By continuing to work past the traditional retirement age, many people have the opportunity to add more money to their nest egg, and delay Social Security. According to her June survey by MagnifyMoney, 21.9% of Americans 65 and older were working in May, compared to 19.5% of hers in May 2020.
It’s important to know how working affects your Medicare benefits, Social Security, and tax situation. There are a few things you need to understand to stay in the workforce as you age.
You may be able to delay enrolling in Medicare
If you’re 65 and still working and have health insurance through your employer or your spouse’s employer, you may be able to delay enrolling in Medicare. If the company has fewer than her 20 employees, she must sign up for Medicare, but if it has more than her 20 employees, she may be able to defer enrollment.
If you have a choice, compare how much you pay for group benefits to how much you pay for Medicare, including supplemental coverage and prescription drug benefits. Julie Hall, a certified financial her planner in Ann Arbor, Michigan, said: (Part A is free for most people, so there’s no point in delaying it unless you have an HSA. More on that below.)
Contact your benefits department before deferring to make sure your employer hasn’t required you to enroll in Medicare.
Don’t confuse AN HSA with Medicare
If you have health insurance with a high deductible along with a Health Savings Account (HSA), be aware that you can’t save to your HSA after you enroll in Medicare. An HSA can be a valuable retirement savings tool, so if you have access to employer benefits that allow you to defer Medicare, it’s an option worth considering.
“We see[HSA]as having three tax benefits,” says Diane Pearson, CFP in Wexford, Pennsylvania, who says she can save money before taxes, tax-free, and pay eligible medical bills. Because of the fact that you can withdraw before tax.
If you collect Social Security, you are automatically enrolled in Medicare Part A when you turn 65. If you want to save for HSA, you must delay your Social Security benefits. If you plan to enroll in Medicare and have an HSA, both you and your employer must stop contributions at least six months before you apply for Medicare to avoid tax problems. I have.
Your Income Affects Your Social Security Payments
If you’ve claimed Social Security in the last few years of your working life, your income may affect your benefits.
For example, in 2022, for every $2 in income over $19,560, Social Security benefits will be reduced by $1. The calculation of the years in which full retirement age is reached is different. For every $3 he earned over $51,960 through the month prior to the month he reached full retirement age, his benefits will be reduced by $1. After reaching full retirement age, no matter how much you earn, it will not be reduced.
In addition, social security benefits may be taxable. In 2022, people who file individual tax returns with combined income over $25,000 or file joint returns with combined income over $32,000 will pay taxes on up to 85% of their Social Security benefits. will be (Social Security defines “combined income” as the sum of adjusted gross income, tax-free interest, and half of Social Security benefits.)
Barbara O’Neill, CFP, Ocala, Fla.
Your Income Affects Your Health Insurance Premiums
Medicare Part B and Part D are subject to Income-Related Monthly Adjustments (IRMAA). The more you earn, the higher your premium will be.
In 2022, if your adjusted adjusted gross income two years ago exceeded $91,000 as a single tax filer or $182,000 if you filed jointly, your Part B and Part D payments will be reduced. increase. Experts recommend incorporating this into your work plan, as it can add extra costs.
“People might say, ‘I work, but I can only make so much money,'” says O’Neill. “IRMAA should be invoked with caution.”
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This article was provided to The Associated Press by personal finance site NerdWallet. The content is intended for educational and informational purposes and does not constitute investment advice. Kate Ashford is a writer for her NerdWallet. Email: kashfordnerdwallet.com. Twitter: Kate Schford.