If you are considering working past age 65, there are some important things you should be aware of. By taking these things into consideration, you can reduce stress, avoid unnecessary penalties down the road, and have a much smoother retirement when the time comes.
While we give general recommendations, we strongly encourage you to speak with one of our advisors about your unique situation. This helps ensure that you fully understand the steps you should take to remain in control of your retirement situation and avoid surprises, even as you continue working.
Things You Should Consider:
- Do you need to take Medicare even though you’re still working?
- Should you delay Medicare Part B?
- How does Medicare work with your Health Savings Account?
- How does Medicare work with your employer’s health insurance?
- Can you be penalized for not taking Medicare at age 65?
Do You Need to Take Medicare Even Though You’re Still Working?
As you continue your career beyond your initial Medicare eligibility (age 65), you may wonder if you should still enroll in Medicare. However, if you work for a company with more than 20 employees and have health care benefits through the company, you may not need to take Medicare.
In many cases, people who plan to keep working do enroll in Medicare Part A, because they can receive the benefit “premium free.” However, be sure to read below about how Part A can impact your Health Savings Account (HSA), if you have one.
Should You Delay Part B?
While the answer to this question varies based on the individual, here are some reasons you may want to consider delaying Part B:
- You or your spouse is still working for a company with 20 or more employees
- You receive your health insurance through your or your spouse’s employer
The good news is that if you choose to delay Part B, you will not be required to pay the monthly premium quite yet. Likewise, taking the appropriate steps to properly defer your Part B benefits will ensure you are not penalized when you are ready to enroll in Part B.
How Does Medicare Work with Your Health Savings Account?
If your employer has 20 or more employees and offers a High Deductible Health Plan (HDHP) that features a Health Savings Account (HSA), you may want to consider delaying your enrollment in Part A. This is because if you have Part A, you and your employer will no longer be able to contribute to your HSA. It’s important to note that you must stop contributing to your HSA six months before you enroll in Medicare Part A.
Learn more about the intricacies of how Health Savings Accounts work with Medicare.
It’s very important that you understand what is right for your situation in this scenario. Many pre-retirees who are still working and have access to an HSA find that it is a great tool for retirement health care savings, since the funds contributed to these types of accounts are not taxed. For individuals who have access to this account and who plan to work beyond 65, it may make sense to maximize this benefit by continuing to save as much as you can in your HSA for medical expenses once you retire.
Not sure where to start? Our advisors are experts in these details who can walk you through your steps for working past age 65. Schedule a call with one of them today!
How Does Medicare Work with Your Employer’s Health Insurance?
If you are self-employed or work for a company with less than 20 employees, it will make sense for you to take Medicare Part A and Part B when you turn 65. In this case, Medicare will become the primary payer and your company’s health care plan will become secondary. This means that if you receive a medical bill, Medicare will pay first and then your employer’s insurance will pay second. Learn about what to do when you eventually come off employer coverage.
Can You Be Penalized for Not Taking Medicare at Age 65?
The short answer: yes, if you do not follow the appropriate steps to delay your Medicare benefits.
Understanding all the different enrollment periods and how they impact you is important because if you do not sign up for Medicare on time, you can incur penalties that add unnecessary expense and can stay with you for life. Here are a few to be aware of.
Medicare Part A Penalty
If you are already receiving Social Security benefits, you will automatically be enrolled in Part A. In this case, you would not be eligible to defer Part A. If you are not already receiving Social Security benefits, it may be in your best interest to delay your Part A enrollment due to an HSA through your employer. If you do not have active creditable coverage through an employer with 20 or more employees and delay taking Part A when you are first eligible during your Initial Enrollment Period, you could incur a late enrollment penalty.
The Part A penalty is 10 percent of the current Part A premium. You will pay the Part A premium + the penalty for twice the number of years you were eligible for Part A but were not enrolled.
Medicare Part B Penalty
Like Part A, if you do not take the correct steps to delay Part B, you will receive a penalty when you go to sign up. However, this penalty stays with you for the rest of your life in addition to your monthly Part B premium.
Expert Tip: One exception to this rule is if you enroll in Medicare through a Special Enrollment Period. In this circumstance, you might not be required to pay this penalty.
The Part B penalty causes your Part B premium to go up 10 percent for each full 12-month period that you went without it.
Medicare Part D Penalty
Due to confusion about what makes drug coverage creditable, the Medicare Part D penalty is especially tricky. However, it pays to make sure you take the appropriate steps with your drug coverage and avoid this penalty.
If you go without creditable prescription coverage when you become eligible for Medicare Parts A and B, you will be penalized when you go to purchase a Part D drug plan.
Like Part A and Part B, the Part D penalty is added onto the regular premium for your drug coverage. The fee is calculated as 1 percent of the average monthly prescription drug premium times the number of months you were late, rounded to the nearest 10 cents. This penalty stays with you for as long as you carry Part D coverage.
How to Delay Medicare Part A or B
If you are not receiving Social Security benefits, you will not need to do anything to defer your Original Medicare coverage. If you are receiving Social Security benefits, you will receive your Medicare red, white and blue card for Parts A and B in the mail. You can follow the instructions on the card to send it back and defer Medicare Part B. You are not able to defer Medicare Part A if you are taking Social Security.
It’s important to note that you are unable to defer Medicare for anything other than active employer coverage. To defer Medicare for active employer coverage, your company must have 100 or more employees if you are under age 65. And if you are over 65, your company must have 20 or more employees. When you apply for Medicare at a later date, you will have to provide proof of prior active coverage to avoid penalties.
Questions? Call Us! We’ve Got You Covered.
Medicare can be confusing. We are here to make it simple for you! Our team of advisors are experts in Medicare, so you don’t have to be. To make sure you are prepared for working past age 65, contact our team of advisors at 1-866-600-5638 today!