Medicare plays a major role in when people retire

A new study has found that eligibility for Medicare benefits at 65 plays an important role in people’s retirement decisions.

In the past, the age people were able to apply for Medicare coincided with the full retirement age at which they could collect Social Security benefits, so it was harder to determine if Medicare benefits played a part in when people chose to retire.

Now that the full retirement age has been raised, it is easier to see what impact Medicare has on individuals’ decisions about retirement.

About 44 percent of 64-year-olds have  no need of Medicare benefits because they have workplace-sponsored retiree health insurance, but the individuals who have no retiree health benefits are especially likely to retire in the month they turn 65.

“Their increased propensity to retire when they become eligible for Medicare in fact accounts for about 30 percent of the continuing spike in retirement at age 65, now that the Social Security full retirement age has increased to age 66,” the report’s authors found.

The report also determined that Medicare eligibility will continue to factor heavily into people’s retirement decisions moving forward, especially with the continued rise in health care costs.

Some in the industry advocate for raising the age people can qualify for Medicare to 67. If that happened, workers would stay employed longer.

The health insurance exchanges created by the Patient Protection and Affordable Care Act are projected to significantly expand access and reduce the premiums for non-employer provided insurance, especially for older workers, the report found.

If coverage in the exchanges is comparable to Medicare coverage, workers may be freed up to retire on their own terms and not have to wait for Medicare eligibility.

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