Working past 65 has become more common than ever. Whatever your reason for working past 65, it’s essential to know how it will affect your Medicare benefits. Medicare age begins at 65, and you could face lifetime penalties if you fail to enroll in Medicare when you need to. Signing up to Medicare while you’re working can be a confusing process. However, not everyone needs Medicare at 65 if they have large employer coverage. Let’s break this down.
Do I need to enroll in Medicare?
Medicare is health insurance that the federal government provides to eligible people. If you’re a U.S. citizen or permanent resident for at least five years, you are eligible for Medicare. This program is meant to provide healthcare benefits to those 65 and older and those with specific disabilities. At 65, if you don’t have insurance from a large employer based on active employment, you will want to enroll in Medicare.
Many people enrolled in the Affordable Care Act (ACA) ask why they can’t keep that coverage and wonder if it is necessary to transition to Medicare. ACA plans were created to help give healthcare benefits to those who are not yet Medicare age, but once you reach 65, you would need to transition to Medicare.
If you fail to enroll in Medicare during the appropriate enrollment period, you can cumulate a lifelong late enrollment penalty.
Working for a large employer at 65
However, if you or your spouse actively work for an employer with more than 20 employees and that insurance covers you, you can delay Medicare past 65. You would not be penalized for delaying Medicare when you have creditable large employer coverage.
Many people will enroll in Part A at 65 for secondary hospital coverage if they qualify for premium-free Part A. However, if you contribute to a Health Savings Account (HSA), you will want to delay both Part A and Part B while that insurance covers you.
Special Enrollment Period (SEP)
When you or your spouse are ready to retire, you will qualify for a SEP. That means you will have an 8-month window from the day you lose coverage to enroll in Medicare Part A and Part B. Once you are outside that window, you will start to accrue the late enrollment penalty.
You will also have a SEP for a Medicare Advantage or Part D plan. You are given a 2-month window from the day you lose coverage to enroll in either plan before accruing a late enrollment penalty. This means you will need Part A and Part B in place to enroll in these plans.
Small employer insurance at 65
A small employer is one that has less than 20 employees. If you or your spouse work for a small employer and are covered by their insurance, it is not creditable for Medicare. Therefore, you must enroll in Medicare Parts A and B within your Initial Enrollment Period (IEP) to avoid the late enrollment penalty. Small employer insurance is secondary to Medicare, so you would want to have Medicare in place so your small employer insurance can help cover some of your healthcare costs.
If you fail to enroll during your IEP, you will start to cumulate the Part B late enrollment penalty, and when you apply for Part B in the future, you will pay that penalty in addition to your monthly premium.
Research your Medicare windows early
Since the Part B penalty can be lifelong, it’s important to know whether your current employer insurance is creditable for Medicare. If it is, you can delay Medicare while you actively work. But, if it isn’t, you must enroll in Medicare at 65, so you don’t get penalized.