Magic retirement number is 66, but Medicare a key factor

New study finds employee and retiree health care coverage impacts length of working life

May 28, 2013 @ 3:00 pm

By Darla Mercado

social security, retirement, medicare
+ Zoom

Sixty-six is the magic retirement age for people seeking full Social Security eligibility, but Medicare eligibility appears to be a considerable factor for those who decide to stop working at 65.

That was the conclusion of a study published by the Center for Retirement Research at Boston College. The institute released a research brief Tuesday entitled “How Important is Medicare Eligibility in the Timing of Retirement?”

The study examined 3,717 individuals who were still employed at 64 and had observable work histories up to 66. Of those participants, 2,109 were eligible for full Social Security benefits at 65 and 1,608 had a higher full retirement age.

Researchers studied participants' behavior and examined a number of factors, including pension coverage, financial planning horizons and how health care coverage in retirement affects the likelihood of retirement.

CRR found that workers who didn't have retiree healthcare coverage were 6.5 percentage points more likely to retiree in the month they turn 65 than those with retiree health care coverage through their employer.

Ultimately, the study predicted that 13% of the participating workers who had employee health care coverage but no retiree coverage would retire at age 65, compared with 9.8% of those who had neither employee nor retiree health insurance. Meanwhile, 7.7% of those who had both retiree and employee coverage were likely to retire at age 65.

Author and research economist Matthew S. Rutledge noted that other factors contributed to why someone might decide to retire at 65 instead of waiting, but these factors were negligible. For instance, some defined-benefit pension plans consider 65 to be the retirement age while some people might not realize that the eligibility age for Social Security isn't 65 — it was raised to 66 in 2008.

However, he noted that more people might be able retire at 65 — or even earlier — depending on how effectively the Affordable Care Act is implemented. Next year, as part of President Barack Obama's health care reform act, states are expected to have health insurance exchange programs up and running.

“It depends on whether the exchanges will be able to replace or phase out employer-sponsored insurance,” Mr. Rutledge said. “If it's implemented well and the exchanges are good substitutes for what you can get through your employer, then you will see others retire a little earlier.”

“We think those people who are just holding on for the insurance coverage might leave their employer if they can find adequate coverage elsewhere,” he added.

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