Most retirees are required to sign up for Medicare parts A and B when they reach age 65. However, there are some circumstances that allow for delayed signup. It’s very important to know when you are required to enroll in Medicare, because those who sign up too late may be hit with serious penalties.
Medicare Late Enrollment Penalties
If you don’t enroll in Medicare Part B when you are first eligible, you may have to pay a late enrollment penalty. The penalty increases your monthly premium by 10% for each 12-month period you could have had Part B but didn’t sign up. It is important to note that the higher premium lasts as long as you have Part B coverage.
Example: Your Initial Enrollment Period ended December 2018. You signed up for Medicare Part B in March 2021 during the General Enrollment Period. Your coverage starts July 1, 2021. You went 27 months without coverage even though you were eligible to sign up. Your Part B premium is increased by 20% because you went two full 12-month periods without coverage. You have to pay this increased amount as long as you have Part B.
When Should You Sign Up for Medicare to avoid late enrollment penalties?
Some people are enrolled in Medicare Parts A and B automatically, others need to sign up. Whether you are automatically enrolled or need to sign up depends on if you are receiving Social Security when you turn 65.
For those already receiving Social Security benefits:
You will automatically be enrolled in Medicare Parts A and B if you are receiving Social Security at least 4 months prior to your 65th birthday. If you are enrolled through Social Security, you should receive your Medicare card in the mail 3 months before your 65th birthday. If want to delay your Medicare Part B coverage and you meet the criteria, follow the instructions that come with the card and send it back.
For those who are not receiving Social Security benefits:
Those not receiving Social Security prior to their 65th birthday will need to sign up for both Medicare Part A and Part B or face a late enrollment penalty. Most people enroll in Medicare Part A when they turn 65, but some may be eligible and choose to delay enrollment in Part B. These circumstances are discussed under the “Special Circumstances” section of this article. If you need to sign up for Medicare, you can do so through the Social Security Administration during a valid enrollment period.
The first, and most commonly used, opportunity to sign up for Medicare is the Initial Enrollment Period. This period includes the month of your 65th birthday, the 3 months prior, and the 3 months after. During your Initial Enrollment Period, if you weren’t automatically enrolled through Social Security, you can sign up for Medicare Parts A and B.
It is important to note that waiting to sign up for Part B until the month you turn 65 or later can result in a coverage gap. If you sign up for Medicare Part B during the three months prior to your 65th birthday, your coverage will start the first day of the month you turn 65. If you sign up the month of your 65th birthday or the three months after, your coverage will be delayed 1-3 months.
If you miss your Initial Enrollment Period, you can still sign up but will have to wait to sign up during the January 1- March 31 General Enrollment Period. If you sign up during that time, your coverage will begin July 1. To enroll, you can apply online, call 1-800-772-1213, or contact your local Social Security Office.
Special Circumstances
There are certain circumstances which would allow you to delay Medicare coverage. For most people, Medicare Part A, hospital coverage, is available without a premium while Medicare Part B, medical insurance, charges a premium. Some people who are still working at age 65 prefer to keep their employer sponsored health care plan because it either offers more robust coverage or has a lower cost than Medicare. In some cases, this can be a better option.
If you or your spouse are currently working and you are covered by a group health plan, the size of your employer determines if you can delay Medicare coverage. If your employer has fewer than 20 employees, you should sign up for Medicare Parts A and B when you’re first eligible because Medicare will be your primary insurer.
If your employer has over 20 employees, you may be able to delay coverage and sign up during a Special Enrollment Period. You should consult the benefits manager at your company to determine if the group health plan you are enrolled in qualifies you to delay Medicare coverage. If that is the case, and you were not automatically enrolled in Medicare Parts A and B through Social Security, you do not need to do anything when you turn 65. Instead, you will sign up for Medicare during your Special Enrollment Period. The Special Enrollment Period for you to sign up for Medicare is the 8-month period beginning the month after your employment or employer sponsored group health insurance coverage ends. Usually, you don’t pay a late enrollment penalty if you sign up during a Special Enrollment Period.
If you or your spouse are covered under a group health plan with a current employer that has over 20 employees, you can sign up for Medicare Part A and B any time during your employment. Or you have the option to delay coverage and sign up during your Special Enrollment Period. Note that COBRA plans are not considered employer coverage that qualifies for a Special Enrollment Period.
The wisest course of action is to avoid late enrollment penalties and sign up for Medicare Parts A and B during your Initial Enrollment or Special Enrollment Period. If you or your spouse are still working when you turn 65 and you want to delay enrolling in Medicare, be sure to speak to your company’s benefit manager to determine if you are eligible to delay enrolling in Medicare based on your company sponsored coverage. If you miss your Initial or Special Enrollment Period, make sure to sign up during the next General Enrollment Period to minimize the late enrollment penalty.
Talk to an Experienced Financial Professional
Navigating Medicare and Social Security can be a challenge for even the savviest investors. Meld Financial offers many educational resources to help investors plan for a comfortable retirement.
Having a team of experienced financial professionals can help you achieve your retirement goals. At Meld, our team of financial and legal professionals can leverage our decades of experience to help you develop your Financial Fingerprint®.
Your Financial Fingerprint® is a unique financial planning process that is quick to assemble, easy to understand, and simple to modify as your circumstances change. Contact a member of our team today to get your Financial Fingerprint®.
