For most employees, open enrollment is routine: confirm the health plan, adjust a payroll deduction, move on. Making the Most of Your Employee Benefits covers how to get the most from a benefits package year to year. But if retirement is likely in the coming year, this enrollment may work differently. Some coverage can follow you out the door only if it is in place before you leave, and the HSA has a final-year contribution rule that can catch even the most careful savers off guard.
Do you still need life insurance after you retire?
For many retirees, the honest answer is no. Once children are independent and the house is paid off, a portfolio and Social Security survivor benefits often do the job life insurance once did. Two situations, though, are increasingly common among people approaching retirement.
The first is parents who still have minors at home. Later parenthood and blended families mean more people retire with a child still in high school or college. A surviving spouse could face years of child-related costs on a household income that has already dropped, so keeping life insurance intact through retirement might still make sense.
The second is a mortgage on a home you want to stay in the family. If a spouse or adult child would need to keep making payments, or the goal is to pass the house on free and clear, keeping coverage equal to the remaining balance helps keep that plan intact until the mortgage is paid off.
If either applies, look closely at the group coverage now. Many plans allow increases up to a guaranteed amount without health questions, which matters most if your health has changed. Then read what happens at retirement. Group coverage can often be converted to an individual policy or continued as portable term coverage, but the election window is short, often around 31 days after coverage ends, and premiums can rise considerably. A healthy retiree may find better pricing on the open market. For someone whose health would make underwriting difficult, guaranteed access is the real value.
Can you take your employer's long-term care coverage with you?
Many group long-term care policies are portable, so coverage continues after you leave as long as premiums are paid. If your plan offers guaranteed issue during this enrollment, it may be the last opportunity to secure baseline coverage without medical underwriting, which only gets harder to pass with age.
Two cautions. Check the plan's rules for employees who did not enroll when first eligible, since some plans require health questions from late entrants. And group premiums are generally not locked in, so budget for increases. Even so, a modest group policy can serve as a floor that the rest of a long-term care plan builds on.
How much can you put in your HSA if you delayed Medicare past 65?
This question applies to people who kept working, and kept contributing to an HSA, after 65. Once you are enrolled in Medicare Part A, your contribution limit drops to zero. The complication is that Part A is usually backdated up to six months from the date of application (though not before the month you turned 65), and enrollment often happens automatically when you claim Social Security. Someone who applies in October can learn they have been covered since April.
The common reaction is panic over contributions made during those six months, but the rule caps the total for the year, not the timing of deposits. What matters is how many months you were eligible and whether the amount in each spouse's account fits within that. And remember that HSA contribution elections are one of the few decisions that can be changed after open enrollment closes, so don’t worry if you are discovering this after you’ve already locked in your decisions.
Consider a 67-year-old who applies for Social Security during the month of October, 2027, which is when the six-month lookback starts, even though they don’t plan to retire until December 1. This makes their Part A effective April 1, even if they don’t plan to start Social Security or Medicare until December. The spouse, 60, is covered under the same family HDHP until it ends November 30. Using the 2027 family limit of $9,000 and the $1,000 catch-up for those 55 and older, each amount is prorated by months of eligibility.
|
Retiree (67) |
Spouse (60) |
|
|
Eligible months |
January to March |
January to November |
|
Base contribution |
$2,250 |
$6,000 |
|
Catch-up contribution |
$250 |
$917 |
|
Allowed total |
$2,500 |
$6,917 |
|
Contributed through payroll |
$9,167 |
$0 |
|
Correction |
Remove $6,667 excess plus earnings |
Contribute up to $6,917 by April 15, 2028 |
The household's combined allowance of $9,417 is close to what went in. The problem is where it went. The spouse's catch-up is especially easy to miss when only one spouse has ever had an HSA; it may require opening a new account.
What if the lookback reaches into the prior year?
Retiring early in the year creates a different problem. A six-month lookback from a March application reaches into the previous year, after that year's contributions are complete. Part of the prior year's contribution becomes excess.
Excess withdrawn with its earnings by the tax filing deadline, including extensions, avoids the penalty, though the earnings are taxable. Shortfalls can be made up until April 15. Left uncorrected, an excess triggers a 6% excise tax for every year it stays in the account. That tax cannot exceed 6% of the account's year-end value, so someone who has already spent the balance on medical costs may owe little or nothing. The excess still has to be reported, and excess payroll contributions are added back to taxable income.
What should you review before enrollment closes?
Before submitting this year's elections, map your expected retirement date against Social Security and Medicare timing, confirm the conversion and portability deadlines for life and long-term care coverage, and set HSA contributions to match the months you will actually be eligible. If you would like help working through those decisions, contact us before the enrollment window closes.
Disclosure: This article is provided for general educational and informational purposes only and should not be considered tax, legal, investment, or insurance advice. Benefit features, eligibility rules, conversion and portability options, election windows, and premium structures vary by employer and plan, so review your plan documents or contact your benefits administrator for details specific to your coverage. HSA contribution limits, catch-up amounts, and Medicare rules are set by the IRS and the Centers for Medicare & Medicaid Services and are subject to change; figures cited here reflect information available at the time of writing. Examples are hypothetical and for illustration only. Before making decisions about life insurance, long-term care coverage, HSA contributions, or Medicare enrollment, consult a qualified tax advisor, financial professional, or attorney who can evaluate your individual circumstances.