Written by Jordan McElwain — Updated: Wednesday, August 16, 2023
As you near retirement age, understanding your financial health and estimating your future budget are paramount. Because Medicare premiums are what beneficiaries pay every month, understanding their cost is a significant piece of the budgeting puzzle for most retirees.
If you’re looking for a quick estimate, without explanation, as a typical Medicare beneficiary, you can expect to pay between $200 - $400 every month on premiums, depending on the coverage options you choose. It’s important to know that your premiums will not be your only medical expenses; you’ll still be responsible for Medicare deductibles, copayments, and coinsurance.
In some cases, your monthly premium will be higher or lower based on your income. If you’re a high earner, you may be subject to monthly surcharges known as Income Related Monthly Adjustment Amounts (IRMAA). IRMAA surcharges are detailed below. On the other hand, if you have a lower income, you may be eligible for financial support through Extra Help (also known as Low-Income Subsidy or LIS) and Medicaid.
Cost for most: $0/month
Most Americans receive premium-free Medicare Part A, meaning they pay $0. You’re eligible for premium-free Part A at 65 if any of the following apply to you:
If you’re under 65, you can receive premium-free Part A if any of the following apply to you:
If you’re not eligible for premium-free Part A, you’ll pay either $278 or $506 every month, depending on how long you or your spouse worked and paid Medicare taxes. You may also need to pay the Part A late enrollment penalty if you don’t purchase Part A when you first become eligible.
Cost for most: $164.90/month
Most Medicare beneficiaries pay a standard Part B premium of $164.90 every month in 2023—including those who have chosen to enroll in a Medicare Advantage plan.
Many Medicare Advantage plans have $0 premiums, which means you’ll pay the Part B premium (and nothing else) each month. Other Medicare Advantage plans offer a Part B Premium Reduction—a rebate that your insurance company will pay back to you (you still have to pay the full Part B premium to Medicare each month).
Some Americans pay a monthly surcharge, known as Income Related Monthly Adjustment Amount (IRMAA), due to their higher incomes. You’ll pay a higher premium if your modified adjusted gross income on your tax return from two years ago is more than $97,000 if you file an individual tax return ($194,000 for joint tax returns). Only 5% of Medicare Beneficiaries pay more due to IRMAA, but if you do, your total Medicare Part B premium will fall between $230.80 and $560.50.
Other Medicare beneficiaries with limited income and resources may qualify for Medicare Savings Programs that help them pay Part B premiums. Medicare Savings Programs are state-run, so your state will determine if you qualify. Learn more about your state's eligibility requirements here.
Estimated Average Range: $150-200/mo (source)
Medigap premiums vary widely. There are 10 Medigap plans (or 12, including the high-deductible F & G plans). Since each of these plans (for example, Plan G vs. Plan N) has different coverage, the disparity in premiums makes sense.
However, even within a plan type, premiums will vary. By law, plans of the same type (e.g., all Medigap Plan Gs) have the exact same coverage. But one Plan G may cost more or less than another Plan G. Why do premiums vary? Some of the factors that affect the premium you pay are:
Average Cost: $32.74 (source)
Part D premiums will vary based on your location, level of coverage, and income. In 2023, there will be 801 stand-alone Part D plans offered. Like other Medicare plans, you’ll only be eligible to enroll in plans available in your county.
Like with Part B, Part D plan holders may be subject to a monthly surcharge based on high income. Only 5% of Medicare Beneficiaries pay more due to IRMAA, but if you do, your Part D premium will be between $12.20 - $76.40 more every month, regardless of which plan you choose. Those on a Medicare Advantage plan with Part D coverage will also be subject to IRMAA surcharges.
On the flip side, those with low incomes may be entitled to full or partial Extra Help to reduce their Part D premium costs. You will receive Extra Help automatically if you receive:
Average Cost: $18/mo (source)
Medicare Advantage plans are required to cover everything Original Medicare (Parts A & B) covers, and they often come with additional benefits. There are almost 4,000 Advantage plans nationwide (in 2023), and the average Medicare beneficiary has 43 plans available to them.
Medicare Advantage plans differ in coverage, locations, carriers, and networks. As a result, costs vary—but about 70% of Medicare Advantage plan holders choose $0 premium plans. It’s important to note that if you’re on a Medicare Advantage plan, you will still pay your Medicare Part A & B premiums, even if you’re on a premium-free Advantage plan.
Premiums are not the only medical expense you’ll pay—but because they’re a fixed monthly cost, they’re important to consider when planning for retirement. Our licensed Medicare Advisors are on-hand to answer any questions you have about how to enroll in Medicare and which options are best for your unique health and financial needs.