There are many reasons why some people choose to continue working past the traditional retirement age. For example, you may want to delay taking Social Security benefits until age 70 to maximize your retirement income.
Or you may just want some fun money to play golf and travel with.
Or you may just love your job.
Whatever the reason, if you decide working past the age of 65 is the best choice for you, it’s important to understand how Medicare works while you are still employed.
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Medicare Eligibility and Enrollment at 65
Typically, you would enroll in Original Medicare during your initial enrollment period (IEP).
This Medicare IEP starts three months before you turn 65 and ends three months after your 65th birthday month.
People who are retired at age 65 face late enrollment penalties if they fail to complete their enrollment by the end of their seven-month initial enrollment period.
If you’re taking Social Security or Railroad Retirement Benefits at age 65, you will be automatically enrolled in Medicare Part A or B. But if not, you’ll have to sign up manually after you leave the workforce.
When you’re covered under an employer’s health plan, you may not need to enroll in Medicare right away. You may be able to stay on your employer’s plan and delay enrollment in both Social Security and Medicare.
Consider Your Health Coverage Options.
If you’re still employed at age 65, assess whether your employer’s health plan or Medicare offers better coverage.
Some find that keeping their employer’s plan and delaying Part B and D of Medicare is most cost-effective. Others choose to enroll in Medicare while still working. Your choice depends on factors like the size of your employer and the benefits offered.
It’s a good idea to discuss your options with your employer. Some employers will let you stay on their plan, while others will require you to transition to Medicare.
After You Leave Your Workplace Plan
As long as you remain on your employer’s plan, you are maintaining creditable coverage and you don’t have to worry about Medicare late enrollment fees.
Once you leave your job or lose your employer health insurance, you’ll have a Special Enrollment Period (SEP) to sign up for Medicare Part B.
This SEP lasts for eight months after your employment or health coverage ends, whichever happens first.
As long as you complete your enrollment in Medicare Part B and Part D by the end of that 8-month period, you won’t have any penalties.
Medicare Late Enrollment Penalties
If you miss your deadline to enroll, you may have to pay additional fees that can remain in effect as long as you are on Medicare!
Medicare Part B Penalties
You’ll pay an extra 10% for each year you could have signed up for Part B, but failed to do so. So the longer you delay enrolling, the bigger your penalty will be.
Medicare Part D Penalties
You’ll pay an extra 1% for each month (that’s 12% a year) if you don’t join a Medicare drug plan when you first get Medicare, or if you go 63 days or longer without creditable drug coverage in place.
Additional Coverage After Age 65
As you transition from employment health insurance to Medicare, you may find some new gaps in your healthcare coverage.
Once you’re enrolled in Original Medicare (Medicare Parts A and B), you may want to consider a Medigap, Medicare Advantage, or a Medi-Share 65+ health sharing plan.
Each of these plans help you to cover out-of-pocket costs not paid by Medicare.
You wouldn’t need them while you’re still covered under your employer’s plan. But once you leave or you’re dropped from your employer’s plan, any of these three options can be invaluable in helping you cover the many costs that Original Medicare alone doesn’t cover.
Medigap Considerations
Medigap—also called “Medicare supplement insurance”—is a system of standardized private insurance plans that help pay for your Medicare deductibles, coinsurance costs, and co-pays under Medicare Parts A and B.
These plans require monthly premiums. But if you need care, they can potentially save you thousands and even tens of thousands of dollars in out-of-pocket costs under Original Medicare.
The best time to buy a Medigap policy is during your 6-month Medigap open enrollment period, which starts the first month you have Medicare Part B.
You can delay enrollment in Medigap if you’re still on your employer’s plan without a late enrollment penalty. And as long as you maintain creditable coverage and don’t have a break in coverage longer than 63 days, you’ll still enjoy guaranteed enrollment in Medigap.
That means you don’t have to worry about medical underwriting, and you cannot be turned down.
If you want a Medigap plan, it’s a good idea to take care of both your Original Medicare enrollment and your Medigap enrollment within six months of leaving the workforce.
