Warning: Confusing Medicare and Social Security Eligibility Could Cost You Thousands!
Medicare and Social Security eligibility used to be the same. The full retirement age was 65, and you could receive full benefits for each program at that time.
However, it’s not that simple anymore. The full retirement age (FRA) is evolving. Ever since Ronald Reagan signed the 1983 SSA Amendments, the full retirement age has been creeping up. For people of the baby boomer generation, the FRA is now 66. So—in order to get full Social Security benefits—you now have to wait until age 66 to sign up.
But here’s what throws people for a loop: The time to sign up for Medicare is still 65, despite the change for Social Security. Not only will you be rewarded full Medicare benefits at 65, but you will also avoid costly penalties for signing up on time.
If you wait until 66 to sign up for Medicare (barring a qualifying reason), it’s already too late. The penalties that you have accrued will likely add up to well over $3000 throughout your lifetime.
Don’t believe me? Let’s crunch the numbers together.
We’ll Start With The Part B (Medical Insurance) Penalty.
The Part B penalty is an extra 10% added on to your monthly premium for every year you were late. In 2016, the Part B premium for most people is $121.80. So this is an easy calculation: 10% of $121.80 is an extra $12.80 per month.
This doesn’t sound too menacing, right? If you look at it in the right light, it’s actually kind of cute.
But don’t get too close. This cute and fuzzy fee will eat away at your lifesavings every month for the rest of your life. According to the SSA’s life expectancy calculator, the average 65 year-old can expect to live another 20 years—give or take a couple years. This comes out to 240 months. S0…take that $12.80 and multiply it by the 240 months of life expectancy, and you’ve got yourself $2,923 in penalties.
Nope…not nearly as cute.
But that’s not all.
You’ve Also Got the Part D (Drug Plan) Penalty.
Here’s how this one works: for every month that you were late, an extra 1% of the average drug plan cost in the U.S ($34.10 in 2016) is added on to your premium. So if you signed up a year late, you’ve got 12% of $34.10 in penalties. If you had a calculator handy, you will know that this number comes out to $4.09 per month. Again…not very scary. But multiply 4.09 by 240 months like we did previously, and it has grown into a terrifying $982 beast.
Adding It All Together
Ready for the grand reveal?
$2,923 Part B Penalty + $982 Part D Penalty = $3905.
Sure, it’s a big number. But what makes this number so tragic is not its size. It’s the fact that it was based on one, simple mistake. One mix-up. One aspect of Medicare left unexplored.
This is why Seniormark is so committed to educating our clients and the general public about Medicare. According to a Merill Lynch Retirement Survey, Less than 7% of people ages 55-64 feel very knowledgeable about their Medicare options. This is staggering! Knowledge saves retirees money!
So do yourself a favor and sign up for Medicare when you turn 65 unless you have a qualifying reason. And while you’re at it, learn as much as you can about your options. Knowledge is valuable. And you never know when a nugget of information will be pure gold, saving you thousands of dollars in mistakes.
Want to avoid costly Medicare mistakes and coast into your retirement hassle and penalty- free? Call Seniormark at 937-492-8800 for a free consultation. Our Medicare experts will walk you through the whole process at not cost to you.
Or, sign up for one of our free workshops — held in three convenient locations — Sidney, Troy, and Vandalia, Ohio. You can sign up for one of them here: workshop signup.