Baby boomers are leaving the workforce in droves: an estimated 10,000 per day, the Census bureau says, a trend that will continue through 2029 or so. If you’re one of them, congratulations on leaving the rat race behind.
But don’t hit the golf course just yet: you’ve got to make some key moves that could save you huge amounts of money. One of the biggest is when you should apply for Medicare. If you began taking Social Security early, at age 62, you’ll automatically be enrolled in Medicare when you turn 65. But if you delayed taking
Social Security (and your monthly Social Security checks are much bigger if you wait until age 67), then you have to apply for Medicare at age 65.
It’s a bit confusing (what else would a huge government health care program for tens of millions of people be?), and you have to be careful, because if you enroll for Medicare at the wrong time, it could cost you plenty.
Here’s when to enroll: Let’s say you turn 65 on April 10. You have three months to sign up before your birthday month, and three months after your birthday month. So your Medicare enrollment period (it’s called an initial enrollment period, or IEP) extends from January through July. Not to muddy the waters, but you’re also eligible if you’re younger than 65 but have a qualifying disability or health condition, or if you have an “end-stage” renal disease (ask a doctor for details).
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Here’s where getting any if this wrong could cost you. If you miss your initial enrollment period, you can sign up the next year, between January 1 and March 31, and your Medicare coverage begins that July 1. But you may have to pay a penalty, in the form of higher premiums. The premium depends on how much you worked during your career.
It gets complicated again here. If you worked for 10 years (or 40 quarters in government parlance), you get Medicare “Part A” (which covers hospital costs) for free. If you didn’t, that’s where the premium kicks in. But everyone pays a premium for Medicare “Part B,” which covers things such as doctor visits, lab tests, X-rays, mental health care, and being transported in an ambulance. Sign up late for Medicare and you’ll pay a penalty for your “Part B” premium.
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The penalty is 10% of the premium for each 12 month period you could have had Medicare but didn’t. Aren’t health care premiums high enough already? Who wants to pay more? Get a calendar and mark your enrollment dates and don’t forget—unless you like tossing money out the window.
If you’re new to all this, there’s more to this alphabet soup. There’s also “Part D” which concerns prescription drug plans. Uncle Sam doesn’t pay for your meds, so
unless you want to personally foot the bill for them—a costly proposition—you’ll need private insurance. Given how expensive medication can be, Phillip Moeller, a research fellow at the Center on Aging and Work at Boston College, tells the Washington Post. But he calls Part D plans “essential, must-have protection.”
There’s also Medicare “Part C,” also known as “Medicare Advantage,” which essentially are health plans run by private companies. They combine coverage for hospital stays with coverage for doctor visits. There are options galore here; you can get Plan C coverage with or without prescription drug coverage, for example.
This is all big, complicated and costly stuff. Obviously, you’ll want to take your time, research, and ask around before making any decisions.
Shifting gears, if you’ve heard that you’re getting a federal tax break this year, don’t get too excited. The Medicare Part A premium I mentioned? If you have to pay because you don’t have enough work credits, you’ll have to fork over about 2.2% more this year, either $232 or month or $422. Not a huge change, but enough to notice. And If you have to go the hospital, those deductibles are also about 2% higher: $1,340. So think twice before you go out and blow your tax windfall.