Not retiring at 65? When should you buy Medicare?

The benefits of Medicare are initially activated when you turn 65. That is when you first enroll in this federal healthcare program for seniors. But what if you are still working at the age of 65 and don’t want to officially retire?

Senior couple with dog on cabin porch

Medicare enrollment and retirement are closely tied together. However, their different start dates of 65 and 66 are confusing.

Currently in the United States, the retirement age is officially 66. That is when the full benefits from Social Security can kick in if you want them. If you thought that the retirement age was 65, you’re not remembering things wrong. It was 65 for many years, but legislation passed by Congress in 1983 increased the retirement age to 67—though they are gradually raising that age over a 22-year period.

The benefits of Medicare are initially activated when you turn 65. That is when you first enroll in this federal healthcare program for seniors.

But what if you are still working at the age of 65 and don’t want to officially retire? If your workplace offers health insurance, do you still need to get Medicare when working past 65? What are the repercussions if you don’t?

This article answers all these questions and more.

1. Make sure you are covered by work – The first step in deciding whether you should explore Medicare enrollment while working beyond the age of 65 is to make sure that you are covered by work after 65.

If you are working for a company with 20 full-time workers or more, then by law the company is expected to offer you the same health benefits as younger employees. However, if you work for a small business with fewer than 20 employees, you could be required to sign up for Medicare by your employer.

It’s important to make sure you have a conversation with your company’s human resources department before your 65th birthday to make sure you know what you need to do in terms of health insurance coverage.

2. Get Part A anyway – If you have been working for at least 10 years, and paying your Medicare taxes, Medicare Part A is available for free. If you qualify for premium-free Part A, you can always just opt for Part A of Medicare, even before retirement regardless of whether you have health coverage from your employer. It’s important to make sure that you decline Part B coverage and ensure that your current employment status is recorded as the reason why you are opting out of Part B coverage.

3. Health Savings Accounts – If your workplace is offering an HSA or Health Savings Account, you should not opt for Medicare Part A, even if you are eligible. According to the IRS rules, those enrolled in Medicare are no longer allowed to contribute to an HSA. So, if you work for a company with more than 20 employees, and you have HSA coverage, you can choose to postpone your enrollment until you stop receiving this coverage.

4. What to do when you retire – When you end up leaving work life behind, there is some important information you need to keep in mind about Medicare and retirement. First, if you have an HSA, and you are at least six months beyond retirement age, Social Security offers six months’ worth of benefits as back pay. While this is a positive move, it also means that you have a six-month roll back on Part A coverage. Implying that the last six months of your HSA plan will be taxed.

There is also a special enrollment period to keep in mind when retiring, regardless of the kind of coverage you have. This special enrollment period allows you to apply for Medicare for eight months—starting a month from the day you retire or a month after the day you lose your work-based health insurance.

5. Why is it important to get your Medicare situation right? – There are penalties for late Medicare enrollment. If you are required to pay a Medicare Part A premium because you don’t qualify for free Part A coverage, you could incur penalties for Parts A, B, and D of the coverage. These penalties vary based on how long you wait until you are first eligible to apply and begin if you go for longer than 63 days without getting this coverage after your enrollment period.

Medicare options to consider:

  • Parts A and B are the most basic form of coverage and offer hospital care and basic medical coverage, respectively.
  • Part D is drug coverage.
  • Medicare Supplement insurance or Medigap covers additional out-of-pocket payments such as deductibles, coinsurance, and copayments.
  • You can also consider Medicare Advantage.

There are plans offered by private insurance companies that provide at least the same coverage as Original Medicare (parts A and B) and typically are a lot more comprehensive in nature. Medicare Advantage Plans in California   are a prime example of this type of coverage.

Now that you have information on Medicare and working past 65, plan your health insurance needs accordingly to ensure that you have maximum coverage at a minimum cost.

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Page last updated 10/12/2023

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