| Tue, Jul 04, 2017 @ 09:00 AM

Turn 65, Retire, Sign Up for Medicare…or Not

Posted by Medicare Made Clear

senior woman playing pianoThe popular perception is that your 65th birthday marks the milestone in your life when you hang up your spurs, kick back, and reap the fruits of your labor as you enjoy sunsets from your porch.

For some, that perception is becoming a thing of the past.

Many of the 10,000 baby boomers who turn 65 every day and reach Medicare eligibility are choosing to work past the traditional retirement age. Some do it for financial reasons and others continue to work simply because they enjoy it.

The number of Americans 65 and older who said they were employed full-time or part-time has increased from 4 million people in 2000 to 9 million people in 2016, according to a Pew Research Center analysis of employment data from the U.S. Bureau of Labor Statistics.

Ironically, choosing to work beyond 65 for financial reasons could cost you in the form of Medicare premium penalties if you miss certain Medicare enrollment dates. So it’s important to approach the decision to delay enrolling in Medicare with your eyes wide open.

Here are some important points to keep in mind if you’re planning to continue working past your 65th birthday.

Why you should consider signing up for Medicare at 65

If you’re approaching age 65, you will soon have your Medicare Initial Enrollment Period (IEP) when you need to make some decisions about signing up for Medicare. This 7-month window generally includes the month of your 65th birthday, the 3 months before and the 3 months after.

For example, if your 65th birthday is on June 20, then your IEP starts on March 1 and ends on September 30.

Your IEP is the time to learn about your Medicare coverage options, figure out what coverage you want and enroll. If you’re still working, it’s a good idea to check with your employer plan benefits administrator to see how Medicare might work with that coverage before making any final decisions.

If you don’t have health insurance through your employer or another source, you may want to enroll in both Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) to get the full Medicare benefit.

Even if you have employer or other health coverage, you may want to sign up for just Part A when you turn 65 since most people can get it without paying a monthly premium.

How Social Security benefits can affect Medicare enrollment

If you are receiving Social Security benefits when you turn 65, you’ll be automatically enrolled in Medicare Parts A and B, even if you’re working. The two parts together make up what’s called Original Medicare. Your Medicare card will arrive in the mail about 3 months before your 65th birthday.

Once you’re enrolled in Medicare, a monthly Part B premium will be automatically deducted from your Social Security check. If you don’t want Medicare Part B, you need to notify Medicare to opt out. There will be instructions for doing this on the back of your Medicare card.

Many people wait to claim Social Security until they are 66 or older to increase their monthly benefits. If you fall into this group and still want your Medicare coverage to begin when you turn 65, you’ll need to enroll yourself because it won’t happen automatically.

Watch out for penalties when delaying Medicare enrollment

You could pay a late enrollment penalty if you delay enrollment in Medicare Part B. In most cases, the penalty payment sticks with you for as long as you have the coverage. The penalty is 10 percent of the Part B premium amount for each full 12-month period you delay enrollment past your eligibility month. For example, a person who delays Part B enrollment for 24 months could pay a 20 percent premium penalty. At 36 months, the penalty would go up to 30 percent.

If you delay Part B enrollment because you have employer health insurance, you may qualify for a Medicare Special Enrollment Period (SEP). During your SEP you may enroll in Medicare Part B without penalty. Your SEP lasts 8 months after the month you retire or after your employer health coverage ends.

Delaying Medicare Part D prescription drug coverage is another consideration. Your employer plan must provide drug coverage at least as good as Part D; otherwise you may have to pay a premium penalty if you don’t sign up when you’re first eligible. Ask your employer plan benefits administrator for proof of creditable drug coverage. This will protect you from penalty if you decide to get Part D coverage when you retire.

Act quickly if you want a Medicare Advantage or Part D plan when you retire

Medicare Advantage plans (Part C) are an alternative to Original Medicare (Parts A and B). They provide the same coverage as Original Medicare does, and many include additional benefits that you don’t get with Original Medicare such as dental, hearing and vision coverage.

Medicare Advantage plans often bundle in Part D prescription drug coverage, which is not covered by Original Medicare. You may buy a separate standalone Part D plan to add drug coverage if you opt for Original Medicare.

You have a 2-month SEP to sign up for a Medicare Advantage or a Part D plan after you retire or lose your employer health coverage. This is shorter than the 8-month SEP you have to enroll in Parts A and B. You must be enrolled in Medicare Part A and/or Medicare Part B in order to qualify for Part D coverage.

Keep in mind that it can take some time for plans to process your application. Make your decisions and enroll early to avoid a lapse in coverage.

The bottom line

Just because you delay your retirement beyond the age of 65, it doesn’t necessarily mean you should also delay making Medicare decisions and dealing with Medicare enrollment.

Late-enrollment penalties for Medicare Part B and Medicare Part D are permanent and can have a meaningful impact on your finances throughout your retirement. So it’s important to know when your enrollment periods are and to take action. You can find your dates now using our enrollment date calculator.

It’s a good idea to talk to your human resources representative or employer health plan benefits administrator to get personalized Medicare advice.

Related content

How to Score Tax-Free Retirement Savings

You’re 65 and Working: What about Medicare?

5 Timely Tips for Boomers Turning 65 in 2017

 

For more information, explore MedicareMadeClear.com or contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048

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