth IRA. Assuming an average annual return of 10%, which is roughly consistent with the stock market's long-term historical average, that relatively modest investment would grow to approximately $632,000 by age 65. At a 12% annual return, the account would grow to approximately $1.18 million. And assuming the Roth IRA withdrawal requirements are satisfied, that money could be withdrawn entirely tax-free.

Now consider the same individual who waits until age 35 to begin investing. The monthly contribution is still $100, and the investment strategy is identical. But with only 30 years remaining until age 65, the account would grow to approximately $226,000 at a 10% annual return, or about $350,000 at 12%. The difference isn't the amount invested each month or the investment selected. It's simply the ten years that were lost.

Here's what makes this comparison particularly interesting. The person who starts at 25 contributes a total of $48,000 over 40 years, while the person who starts at 35 contributes $36,000 over 30 years. That's a difference of just $12,000 in actual contributions. Yet at a 10% return, the difference in their ending balances is more than $400,000. That's the extraordinary effect of allowing investment returns to generate additional returns over an extended period.

There's an important lesson here, particularly for young people who assume they need to earn a substantial income before they can begin investing. Building wealth doesn't necessarily require starting with a large sum of money. It requires developing the discipline to invest consistently and giving those investments sufficient time to grow. A hundred dollars per month may not seem particularly meaningful at 25, but the decision to start can have enormous consequences four decades later.

Of course, stock market returns aren't guaranteed, and the market won't deliver 10% every year. Some years will be considerably better, and others will be negative. Inflation will also reduce the purchasing power of those future balances. Nevertheless, the underlying principle remains the same: The earlier you begin investing, the less dependent you become on having to invest substantially larger amounts later in life. When it comes to building long-term wealth, time is an asset worth taking advantage of.

Thing Three

Just A Thought  

“Lost time is never found again.” - Benjamin Franklin