According to the U.S Bureau of Labor Statistics, almost 20 percent of Americans over the age of 65 still work for pay in some capacity. This is the highest percentage of senior workers since the formation of Medicare. While some Baby Boomers work because they enjoy it, others need the money because the financial crisis hit their savings hard. For example, approximately 60 percent of U.S. households have no money in a 401(k) or similar retirement account.
This new phenomenon has caused some confusion regarding Medicare enrollment. If you are working beyond the traditional retirement age, do you actually need Medicare? Additionally, will you receive a penalty for not enrolling? We answer these questions below.
Social Security Benefits
If you aren’t qualified to claim Social Security benefits, you would need to pay Part A premiums. Consequently, your main concern is the monthly premium and NOT the deductible. In 2016, you might have to pay up to $411 a month! Obviously, Part A makes absolutely no sense for you in this situation.
If you qualify for Social Security benefits, it’s a good idea to take them regardless of whether you’re retiring or not. In order to qualify, you must have a minimum of 40 credits of covered work in jobs where you paid Social Security payroll taxes. It’s often assumed that this equates to the equivalent of 10 years (a credit = 3 months of work).
In fact, earnings are the basis for credits. In 2016, one credit is $1,260. If you were to earn $5,040 in a single month, you would already have the maximum of four credits per year that contribute to your Social Security eligibility. If you have the 40 credits, you get Part A free, which means you should take it!
Group Health Policies
The majority of people with group health policies with their employer don’t need to sign up for Medicare once they reach the age of 65. You can then keep your employer coverage until the day you decide to retire from the workforce. From that day, you will have eight months to sign up before receiving a Late Enrollment Penalty.
The size of your employer plays a huge role in whether you need to sign up immediately. Medicare typically takes up the role of “first payer” if you are over 65 and work in a company with less than 20 employees. In simple terms, this means you would have to enroll in Medicare. It would offer primary coverage with any insurance provided by your employer deemed to be “secondary.”
The question of whether you should enroll in Medicare the moment you hit 65 regardless of your employment status does not yield a straightforward answer. As well as the information above, there are all manner of caveats, which you can read on the official Medicare website.