Still working at 65, spouse is 63: the math on splitting up

I appreciate the vote of confidence. And yes, today's topic is one where the numbers really do the heavy lifting, so I'm glad we're digging into it together.

It's a good way to think about what this episode is. We're not going to tell you what to do. We're going to show you how to think about the question, which is the same thing Ian Schaeffer is doing in that piece.

And the honest answer, which is exactly how Ian Schaeffer puts it, is that it depends on three things most people never check. The size of your employer, how your plan prices its different coverage tiers, and a tax return you filed a year and a half ago.

It can, significantly. But let's come back to that because it's its own chapter. First, let's talk about the employer size question, because there's actually a rule buried in there that matters a lot and most people have no idea it exists.

So here's the rule. If the company has 20 or more employees, your work plan is considered primary coverage. It pays first, Medicare pays second. And because of that, you are allowed to delay signing up for Part B for as long as you or your spouse keeps working there, and you will not be penalized for waiting. When the job ends, you get an eight-month window to enroll without any late penalty.

Right, and that's the thing a lot of people don't know. They assume 65 means Medicare, full stop, no exceptions. But for a lot of working people, that's just not the case. Now, if the employer has fewer than 20 employees, the picture flips. Medicare pays first, and your work plan only covers what Medicare would have covered anyway. So in that case you need Part B now or you're leaving yourself exposed.

That's literally number one. And once you know the answer is yes, waiting is allowed, then the real decision becomes whether it's smart. And that's where the columns come in.

Pretty simple, actually. KFF's 2025 employer survey puts the average family plan at about $26,993 a year total. The worker typically pays around $6,850 of that, so roughly $571 a month coming out of your paycheck. And that covers both of you.

The second scenario gets more complicated because you have to split it in two. Your side, the person who goes on Medicare, and your spouse's side, who stays on the work plan. On your side, Part B in 2026 is $202.90 a month. Then Ian Schaeffer prices out a Medicare Supplement Plan G in Maricopa County, and that runs somewhere between $131 and $526 a month at 65, depending on the plan. And a drug plan can be as little as zero dollars.

Correct. And then you have to call HR, because the spouse side is something Ian Schaeffer is very clear he cannot calculate for you. There are two questions you absolutely have to ask. First, does your plan price employee plus spouse close to the full family rate? Because if it does, dropping yourself saves almost nothing. Second, does your plan actually require the employee to be enrolled in order for a dependent to stay on at all? Because in some plans, if you leave, your spouse leaves too.

Exactly, and that's the kind of thing that only HR can tell you, because every employer plan is different. So before you touch anything, you call HR and you ask both of those questions.

So this is IRMAA, which stands for Income-Related Monthly Adjustment Amount. The way it works is that Medicare doesn't charge everyone the same premium for Part B or for drug coverage. Higher earners pay more, and the way they determine what you earn is by looking at your tax return from two years back. So your 2026 Medicare premium is based on your 2024 income.

Which is exactly the trap. And Ian Schaeffer lays out the 2026 brackets from CMS, so let me give people those numbers because they matter. For a couple filing jointly, if your income was up to $218,000, you pay the standard $202.90 for Part B. If you were between $218,000 and $274,000, Part B is $284.10 a month, plus $14.50 added onto your drug plan. Between $274,000 and $342,000, Part B jumps to $405.80, plus $37.50 on the drug plan. Between $342,000 and $410,000, you're at $527.50, plus $60.40. Between $410,000 and $750,000, it's $649.20, plus $83.30. And above $750,000, it's $689.90 for Part B plus $91 on the drug plan.

And Ian Schaeffer runs that exact example. If you're in that $274,000 to $342,000 bracket, you're paying $405.80 for Part B and $37.50 on top of the drug plan. That's $443.30 a month just in base premiums, before you've added a supplement. Add a mid-priced Plan G and now we're back in that same territory we talked about earlier -- $600 to $950 a month, for one person. Remember Column A was $571 for two.

