Enroll in Medicare at 65 and Consider Delaying Social Security
Representing almost one-quarter of the U.S. population, the Baby Boomer generation — those born from 1946 to 1964 — have or will reach age 65 between 2011 and 2029. If you are one of millions of “Boomers” reaching age 65 each year, you must enroll in Medicare on time to avoid penalties. Some individuals younger than 65 may also qualify for Medicare, including those with disabilities.
Medicare Benefits
Most Americans age 65 are eligible for Medicare Part A, which provides hospitalization insurance, without cost, if they have been employed and paid Medicare taxes. Medicare Part B provides medical insurance and requires that premium payments be made, based on income.
The additional components of Medicare are provided by insurance companies that must follow rules set by Medicare. Supplemental policies help pay out-of-pocket expenses not covered by Medicare Part A and Part B, including copayments, coinsurance, and deductibles. Medicare Advantage Plan (formerly known as Part C) includes all benefits covered under Part A and Part B plus prescription drugs, vision, hearing, and dental coverage, bundled in one plan. Lastly, Medicare Part D provides prescription drug coverage. These additional plans should be carefully evaluated with a financial professional to develop a comprehensive medical plan.
Enroll on Time
You become eligible to enroll in Medicare during the seven-month period that begins three months before your 65th birthday. You may be charged a late enrollment penalty for as long as you are covered by Medicare if you do not enroll during this “initial enrollment period.” If you do not enroll in Part B during this period, and then do so later, your monthly premium will be increased 10 percent for each 12- month period you were eligible but did not enroll. However, you may qualify for the “special enrollment period.” Medicare Part D late enrollment penalties begin if you do not have credible prescription drug coverage for as little as 63 days.
Special Enrollment Period
If you are age 65 and have health insurance through your or your spouse’s current employer under a group health plan, you may not need to enroll in Medicare Part B. The special enrollment period allows you to sign up for Part B in 1) any month you remain covered under the group health plan and your or your spouse’s employment continues, or 2) the eight-month period that begins with the month after your group health plan coverage or the employment it is based on ends, whichever comes first.
Medicare Premium Notice
Many Americans receiving Social Security have the Medicare premium deducted from their checks. But, if you enroll in Medicare prior to claiming Social Security, you will receive an invoice for Medicare Part B. In 2020, the standard premium is $144.60 per month at age 65. Premiums increase, based on your income, to the maximum monthly premium of $491.60.
Some Social Security Recipients are Automatically Enrolled
You can claim Social Security as early as age 62. If you claim Social Security prior to age 65, you will be automatically enrolled in Medicare three months prior to turning age 65. However, if you delay claiming Social Security until after age 65, you must take action to enroll in Medicare.
Consider Delaying Social Security
Even though you can claim Social Security retirement benefits at age 62, you should consider delaying your benefits until at least your “full retirement age.” Based on your year of birth, your full retirement age is 66 to 67. Depending on your marital status and earnings, claiming Social Security at age 62 will result in a monthly income benefit that is 25 to 30 percent less than your full retirement benefit. Additionally, in the event of your death, the benefit payable to a surviving spouse will be less. For every year that you postpone claiming Social Security beyond your full retirement benefit age and up to age 70, you will receive an eight percent increase in your monthly benefit. Delaying Social Security until age 70 provides a monthly benefit that is more than 75 percent greater than the monthly benefit at age 62. Considering longer life expectancy, the increased monthly benefit from a delayed Social Security claiming strategy may provide meaningful income later in life.
Sound decisions regarding enrolling in Medicare and when to claim Social Security begin with a financial plan designed to achieve your wealth management and personal goals. Your other resources, including income from pensions, IRAs, 401(k), and other investable assets, should be considered in developing the most effective claiming strategy for you and your family.
Kevin C. Kingston
Financial Advisor / Managing Director
ChFC®, CLU®