While delaying retirement can help you put more money away for the future, it can also impact when you access your retirement benefits and put you at risk of missing important enrollment deadlines for Medicare. The good news is that you can still take advantage of Medicare benefits even if you are working past age 65. Understanding a few things about Medicare and what full retirement age really means can help you strategize and make the best choices for your future.
The Age You Can Start Collecting Your Full Social Security Retirement Benefit
Common wisdom says retirement age starts when you turn 65. And until 1983, so did the Social Security Administration. Because people live longer than they did when Social Security started, Congress passed a law to slowly raise the “full retirement age” for Social Security collection from age 65 to 67. Fast forward four decades, and now people born in 1954 can begin collecting their full retirement benefit at age 66. Every birth year after 1954 gets a few months added until the full retirement age will cap (for the time being) at 67 for people born in 1960 or later.
Confused? Just enter your birthdate in the Retirement Age Calculator on SSA.gov to get your actual retirement date.
In truth, there is no official retirement age. Some people retire earlier than 65, and some retire later. But the age you choose does impact how much Social Security you can collect.
If you retire earlier than your full retirement age, you won’t collect the full amount due to you from Social Security. If you retire after that age, you could collect a fraction more. Medicare, on the other hand, is on a different age-in schedule.
What Is Medicare?
Unlike Social Security’s tiered eligibility system, everyone becomes eligible for Medicare at 65. Even though you may be thinking about working longer and postponing Medicare enrollment, you still should know the three basic types of Medicare coverage as you consider your options.
Original Medicare is a federal health insurance program that’s made up of Part A (Hospital Insurance) and Part B (Medicare Insurance). It covers:
- People who are 65 and older
- Certain younger people with disabilities
- People with End-Stage Renal Disease
Medicare Advantage is offered by private companies that are Medicare approved. These plans offer Parts A and B coverage along with additional benefits Original Medicare doesn’t offer, like gym memberships or meal delivery.
Medicare Supplement Insurance is also known as a “Medigap” plan that helps fill the gaps in Original Medicare and is offered by private insurance. It helps pay for out-of-pocket costs that Original Medicare doesn’t cover.
Can Your Employer Force You to Enroll in Medicare?
If you’re still employed beyond age 65, you must be offered the same health insurance benefits as the younger people at your job. The Employee Retirement Income Security Act of 1974 (ERISA) provides this protection to you and any dependents you may still have on your plan. That means that even though you are eligible for Medicare, you can’t be denied the benefits that would be otherwise available to you through your employer based on that eligibility.
However, ERISA only applies to employers with 20 or more workers. If your company has fewer than 20 employees, you may be required to enroll in Part B (Medical coverage) at age 65. In this case, Medicare would become your primary coverage, and your employer’s group insurance plan would become secondary.
Why Sign up for Part A, Even Though With Group Insurance?
Even though you aren’t required to sign up for Medicare if you have group insurance, it makes some sense to do it anyway. Part A Medicare covers your hospital expenses. If you’ve been employed more than 10 years, odds are you’ve paid enough payroll taxes to get the premium-free Part A benefit which can provide extra coverage for hospital stays beyond your employer’s group. Think of it as an extra insurance policy that will help you fill any gaps your group insurance might have.
Eligibility for Enrollment in Parts A and B
Your Medicare Initial Enrollment Period is seven months long and covers the three months before you turn 65, your birthday month, and the three months following your birthday. This gives you plenty of time to research your options and compare plans.
To enroll, you can call Social Security, which handles Original Medicare enrollment, at 800-772-1213 and schedule an interview over the phone or at your local Social Security office. If you’re thinking of enrolling into a Medicare Advantage plan which is offered by private health plans, you must be enrolled in Parts A and B before you can sign up.
What Happens if You Miss Your Initial Enrollment Period?
Your initial enrollment period is the only time you can enroll in Medicare outside of the annual cycle that everyone else is on. If you miss that period, you’ll likely have to wait until the Medicare Annual Enrollment Period comes around again. The Annual Enrollment Period (AEP) runs from October 15 to December 7 of each year.
Missing your initial enrollment can not only create a gap in coverage, it can also leave you vulnerable to late enrollment penalties. According to Medicare.gov, “If you have to buy Part A, and you don’t buy it when you’re first eligible for Medicare, your monthly premium may go up 10%. You’ll have to pay the higher premium for twice the number of years you didn’t sign up.” You can postpone signing up for Parts A, B, and D as long as you have “creditable coverage.”
To postpone, you or your spouse must be actively employed and covered by employer-provided health insurance and a prescription plan. Your benefits administrator at work can confirm if your health plan is considered creditable by Medicare. When you interview with Social Security during your Initial Enrollment Period, make sure that they record you have declined Part A or B or D because you have creditable coverage through you or your spouse’s current employment.
Once your employment or group coverage ends, you’ll be eligible for a special 8-month enrollment period to enroll in Parts A and B. And you’ll have two months to enroll in Part D. If you don’t enroll during these times, you may be liable for ongoing late enrollment penalties. It’s a good idea to check with your benefits administrator to see how your current group plan works with Medicare.
How Does Retiring or Enrolling in Medicare Affect an HSA?
If you have a Health Saving Account with your employer, you must stop contributing six months prior to enrolling in Part A or Original Medicare. You also must stop contributions to your HSA before applying for Social Security benefits. Once you apply for Social Security, you will be automatically enrolled in Parts A and B. If you don’t stop your HSA contributions in time, you could face a tax penalty.
What If You’ve Delayed Enrolling in Medicare and Get Laid Off?
Starting the month after your employment ends or your group health insurance ends (whichever happens first), you can enroll in Medicare during an eight-month special enrollment period.
You also can’t delay Part B due to COBRA coverage or retiree benefits. You can only delay Part B if you or your spouse is actively employed and part of a group health plan.
When it comes to Part D, as long as your COBRA or retiree drug coverage is considered creditable by Medicare, you won’t need to enroll in Part D until these benefits end. And again, you’ll be entitled to the two-month special enrolment period mentioned previously.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.