Better yet, do it immediately, so that you are still protected against the cost of unexpected injuries and illnesses, and you don’t have any coverage gap at all.
Note: The six-month window you get to enroll in Medigap penalty-free is a different timeline from the eight-month Special Enrollment Period you have to enroll in Medicare Part B after leaving your workplace plan.
These different enrollment periods and deadlines in the Medicare world can be confusing for many seniors.
To avoid risking late enrollment penalties and medical underwriting from private insurance plans, schedule a free consultation with a Personal Benefits Manager.
Part D Prescription Drug Plans
If your employer coverage doesn’t include creditable drug coverage, consider transitioning to Medicare and enrolling in a Medicare Part D plan right away.
This way, you won’t have to worry about Part D late enrollment penalties, which increase monthly, and can really add up!
This is frequently a better solution than remaining on your employer’s plan, paying part of the premiums as an employee, and going without Part D, while incurring steadily increasing penalties that become effective as soon as you do eventually enroll in a Part D plan.
The Medi-Share 65+ Health Sharing Alternative
Medi-Share 65+ is a healthcare sharing program for seniors, offering a comprehensive and affordable alternative to Medigap plans.
It’s designed to provide members with a way to share healthcare costs while offering flexibility and potentially lower expenses compared to traditional Medicare plans.
Medi-Share is a lower-cost, Christian, non-insurance alternative to Medigap.
It offers very similar benefits to the popular Medigap Plan G, though typically at a much lower monthly cost.
There are no late enrollment penalties for Medi-Share 65+. And you can delay enrollment while you’re still on your employer’s plan.
However, if you want to enroll in Medi-Share 65+, it’s smart to do it as soon as you leave your employer’s plan and enroll in Original Medicare. This is because Medi-Share 65+ waives the normal six-month waiting period on pre-existing conditions if you enroll as soon as you’re eligible and within six months of leaving your employer’s plan.
Click here to learn more about Medi-Share 65+.
Medicare Advantage
Medicare Advantage plans, also known as Medicare Part C, are offered by private insurance companies approved by Medicare.
They cover all Part A and Part B benefits and often include extra benefits like dental, vision, and hearing.
Pros:
- Often include additional benefits
- May have lower upfront out-of-pocket costs. Many plans are available at zero premium.
- Some offer prescription drug coverage
Cons:
- Limited to specific provider networks
- May require referrals for specialists
- Plans and benefits can change annually
- Much higher potential maximum out-of-pocket costs (MOOP) if you need care
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Continuing to work after age 65 impacts your Medicare Advantage enrollment timeline.
- Special Enrollment Period (SEP): If you’re working past 65 and covered under an employer’s health plan, you won’t face late enrollment penalties for delaying Medicare Part B or a Medicare Advantage plan. Once you leave your employer plan, though, you get a two-month Special Enrollment Period (SEP) to enroll penalty-free in a Medicare Advantage plan.
- If You Miss Your SEP: If you miss the 2-month window, you can sign up for a Medicare Advantage plan during the General Enrollment Period, which runs from January 1 to March 31 each year.
You must be enrolled in Medicare Part A and B (Original Medicare) when you join a Medicare Advantage plan.
However, coverage only starts on July 1 of the same year, potentially leaving a gap in your health coverage.
Balancing work and Medicare enrollment requires strategic planning.
For more personalized guidance, especially when considering health sharing plans or HSAs as part of your retirement healthcare strategy, connect with a Personal Benefits Manager.
They can help you navigate all your options, including the advantages of health sharing in retirement, and help you make the best choice for your specific situation.
For Further Reading: Medicare Penalties and How to Avoid Them | How to Find a Great Medicare or Senior Market Insurance Agent | Why You Should Use an Independent Agent to Buy a Medicare Plan | Medicare for Full-Time RV Travelers | Does Medicare Cover Non-Working Spouses? | How To Avoid Prior Authorization in Medical Billing
Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage.