The Social Security full retirement age is 66 for most baby boomers, and you receive a smaller monthly payout if you sign up at a younger age. Some retirees sign up even later in order to qualify for larger monthly payments later in retirement. However, the Medicare eligibility age remains 65. So, if you want to wait until 66 or later to claim Social Security, you will have to sign up for Medicare separately at age 65. Here's how to sign up for Medicare while delaying claiming Social Security.
Social Security and Medicare are separate decisions. You don't need to sign up for both programs at the same time. "Most people take Social Security earlier than 65, but there's a penalty for that, and you get less per month if you start earlier," says Linda Fried, a medical doctor and professor of public health at Columbia University. For example, if you sign up for both Social Security and Medicare simultaneously in 2016 at age 65, you will only receive 93.3 percent of the Social Security benefit you have earned due to starting payments before your full retirement age of 66.
Some people are automatically enrolled in Medicare. Existing Social Security recipients are often automatically signed up for Medicare Part A and Part B, and the coverage begins the month they turn 65. A Medicare card generally arrives in the mail three months before your 65th birthday, and Medicare Part B premiums are withheld from your Social Security check. "People can [sign up for Social Security] as early as age 62. If they do so before the age of 65, they will be automatically enrolled in Medicare three months before they turn 65," says David Santana, a health insurance specialist for the Centers for Medicare and Medicaid Services. "They will receive a Welcome to Medicare package in the mail indicating they have been enrolled in Medicare Part A and B." However, if you want to delay signing up for Social Security until age 66 or later in order to get your full or an enhanced monthly payment, you will need to take action to sign up for Medicare.
Sign up for Medicare on time. You first become eligible to sign up for Medicare during the seven-month period that begins three months before your 65th birthday. If you don't start Medicare during this initial enrollment period, you could be charged higher Medicare premiums for the rest of your life. "Those who are not automatically enrolled because they did not receive Social Security retirement will have to be proactive and apply for Medicare," Santana says.
Medicare parts B and D both have late enrollment penalties. Monthly Part B premiums increase by 10 percent for each 12-month period you delay enrolling in Medicare Part B after becoming eligible for it. The Medicare Part D late enrollment penalty kicks in if you go as little as 63 days without prescription drug coverage and increases the longer you go without insurance. Both late enrollment penalties could be added to your premiums for the rest of your life if you don't sign up for Medicare during the months around your 65th birthday.
Medigap policies have a different initial enrollment period that begins when you are 65 or older and enrolled in Medicare Part B, after which you could be charged significantly higher premiums or even denied the right to purchase a Medigap policy. "Even if you want to hold off on signing up for Social Security, you shouldn't hold off on signing up for Medicare," says Mark Duggan, an economics professor at Stanford University. "In those first several months there are some important decisions that people need to make about Medicare, including enrolling in Part D and a Medigap plan." The actions you take (or fail to take) in the months around your 65th birthday will affect how much you pay for Medicare for the rest of your life.
Older workers can avoid the late enrollment penalty. If you or your spouse are working and covered by a group health insurance plan, you can avoid Medicare's late enrollment penalties if you sign up for benefits within eight months of leaving the job or the coverage ending. However, retiree health insurance and COBRA coverage through a former employer do not qualify as coverage that allows you to avoid the penalty. And if your group health plan coverage ends during the seven-month period around your 65th birthday, you will not qualify for the extra eight-month extension to sign up for Medicare.
Signing up after you missed the initial enrollment period. If you didn't sign up for Medicare near your 65th birthday, there's an annual enrollment period each year between Jan. 1 and March 31, and your coverage could start on July 1 of the same year. However, you will have a penalty amount added to your premiums based on how long you went without group health insurance coverage. "If you do it during the general enrollment period, meaning you did not do it at your first opportunity, it's very likely that if you don't qualify for a special enrollment period, you would have to pay a penalty," Santana says.
Be prepared to get a bill. Most people who receive Social Security payments have their Medicare Part B premiums automatically withheld from their checks. However, if you sign up for Medicare before claiming Social Security, you will get a bill for Medicare Part B. The standard Medicare Part B premium is $104.90 per month in 2016. However, new enrollees who sign up for Medicare in 2016 will be charged $121.80 monthly. A retiree who signs up for Medicare at age 65 in 2016 but delays claiming Social Security until age 66 will need to pay $1,461.60 in Medicare Part B premiums out-of-pocket over the course of the full calendar year. Once you sign up for Social Security you can instead elect to have these premiums deducted from your Social Security payments. Retirees with incomes above $85,000 for individuals and $170,000 for married couples also pay higher Medicare premiums, ranging from $170.50 to $389.80, with the highest income retirees being charged the biggest premiums.
Don't wait until age 65 to start researching your Medicare options. Signing up for Medicare requires you to make a variety of important decisions, including selecting the Medicare Part D plan in your area that best covers the medications you use, finding a Medigap plan to fill in some of traditional Medicare's out-of-pocket costs or choosing to go with a private sector Medicare Advantage Plan instead of traditional Medicare. "Thinking about it two or three years out makes a lot of sense so that you can make good decisions," Duggan says. Shopping around and meeting the enrollment deadlines will help you cover your health care needs at the lowest possible cost.
Emily Brandon is the author of "Pensionless: The 10-Step Solution for a Stress-Free Retirement."
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