When does Medicare start?  What you need to know before you Retire Early

Michael QuanContributed, Education, Insurance, MiscLeave a Comment

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Retiring Early has many moving parts that we sometimes forget about when planning for our exit.  I know for myself, I never bothered to ask, “When does Medicare start?” Fortunately, my wife’s healthcare covers me. But, what if we both weren’t working?  We should know when Medicare kicks in, and if we’d need some supplemental coverage prior to then. 

Since I know nothing about Medicare, I’ve brought in Danielle Roberts, a Medicare expert, entrepreneur, and Forbes contributor to help us out.  Let’s just say she knows her stuff and will break this subject down into easily digestible pieces.  Take it away, Danielle!

When does Medicare start?  What you need to know before you Retire Early

Medicare is our national health insurance program in America for people aged 65 and older. (*Some people with disabilities may qualify earlier). Anyone who is a U.S. Citizen or permanent resident who has lived here for at least 5 years can qualify to enroll in Medicare.

Here are a few of the basics that you should know if you plan to retire early.  Additional details can be found at Medicare.gov.

When to Enroll

While you can enroll in Social Security income benefits as early as age 62, you are not eligible for Medicare until you turn 65. This is important to understand if you plan to retire early, because you may need to enroll in individual health insurance coverage through the Healthcare Exchange until you become eligible to enroll in Medicare at 65.

There are many plan options on the Exchange that can be the perfect bridge from your retirement date until your Medicare eligibility date.

All Medicare beneficiaries are given a 7-month Initial Enrollment Period that begins 3 months before their 65th birthday. As long as you enroll during this time, you will not incur any late penalties. Medicare benefits will begin on the first of the month in which you turn 65.

Where to Enroll

Most individuals enroll in Medicare via the Social Security office. You can go down in person to complete an application if you like. If you go this route, call the Social Security office ahead of time to set an appointment. Or, see if you can schedule an appointment online. This will save you a whole lot of waiting time in the office the day of.

You can also call Social Security at 1-800-772-1213 and request that they mail the Medicare application to you. This route takes a few weeks.  So, its best to only enroll this way if you’ve got 1 – 2 months before your coverage will start.

While phone and in-person enrollment options exist, most people these days apply for Medicare online at the Social Security website. You can enroll in Social Security income benefits at the same time if you will need both.

Medigap Open Enrollment

Your Part B effective date will trigger a one-time 6-month open enrollment window for Medicare supplement plans as well. During this window, you can apply for any Medigap plan in your area with no health questions asked. It is considered one of the best times to start your supplemental coverage since the coverage is guaranteed to be issued.

This enrollment period can be extremely important if you have health conditions which will make it impossible to qualify for a Medigap plan later on. Once the open enrollment window for Medigap has passed, you will have to answer health questions and go through medical underwriting to qualify for a Medigap plan in the future.

The insurance companies can accept or decline you for coverage at their discretion in most states. Some states like New York and Washington have year-round open enrollment for Medigap. While this is good for people with pre-existing health conditions, it also makes the Medigap plans in these states quite expensive.

A couple of other states like Oregon and California have limited open enrollment periods once per year. People with existing Medigap plans can use these periods to change from their current plan to a plan with equal or lesser benefits with no health questions asked.

What Costs to Expect

Medicare is not free, and not preparing for Medicare’s costs is one of the biggest retirement mistakes that people often make.

Often beneficiaries are surprised to find that Medicare has monthly premiums because they know they have been paying payroll taxes during their working years that go toward future Medicare benefits. Those taxes go only toward Medicare Part A, which is your inpatient hospital coverage.

As long as you have worked at least 40 quarters (10 years) in your lifetime, you will not pay for Part A. Individuals who do not have 40 quarters can qualify for free Part A under their spouse’s work history if that spouse is at least 62 years old and if the couple has been married for at least a year.

People can also purchase Part A benefits if neither they nor their spouse has the work history. This is the case for a very small percentage of beneficiaries – less than 1%.

Voluntary Coverage

So while Part A costs nothing for most people at age 65, Parts B and D have monthly premiums that you will pay as long as you are enrolled. In 2019, the standard base premium for Part B is $135.50/month. This is what most people pay, although people with higher incomes will pay more based on their modified adjusted household gross income.

Part D drug coverage is voluntary. It provides coverage for retail outpatient prescriptions. Some people do not enroll in Part D because they have other drug coverage. Others may choose not to enroll because they don’t currently take any prescription medications.

However, if you don’t enroll when you are first eligible and you don’t have other creditable coverage, such as through an employer, then you will pay a late enrollment penalty later on when you enroll. That penalty is assessed at 1% per month for every month that you waited to enroll. So, for example, if you didn’t enroll for 2 years, you would later pay a 24% penalty on top of your monthly premiums for Part D for as long as you remain enrolled in it.

The Part D  plan premiums are set by the carriers who offer them and vary widely, but the average monthly premium in 2019 is around $35/month.

People with higher incomes will pay more for Part D just as they do with Part B.

You should also know that Medicare covers approximately 80% of your healthcare costs. You will pay the rests in the form of deductibles, copays, and coinsurance. Most people enroll in supplemental coverage to help them pay for this.

In our next article, we’ll cover how Medicare works. We’ll look more in depth at what it covers so that you can feel confident in what to expect.

Readers, have you ever checked into when Medicare would start for you?  How important is Medicare to your overall retirement plan?

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