Countless workers worry about how they’re going to pay the bills and take care of their health in retirement. To date, there are two key programs — Social Security and Medicare — designed to help in both regards. In fact, you may be wondering whether it pays to sign up for both programs simultaneously. And the quick answer is: It depends.
The tricky thing about coordinating enrollment in Social Security and Medicare is that eligibility for these programs kicks in at different times. Specifically, you’re only eligible for coverage under Medicare once you turn 65 (though you can enroll up to three months before the month of your 65th birthday). Social Security eligibility, on the other hand, begins at age 62, and though there are drawbacks to filing for benefits that early, it’s an option that makes sense under some circumstances.
Workers who accumulate enough credits to collect Social Security in retirement actually get an eight-year window to file for benefits that begins at age 62 and ends at age 70. Technically speaking, you’re not forced to sign up for Social Security at 70, but there’s no financial incentive not to. Generally, seniors are advised to wait until full retirement age to file because that’s the age at which they’re entitled to their monthly benefits in full. Claiming Social Security before full retirement age, on the other hand, results in a reduction in monthly payments.
Full retirement age for Social Security purposes is based on your year of birth; for today’s workers, it’s either 66, 67, or 66 and a number of months. This means that if you’re looking to avoid taking a hit on your benefits, it’s better not to sign up for Medicare and Social Security at the same time. That’s because claiming benefits at 65 will lower them by anywhere from roughly 6.67% to 13.34%, depending on your full retirement age.
Furthermore, if you decide to file for Social Security as early as possible, then you can’t sign up for Medicare at the same time because eligibility doesn’t start for another three years. That said, if you’re already collecting Social Security income by the time you turn 65, you’ll typically become enrolled in Medicare automatically.
Does it pay to sign up for Social Security and Medicare simultaneously?
Not really. The only real benefit to enrolling in both programs concurrently is that you might save yourself a little time with the process. Provided you’ve reached 65 and are therefore eligible for both programs, you can typically apply for Social Security and Medicare on a single application. But other than that, there’s no reason to enroll simultaneously once you become eligible for Medicare if you don’t need your Social Security income right away.
Furthermore, you should know that if you’re still working at age 65 for a company that employs 20 or more people and offers health insurance, you don’t have to completely sign up for Medicare right then and there. If your employer’s plan is superior to the coverage you’ll get under Medicare, it makes sense to enroll only in Medicare Part A, which covers hospital stays, since it’s free for most people and can act as secondary insurance. But because Part B, which covers doctor visits and diagnostics, costs money, it pays to wait until you’re no longer receiving health insurance through an employer to enroll.
On the other hand, it doesn’t necessarily pay to hold off on Social Security indefinitely while you’re still working. As soon as you reach full retirement age, you can work and collect benefits simultaneously without having those monthly payments reduced. But if you’re still working at full retirement age and therefore don’t need the money, you can delay your benefits up until age 70, which will result in an automatic 8% boost for each year you hold off. Once you turn 70, however, it pays to sign up for Social Security regardless of your employment status, so it could very well end up being the case that you start collecting benefits at that age without having yet enrolled in Medicare (at least Part B).
Though Social Security and Medicare both serve as lifelines for seniors, they’re actually very different beasts. Whether it pays to sign up for both at once will depend on how circumstances happen to align for you once you’re eligible.