Do I Need to Enroll in Medicare at Age 65?, #147
There can be a lot of confusion around enrolling in Medicare. Many of my clients believe they HAVE to enroll once they turn 65, but that is not necessarily the case. On this episode, I’m clearing things up by going over five questions you should ask before enrolling in Medicare at age 65.
You will want to hear this episode if you are interested in...
Do you have credible coverage? [2:50]
Are you enrolled in a high-deductible health plan? [3:51]
Will Medicare save you money? [4:34]
Is your spouse on your health plan? [6:22]
Should I enroll in Medicare Part A? [8:41]
Not so fast
The first question anyone should ask themselves before enrolling in Medicare is: Do I already have credible coverage? If you work for a company with 20 or more employees that provides health insurance, that coverage will likely exempt you from enrolling in Medicare if you plan to work past 65. Those who retire, are self-employed, or work for a smaller company will need to enroll in Medicare at 65 or face a 10% penalty for every year they don’t enroll.
There’s also the issue of a Health Savings Account (HSA). If you regularly listen to the show, you know I’m a big fan of HSAs. The fact that they let you save money on a pre-tax basis, take a deduction, grow the money tax-deferred, and then withdraw it tax-free for health-related costs makes HSAs one of the best moves you can make while prepping for retirement. However, signing up for Medicare means that you and your employer can no longer contribute to your HSA. So avoid enrolling in Medicare if you have a high deductible HSA that you want to keep building up!
Breaking it down to nickels and sense
Another thing to consider is cost. It might cost less to go on Medicare than to stay on your current individual health plan. It could also cost more! The starting premium for Medicare Part B is $164.90. For the first year you’re enrolled in Medicare, they base premiums on your last two years of tax returns. Individuals with an annual income greater than $100,000 and couples with an income that exceeds $200,000 will face a Medicare surcharge called IRMAA (Income Related Medicare Adjustment Amount).
Even paying the base premium of $164.90 won’t cover everything. Medicare does not cover things like out-of-pocket costs or 20% coinsurance, so many people end up enrolling in a supplemental Medicare plan to close the gap. All costs considered, Medicare could end up being a $200 to $400 monthly line item per person. If you're working past 65 and only paying $100 a month for your current health insurance, Medicare is not the answer right now. You are better off staying on your current health insurance until you retire. Listen to this episode for more on enrolling in Medicare at 65!
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