Retiring at 65 is no longer a given. In this time of increasing inflation and decreasing nest eggs, many people choose to work longer to add more money to their retirement accounts and delay Social Security to increase their eventual benefits. For others, work gives them a sense of fulfillment and purpose that they are not yet ready to give up.
If you are approaching 65 and plan to continue working, you may be wondering what you should do about Medicare. It’s important to understand how staying in the workforce affects your Medicare benefits to make an informed decision.
Medicare Part A
Medicare Part A covers inpatient hospitalization, skilled nursing facility care, hospice care, home health care and some nursing home care (not long term or custodial care).
In most cases, it’s a good idea to sign up for Part A even if you continue to work. You will qualify for premium-free Part A if you or your spouse worked for at least 10 years or 40 quarters.
If you are receiving Social Security benefits you are automatically enrolled in Part A. If you are not receiving Social Security benefits you need to sign up during your Initial Enrollment Period. This is the seven-month period around your 65th birthday, the three months prior, the month you turn 65, and the three months following.
Medicare Part B
Medicare Part B covers doctors’ visits, diagnostic tests, preventative services, and other outpatient services not covered by Part A. You may be able to delay enrollment in Part B, depending on the size of your employer.
Large Group Employer
If your company has 20 or more employees, you can delay enrolling without worrying about late penalties or gaps in coverage. Your employer coverage will be your primary insurance.
It makes sense to compare what you would pay for your group coverage vs. what you would pay for Medicare, including supplemental coverage and prescription drug coverage. The standard monthly Part B premium will be $164.90 in 2023. Higher income earners may pay more. Contact your benefits department before delaying enrollment to make sure your employer doesn’t require you to enroll in Medicare.
When you leave your job, you will have an eight month Special Enrollment Period to sign up for Part B. If you don’t enroll during this time, you could face late penalties and a gap in coverage.
Small Group Employer
If your company has fewer than 20 employees, you will need to enroll in Part B. By law, your employer group insurance is only required to pay after Medicare pays first as your primary insurance. If you fail to enroll, you could be responsible for 80% of the bill that Medicare would normally pay. To avoid late penalties and a delay in coverage, you should enroll in both Part A and Part B during your Initial Enrollment Period.
Employees at small companies often pay more for their benefits than employees at large companies. It may be more cost effective to drop your employer coverage and pick up a Medigap and Part D plan, or an Advantage Plan, instead of keeping the workplace plan as secondary insurance. It is important to compare benefits and costs before making this decision.
Medicare Part D
Prescription drugs are not covered under Parts A and B. Whether you sign up for a Part D plan depends on whether your employer coverage is considered “creditable”. Creditable coverage is equal to, or better than prescription drug coverage under a Medicare Part D plan. Your employee benefits department will be able to tell you if your employer coverage meets this standard. If it does, you do not need to sign up for Part D at 65. When your employer coverage ends, you will have a 2-month special enrollment period to sign up for Part D without penalty. If it’s not considered creditable coverage you will have to enroll in Part D during your Initial Enrollment Period when turning 65.
Other Important Considerations
Your income could affect your Medicare premiums. For Medicare Part A and Part D the more you earn the more your premiums will be.
If you claim Social Security benefits before your full retirement age, the income you earn may reduce your monthly payments.
Medicare can be complex and there is a lot to consider when working past 65. Making the wrong decision could result in late penalties and gaps in coverage. Reach out to your Medicare agent for guidance.
