Retirement Healthcare
From the day you retire to age 65 and beyond — understanding Medicare, IRMAA, and enrollment windows is one of the most valuable things you can do for your financial plan.
During working years, your employer handles health insurance. In retirement, Medicare becomes your primary coverage — but navigating it well requires understanding its four parts, the income-based surcharges, and the time-sensitive enrollment windows.
One critical note: applications should begin during the 7-month Initial Enrollment Period surrounding your 65th birthday. Missing it can result in permanent premium penalties. Always verify your situation at medicare.gov.
Medicare Part B and Part D premiums increase at higher income levels. The surcharge added to the base premium is called IRMAA — Income-Related Monthly Adjustment Amount. Use these 2026 figures for estimation purposes.
| Income (MAGI) | Part B / mo | Part D / mo | IRMAA | Total / mo | Per Person / yr | Couple / yr |
|---|---|---|---|---|---|---|
| $218k or less | $202.90 | $35 | $0 | $237.90 | $2,854.80 | $5,709.60 |
| $218k – $274k | $284.10 | $35 | $14.50 | $333.60 | $4,003.20 | $8,006.40 |
| $274k – $342k | $405.80 | $35 | $37.50 | $478.30 | $5,739.60 | $11,479.20 |
| $342k – $750k | $527.50 | $35 | $74.20 | $636.70 | $7,640.40 | $15,280.80 |
| Above $750k | $594.00 | $35 | $81.00 | $710.00 | $8,520.00 | $17,040.00 |
If you retire in 2026, your 2026 Medicare premiums are based on your 2024 tax return. This is why planning Roth conversions, portfolio withdrawals, and capital gains timing well before retirement is essential — high income today means higher premiums two years from now.
Timing is critical — missing the right window can result in permanent lifetime penalties added to your monthly premiums. Know your windows before you retire.
3 months before · birthday month · 3 months after (7 months total)
Your primary enrollment opportunity. Sign up for Parts A and B during this window to avoid late penalties. Most people should enroll even if still working — verify with your HR department.
January 1 – March 31 each year
For those who missed their IEP and don't qualify for a Special Enrollment Period. Coverage typically begins July 1. Late enrollment penalties for Part B and Part D apply and are permanent.
October 15 – December 7 each year
Annual window for current Medicare beneficiaries to switch between Original Medicare, Medicare Advantage, or Part D drug plans. Changes take effect January 1 of the following year.
If you or your spouse are still covered by employer-sponsored insurance at 65, you may be able to delay Part B without penalty — but rules vary. Always verify your specific situation with your HR department and Social Security before deciding to delay.
Please visit medicare.gov to understand all penalties, including the 10% per year Part B penalty and the 1% per month Part D penalty that apply for missed enrollment windows and are levied for life.
This is a simplified introduction. More detail is available and should be reviewed before making any decisions. The Medicare Flowchart gives a clear picture of what each part covers and what requires supplemental Medigap coverage.
Medicare is not a single plan — it is a system of four interlocking parts, each covering a distinct category of healthcare. Understanding what each part does (and doesn't) cover is essential before you enroll.
Covers inpatient hospital stays, skilled nursing facility care (following a 3-day hospital stay), hospice care, and some home health services.
Does not cover custodial care, long-term nursing home stays, or most outpatient services.
Covers outpatient care, doctor visits, preventive services, lab tests, durable medical equipment, and some home health services.
You pay 20% coinsurance after your annual deductible ($257 in 2026) with no out-of-pocket maximum unless you have a supplement.
Private insurance alternative to Original Medicare (Parts A + B). Often bundles Part D drug coverage. May include dental, vision, and hearing — not covered by Original Medicare.
Typically uses HMO or PPO networks, which may restrict choice of doctors and hospitals. Prior authorizations are common.
Standalone drug coverage added to Original Medicare (Parts A + B), or bundled inside a Medicare Advantage plan. Each plan has its own formulary (list of covered drugs) and tiers.
The Inflation Reduction Act capped out-of-pocket drug costs at $2,000/year starting in 2025 — a major change for people on expensive medications.
If you miss your Initial Enrollment Period because you had qualifying employer coverage, a Special Enrollment Period lets you sign up without penalty — but you must act promptly when your coverage ends.
If you (or your spouse) are actively employed and covered by a group health plan, you can delay Part B enrollment without penalty. Your SEP begins when employment or group coverage ends — whichever comes first.
You have an 8-month SEP from the date your employer coverage ends to enroll in Part B. Do not rely on COBRA — COBRA is not considered employer-sponsored coverage for SEP purposes and does not extend this window.
If you move to a new geographic area not covered by your current Medicare Advantage or Part D plan, you qualify for a 2-month SEP to choose a new plan. This also applies when new plans become available in your area.
Losing eligibility for Medicaid, Extra Help, or other qualifying coverage can trigger a SEP. The window is typically 2–3 months from the date of coverage loss depending on the circumstance.
