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Ask Bob: Will I pay a penalty if I don't apply for Social Security and Medicare on time?

A reader asks a question on what applying for Social Security and Medicare late would look like.

Question

I'm planning to retire in 2024. I'll be 64 years old in December. I was told I have to apply for my Social Security and Medicare 10 months before I turn 65. If not, I would pay plenty for it if I don't apply and want to apply later on. Which way is the best way?

Answer

There is no requirement to apply for Social Security at any age, says Joseph Stenken, J.D., CLU®, ChFC®, a Qualified Plan Counsel at McHenry Advisers. “But the later that someone waits to receive Social Security benefit the higher the monthly benefit will be. There is no reason to wait past age 70 though as at that age Social Security benefits max out,” he adds.

For Medicare there are a couple things to keep in mind, Stenken explains. “Medicare Part A (also known as Hospital Insurance) is funded through payroll taxes and for most people there is no cost for enrolling. So generally, there is no downside to enrolling in Medicare Part A even if you are working and covered by a medical plan provided by your employer.”

“For Medicare Part B (also known as Medical Insurance) there is a monthly cost which varies based on your income level. If you do not sign up for Medicare Part B at 65 you could pay an increased premium as a penalty. However, this penalty will not apply if you are covered by health insurance through your employer. Note that coverage as a retiree does not count to avoid the Part B penalty.”

For more information on when to enroll in Medicare, the Centers for Medicare and Medicaid Services has a Fact Sheet entitled Deciding Whether to Enroll in Medicare Part A and Part B When You Turn 65. It is available online at: https://www.cms.gov/Outreach-and-Education/Find-Your-Provider-Type/Employers-and-Unions/FS3-Enroll-in-Part-A-and-B.pdf

Stenken notes that an individual can apply for Medicare three months before they turn 65, the month they turn 65, or within three months after they turn 65. Coverage isn't available until you are at least age 65. “And if someone fails to sign up for Part D they could pay a penalty if they don't have other coverage,” he notes.

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Question

I'm planning to retire in 2024. I'll be 64 years old in December. I was told I have to apply for my Social Security and Medicare 10 months before I turn 65. If not, I would pay plenty for it if I don't apply and want to apply later on. Which way is the best way?

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