Confused about Working, Medicare and Spouse Benefits

Dear Planning:

Signing up for Medicare when you turn 65 is optional if you have creditable employer coverage. If you enroll in Part A, and you have a Health Savings Account (HSA) you and your employer must both stop contributing to it the month before you turn 65. Whether you should take Medicare Part B (coverage for doctors and other outpatient services) at age 65 depends upon whether your healthcare coverage through your employer is considered a “creditable” alternative to Medicare Part B coverage. Generally, if it’s a group plan with more than 20 participants it will be considered creditable, but you should check with your HR department to make sure. Assuming your employer coverage is “creditable”, you can defer enrolling in Part B until your employer coverage ends. At that time, you’ll enter a “special enrollment period” during which you can enroll in Medicare Part B (and Part D drug plan) without a late enrollment penalty. You can enroll in Part B (and Part D) a little before your employer coverage ends so as to avoid any lapse in health care coverage.

If your wife claims her Social Security benefit at age 64 when you claim your SS at age 66, her own benefit will be reduced, and her spousal benefit will also be reduced from 50% of yours because she is claiming the spousal benefit earlier than her full retirement age. Any time any Social Security benefit is claimed earlier than one’s full retirement age it is reduced. Taken 2 years before her FRA, your wife’s spousal benefit will be about 42% of yours, not 50%.

Your wife cannot enroll in Medicare simply because she is collecting Social Security; she’s not eligible for Medicare until she is 65 (she can enroll 3 months earlier for coverage to start the month she turns 65). If your wife retires from work before she is eligible for Medicare, she may use COBRA coverage until she reaches age 65 and her Medicare coverage begins. If your wife claims her Social Security to start when she retires at 64, she will be automatically enrolled in Medicare Parts A and B just prior to her turning 65 years of age, but if she continues to work and still has creditable employee (not COBRA) healthcare coverage from her employer at that time and wishes to delay enrolling in Part B (to avoid the premium), she can do so until her employer coverage ends. Then when her employer coverage ends, she should enroll in Medicare Part B (and Part D plan) during her special enrollment period so as to avoid any future late enrollment penalties. Finally, you should both be enrolled in Medicare Part A (hospitalization coverage) because it is required to collect Social Security benefits after age 65. Medicare Part A coverage is free for anyone who is eligible to receive Social Security benefits.