Should You Enroll in Medicare if You Still Have a Job?

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With our nation’s daily record-setting surge of people turning 65, a question asked more frequently than ever is: “Should I enroll in Medicare if I am still working?”

As more people continue working beyond 65, perhaps encouraged by the increased age requirement for receiving Social Security’s full retirement age (FRA) benefits, questions about when and how to claim Medicare are always top of mind.

If you are confused about this, do not feel bad. This question has confounded people irrespective of a person’s household net worth, location, educational background or level of work experience. It’s a question being asked more than ever because, as the Retirement Income Institute at the Alliance of Lifetime Income recently reported, the United States has reached a historic milestone with 11,200 people turning 65 every day through 2027. We have never had so many people reaching 65 all at once, and the Pew Research Center last year reported one in five people over 65 are still working. This translates to 11 million in the workforce, a fourfold increase from 40 years ago.

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Here are answers on what you can and, more important, should do when applying for Medicare for optimum benefits and how to avoid any penalties, which can be long-term and costly.

What you can do

When you turn 65, you are free to electively cancel your participation in your employer-sponsored plan and enroll in all parts of Medicare (A and B, D or Medicare Advantage). You will need to work with your human resources department to cancel your employer plan. There will be forms to complete, and make sure you allow for a multiweek transition period to get through all the administrative steps.

If you have reached 65 and are remaining on as a full-time or part-time employee who is still eligible for participating in your employer plan, you are not required to apply for Medicare at all. Your employer-sponsored plan, however, must include drug benefits deemed to be creditable coverage, as determined by the CMS (Centers for Medicare & Medicaid Services).

Many people do choose to enroll in Medicare Part A (hospital coverage) only alongside their employer plan. This is a popular approach for those who continue to work since Medicare Part A has no premium and can be coordinated with an employer-sponsored health insurance plan. However, you must have accumulated 40 quarters of coverage as determined by the Social Security Administration. The spouse of a full-time employee can also choose to not enroll in Medicare under these conditions. If you haven’t already, sign up for an ssa.gov account to check your status.

Lastly, special attention is required for those who are enrolled in a high-deductible health plan (HDHP) and are making deposits into a health savings account (HSA). One reason that people may not want to enroll in Medicare Part A while still having coverage from an employer plan is that you are not allowed to be covered by any part of Medicare, from the date that any Medicare coverage begins, while simultaneously making any deposits into an HSA under your name, as doing so would be considered a tax violation. This also means that your employer cannot contribute to your HSA while you are enrolled in any part of Medicare.

What you should do

Avoiding penalties and meeting eligibility requirements when signing up for Medicare or delaying signing up is one thing. Getting the most out of Medicare is another topic entirely and is dependent on individual circumstances.

The first is understanding your own health status and/or condition. If you know or predict you’ll be needing extensive health care services, and depending on which coverage you select, Medicare and its adjacent policies will likely result in lower overall health care costs to you and greater access to your choice of health care providers.

In other words, even if the premiums you pay are the same under both an employer-sponsored plan and Medicare (and its adjacent policies), the cost of deductibles, coinsurance, co-pays and/or out-of-pocket maximums will likely be lower under Medicare compared to almost all employer-sponsored coverage.

However, your income also needs to be taken into consideration. Employers have discretion when it comes to deciding how much you will pay for your health insurance, and your payroll deduction may be less than the cost of Medicare and the adjacent policies (Medigap, Part D, Medicare Advantage). For high-income earners, Medicare IRMAA provisions may increase both Part B and Part D premiums. In addition, you will want to check if you will lose other benefits, such as dental and vision coverage, if you transition to Medicare.

Making Medicare decisions is unfortunately very complicated for people because a lot of work is required to get it right, and some of the choices you make can be permanent. It is understandable that employees are unaccustomed to making choices when it comes to health care coverage. They have historically relied on their employer for health insurance, which limits the menu of plans and enrollment conditions. All of that dramatically changes when it comes to Medicare. The consumer has a far wider set of options from both cost and benefits perspectives.

No doubt, Medicare decisions can be confusing and unsettling, especially if you’re continuing to work after 65. In many cases, it can be helpful to seek advice from a professional Medicare adviser. Regardless, the more you understand the rules and various intricacies of Medicare, the greater your savings and the better your health care outcomes.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jae W. Oh is a Certified Financial Planner (CFP) with over a decade of experience leading GH2 Benefits, based in Ann Arbor, Mich. He is a published author of "Maximize Your Medicare (2024-2025 Edition)" and an education fellow at the Alliance for Lifetime Income, a non-profit organization focused on annuity education. Mr. Oh can frequently be seen/heard on thestreet.com’s Retirement Daily and has been quoted in ThinkAdvisor, USA Today and Marketwatch.com.