Medicare and working after 65
As people approach the age of 65, many consider retiring and accessing their Medicare benefits. However, a growing number of individuals are choosing to continue working after turning 65.
Navigating Medicare and working after 65 requires an understanding of how these systems interact. By exploring your options, enrolling during the appropriate periods, and considering your retirement plans, you can make informed decisions that optimize your healthcare coverage and financial security. It is also be a good idea to consult with a licensed Medicare agent as well as a financial advisor to be sure you make the best choices for your unique situation.
Medicare Eligibility:
Most people become eligible for Medicare at age 65. If they or a spouse have worked and paid Medicare taxes for at least 40 quarters/ten years, they usually qualify for premium-free Part A. Enrollment in Part B has a premium for most people.
Here are the 4 parts of Medicare and what they cover:
- Part A: Is Hospital insurance and it covers inpatient hospital stays, skilled nursing facilities, hospice care, and some home health services.
- Part B: This coverage is called Medical insurance and it provides coverage for doctor visits, preventative care, outpatient services, and medical equipment.
- Part C: Not everyone needs to have Medicare Part C. This is another name for a Medicare Advantage plan. These plans are offered by private health insurance companies and take the place of Medicare Part A & Part B coverage (although you still have to pay the Part B premium even with a Part C plan). In most cases, they include Part D prescription drug coverage.
- Part D: This is prescription drug coverage that helps pay for your medications. These plans are offered by private insurance companies.
Working After 65:
Many seniors choose to work past 65 for various reasons. These reasons may include; financial security, personal fulfillment, and maintaining social connections. If you continue working after 65, consider the following:
Employer Coverage vs. Medicare:
If you have health coverage through your employer or your spouse’s employer, you can delay Part B enrollment without facing penalties. You should look at the coverage and cost of each option before you make a decision. This is a perfect time to consult a Medicare agent so they can go over both plans and help you make the best choice. However, if your employer has less than 20 employees, Medicare becomes your primary coverage. This means you should enroll in both Part A and Part B to avoid potential late enrollment penalties.
Enrolling in Medicare While Working:
If you want to access Medicare benefits while working, make sure you sign up during your IEP or Initial Enrollment Period. The IEP begins three months before your 65th birthday and ends three months after your 65th birthday. Just be sure you understand how your Medicare coverage works with your employer plan if you have both. You may drop employer coverage and to join a Medicare plan. If you choose this option, you will need additional coverage such as a Medicare Advantage plan or a Medicare Supplement plan and a Medicare Part D plan.
No matter which plan you choose, be sure you have Creditable prescription drug coverage. If you do not, you can end up with a life-long penalty for late enrollment once you decide to purchase a Part D plan.
Medicare and Part-Time Work:
Even if you work part-time, you may be eligible for Medicare benefits. The rules for Medicare and employer coverage will vary. It all depends on your situation which includes the size of your employer. It is best to check with your employer’s HR department and your Medicare agent to see what your options are.
Click here for more information on working past 65
Medicare and Retirement Plans:
Working after 65 can impact your retirement plans, especially if you have retirement accounts like a 401(k) or an Individual Retirement Account (IRA). Check with your financial advisor for contribution limits and rules. You should also consider the following points:
The main rule for contributing to either a traditional or Roth IRA is, you or your spouse need to have earned income during that year.
Please be aware; IRA contribution limits apply based on your adjusted gross income amount.
- Earned income includes wages, salaries, tips, bonuses, commissions or earnings from self-employment.
- What is not counted as earned income cannot be deposited into your IRA include; dividends, interest, capital gains or distributions from retirement accounts.
Note; Social Security does not qualify as earned income, and can’t be contributed to an IRA.
Medicare and HSA Contributions:
If you have a Health Savings Account (HSA), contributing to it can provide significant tax benefits. However, once you enroll in Medicare, you can no longer contribute to an HSA.
RMDs and Retirement Accounts:
Once you reach either 72 or (73 starting in 2023) , you must begin taking Required Minimum Distributions (RMDs) from your retirement accounts. Make sure to plan for this additional income in retirement.
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