• Medicare is a federal program that helps you pay for healthcare once you reach age 65 or if you have certain health conditions.
  • You don’t have to sign up when you turn 65 years old if you continue working or have other coverage.
  • Signing up late or not at all might save you money on monthly premiums but could cost more in penalties later.
  • Planning before you retire can help you avoid overpaying for health coverage during retirement.

Medicare is a public health insurance program that you qualify for when you turn 65 years old. This might be retirement age for some people, but others choose to continue working for many reasons, both financial and personal.

In general, you pay for Medicare in taxes during your working years and the federal government picks up a share of the costs. But some parts of the program still come with a monthly fee and other out-of-pocket costs.

Keep reading for help deciding when to sign up for Medicare. We’ll also review how that may change if you choose to keep working, what it will cost, and how to avoid penalties if you delay enrollment.

Retirement age is not a number that’s set in stone. Some people may have the option to retire early, while others need — or want — to keep working. The average retirement age in the United States in 2016 was 65 for men and 63 for women.

Regardless of when you plan to retire, Medicare has designated age 65 as the starting point for your federal health benefits. Medicare isn’t technically mandatory, but you could encounter significant costs if you decline to enroll. You might also face additional costs and penalties if you decide delay enrollment.

If you choose to retire early, you’ll be on your own for health coverage unless you have specific health issues. Otherwise, you’re advised to sign up for Medicare programs in the few months before or after your 65th birthday. There are specific rules and deadlines for various Medicare programs, which are outlined later in the article.

If you continue working after age 65, different rules apply. How and when you sign up will depend on what kind of insurance coverage you have through your employer.

If you decide — or need — to keep working after you reach retirement age, your options for how and when to sign up for Medicare can vary.

If you have healthcare coverage from your employer, you may continue to use that health insurance. Because you pay for Medicare Part A in taxes throughout your working years, most people don’t pay a monthly premium once their coverage does begin.

You’re usually automatically enrolled in Part A when you turn 65 years old. If you’re not, it costs nothing to sign up. If you have hospitalization insurance through your employer, then Medicare can serve as a secondary payer for costs not covered under your employer’s insurance plan.

The other parts of Medicare have specific enrollment periods — and penalties if you don’t sign up during those dates. If you have an insurance plan through your employer because you’re still working, you may qualify to sign up late under a special enrollment period and avoid any penalties.

Discuss your retirement plans well in advance of your retirement date with the benefits administrator at your workplace in order to best determine when to sign up for Medicare. They might also give you tips on how to avoid penalties or additional premium costs.

When you choose to enroll in Medicare depends on several factors.

  • If you’ve already retired and are approaching your 65th birthday, you should plan to sign up for Medicare as soon as you are eligible to avoid late enrollment penalties.
  • If you’re still working and have insurance through your employer, you may still elect to participate in Part A because you likely won’t have to pay a premium. You may, however, want to wait to sign up for other Medicare programs that would charge you monthly fees and premiums.
  • People who continue working and have health insurance through their employer, or who have a working spouse who has health insurance coverage, are usually eligible for special enrollment periods and can avoid paying late enrollment penalties.
  • Even if you have insurance through an employer plan, you may still want to consider starting Medicare coverage because it can cover costs not paid for by your primary plan.

Once your (or your spouse’s) employment or insurance coverage ends, you have 8 months to sign up for Medicare if you’ve chosen to delay enrollment.

To avoid late enrollment penalties, only delay enrolling in Medicare if you’ll be eligible for a special enrollment period. If you don’t qualify, your late enrollment penalty will last for the duration of your Medicare coverage.

Most people don’t pay a monthly premium for Part A, but you will still have to plan to pay a portion of your inpatient care costs if you’re admitted to a hospital for care.

Other Medicare parts, like Part B, also come with costs that can add up. You’ll need to pay monthly premiums, copayments, coinsurance, and deductibles. In 2016, the average Medicare enrollee paid $5,460 annually for healthcare expenses, according to the Kaiser Family Foundation. Of that amount, $4,519 went toward premiums and healthcare services.

You can pay for premiums and other Medicare costs in several ways. While you could budget and save for healthcare throughout your life, other programs can help:

  • Paying with Social Security. You can have your Medicare premiums deducted directly from your Social Security benefits. Plus, certain protections can keep your premium increase from exceeding your cost of living increase from Social Security. This is known as the hold harmless provision, and it could save you money from year to year on your premiums.
  • Medicare Savings Programs. These state programs use Medicaid dollars and other funding to help you pay your Medicare costs.
  • Extra Help. The Extra Help program offers additional help paying for prescription medications under Part D.
  • Don’t delay your enrollment. To save the most money on your Medicare costs, make sure you qualify for a special enrollment period before you delay signing up.

