Working After 70?  Your Social Security Claim Triggers Medicare Part A (Part 3)

Don’t leave money on the table, or overcontribute to your HSA

To build more details of all the HSA and Medicare rules, you might find it helpful to check out the other blogs in the series. The HSA-Medicare Connection (part 1) lays out some of the ground rules. And the Medicare Part A Retroactive Period Effect on HSA Contributions post lays out why the 6-month HSA lookback is really 9 months.

In this post, we’ll look at key considerations workers approaching age 70 need to consider.

Reaching 70 is an important milestone…

…but not because there are more candles on your cake. If you haven’t yet claimed Social Security, waiting until 70 was your strategy. You wanted to get last drop out of your benefit and now you’ve achieved that goal.

By waiting until 70, you’ve increased your benefit payment by 8% per year since reaching Full Retirement Age (FRA). If your FRA was age 66, your monthly payment is 32% higher than your PIA. PIA is your Primary Insurance Amount—the  calculated benefit at your FRA. Your birth year is 1954 if you’re reaching 70 in 2024. And your FRA was the month you turned 66.

If your FRA is 66 and 6 months, your monthly payment will be 28% higher than your PIA. You’re eligible for the maximum Social Security payment in about three and a half more years.

If your FRA is 67—and it is for anyone born in 1960 or later—you won’t reach age 70 until 2030. So keep on working!

The connection between Social Security claiming and Medicare

Medicare is integrated into the Social Security law. On two ends. While working, you’ve been paying FICA taxes. You pay 6.2% into the Social Security side of FICA and 1.45% into Medicare (or more for higher income folks). Your employer also contributes the same percentage of your salary on your behalf.

But you don’t generically pay into something called “Medicare.” Rather your FICA payment goes specifically to HI—Hospitalization Insurance. Better known as Medicare Part A.

Since these taxes go in together as a couple or a duo, the benefits get paid out together as well. In the case of the person working after 70, they’ll automatically get Part A when claiming Social Security. Assuming they haven’t already enrolled in Medicare.

Health insurance benefits when working after 70

When you are still an employee and working after 70, your health insurance benefits are just like at 69. Large employers—those with 20 or more employees—must offer their large group health insurance plans to all employees. Regardless of age.

So if you’re still working at Big Co. when you are 72 or 77 or 83, that’s great. You are still eligible to remain in the health insurance plan offered by the company. And  you pay the same premiums as the 25 year-old kids. And every other worker in the plan.

But there will likely be a wrinkle once you celebrate your 70^th birthday. You should have already applied for your Social Security benefits. And when you apply for Social Security, you have also applied for its partner-in-crime: Medicare Part A.

If working after 70, it’s important to apply for Social Security by age 70

Your maximum Social Security calculated benefit happens at age 70. That’s because all available Delayed Retirement Credits (DRCs) have now been applied.

(Note: Your Social Security benefits may still increase after age 70 if your wages are higher than in earlier years. But, your overall maximum calculated benefit occurs at age 70.)

You don’t want to skip applying for Social Security by age 70. Otherwise, you could lose some of your monthly benefit payments. Social Security can only pay benefits up to six months in arrears. It’s the way the law is written, that’s why.

When someone tells me they are still working at age 72 and hasn’t claimed Social Security, I have nothing but bad news. They have missed out on 18 months of their own Social Security benefit money.

Applying for Social Security triggers Medicare Part A problems

You may need to adjust your large group health insurance plan as you approach 70. Ideally, you’ll apply for Social Security three months before your 70^th birthday month. That means you are also applying for Medicare Part A.

In this case, your first Social Security payment will be paid the month after your 70^th birthday month. But your Medicare Part A benefits started retroactively. Even if you didn’t realize it. Or factor that into your plans.

Part A started automatically 6 months before the application date for Social Security. Or you can look at it this way: Part A started 9 months before your 70^th birthday month.

If you have a high-deductible health plan (HDHP) and are funding an HSA, you have walked into a problem. You’ve made nine (9) months of ineligible HSA contributions. Yikes. Now you have a potential tax problem that needs to be corrected.

You needed to somehow know to stop your HSA contributions 9 months before your 70^th birthday. And you are responsible for informing your employer. And you maybe should have elected a different health insurance plan during annual enrollment. Oops.

Scenario: How working after 70 triggers Medicare Part A problems

You met Sally Snowflake in Part 2 of this HSA series. There you saw how one started her Medicare Part A date retroactively. Let’s check in with Sally again, who we’ll say is turning 70 on July 20, 2024.

She’ll apply online at SSA.gov. When she applies for Social Security, the application automatically attaches Medicare Part A to the request. And now, unbeknownst to Sally, her application for Social Security triggered Medicare Part A enrollment.

The health insurance she selected through her large company plan is a high-deductible plan. And she’s been fully funding her HSA throughout 2024. Plus her $1,000 catch up. That’s a problem.

When Sally files her taxes for 2024, she’s going to use the worksheet in IRS Form 8889. Here is a look at what Sally did (on the left) versus what she should have done (on the right).

Social Security triggers Medicare Part A much earlier than Sally expected

Before applying for Social Security to maximize your age 70 maximum benefit, work backwards to figure out any HSA problems. Clearly, Sally is in for an unwelcome surprise here.

She overcontributed by $3,004 in 2024. That amount needs to be removed from the HSA before her tax-filing deadline.

Even worse, she also made three ineligible contributions in the prior tax year. Ugh. Now she has to amend her 2023 taxes to declare an additional $14,550 as income. Plus any investment earnings are also taxable income. And she may have a penalty to pay. No one wants this mess to clean up.

When you have a mid-year birthday, you end up crossing tax years when figuring out the Medicare Part A retroactive period. It can get messy if you are unprepared for when to stop HSA contributions.

The Medicare Part A retroactive period really is 9 months before your 70^th birthday month. Please plan accordingly.

Where to get help with HSAs when working after 70

My best advice is to work closely with your tax accountant or tax expert. Talk to them about your plans for claiming Social Security at 70 and that you are funding an HSA. Your financial advisor is another good resource to discuss your plans.

The best place to ensure you stay informed about HSAs comes directly from the IRS. Use IRS Publication 969 and Form 8889.