CMS may grant SEPs for natural disasters, incarceration release, errors made by government entities, or being misled by an insurance agent. These are evaluated case-by-case and require documentation.
A common mistake: people assume electing COBRA after leaving a job extends their Medicare SEP. It does not. The 8-month SEP clock starts when your employer group coverage ends — not when COBRA ends. Enroll in Medicare B promptly.
Unlike most insurance programs, Medicare's late enrollment penalties are permanent and compound for life. Avoiding them is one of the highest-value actions you can take at retirement.
For every 12-month period you were eligible for Part B but didn't enroll (and didn't have qualifying employer coverage), your Part B premium increases by 10% permanently.
This penalty is added for as long as you have Part B — which is the rest of your life.
For every month you go without creditable prescription drug coverage after your IEP ends, your Part D premium increases by 1% per month, permanently.
"Creditable coverage" means coverage at least as good as standard Part D — most employer plans qualify, but you must get a notice confirming this each year.
After enrolling in Parts A and B, you face a fundamental choice: stay in Original Medicare (and optionally add Medigap), or switch to Medicare Advantage. This decision affects your doctors, costs, and flexibility for years to come.
| Feature | Original Medicare Parts A + B only |
Original + Medigap Parts A + B + Supplement |
Medicare Advantage Part C (private plan) |
|---|---|---|---|
| Provider choice | ✔ Any Medicare-accepting provider nationwide | ✔ Any Medicare-accepting provider nationwide | ~ Usually HMO/PPO network; out-of-network costs are high |
| Monthly premium | Part B only (~$203/mo base) | Part B + Medigap (~$150–$350/mo added) | Often $0 beyond Part B, but cost-sharing varies widely |
| Out-of-pocket maximum | ✗ No cap — 20% coinsurance is unlimited | ✔ Medigap covers most or all out-of-pocket | ✔ Annual OOP cap (up to $8,850 in-network in 2026) |
| Prescription drugs | ✗ Must add standalone Part D plan | ✗ Must add standalone Part D plan | ✔ Usually bundled in most MA plans |
| Dental, vision, hearing | ✗ Not covered | ✗ Not covered by Medigap (buy separately) | ~ Often included, but benefits vary by plan and region |
| Prior authorizations | ✔ Generally none required | ✔ Generally none required | ✗ Common — especially for specialist referrals and procedures |
| Travel / nationwide use | ✔ Accepted anywhere in the U.S. | ✔ Accepted anywhere in the U.S. | ~ Emergency only out-of-network; limited when traveling |
| Switching flexibility | Can switch to MA during OEP (Oct 15–Dec 7) | Can drop Medigap, but re-enrollment may require underwriting | Can switch plans annually during OEP; returning to Original Medicare may lose Medigap access |
| Best for | Those who value nationwide flexibility but can handle unpredictable costs | Predictable costs, chronic conditions, frequent travelers — most comprehensive | Healthy retirees in stable locations who want low premiums and bundled extras |
If your income has dropped significantly since the tax return used to calculate your IRMAA, you can appeal using Form SSA-44. CMS recognizes specific life-changing events that justify using more recent income data.
Visit your local Social Security office or call 1-800-772-1213. Submit Form SSA-44 with evidence of the life-changing event and your estimated current-year income. If approved, Medicare will use your more recent income to recalculate your IRMAA — potentially reducing your premium immediately. Appeals can be filed at any time during the year.
You or your spouse stopped working or significantly reduced work hours. This is the most common LCE filed by new retirees whose income has fallen sharply from a high-earning year.
Your filing status changed from Married Filing Jointly to Single — which affects the IRMAA income thresholds significantly (single thresholds are roughly half of married thresholds).
A qualifying life event that changed your household income and filing status. Document with court records or finalized divorce decree.
Involuntary job loss, layoff, or employer bankruptcy. Must show evidence that income was lost and is not expected to continue at prior levels.
Property destroyed by disaster, theft, or other casualty resulting in reduced income. Also applies to involuntary closure of a business.
A one-time employer settlement caused income to spike in the lookback year. You can appeal to exclude that non-recurring amount and use a more typical income figure.
Your Medicare premiums at age 65 are set by your income at age 63 (the 2-year lookback). This is your last window to actively manage MAGI before it locks in your first year of Medicare costs. Consider deferring large Roth conversions, being thoughtful about capital gains realizations, and avoiding one-time income spikes in these two years. A single year of high income can cost thousands in higher premiums — permanently until your income drops again.
One of the most powerful Medicare planning strategies is executing Roth conversions during your early retirement years (ages 59–63), before Medicare begins. These conversions count as MAGI in the year of conversion, but once the money is in Roth, future qualified withdrawals are tax-free and do not count toward IRMAA. A well-timed Roth ladder can dramatically lower your lifetime Medicare premiums by reducing future IRA withdrawals that would otherwise push you into higher IRMAA brackets every year.