Millions of seniors depend on Social Security to pay the bills in retirement. Similarly, millions look to Medicare to cover their health-related needs. And while the two programs are interrelated, eligibility for them kicks in at different times.
Medicare eligibility begins at age 65, and you can enroll in the program up to three months before the month of your 65th birthday. Social Security eligibility, meanwhile, starts at age 62, though that's not necessarily the best time to sign up for benefits. Seniors actually get an eight-year window to file for Social Security that begins at 62 and closes at 70. (When we say “closes” at 70, it means there’s no financial incentive to file past then, though you can technically file as late as you want.) Right in the middle of that window is full retirement age, otherwise known as the age at which you get to collect your monthly benefits in full.
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Full retirement age is either 66, 67, or 66 and a number of months, depending on your year of birth, and seniors are often advised to wait on Social Security until that point or beyond. That's because filing for benefits ahead of full retirement age will cause a reduction (and quite possibly a permanent one), whereas delaying past full retirement age can boost benefits for life. As such, signing up for Social Security in conjunction with Medicare at age 65 doesn't necessarily make the most sense, as it means taking a hit on benefits no matter what.
Still, there is an upside to enrolling in both programs at age 65. Whether or not it's worth the hit you'll take on your monthly Social Security income, however, is a different story.
The upside of being on Medicare and Social Security concurrently
Though Medicare Part A, which covers hospital care, is generally free for enrollees, Part B, which covers doctor visits and diagnostics, costs money. Enrollees in Part B pay a premium for that coverage just as one would for traditional health insurance. And in some cases, already being on Social Security could prevent you from seeing your Medicare premiums go up.
As is the case with health insurance premiums in general, Medicare Part B premiums have a tendency to increase from year to year. But thanks to Medicare's hold-harmless provision, enrollees who are also collecting Social Security and have their Part B premiums deducted directly from their monthly benefits are protected against major increases in those premiums. In a nutshell, Medicare Part B premiums can't rise at a faster pace than Social Security's cost-of-living adjustments. Or, to put it another way, Social Security enrollees can't see their monthly benefits go down because of rising Medicare premiums.
But Medicare enrollees who aren't on Social Security miss out on this protection. As such, they're forced to absorb the full cost of whatever their Part B premium increases end up being.
Still, that doesn't necessarily make it worthwhile to claim Social Security sooner rather than later. If you're 65 and need your benefits to pay the bills, then filing makes sense if it helps you stay afloat and avoid debt. But filing for benefits at 65 just to avoid a larger Medicare premium hike generally won't pay off financially. That's because you'll lose about 6.67% of your Social Security benefits for each year you file ahead of full retirement age. If you're looking at a monthly benefit of $1,461 (the average for 2019) at a full retirement age of 66, filing at 65 means losing out on close to $1,200 of annual income.
On the other hand, Medicare's standard Part B premium jumped only $1.50 a month in 2019 (although higher earners pay more for Part B, the standard monthly premium in 2018 was $134, and it's only $135.50 for 2019). And while this recent increase was lower than previous ones, the point is that generally speaking, you'll lose far more money by claiming Social Security early than you'll gain from the hold-harmless provision.
Another thing: While being on Social Security makes it easy to pay your Medicare Part B premiums, since they're deducted directly from your benefits, paying them directly is hardly cumbersome. In fact, you can arrange to have your premiums paid automatically from a bank account or credit card so that you don't have to worry about them on an ongoing basis.
Though it's certainly feasible to sign up for Social Security and Medicare at the same time, doing so often doesn't make sense financially. Unless there's an outside reason to claim those benefits before full retirement age, you're better off waiting until that point or later and avoiding a potential lifelong reduction in income.
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