Navigating Medicare: How and when to sign up for coverage

The intersection of health and wealth—it’s the foundation of a happy and successful retirement. And a major component in that equation will be your retirement health care coverage provided through Medicare.

While not an overly complicated benefit, initially signing up for Medicare can be an overwhelming process. Medicare consists of an alphabet soup of plans, coverage choices, premium levels and enrollment rules. All that said, there are a few key decisions you’ll be required to make regarding your Medicare coverage:

• How do you choose which Medicare options to sign up for?
• When will you need to enroll?
• Should you defer Medicare if you work past age 65?

Decision #1: How do you choose the right Medicare coverage options?

Before making a choice, it’s best to gain an initial understanding of your options, even if you’re still several years away from your 65^th birthday. Begin by familiarizing yourself with the different parts of Medicare and what each component covers:

• Part A: (hospital coverage) covers things like inpatient hospital stays, some home health care, skilled nursing facility care and hospice. It typically requires no out-of-pocket annual premiums but has both annual deductibles and copays.
• Part B: (medical coverage) covers things like doctor visits, outpatient services, X-rays and lab tests, as well as preventive screenings; carries both annual deductibles and copays and requires monthly premium payments.
• Part C: (Medicare Advantage) this is a private ‘all-in-one’ alternative to Medicare that covers the services associated with Parts A and B (and usually Part D). On the plus side, these bundled plans tend to be more affordable, may offer broader coverage (e.g., vision, hearing and dental), and providers must be Medicare-approved. But the plans typically come with greater restrictions and most plans act as HMOs and require you to go to their network of doctors and health care providers.
• Part D: (prescription drug coverage) this is an optional add-on prescription drug coverage that requires monthly premiums, annual deductibles, and copays. You’ll need to enroll in an approved plan and be covered under both Medicare Parts A and B (or Part C).
• Medigap: offered by private insurers to help fill any coverage gaps in Part A and Part B such as copayments, coinsurance, deductibles, and potentially foreign travel health emergencies. There are 10 different types of Medigap plans—some cover more out of pocket costs than others.

When considering your Medicare elections, try to factor in your anticipated future health care needs. Do you have any pre-existing conditions or a family history of chronic disease? If so, you may want to explore more robust coverage options such as a Medigap policy. Medicare is generally available to anyone age 65 or older (as well as to younger people with qualifying disabilities). Part A is available premium-free if you paid Medicare taxes for at least 10 years (40 quarters) of your working life. If you have fewer work credits than that, however, you’ll be required to pay a monthly premium. For 2025, the premium would be $285/month if you had between 30-39 quarterly credits, or $518/month if you have fewer than 30 quarterly credits.

• Know that high earners may face surcharges

High income earners may also need to factor Income Related Monthly Adjustment Amount (IRMAA) surcharges into their Medicare cost calculations. Depending on your modified adjusted gross income from two years prior and your tax filing status, you may fall into one of five income brackets that are subject to incrementally higher surcharges.

For example, if you’re married filing jointly and had a 2024 modified adjusted gross income of $500,000, this income amount falls in IRMAA bracket 4 ($386,000 to $750,000). In this case, your monthly Part B premium would increase from $174.70 to $559, and you would be subject to a $81 surcharge in addition to what you pay for their Part D coverage.

Any Part B IRMAA surcharges are added to your Part B premium, while Part D IRMAA surcharges are paid separately to Medicare. It is important to note that Medicare treats IRMAA payments the same as any other premium bill. If you do not pay the surcharge on time, you could potentially lose your coverage.

Decision #2: When do you need to enroll?

For most people, Medicare coverage begins the first day of the month you turn age 65. If you’ve already started receiving Social Security benefits, you’ll automatically be signed up for Medicare Part A and Part B. If you haven’t yet made a Social Security benefit claim, you’ll need to submit a Medicare application.

To avoid any coverage gaps or potentially higher premiums, if you’re not still covered by your employer plan, you must sign up during your seven-month initial enrollment period (IEP) spanning the 3 months preceding and following the month in which you turn age 65.

Stay aware of other key sign-up periods

In addition to the seven-month IEP around your birthday and the eight-month special enrollment period (SEP) that kicks in when you leave your employer’s plan, there are other annual enrollment dates you’ll want to be aware of:

• General Enrollment Period: Those who missed their IEP and SEP can sign up during Medicare’s General Enrollment Period (January 1 to March 31) with coverage taking effect on July 1.
• Open Enrollment Period: Every year, you can join, switch, or drop a plan between October 15 through December 7, with new coverage taking effect the following January 1.
• Part C Open Enrollment Period: If you’re enrolled in a Part C Medicare Advantage plan, you can change plans each year between January 1 and March 31.

How to avoid penalties

Unlike Social Security, where you’re rewarded for delaying your benefits, you could be penalized with higher monthly premiums if you fail to enroll in Medicare on time. These include:

• Part A: You may be assessed a 10% increase in your monthly premium if you don’t qualify for premium-free coverage and fail to enroll when you’re first eligible. This penalty will be assessed for twice the number of years you delay signing up. So, if you wait two years beyond your first eligibility to enroll, you’ll be required to pay the higher premiums for four years.

• Part D: While typically small, penalties for late enrollment in a Medicare prescription plan are assessed for as long as you have coverage. The amount is calculated as 1% of the ‘National Base Premium’ ($36.78 in 2025) for the total number of months you delayed enrolling in Part D. For the same two-year (24 month) delay above, it would translate into a $8.83/month penalty [0.24 x 36.78].

While the penalties for Part A and Part D are small, the penalty for Part B can be substantial:

• Part B: For failing to enroll in Part B, the penalty is 10% for each 12-month period you delay. Let’s say you turned 65 in March of 2017 but didn’t enroll in Medicare until March of 2024 (and had no employer plan during that time). Your monthly premium will be 70% higher for as long as you have coverage.

There’s no late enrollment penalty for Part C or Medigap insurance (although you could be subject to underwriting and Medigap rates may go up dramatically if you delay signing up). Additionally, you have an opportunity to dispute any penalties and/or surcharges that are assessed by filing an appeal with the U.S. Centers for Medicare & Medicaid Services. Forms can be found on their website at www.cms.gov.

In most instances, the entire Medicare enrollment process can be completed online at www.medicare.gov. The site provides extensive information along with resources to help you select the right coverage for your circumstances.

Decision #3: Should you defer Medicare if you work past age 65?

If you choose to work past age 65 and continue to be covered by your employer’s health plan, you can choose to defer Medicare without incurring any penalties. In this case, you’ll be required to enroll for Part A and/or Part B during your Special Enrollment Period (SEP) which begins the month after your employment or group coverage ends (whichever comes first) and lasts for eight months. If you choose to continue your employer health coverage under COBRA, you still need to enroll, it won’t delay the start of your SEP enrollment window.

Even if you’re still working and covered by an employer’s plan, you may want to enroll in Medicare Part A when you turn 65 since it’s usually premium-free. You’ll therefore already be signed up and can simply add Part B and D (or choose a Medicare Advantage plan) during your SEP to postpone paying the monthly premiums until you actually need the coverage.

The only real downside is that you’ll no longer be eligible to contribute any additional pre-tax dollars to your employer Health Savings Account (HSA). Generally, you should stop contributing to an HSA six months before you enroll in Medicare. If you decide to enroll in Medicare at 65 and stop contributing to an HSA, you can continue to use your HSA for qualified medical expenses for as long as you have funds in your HSA.

If you’d like additional assistance reviewing your options and determining how various Medicare choices will fit into your health care cost planning and overall wealth plan, please contact your Fiduciary Trust International advisor.