Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Election Period

What it is:

An election period is a window of time during which a person can take a certain action. In the bond world, the term refers to the period of time a holder of an extendible or retractable bond can extend or retract a bond. In the personal finance world, an election period often refers to the period of time during which a person can sign up for Medicare.

How it works (Example):

Let's say John Doe purchases an extendible bond from Company XYZ. The bond pays a 5% coupon and matures in 2025 but has an option to extend to 2030. The bond gives John Doe from January 1, 2024, to January 31, 2024, to elect to extend the bond (he can either get his principal back in 2025 or continue receiving coupon payments until 2030). He must inform Company XYZ of his decision during this election period.

In another example, let's say John Doe turns 65 in about six months. At that age, he will qualify for Medicare. However, he must sign up for it, and if he wants to purchase any supplemental coverage, he must do so during the election window, which is generally the three months before he turns 65.

Why it Matters:

Election periods require investors to be organized and on the ball. Miss the election period, and you could be out of luck. In the bond world, election periods are clearly laid out in the bond prospectus.

Retirees can learn more about election periods on Medicare's various websites.