Getting older isn’t something everyone celebrates. But there’s a reason to get excited about turning 65 – that’s when Medicare eligibility begins for many folks. And if you’ve been waiting to turn 65 so you can sign up for Medicare and leave your career behind, that’s certainly a milestone to be happy about.
Once you turn 65, you likely are eligible to receive both Medicare Parts A and B – often referred to as Original Medicare. Some seniors opt to enroll in only Part A when they first become eligible since there’s generally no premium cost for Part A. (Note that if you’re not covered under a group health plan as an active employee or spouse of an active employee, you will potentially face a late enrollment penalty if and when you do eventually sign up for Part B.)
As of September 2024, nearly 5.7 million people were enrolled in only Medicare Part A, without Part B. (There were a total of 67.6 million Medicare Part A enrollees at that point, so the vast majority did have both Part A and Part B.)
Once you turn 65 and are eligible to sign up for Part A, two factors to consider are:
You’ll need to stop contributing to your HSA
Health savings accounts (HSAs) are one of the most tax-efficient tools available. Contributions go in tax-free, investment gains are tax-free, and withdrawals are tax-free when used to cover qualifying medical expenses.
You may be motivated to sign up for Medicare Part A at 65, but here’s another incentive: Even if you have group health coverage through your employer, Part A can coordinate with your existing insurance or serve as primary or secondary payer insurance. And if you’re not subject to a premium for Medicare Part A, which holds true for most enrollees, then you might as well snag that additional coverage.
But if you have access to an HSA, enrolling in Part A will mean you have to stop funding your account. That could mean you’d miss out on near-term tax savings because your taxable income could be higher and you’d land in a higher tax bracket. And it could also result in less money to invest in your HSA over the long term, since HSA contributions remain in the account until you use them.
Halting your HSA contributions could also result in higher Medicare costs down the line. High-income retirees are at risk of income-related monthly adjustment amounts (IRMAAs), which are surcharges that apply to both Part B and Part D premiums.
IRMAAs are calculated based on your Modified Adjusted Gross Income (MAGI) from two years prior to the current year. If you sign up for Medicare Part A at 65 and lose your HSA contribution, and that bumps your income high enough, it could result in an IRMAA two years later. (Note that if your income or circumstances have changed and your income from two years prior is no longer an accurate representation of your current situation, you can appeal an IRMAA decision.)
Now one important thing to note is that you must stop HSA contributions six months before your Part A enrollment if you’re signing up past age 65½. That’s because Medicare enrollees who sign up after turning 65 get six months of retroactive coverage dating back to their 65th birthday.
Your coverage through an employer already gets the job done
Enrolling in Part A alone could mean getting access to primary or secondary payer insurance for hospital care – for free. But if you have outstanding health coverage through your employer, Part A may not be necessary.
When you’re enrolled in a group health plan of 20 or more employees at age 65, that employer plan is typically your primary insurance and Medicare is a secondary payer. If you end up needing hospital care and are signed up for Part A, your employer insurance will be billed first. Part A might then pick up the tab for the costs of services Part A covers and which your primary insurer hasn’t paid for.
However, if your employer coverage is great, your desire for additional coverage may not outweigh the complications of navigating coverage from multiple insurers. If your employer coverage is outstanding and your anticipated savings from getting Part A as a backup are minimal, you may not want to deal with the hassle.
Maurie Backman has been writing professionally for well over a decade, and her coverage area runs the gamut from healthcare to personal finance to career advice. Much of her writing these days revolves around retirement and its various components and challenges, including healthcare, Medicare, Social Security, and money management.
Footnotes
Tags: health savings account, Medicare Part A
