Getting ready to retire? Congratulations !!!
Have you ever taken a trip to a popular destination with no reservations and no plans? It may sound spontaneous and fun—but the truth is that game plan usually results in staying at a hotel out in the middle of nowhere and enduring some very long lines. Some enroll in a Medicare plan with a similar "no real plan" strategy, and end up with less than optimal results.
Plan ahead for the best results!! If you are getting close to being eligible for Medicare, and/or preparing to leave your employer group plan, give me a call 6 months or so ahead, and I will be happy to walk you through the Medicare enrollment process. Topics include:
- When, how, and whether you should sign up for Part A and/or B
- If COBRA is offered to you, how that should factor in to your plan
- What to do about HSA contributions
- How taking social security may effect your enrollment actions
- Planning ahead for possible Medigap enrollment period after group coverage ends
- Plan for Part B premiums well before you are eligible for Medicare
Together we can map out a Medicare Plan, but here are a few tips to help in your planning:
Check out the social security website. A few months or even years before you plan to go on Medicare, log on to the Social Security Administration website (ssa.gov) and create an account, or call your local social security office to ensure you qualify for zero premium Part A (Hospital coverage) of Medicare.
Consider your Part B premiums. Part B covers doctor visits and other medical care. Premiums are dependent on your income from two years prior; most people will pay $174.70/month for 2024, but you can check the "Income-Related Monthly Adjustment Amount" (IRMAA) to see if you will have to pay a higher monthly premium for Part B. You can view the entire income chart on the medicare.gov website. Just type in "Part B premiums" in the search bar and it will take you to the income chart. Keep in mind MAGI includes investment income. So, if you are thinking about selling investments and/or converting your IRA or 401k to a Roth IRA, you may wish to speak with your tax advisor about the timing of selling investments and how it relates to Part B premiums.
Deciding when to sign up for Medicare. To avoid gaps in coverage and possible penalties for late enrollment, most people should sign up for Medicare Part A and Part B during their seven-month initial enrollment window. You can read more about the enrollment window on medicare.gov. For those enrolled in an employer group healthcare plan, (or a spouse’s employer group plan) with over 20 employees, it may be advisable to postpone enrollment.
What if I plan to work beyond age 65, should I enroll in Medicare Part A and/or B? Perhaps. Most people are entitled to zero premium Part A if they have worked over 10 years. Depending on your plan at work, having Part A could help reduce your costs if you were to have a hospital stay. If you are still working and your employer plan is considered a creditable coverage plan, (which is typically the case if your employer has over 20 employees), as long as you are not contributing to a Health Savings Account, you may wish to enroll in Part A, and delay enrolling in Part B. Again, Part A is premium-free for most people who have worked, or if their spouse has worked, for at least 40 quarters or ten years, but there is a premium for Part B. There can be penalties for enrolling late, so if you plan on continuing to work past age 65, and keeping your group coverage, check with your employee benefit department to ensure your group plan would be considered “creditable coverage” by Medicare.
If you separate from your company, and are offered COBRA coverage or other retiree coverage, there are issues to be aware of if you are over age 65, or nearing age 65. If that is you situation, give us a call about your specific situation.
What about my health care savings account, can I still contribute? HSAs are an issue where the things can get tricky. If you are actively working, and are contributing to a Health Care Savings account, and wish to continue, you need to postpone Medicare enrollment. You are not allowed to contribute to an HSA while enrolled in Medicare—ANY part of Medicare. As long as your employer has at least 20 employees, and the employer’s plan is considered “creditable coverage” by Medicare, you are allowed to postpone applying for Medicare without any penalty; thus, providing a way to continue making contributions to your HSA. You will continue to be able to make those contributions tax-free PAST age 65 as long as you are actively employed, you maintain your "credible coverage" group health insurance, AND again, you are not enrolled in ANY part of Medicare, including Medicare Part A. Be aware of the Medicare "6 month lookback." If you are over age 65, you will need to stop contributions 6 months before you enroll in any part of Medicare. Again, planning ahead is important!
You may wish to consult with your financial advisor about the trade-offs of continuing with your HSA past age 65.
What happens to the money I have in my workplace Health Care Savings Account? You keep that money. You contributed to that fund while working; you can continue to use it to pay for eligible healthcare expenses such as co-pays, co-insurance, eyeglasses, etc. The "tricky" issue mentioned above pertains to contributing to an HSA, not having the actual Health Care Savings Account.
Why do some who are 65+ and still working switch from their employer group plan into a Medicare Advantage plan or Medicare Supplement plan? It's mainly about running the numbers--comparing deductibles, co-pays, and premiums. Remember even the zero premium Medicare Advantage Plans require the policy holder to sign up for Part A and B of Medicare, and there is a premium for Part B. Think ahead to future years and consider whether you will be required to pay a higher Part B due to your high income. For some, it makes financial sense to switch to a Medicare plan, for others, remaining with their group plan is the better idea. There are other factors to consider as well. For example, some employer plans only offer an HMO, and therefore they might like the idea of a Medicare Advantage PPO or Medicare Supplement where a referral isn't needed to see a specialist. Consider the costs of your prescription drugs when you compare options.
Yes, it’s true—there is quite a bit to Medicare! This is only a brief list of the many issues that pertain to Medicare "newbies.” I am always here to help so please feel free to call with any of your questions. My service is completely free of charge to you and with no obligation.
One final note…. When you are new to Medicare you may hear plenty of blanket proclamations from friends and family about what type of plan you should get, and/or whether or not you should continue on your employer group plan. It's great to learn from others about their experiences, just know however, that the right choice for your friend or co-worker may not be the right choice for you.
Evan Jellesma
evan@tmzinsurancesolutions.com
602-769-9280