The decision to sign up for Social Security is a big one. That’s because your filing age determines how much of a monthly benefit you’re entitled to during your retirement.
You can already register for Social Security at the age of 62. But you can’t claim your full monthly benefit based on your pay history until full retirement age, or FRA. FRA depends on your year of birth, and it is 66, 67 or 66 and a certain number of months.
Meanwhile, Medicare eligibility begins at age 65. You can even sign up for Medicare up to three months before the month of your 65th birthday. If you reach that point and aren’t collecting Social Security yet, you may be wondering if it’s worth deferring your Medicare enrollment.
In some cases it could. But in many cases not.
Two separate programs
You can assume that you will not be able to enroll in Medicare until you have applied for Social Security benefits. But actually that’s not true at all. Just as you can apply for Social Security before Medicare, you can also do the opposite: enroll in Medicare at age 65, even if you want to wait until FRA or after to claim Social Security.
In fact, deferring Medicare simply because you don’t have Social Security can become problematic for a number of reasons. First, it may mean foregoing the medical coverage you need. Second, it can mean you’ll face expensive penalties for Medicare Part B, which covers outpatient services.
For each period of a year that you are eligible for Part B, but you do not enroll, you will receive a lifetime supplement of 10% on your premium costs. Now there is an exception to that rule, if you are covered by group health insurance. If so, that fine will be waived and you will be given a special enrollment period to sign up for Medicare once you are separated from your employer or your group coverage disappears.
But otherwise, keep that penalty in mind when deciding whether to defer Medicare. And don’t let Social Security — or the fact that you’re not yet receiving benefits — dictate that decision.
When it is doing pay to defer Medicare
For many seniors, enrolling in Medicare at age 65 makes sense. But if you’re still working, have group health insurance you’re happy with, and contribute to a health savings account (HSA), it may pay off to defer Medicare.
Once you enroll in Medicare, you are no longer eligible to fund an HSA. This doesn’t mean you can’t use your existing HSA to cover healthcare costs you incur as a Medicare beneficiary. But you cannot deposit fresh money into your account.
That aside, it often pays to enroll in Medicare Part A at age 65, even if you have a group health plan through an employer. Part A, which deals with hospital care, is generally free for seniors. And it can serve as secondary insurance, covering some of the costs that your primary insurance plan doesn’t have.
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