- You can delay Medicare enrollment past 65 if you have qualifying employer coverage, but you must follow strict timelines to avoid paying late enrollment penalties for Part B and Part D.
- Medicare charges higher premiums to high earners through IRMAA, using your income from two years ago. You can submit a form if your income has gone down.
- Planning your switch from employer coverage to Medicare helps you avoid gaps and penalties, and a licensed advisor can guide you through the process clearly and accurately.
Planning to work past 65? You’re not alone. Many people choose to delay retirement for financial reasons, personal goals, or simply because they enjoy working. But when it comes to Medicare, delaying retirement adds a few wrinkles—especially around when and how much you’ll pay in premiums.
If you’re unsure about how Medicare works when you keep your job, this guide breaks it down step by step. You’ll see what decisions you need to make and how those choices affect your wallet. Let’s clear up the confusion and help you make smart moves with your healthcare coverage.
Understanding the Basics of Medicare and Retirement
Medicare kicks in for most people at age 65. Retirement age can be later. This creates a gap where you may be eligible for Medicare but still have employer coverage. Understanding how the two fit together is important. Medicare has multiple parts:
- Part A covers hospital services
- Part B covers doctor visits and outpatient care
- Part D is for prescription drugs
- Medigap helps pay for what Parts A and B don’t
- Medicare Advantage combines Parts A and B, often with extras
When you’re still working and have insurance from your job, you may not need all these parts right away. But what you delay—and how—can impact what you pay later.
Do You Have to Sign Up for Medicare at 65?
No, but it depends on your situation. If you have group health insurance through your employer or your spouse’s employer, you may be able to delay Medicare Part B without a penalty. The key is the size of the employer.
- If your employer has 20 or more employees, your group health plan stays the primary coverage. Medicare is secondary. You can delay enrolling in Part B and Part D.
- If your employer has fewer than 20 employees, Medicare becomes your primary insurance. In this case, you should sign up at 65 to avoid coverage gaps and late penalties.
Missing the timing here leads to monthly penalties. These don’t go away and can increase your costs for years.
How Premiums Work When You Delay Part B
Part B has a standard monthly premium. If you don’t sign up when first eligible and don’t have qualifying employer coverage, you’ll pay a penalty. The late enrollment penalty for Part B is 10% for each 12 months you were eligible but didn’t sign up. This is added to your monthly premium permanently.
For example, if you wait three years past your eligibility and didn’t have employer coverage, your penalty could be 30% more every month. That adds up fast. If you’re still working and have coverage, the penalty doesn’t apply. But once you stop working, you’ll have 8 months to sign up without a penalty. This is called a Special Enrollment Period.
What Happens to Part A?
Most people don’t pay a premium for Part A. If you’ve worked at least 10 years (40 quarters) and paid Medicare taxes, Part A is free. So even if you’re still working, many people choose to enroll in Part A at 65 since it doesn’t cost anything.
But there’s a catch if you’re contributing to a Health Savings Account (HSA). You can’t contribute to an HSA if you’re enrolled in any part of Medicare. So if your job comes with a high-deductible health plan and HSA, it might make sense to delay Part A, too. Once you claim Social Security, you’re automatically enrolled in Part A and can’t opt out. So timing matters.
How IRMAA Affects Higher Earners
Some people pay more for Medicare due to their income. This extra charge is called IRMAA—short for Income-Related Monthly Adjustment Amount. IRMAA applies to:
- Part B premiums
- Part D drug plan premiums
What many don’t realize is that IRMAA is based on your tax return from two years ago. So if you’re 65 in 2025, they’ll look at your 2023 income. If you were working and earning more in 2023, your Medicare costs could be higher—even if you’re retired by then. If your income has dropped due to retirement or another reason, you can file a form to ask for a reconsideration. It’s called Form SSA-44.
Prescription Drug Coverage and Late Penalties
Part D covers prescription drugs. You can delay it if you have creditable drug coverage through your employer. But if your coverage ends and you go 63 days or more without drug coverage, you’ll face a penalty.
The penalty adds 1% of the national base premium for each month you delay. Like the Part B penalty, this stays with you for life.
Example: You wait 24 months to get Part D after losing employer coverage. You’d pay a 24% penalty on top of your monthly premium. This never goes away. To avoid this, make sure your drug plan is considered creditable and sign up on time after losing employer coverage.
What About Medicare Advantage?
If you’re still working, you probably won’t enroll in Medicare Advantage right away. But once you retire, it becomes an option. Medicare Advantage, or Part C, replaces Original Medicare and often includes extras like dental, vision, and drug coverage.
Premiums for these plans vary. Some even have $0 premiums, but that doesn’t mean zero cost. You’ll still have copays and out-of-pocket limits. You must be enrolled in Parts A and B before joining a Medicare Advantage plan. So if you delay those, you delay Advantage enrollment too.
It’s also worth noting that some people choose Medicare Advantage because it feels more like an all-in-one package. Others prefer Original Medicare with a Medigap plan for broader provider access.
Making the Switch After You Retire
Once you retire and lose employer coverage, you need to act fast. The Special Enrollment Period lasts 8 months from the time your coverage ends. This gives you time to sign up for Part B and Part D without penalties.
But here’s the key: if you want to enroll in Medigap, your window is shorter. You get 6 months from your Part B start date to pick any Medigap plan without answering health questions. After that, insurers can charge more or deny coverage.
Planning this transition helps avoid penalties, gaps, and surprise costs. You don’t want to get caught scrambling.
How to Choose What’s Right for You
There’s no one-size-fits-all answer. Some people delay all parts of Medicare and stay on employer coverage. Others sign up for Part A but delay Part B and D. It depends on:
- Your employer’s size
- What your group plan covers
- Whether you use an HSA
- Your income and how it affects IRMAA
- Your future healthcare needs
This is where expert guidance becomes valuable. Trying to compare costs, avoid penalties, and line up your coverage dates can feel like a full-time job.
If you’re planning to work past 65 or have questions about how Medicare fits into your retirement timeline, it helps to speak with someone who understands the details. At HealthMarkets Insurance – Eric Zawicki, we help you make sense of your options so you can avoid penalties and choose the right coverage. Contact us today to get personalized guidance that fits your health needs and your schedule.
