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Can you continue to work and receive Social Security benefits? Should you sign up for Medicare if you’re still employed at age 65? The answer to both questions often is yes. But you’ll want to understand how your job may affect your Social Security benefits and Medicare coverage. Every situation is different, but here’s a look at how employment may come into play.
If you’re working and receiving Social Security benefits, your benefits may be reduced if you haven’t reached full retirement age (FRA) and you earn more than the limit established by Social Security. Your FRA is determined by the year you were born. For instance, it’s 66 for most individuals born in 1943 through 1954.
If you’re under your FRA the entire year, Social Security deducts $1 from your benefits for every $2 you earn above the annual limit. For 2019, this limit is $17,640. Assume you’re below FRA and earn $25,000. Your benefits will be cut by ($25,000 – $17,640)/2, or $3,680.
If you’ll reach FRA during the year, Social Security will deduct $1 from your benefits for every $3 you earn, but above a different limit. In 2019, this is $46,920. It applies only to income you earn before the month you reach your FRA.
Say you’ll reach FRA during October 2019. You earn $54,000 in salary from January through September. Your Social Security benefits will be cut by ($54,000 – $46,920)/3, or $2,360.
Starting in the month you reach FRA, employment wages typically won’t reduce your benefits.
Even if you’re working, consider enrolling in Medicare as your 65th birthday approaches, unless you’re automatically enrolled. The reason? You may pay a penalty and face gaps in coverage if you wait. Your initial Medicare enrollment period typically begins three months before the month you turn 65, and ends three months after the month you turned 65 (with exceptions based on whether you’re still covered by your employer’s insurance policy).
Because many people don’t pay a premium for Medicare Part A, which covers inpatient hospital stays and other services, you may want to enroll even if you receive health insurance through your employer. It’s important to keep in mind that, if you have a Health Savings Account (HSA), you won’t be able to fund it once your Medicare coverage begins.
You’ll pay a premium for Medicare Part B, which covers some doctors’ and other services. But if you wait to enroll, the premium may increase and you may experience a gap in coverage.
Your Belfint accounting professional can help you assess the many considerations around working and receiving Social Security benefits or enrolling in Medicare.