Should you sign up for Medicare when you turn 65?

July 29, 2020

When you approach your 65th birthday you will have no shortage of questions on Medicare.

There will also be countless organizations offering information on the products they sell. It can become overwhelming with the amount of materials and phone calls you will receive over the next several months.

The problem is that they all want to sell you something before you even know what the best option is for you.

Let's not put the proverbial cart before the horse. So, if you have questions and need to enroll in Medicare, this is where to start.

You certainly need to know HOW and WHEN to sign up for Medicare, but possibly the most important question is IF you need to sign up at all.

You see, the process is determined by your individual situation, based on what your plans are at this point in your life. There is not a one size fits all solution. We do not just magically turn 65 and spend the rest of our lives in a rocking chair or knitting on the sofa.

We will start by asking a few simple questions.

Do you plan to continue to work?

Many people continue to work after age 65 for a variety of reasons. We are physically able to work to an older age. Social Security will make us wait to age 66 or 67 before we can collect full retirement benefits, and these are just a few reasons we put off retirement.

Do you have a younger spouse who is covered under your plan at work?

Many people continue to work due to the high cost of insuring a younger spouse which can run from $500 to $1300 per month with extremely large out of pocket costs! If your spouse is 3 years younger and healthcare runs $800 a month, that will eat up at least $30000 of your retirement nest egg, and that does not include out of pocket costs.

The next two questions go hand in hand.

Do you have health insurance through your employer?

If you don't, sign up for Medicare.

If it is terrible, sign up for Medicare.

If it is good and affordable go on to the next question.

How many employees does your employ?

Let's walk through this part of the process on step at a time.

You work for a large company and plan to continue to work

If you plan on continuing to work after 65 you will still be entitled to your employer sponsored coverage. You may choose to stay with this coverage because you need to cover a younger spouse, but be sure to verify if your employer has over 20 employees.

If that is the case, then all your coverage can remain as is. Your employer coverage will be considered primary and Medicare will be secondary.

You will not be required to sign up for Medicare Part B if you stay on that coverage and you will be granted a SEP (Special Enrollment Period) when you end employment and are no longer covered on the group plan.

The second item to check is if your Rx coverage is considered credible by Medicare. You can check that with your HR department, or you can contact the insurance company's customer service department.

You work for a small company and continue to work

What if your employer has less than 20 employees? Well now Medicare becomes primary. It will pay first and if you do not sign up for Part B, your employer plan will exclude whatever Medicare would have paid. Let that sink in for a minute, that could be a very big number. In this situation be sure to sign up for Part B.

Now the question becomes, “Do I stay on my employer's coverage or go onto Medicare? First, do you have a younger spouse that needs coverage? If this is the case, then it is probably best to stay on the employer plan until your spouse is eligible for Medicare or you stop working.

If this is not the case, you will have to perform a comparison of both options.

What's better, employer coverage or Medicare?

First take the cost of your employer coverage that is taken out of your paycheck for the entire year. Second add to that the maximum deductible and out of pocket for the year. Now you have your maximum cost of care for a year. You can also adjust this number by looking at how much your out of pocket expenses have been over the years and d the premiums to that number.

As for Medicare, Part B costs enrollee's $144.60 per month in 2020 plus the costs of any supplemental coverages you choose, which could be a Medicare Supplement, Part D RX plan or a Medicare Advantage Plan.

There are also many other items to consider such as which Drs. and hospitals you can access and in which areas of the country? Do you have coverage overseas? Will you have access to any additional benefits such as gym memberships etc. Each of these items vary from plan to plan and have a very different amount of value to every person.

As you can see, there are very different factors that will impact each of us differently. The key is that if you are unsure about which way to proceed, seek the help of a professional. There is not an additional cost for the help of an insurance professional, so don't be afraid to use one.

Remember, the choices that you make today could have an impact for years to come.