Welcome to Peak 65
Key Takeaways
- As Baby Boomers age, there are more Americans turning 65 than ever before.
- 65-year-olds have very different lives than past generations and are more likely to continue working.
- Depending on your individual situation, you may make different decisions about your Medicare coverage.
Baby boomers, the members of the post-World War II generation born between 1946 and 1964, are making history yet again. A report from the Institute for Lifetime Income estimated that 4.1 million Americans born in 1959 turned 65 in 2024, and similar numbers will follow every year through 2027. That’s more people reaching this milestone than ever before in the nation’s history.
All those birthdays are especially significant because 65 is the age when most U.S. citizens and permanent residents are first able to sign up for Medicare. Even though the age to retire with full Social Security benefits has gradually gone up since a 1983 change in law (and will be 67 for anyone born in 1960 or later), the age for Medicare eligibility has stayed the same since the program’s founding in 1965.
Let’s consider some of the implications that this era of “peak 65” has for individuals and for the Medicare system.
65 Isn’t What It Used To Be
The people who are turning 65 now have very different lives than older people in past generations. They’re more likely to exercise regularly, to get a divorce, and to continue working for years. The Pew Research Center reported that 19% of Americans over 65 were still employed in 2023, up from 11% in 1987.
The establishment of the modern Social Security system in the mid-1960s enabled many older workers to retire. However, more recent updates have become good reasons to stay on the job.
Wage earners who were born in 1960 or later are eligible for benefits as early as age 62, but those payments will only be 70% of what they’d receive if they keep working until 67. The benefits that retirees eventually collect grow slightly with every month they work after turning 62. That amount can add up, especially as people live into their 80s or beyond.
According to Pew, some of the other major factors that lead people to work until later in life include:
- Better health, including a lower rate of disability.
- Higher education levels, which qualify workers for less physically demanding jobs.
- The transition from companies offering pensions to retirement plans, such as 401(k)s, that incentivize staying employed to save more.
- More flexible work arrangements.
In turn, these changes contribute to the fact that Americans over 65 are, on average, significantly wealthier than in past decades. The Survey of Consumer Finances conducted by the Federal Reserve found that people between 65 and 74 had a median net worth of $410,000 in 2022. The Wall Street Journal noted that this figure represents a 45% increase from the assets held by the same age group in 2010 when adjusted for inflation.
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Should I Still Enroll in Medicare at 65?
Most U.S. citizens and permanent residents become eligible for Medicare at the age of 65. The Initial Enrollment Period lasts for seven months, including the three months before and after the month of your 65th birthday. Reaching this period is a momentous event, but with more older Americans remaining in the workforce longer, you may have some big decisions to make about your health insurance.
- If you don’t have health insurance from another source, you should sign up as soon as you can for Original Medicare, which consists of Medicare Part A (coverage for inpatient care such as stays at hospitals or skilled nursing facilities) and Part B (coverage for medical needs like doctor’s visits and durable medical equipment).
During the Initial Enrollment Period, you can get coverage for medications by joining a Medicare Part D prescription drug plan. You also have the option to substitute a Medicare Advantage plan, which matches Part A and B coverage and may feature a variety of supplemental benefits. Most plans include Part D coverage, and they may also offer benefits like dental, vision, and hearing. You need to sign up for Original Medicare before switching to a Medicare Advantage plan, also called Medicare Part C.
- If you or your spouse are still working and covered by an employer-provided health insurance policy, you should probably join Medicare Part A anyway. There’s no monthly premium if you or your spouse paid Medicare taxes while working for at least 10 years. Medicare will be a secondary payer in this scenario, helping with costs from inpatient care that aren’t paid by your job-based insurance.
When you or your spouse stop working, you’ll qualify for a Special Enrollment Period to sign up for Medicare Part B, which lasts for eight months. However, the Centers for Medicare and Medicaid Services (CMS) advise signing up for Part B about a month before the end of your job-based insurance to avoid a coverage gap. If you no longer have other coverage, you shouldn’t wait to enroll in Part B. Otherwise, when you do sign up, you may have to pay a late enrollment penalty that adds 10% to your premiums for every year you were eligible but didn’t enroll. Enrollees who take advantage of a Special Enrollment Period generally don’t have to pay this penalty.Once your employer-provided insurance ends, you also have two months when you can opt into a Part D prescription drug plan or a Medicare Advantage plan. Like Part B, it’s best to get this coverage as soon as possible: Enrollees who go without prescription drug coverage from another source that Medicare considers “creditable” for at least 63 days in a row are charged a penalty when they eventually sign up for Part D.
As millions of baby boomers become eligible for Medicare over the next few years, they’ll each face crucial questions about continuing to work, staying healthy, and managing their finances for a potentially long retirement.
Understanding your Medicare options can help you to plan wisely and maintain your peace of mind.
Sources
Welcome to the Peak 65 Zone. Alliance for Lifetime Income.
Divorce Skyrocketing Among Aging Boomers. AARP.
The growth of the older workforce. Pew Research Center.
NHATS Trends Dashboard. Michigan Center on the Demography of Aging.