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Early Retirement, “Unretiring” and Medicare

After the pandemic, there was a worldwide rethinking of priorities and many people decided to turn in their work days for early retirement. More than 3 million Americans retired early because of the Covid-19 crisis, which equals more than half of the workers still missing in the labor force from pre-pandemic levels.

This trend was partially fueled by the surge in stocks and housing values which made it possible for young baby boomers with a nest egg to stop working, and senior wealth increased as soon as the second quarter of 2020, as asset values quickly recovered from the initial shock of the lockdowns.

It wasn’t all good news and fat wallets though — older workers who lacked assets missed out on the boom and couldn’t afford to retire. Others who lost their jobs and weren’t able to find a new one were forced to retire before they were ready. And now that the world has (almost) returned to business as usual, many of these retirees are finding ways back into the workforce.

Many who found themselves in a forced retirement situation also had health concerns to deal with and Medicare was the natural solution to that concern. The upshot of re-entering work life is that, depending on the size of your new employer, they might be able to pick up the company health plan and drop Medicare — and then re-enroll again down the road.

If you fall into this category then there are many rules and deadlines you’ll need to be aware of.

Some basics on Medicare:

Generally, people are eligible for Medicare at age 65 or above. Basic Medicare is Part A (hospital coverage) and Part B (outpatient care). Some beneficiaries pair that with a standalone Part D prescription drug plan and a Medigap policy (which covers some costs that come with basic Medicare). Another option is to get Parts A and B through an Advantage Plan (Part C), which usually includes Part D and some extras like dental and vision.

Part A comes with no premium as long as you have a 10-year history of contributing to the program through payroll taxes. For Part B, the standard monthly premium is $170.10 (for 2022), and Part D premiums average $33. However, higher-income beneficiaries pay more for Parts B and D premiums. This means it’s worth considering how extra income from a job could affect what you pay. Sticking with your Medicare coverage may result in higher premiums due to the extra income from your job.

There are also some nuanced differences when you re-enter employment at a small company versus a large one. If you’re looking at a health plan at a company with 20 or more employees, be aware of a few potential snags.

First, if the work-based coverage comes with a health savings account or HSA, you cannot contribute to it if you remain on any part of Medicare, including just Part A. And, canceling Part A solely to take advantage of an HSA may not be practical.

There are other rules to be aware of when you eventually do lose your employer coverage and want to switch to Medicare, and, often, requirements for proof that you had qualifying coverage. Once you stop working, you get an eight-month window to enroll or re-enroll. For those who may cycle in and out of the workforce and therefore in and out of workplace insurance: Each time you lose the coverage, the eight-month window restarts, according to the Centers for Medicare & Medicaid Services.

No matter what your retirement or work status is, having a good health plan is essential in your older age, so knowing the details of Medicare and company-sponsored Health Plans is just as important when it comes to your retirement — or unretirement. 







Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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