I’ve got good news and bad news.
Bad news: Some federal employees will be forced into Medicare whether they want to or not.
Good news: But for now, this new rule only applies to USPS employees.
But if it goes well then they’ll probably come for everyone else soon enough.
What is the Current Rule?
As of right now, the only federal employees that will have to go into Medicare in retirement to keep their federal health insurance are USPS employees.
But there is an exception for any active postal employee who retires before January 1st 2025, or for any active employee at least 64 years of age as of January 1st 2025.
So if you are a USPS employee who is younger than 63-ish (as of 2023) then you’ll probably be required to take Medicare A and B in retirement (65+) if you want to keep your federal insurance.
Before You Freak Out
But I have good news. Most federal employees enroll in Medicare in retirement anyway. The only difference is that most federal employees aren’t required to.
One of the most common strategies is to enroll in Medicare A and B while getting an FEHB (federal health insurance) plan that is Medicare friendly.
This combination often leads to very little out of pocket costs because of the double coverage.
If This Goes Well
The main purpose of USPS changing its health insurance rules is to save money by pushing more responsibility to Medicare.
And if it proves to be cost effective then I wouldn’t be surprised if similar changes aren’t made for all federal employees.
But for now, the only people this new rule affects are those that work for USPS.
But Watch Out If…
Having Medicare in retirement makes sense for most people but not for everyone.
The cost of Medicare part B is based on income and it can get very expensive for people that have high incomes in retirement.
Here is a chart that shows how Medicare part B premiums go up with income.
Source: Medicare
So if you have very high income in retirement then having Medicare can be very expensive.
Key Takeaway
This is my key takeaway from all of this.
The government can and will change the rules. Sometimes these changes help you and sometimes they hurt you.
You have to have enough wiggle room in your retirement plan to weather the changes that are almost certainly going to happen over the course of your career and retirement.
