Still Working at 65? Here's Why You May Want to Delay Your Medicare Enrollment.

Age 65 is an important milestone in the context of healthcare. That’s when most people become eligible to enroll in Medicare.

Your initial Medicare enrollment window actually begins three months before the month of your 65th birthday, allowing you to sign up ahead of time and put that coverage in place right away. But if you’re still working at age 65, you may want to hold off on enrolling in Medicare. And the reason may surprise you.

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The less obvious reason to wait on Medicare

If you’re still working when you become eligible for Medicare, it may not make sense to sign up if you have good health coverage through your employer. While Medicare Part A, which covers hospital care, is free for most enrollees, Part B, which covers outpatient care, comes with a monthly premium. And why pay that premium if you have a workplace plan you’re happy with?

But there’s a less obvious reason to hold off on Medicare enrollment. Waiting to sign up could allow you to keep contributing to a health savings account, or HSA.

HSAs are available to people enrolled in high-deductible health insurance plans. And what’s great about them is that they’re triple tax-advantaged.

With an HSA:

• Contributions are made with pre-tax dollars
• Invested funds get to grow tax-free
• Withdrawals are tax-free as long as they’re used for qualifying healthcare expenses

Once you enroll in Medicare, though, HSA contributions are banned. This holds true even if you only sign up for Part A, which some people do in conjunction with having health coverage through work since it’s free and can serve as secondary insurance. If you want to continue contributing to an HSA at 65, you’ll need to wait on Medicare.

Make sure there aren’t consequences for a delayed Medicare enrollment

There can be steep penalties for delaying enrollment in Medicare. But often, if you’re still working at the time of your initial enrollment window, you can get out of them.

If you’re covered by a qualifying group health plan at the time of your initial Medicare enrollment window, you’ll generally be eligible for a special enrollment period. This allows you to sign up for Medicare at a later point without facing penalties.

That said, you’ll need to make sure your group health plan through your job renders you eligible for a special enrollment period. This is usually the case if it has 20 or more employees enrolled.

You should also know that if you’re delaying your Medicare enrollment so you can continue funding an HSA, you’ll need to be mindful of stopping contributions at the right time. Medicare coverage can sometimes be retroactive for up to six months if you enroll after age 65. So it’s important to stop funding an HSA half a year before you intend to sign up for Medicare.

Losing access to HSA contributions could mean giving up valuable tax breaks sooner than you want to. So if funding an HSA is a priority for you, and you’re still working at 65, you may want to hold off on Medicare. Just make sure you understand the rules so you don’t end up getting penalized for signing up too late or for funding your HSA when you should’ve stopped those contributions.