The Trickiest Retirement Decision You’ll Have to Make

Hint: It’s not picking a date or deciding when to take Social Security.

Life is full of choices. As retirement approaches for federal employees, there are issues like picking the best date, choosing when to start taking Social Security and deciding how much life insurance to keep. 

None of these decisions seem to bring as much confusion and concern as the choice of whether or not to enroll in Medicare Part B.

There are a few reasons why this is true, including:

  • Your Federal Employees Health Benefits Program coverage will continue even if you elect not to enroll in Part B. 
  • Part B can be expensive. The standard premium for 2021 is $148.50 per person per month. If you and your spouse are enrolled, the cost is an extra $297 a month out of your retirement income. This is in addition to your FEHBP premium.
  • Some high-income retirees will pay an income-related monthly adjustment amount, or IRMAA

So, with those issues in mind, what are your choices?

Option 1: Continue FEHBP and ignore Part B. Most people who do this will still get Medicare Part A (hospital insurance) at no charge.

Option 2: Enroll in Part B and pay the additional premium, with no change to your FEHBP coverage. Check Section 9 of your FEHBP plan brochure to see how your plan coordinates with Medicare. (If you are covered by TRICARE, you need to have Part B coverage in order to keep your TRICARE benefits.)

Option 3: Enroll in Part B and change your FEHBP coverage. Find an FEHBP plan that provides a reimbursement of some or all of your Part B premium and provides “wraparound” coverage with Medicare. That means when Medicare is the primary payer for your medical care, you will incur very little, if any, out of pocket expense. You might save more than it costs to enroll in Part B, or at least pay less in fixed costs than you would pay had you decided not to enroll in Part B. 

Option 4: If you are covered by current employment health insurance, you can delay Part B enrollment without penalty and sign up during a special enrollment period that follows your retirement (or your spouse’s retirement if you are covered under their health plan and they are still employed carrying insurance through their employer).

Option 5: Delay Part B for a year or more, saving the cost of Part B, but paying the surcharge of 10 percent of the standard premium for every 12 months that you delay enrollment. If you are enrolled in a high deductible health plan and you’re contributing to a health savings account, you can continue doing so past age 65 if you are not enrolled in Medicare A or B.

If you’re considering this option, keep two things in mind: First, you’ll have to pay the surcharge for the rest of your life even though your income may have dropped. Second, if you experience a serious health problem during the years you delayed enrollment, you could have saved as much as the Part B premium would have cost.