How to Avoid Medicare Late Enrollment Penalties


Dear Liz: I’m 65, still working, and have health insurance through my employer. I am not enrolled in Medicare and was told I did not need it. I plan to do it when I retire. There is a passage in my Social Security statement that says, “Because you are already 65 or older, you must contact Social Security to enroll in Medicare. You may be subject to a lifetime late registration penalty. Special rules may apply if you are covered by certain occupational health plans. I’ve tried to do more research on the Medicare website, but can’t find a clear answer as to whether or not I’m ok with not enrolling at this time.

Answer: If your employer has 20 or more employees, you are fine for now. When you stop working for that employer, you will have eight months to enroll in Medicare without paying penalties.

If you want your Medicare coverage to begin when your employment-based coverage ends, you must enroll one month before you retire. Similar rules would apply if you were covered under a spouse’s workplace health insurance plan. As long as your spouse still works for the employer providing coverage, you can avoid permanent Medicare penalties.

However, if your employer has fewer than 20 employees, you may need to enroll in Medicare when you first qualify. Check with your employer.

Newlywed House Sales Taxes

Dear Liz: You recently wrote about how home sales are taxed, but I have a question. My son was single when he bought his condo. He is now married and is planning to sell it. Does he qualify for the $250,000 exclusion or the $500,000 exclusion?

Answer: As you know, the exclusion allows home sellers to avoid capital gains taxes on a certain amount of profits as long as they have owned and lived in the home for at least two of the previous five years. In the case of married couples, only one spouse must meet the ownership test, but both must meet the “use” test. In other words, your son and your son’s spouse must have lived in the home for at least two years before the sale for the couple to qualify for the $500,000 exclusion. The couple must file a joint return in the year they sell the condo, and neither spouse can have excluded the gain from the sale of another home during the two-year period before the sale of that home.

Credit ratings and usage

Dear Liz: Thank you for your recent article on how credit scores react to heavy credit card use. We pay our credit cards in full each month, but recently we had big charges on three cards for vacations, home supplies, and other purchases. I am the primary account holder on all three cards and my credit ratings have plummeted! I even received email warnings about this from my credit monitoring service.

I paid off two of the cards and will soon pay off the third. My husband has a credit card in his name which he uses occasionally and he is an authorized user on others. I’ve always been the fanatical financial partner so he thinks it’s funny that he has good scores and I look like a loser! Luckily we had no intention of buying a house or refinancing the mortgage.

Answer: Soon your husband will have to find something else to tease you with. Your scores are likely to return to their previous levels once high balances are paid off and you return to your normal spending habits.

Many people are surprised at how responsive credit reporting formulas are to the amount of available credit they use. But this knowledge can help you the next time you consider getting a big loan.

For example, you can reduce your credit card usage a few months before you apply. Alternatively, you can make weekly payments instead of monthly payments to ensure balances reported to credit bureaus and used in your scores are as low as possible.

Another approach is to pay your balance a few days before the statement closing date, since the balance on that date is what is usually reported to the offices. (If a charge appears after you’ve paid the balance, you’ll need to make a second payment before the due date to avoid late fees.)

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, #238, Studio City, CA 91604, or by using the “Contact” form on


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