Many retired individuals receive a large portion of their medical care through Medicare. Even after years of paying Medicare tax on their earnings, retirees must usually incur additional costs for Medicare. With adequate planning, however, working individuals can ensure that their future cost of Medicare Part A is minimized or eliminated.

Medicare Part A and Medicare Part B are known as the original Medicare parts. Part B is generally for outpatient services such as doctor visits. Part A provides insurance coverage for hospital stays. Medicare enrollees always incur a cost if they opt for Part B coverage. In contrast, the cost of Medicare Part A is typically free for a large number of retirees.

If your work history is adequate enough to qualify you for Social Security retirement income, you are also eligible for free Medicare Part A coverage. However, there is an earnings threshold at which workers become eligible for Social Security benefits. As a result, some individuals might consider briefly returning to the workforce in order to reduce their future cost of Medicare.

Medicare tax withheld from earnings

If you are not eligible for free Medicare Part A coverage, the cost is based on the amount of time you paid Medicare tax during your working years. If Medicare tax was withheld from your earnings for 30 to 39 quarters, the monthly Part A cost for 2017 is $227. If you had Medicare tax withheld for fewer than 30 quarters, the monthly Part A premium for 2017 is $413.

Medicare coverage for spouse

An exception to the general Medicare eligibility rule may apply if you are married. If your spouse is eligible for Social Security, you are also eligible for free Medicare Part A coverage at age 65. There are other Medicare exceptions that apply to certain disabled individuals.

Late enrollment penalty

Another reason to avoid the cost of Medicare Part A altogether is that a penalty applies to late enrollments. If your Part A coverage is not free, the premium amount may increase if you fail to enroll when initially eligible. For late enrollments, the monthly cost of Medicare Part A can increase as much as 10 percent. The higher rate is assessed for twice the number of years that enrollment was delayed beyond initial eligibility.

Some individuals may be just a few quarters short of qualifying for Medicare on their own earnings record. Contact a retirement planning company like Estate & Financial Strategies, Inc. for further information on how to optimize Social Security and Medicare in retirement.

Share