CATHERINE: I just turned 65 and I’m still working and covered by my employer’s group health insurance plan. Should I sign up for Medicare Part A since it’s free? I contribute to a health savings account at work.
MBF: You can sign up for Medicare Parts A and B when you turn 65, but you don’t have to if you’re covered by a group health insurance plan through your current employer or your spouse’s current employer. The company must have at least 20 employees to qualify for this exception. If you want to delay both Part A and Part B coverage, you don’t need to do anything when you turn 65.
Once you enroll in Medicare, even if it’s just premium-free Part A hospital insurance, you will no longer be able to contribute to an HSA. Medicare Part B, which covers outpatient services and doctors’ fees, has a monthly premium.
Most people should sign up for Medicare during their initial enrollment period — the seven-month period starting three months before you turn 65, including the month you turn 65 and ending three months after you turn 65. You can enroll in Medicare online at https//www.ssa.gov/benefits/medicare/.
If you don’t enroll when you’re first eligible, you may have to pay a Part B late enrollment penalty for the rest of your life, and you may have a gap in coverage if you decide you want Part B later.
You can enroll in Part A any time after you’re eligible, but your coverage will begin six months retroactively from the time you sign up (but no earlier than the first month you are eligible for Medicare). To avoid a tax penalty, you should stop contributing to your HSA six months before you apply for Medicare.
You can withdraw money tax-free from your HSA after you enroll in Medicare to help pay for medical expenses like deductibles and premiums, but you can no longer contribute to an HSA once you enroll. You may want to delay enrolling in Part A while you build a tax-free stockpile of cash to cover some of your future health care costs in retirement.
Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.
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