x
To prepare for retirement in 2023, learning about Medicare enrollment is a critical step. If you miss your window to apply for Medicare, you could be stuck with a late enrollment penalty.
On top of knowing when to enroll, you will also want to know the costs you can expect with Medicare and what coverage you will need. But first, at what age are you retiring in 2023?
If you plan to retire when you turn 65, you will apply for Medicare during your Initial Enrollment Period (IEP). This seven-month window begins three months before your 65th birthday month and ends three months after. Your Medicare benefits will start on the 1st of your 65th birthday month when you apply before your birthday month. If you apply during the three months after your 65th birthday month, your Medicare coverage will begin the 1st of the month after you apply.
Most employers will cover you until the end of the month when you retire. However, this varies by employer, so contact your HR department to learn exactly when your employer insurance will end.
If you begin your retirement before 65 and you will not have any form of insurance from your previous employer, you can consider enrolling in an ACA plan. You can find plans available in your area through healthcare.gov and choose a plan that you find the most cost-effective.
Since ACA plans are not creditable for Medicare, you will want to transition to Medicare at 65. Sign up for Medicare during your 7-month IEP window, and then research which Medigap or Medicare Advantage option best fits your needs. Once you have your Medicare coverage all set up, you can contact your ACA plan and cancel the plan. You can time it so that your ACA plan will end on the last day of the month and Medicare will begin on the 1st of the following month.
You would also apply for Medicare during your IEP if you retire before 65 and have Cobra through your previous employer.
Suppose you are past your IEP window, and you or your spouse actively work for a large employer. In that case, you will have a Special Enrollment Period (SEP) window to apply for Medicare when you lose that employer’s health plan. You will have 8-months to enroll in Medicare once you lose coverage or employment before accruing a late enrollment penalty.
However, most people prefer for their Medicare benefits to begin immediately after their former employer coverage ends. We recommend applying for Medicare about two months before you need it to be effective. It can take several weeks for Social Security to process your documents. You will need to submit CMS form 40B and CMS form L564 to the Social Security office when you apply due to losing creditable coverage.
If you plan to work for a small employer past 65, be aware that Medicare is primary and the group coverage is secondary. This means you will want to apply for Medicare during your IEP to avoid any late enrollment penalty.
If you are offered Cobra or retiree coverage when you retire, you will likely want Medicare to start as soon as you switch to Cobra or the retiree plan. Those options will usually be secondary to Medicare Part A and Part B. You can confirm how your retiree coverage will work with Medicare by contacting your HR department or Medicare directly.
Suppose you are offered a retiree plan by your former employer. In that case, you can compare that plan with the plans offered by private insurance companies, such as a Medicare Advantage or Medicare Supplement plan. You may find those plans to be more cost-effective than your retiree plan.
Medicare does not cover all your hospital and medical services in full. You can expect to have some cost-sharing in the form of copays, deductibles, and 20% coinsurance for your services with no cap on your costs. This is the reason why people buy supplemental insurance.
There is an option outside of Medigap Insurance and that is Impact Health Share For Seniors. It covers the gap and it is a viable and most affordable alternative to the expensive plan of Medicap. Take a clost look at it and make an informed decision.
Additionally, you will want to enroll in a Part D prescription plan for outpatient drug coverage. If you enroll in Medicare during your IEP, you will also enroll in a Part D plan during that same seven-month window. Some people apply later on, after their IEP, because they work past age 65 and their employer coverage covers their medications. In that scenario, you will be given a 2-month Special Election Period from the day you lose that employer coverage to enroll in a Part D plan.
Part D does have a late enrollment penalty if you miss your window.
The other option is an Advantage plan which is an alternative way to receive your Medicare benefits. You would use your plan whenever you go to the hospital or need a medical service. These plans can offer coverage on services not covered by Medicare, such as routine dental, vision, and hearing. They can also include drug coverage.
The enrollment windows are the same as Part D. If you are beginning Medicare at 65 when you retire, you can apply during that same seven-month window. However, if you retire after 65, you will have two months to sign up for a Medicare Advantage plan. If you miss your window, you will have to wait for the next available enrollment window, such as the Annual Election Period that occurs each fall.
Most people will pay $0/month for Medicare Part A because they worked at least 40 quarters in the U.S. If you have not worked at least 40 quarters, you will pay a premium of either $278 or $506, depending on the number of quarters. You can qualify for free Part A through your spouse if they are at least 62 years old and you’ve been married for one year. You can even qualify through an ex-spouse’s or late spouse’s work history, so most people don’t pay for Part A.
However, all Medicare beneficiaries must pay the Part B premium. In 2023, the standard base premium is $164.90. Some people pay more for Part B based on their income.
Social Security looks at your tax returns from two years prior. If your MAGI was more than $97K individually or $194K jointly in 2021, you will pay more in 2023. The amount you pay above the standard base premium is the Income Related Monthly Adjustment Amount (IRMAA). You can appeal IRMAA if your income has changed. Social Security does re-evaluate your Part B premium each year. They will send you a new Benefit Determination Letter each year in December or January to notify you of your new premium for the upcoming year.
In addition to Original Medicare premiums, you will want to get an idea of how much a Medicare Advantage plan, Medicare Supplement plan, and Part D plan will cost before retiring in 2023 so you can better prepare for the transition.
Planning for retirement can take time as there are many enrollment windows to keep track of and know. Additionally, you will want to know your budget and compare all options, so you choose the most cost-effective route that works best for you.
