For those approaching retirement, decisions abound. One of the most important of these is signing up for Medicare, the government health plan for persons 65 or older. As you might expect with any program dealing with healthcare, doctors, hospitals, and especially the federal government, there are lots of details to consider and several important decisions that need to be made in the proper timeframe.
When should you enroll in Medicare?
This is the most basic decision of all. Medicare is available to Americans age 65 or older, in addition to younger persons receiving Social Security Disability Insurance (SSDI) benefits. Generally, you should apply for Medicare during your initial enrollment period, which runs from three months before the month of your 65th birthday to three months following. If you do not enroll during your initial enrollment period, you may become subject to penalties—in the form of higher monthly premiums—when you do enroll.
However, if you are already covered by another healthcare plan that provides “creditable coverage,” you will not be penalized for deferring your application for Medicare. “Creditable coverage” means coverage that provides benefits equal to or better than those provided by Medicare. Generally speaking, employers with 20 or more employees, as well as certain government employers and organizations, offer coverage that meets these requirements. If you work for such an employer and are age 65 and otherwise eligible for Medicare enrollment, you may be exempt from the penalties for deferred enrollment. This consideration is especially important for persons with younger spouses who do not yet qualify for Medicare. If your spouse’s health insurance coverage is being provided through your employer, it may not be to your advantage to enroll in Medicare and drop your other coverage until your spouse qualifies either for Medicare or other coverage.
If you are approaching the age of eligibility for Medicare and are unsure whether your employer offers “creditable coverage,” you should ask for a notice of creditable coverage. If your employer cannot provide such a notice, you should enroll for Medicare during your initial enrollment period in order to avoid penalties later.
What does Medicare cover?
Most of us will recall that Medicare has different parts, often referred to as “Medicare Part A,” “Medicare Part B,” and so on. Each of the parts covers different aspects of your medical needs, and it’s important that they work together in a way that’s best for your individual situation. So, let’s go over some basics.
Medicare Part A covers most hospital charges including inpatient care, skilled nursing care in a nursing home or skilled nursing facility (as long as it’s not custodial or long-term care) and some home healthcare costs. This part of Medicare is free for most of those who qualify, but there are deductibles and co-pays that are out-of-pocket.
Medicare Part B covers “medically necessary and preventive services” such as doctor visits, durable medical equipment (like walkers and wheelchairs), and drugs for certain conditions. Medicare Parts A and B are sometimes referred to as “original Medicare.”
Medicare Part C, sometimes called “Medicare Advantage,” provides the same coverages as Parts A and B, but works through approved private insurance companies. To enroll in Part C, you must already be enrolled in Parts A and B and live in an area covered by your chosen Part C provider. One difference between Medicare Advantage and original Medicare is that Medicare Advantage typically requires you to use doctors and other providers who are members of a particular network; original Medicare has no such network requirements.
Medicare Part D is for those who want coverage for a wider range of prescription drugs. Part D plans cover a wider range of medications than Part B, but not every drug is covered. If you have a particular prescription that you must take, you should make sure that it is included in your Part D coverage. Remember: “D” for “drugs.”
Important note: Some still assume that long-term care coverage (for expenses related to assistance with “activities of daily living” such as mobility, diet, toileting, etc.) is provided by Medicare; this is incorrect. As we have noted in a previous article, except for a limited 100-day period in a rehabilitation center or skilled nursing facility for persons recovering from illness or injury, Medicare will not provide coverage.
How does income affect Medicare premiums?
While Medicare Part A (“basic Medicare”) is provided free of charge for eligible persons, Part B requires payment of a premium (called an “income-related monthly adjustment amount, or IRMAA), in most cases. The federal government sets the premiums payable for Medicare Part B based on certain levels of modified adjusted gross income (MAGI), adjusted for inflation. In 2026, the costs are as follows:
| Individual MAGI | Married filing jointly MAGI | IRMAA surcharge | Monthly premium payable |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $0.00 | $202.90 |
| $109,001–137,000 | $218,001–274,000 | $81.20 | $284.10 |
| $137,001–171,000 | $274,001–342,000 | $202.90 | $405.80 |
| $171,001–205,000 | $342,001–410,000 | $324.60 | $527.50 |
| $205,001–$499,999 | $410,001–749,999 | $446.30 | $649.20 |
| $500,000+ | $750,000+ | $487.00 | $689.90 |
Because of the income-based premium schedule, retirement income planning is required for accurate modeling of healthcare costs in retirement.
At The Planning Center, we know that healthcare costs are at or near the top of the list of concerns for retirees and those nearing retirement. By building a retirement income plan that reflects good estimates of income, coordinated with applicable costs for Medicare and other coverages, we can help clients move into retirement with greater confidence. If you’d like to learn more about advance planning for healthcare costs in retirement, please get in touch with us.
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