If you or your spouse continue working, or you have a retiree or self-funded health insurance plan, you can use this alongside your Medicare benefit. Your group plan and Medicare will spell out which is the primary payer and which is the secondary payer. Coverage rules may vary based on the arrangement made by the payer and your individual plan limits.

If you have an employer-based insurance plan and you’re also enrolled in Medicare, your private or group insurance provider is usually the primary payer. Medicare then becomes the secondary payer, covering costs the other plan doesn’t pay for. But just because you have Medicare as a secondary payer doesn’t automatically mean it will cover all your remaining healthcare costs.

If you’re retired but have coverage through a retiree plan from your former employer, then Medicare usually serves as the primary payer. Medicare will pay your covered costs first, then your retiree plan will pay what it covers.

Medicare programs can help cover your healthcare needs during your retirement years. None of these programs are mandatory, but opting out can have significant consequences. And even though they’re option, late enrollment can cost you.

Part A

Part A is the portion of Medicare that covers your inpatient care and hospitalization costs. Many people qualify for Part A without a monthly premium, but other costs like copayments and deductibles still apply.

Enrollment in Part A is usually automatic, but in some cases, you may have to enroll yourself. If you’re eligible and not automatically enrolled, signing up for Part A late will cost you an additional 10 percent of your monthly premium for twice the number of months that you delayed signing up.

Part B

This is the part of Medicare that pays for outpatient services like visits with your doctor. Medicare Part B initial enrollment should occur in the 3 months before or after your 65th birthday.

You can defer enrollment if you choose to continue working or have other coverage, and you may be able to avoid penalties if you qualify for a special enrollment period. There are also general enrollment and open enrollment periods for Medicare Part B.

If you sign up late for Part B and don’t qualify for a special enrollment period, your premium will be increased by 10 percent for each 12-month period you had no Part B coverage. This penalty is added to your Part B premium for the duration of your Medicare Part B coverage.

Important Medicare Deadlines

  • Initial enrollment. You can get Medicare as you approach your 65th birthday. Initial enrollment is the 7-month period that starts 3 months before you turn 65 years old and ends 3 months after. If you’re currently working, you can get Medicare within an 8-month period after retirement or after opting out of your employer’s group health insurance plan and still avoid penalties. You can also enroll in a Medigap plan any time during the 6-month period that begins with your 65th birthday.
  • General enrollment. For those who miss initial enrollment, there’s still time to sign up for Medicare from January 1 through March 31 each year. But you may be charged with an ongoing late-enrollment penalty if you choose this option. During this period, you can also change or drop your existing Medicare plan or add a Medigap plan.
  • Open enrollment. You can change your current plan any time from October 15 through December 7 annually.
  • Enrollment for Medicare add-ons. From April 1 through June 30 you may add Medicare Part D prescription drug coverage to your current Medicare coverage.
  • Special enrollment. If you have a qualifying event, including a loss of health coverage, moving to a different coverage area, or divorce, you may qualify to enroll in Medicare without penalty for 8 months following this event.

Part C (Medicare Advantage)

Medicare Part C is a private insurance product that combines all the elements of parts A and B, plus other optional programs like Part D. Since this is an optional product, there is no late enrollment penalty or requirement to sign up for Part C. Penalties charged for late enrollment in parts A or B individually may apply.

Part D

Medicare Part D is the prescription drug benefit offered by Medicare. The initial enrollment period for Medicare Part D is the same as for other parts of Medicare.

This is an optional program, but there’s still a penalty if you do not sign up within a few months of your 65th birthday. This penalty is 1 percent of the average monthly prescription premium cost, multiplied by the number of months you were not enrolled after you first became eligible. This penalty does not go away and is added to your premium each month for the duration of your coverage.

Medicare Supplement (Medigap)

Medicare Supplement, or Medigap, plans are optional private insurance products that help pay for Medicare costs you would usually pay out of pocket. These plans are optional and there are no penalties for not signing up; however, you will get the best price on these plans if you sign up during the initial enrollment period that runs for 6 months after you turn 65 years old.

  • The federal government helps subsidize your healthcare costs through a variety of Medicare programs after age 65.
  • If you keep working, you can delay enrollment in these programs or pay for your healthcare through a combination of public and private or employer-based programs.
  • Even with these programs, you may be responsible for a share of your healthcare costs.
  • Plan ahead for healthcare in your retirement to avoid higher costs or late enrollment penalties, especially as they apply to Medicare programs.