And the coverage on the work plan counts as creditable coverage, so no penalty is building up in the background while you wait. You're not paying for staying. Now flip the income picture, though. A couple who came in under $218,000 in 2024 pays the standard premium, and Medicare plus a supplement can actually beat a pricey family plan pretty comfortably. That's why Ian Schaeffer says no one should answer this question from a rule of thumb. It is arithmetic, and the inputs are yours.

No, and this is one of those things that's genuinely worth knowing because a lot of people assume they're stuck. Social Security has a form for what they call a life-changing event, and stopping work qualifies. You can file that form and ask to have the surcharge recalculated based on your new, lower retirement income right away, without waiting for two years. Ian Schaeffer mentions that the advisors at American Retirement Advisors can help you navigate that process, and I'd say that's one of those things worth putting on the calendar the year you retire, not after.

The IRS rule is as straightforward as it gets, and Ian Schaeffer quotes it directly. Beginning with the first month you're enrolled in Medicare, your HSA contribution limit is zero. You cannot put money into an HSA once you're on Medicare.

Right, the trap is Part A's retroactive enrollment window. If you sign up for Medicare after 65, Part A can actually start up to six months back in time. So if you enroll in, say, October, your Part A might be deemed to have started the previous April. Any HSA contributions you made during those back-dated months are now considered excess contributions, which means taxes and a penalty on money you thought was perfectly fine to put in.

Which is why the guidance Ian Schaeffer mentions is to stop six months before you apply for Medicare, not six months before you turn 65, six months before you apply. And he gives the 2026 contribution limits so people know what's at stake. Self-only coverage is $4,400. Family coverage is $8,750. And if you're 55 or older, you can add another $1,000 on top of that. For the year you enroll, those limits get prorated by the month.

And Schaeffer's whole point comes back to that same idea -- write it down, not on a hunch. Because this is the kind of thing where guessing costs you money.

Medicare is individual coverage. Your spouse doesn't get Medicare early just because you have it. If your spouse is 63, they have to wait until 65, full stop. So when you retire, they need a bridge.

Yes, and this is one of the more nuanced observations in the piece. In part one, COBRA was the expensive choice for the person who was just retiring and had other options. For a 63-year-old spouse with no other bridge to Medicare, it might actually be the right call. He says, same law, opposite answer, because the person changed. And that framing is important because it pushes back against the idea that there's one right answer.

That's what Ian Schaeffer notes, yes. Whether one option or the other is the better fit in terms of cost and coverage would really depend on that specific person's circumstances, and that's an honest question for one of the advisors at American Retirement Advisors, because the specifics of which plan makes sense would depend on income, the Marketplace options in your area, what the premiums actually are.

Ian Schaeffer is pretty specific about what those three questions actually are, and they're not obvious at all. First, how many employees does the employer have, because that determines whether waiting is even on the table. Second, what does HR charge for each tier of coverage, because you cannot do the column comparison without that number. Third, what did your last two tax returns say, because that tells you which IRMAA bracket you're in. And until you have all three of those answers, you genuinely don't know which column wins.

Right, they're useful for understanding the structure of the problem. But your specific number might be very different, especially on the supplement side, which has a pretty wide range, and definitely on the IRMAA side, where the difference between brackets is hundreds of dollars a month.

That's real money. Over the course of a year that's potentially thousands going the wrong direction if you made the choice based on a rule of thumb instead of your actual situation. And the HSA piece alone, if you get the timing wrong, can cost you on money you already saved.

And if you'd rather talk to someone directly, the number in the article is 602-281-3898. That connects you to the team at American Retirement Advisors.

And the reason people get it wrong is usually not that they're not smart or not paying attention. It's that they're asking the general question instead of their question. They're going off what a coworker said or a general article they read somewhere, and the coworker's situation is different from theirs in one of those key dimensions and the answer just doesn't transfer.

And the advisors at American Retirement Advisors do that work with your numbers, not averages. That's the value of that conversation.

And call HR before that conversation. Get the tier pricing. Know how many employees your company has. Pull up those last two tax returns. Go into the meeting with the raw material, and the advisor can do the rest.