Medicare Matters Now More Than Ever

Every day, roughly 11,000 Americans turn 65, and with this milestone comes one of the biggest transitions in retirement planning—Medicare.

For many, it’s the first time they’ve had to choose their own health insurance in decades. Some are still working and unsure how Medicare fits with their employer coverage, while others are newly retired and want to ensure they don’t miss critical deadlines. And nearly everyone worries about making a costly mistake.

People are living longer and need to anticipate their needs 20 to 30 years down the road. The cost of healthcare is of particular concern for this market. On average, the total amount of money a retired couple should expect to spend on health care during retirement is estimated at $330,000. And that doesn’t include long-term care. Consider this: In 2024, the median annual cost of a semi-private room in a nursing home was $111,325 a year.¹ These costs increase annually, and in 20 years, these costs are expected to increase by about 80%.

As fee-only financial planners, we see firsthand how confusing and stressful this process can be. We strive to help clients understand how Medicare works and how they can prepare for the long term in a way that maintains financial independence.

Medicare doesn’t have to be overwhelming once you know what to expect. In this Medicare 101 guide, we walk you through the essential steps to help you prepare, enroll, and make informed choices.

Getting Ready for Medicare: What to Do Before You Turn 65

If you’re nearing your 65th birthday, we highly recommend you begin preparing early. Three to six months before your birthday is the perfect time to start tackling this “to do” list:

1. Confirm your eligibility. Most people qualify at 65 if they’ve worked and paid Medicare taxes for at least 10 years.
2. Review your current health coverage. Understand whether your existing healthcare plan will continue after you turn 65 (and what it covers).
3. Make a timeline. Your Initial Enrollment Period (IEP) starts three months before your 65th birthday and lasts a total of seven months (three months before, your birthday month, and three months after).
4. Gather key documents. You’ll need your Social Security card, proof of age, and work history.

Understanding the Four Parts of Medicare (A, B, C & D)

Medicare consists of several parts, each covering different types of care. Here’s an easy breakdown:

Part A – Hospital Insurance: Covers inpatient hospital stays, skilled nursing, hospice, and some home health care. Usually premium-free if you or your spouse paid Medicare taxes for 10+ years.

Part B – Medical Insurance: Covers doctor visits, outpatient care, preventive services, lab work, and durable medical equipment. Has a monthly premium.

Part C – Medicare Advantage: This is a private plan that bundles Parts A and B, often with additional benefits such as dental, vision, hearing, and prescription coverage.

Part D – Prescription Drug Coverage: This plan helps cover the cost of medications. You buy it separately or as part of a Medicare Advantage plan.

Note: Medicare does not cover most long-term care or custodial care (i.e., help with daily living activities such as bathing or dressing). That’s a major distinction from hospice care, which is covered under Part A for people with terminal illness. Long-term care planning is a separate but essential part of retirement planning.

When and How to Enroll in Medicare

If You’re Turning 65

Your Initial Enrollment Period is your first opportunity to enroll in Medicare. You can sign up through the Social Security Administration (online, by phone, or in person).

If you enroll during the three months before your birthday, coverage typically begins the month you turn 65. If you wait until your birthday month or later, your coverage start date could be delayed, so be sure to mark your calendar early.

If You Miss the Initial Window

You may need to wait for the General Enrollment Period (January 1–March 31), with coverage starting on July 1. Late enrollment in Parts B or D can result in a lifetime penalty – a 10% increase to your monthly premium for every 12 months you were eligible but didn’t enroll. This surcharge applies every year for as long as you have Medicare.

That’s why planning matters. Even a short delay can result in long-term costs.

Medicare Open Enrollment: October 15 – December 7

Open Enrollment happens every year from October 15 to December 7. This period allows you to:

• Switch between Original Medicare and a Medicare Advantage plan
• Change or add a Part D prescription plan
• Review and update your existing coverage

If you’re already enrolled, it’s a good time to review whether your current plan still meets your needs—especially if your medications, doctors, or health situation have changed.

If you’ve never enrolled before, this is not the same as your Initial Enrollment Period. Open Enrollment applies only to people who already have Medicare. If you’re turning 65, your seven-month Initial Enrollment Period takes priority.

Working Past 65? How Medicare Works with Employer Coverage.

Many people today are working well beyond the age of 65, which can complicate Medicare eligibility and timing. The key is understanding whether your employer coverage is considered creditable – that is, equal to or better than Medicare.

• If your employer has 20 or more employees:
  You can usually delay enrolling in Medicare Part B (and avoid the premium) as long as you have employer coverage that is equal to or better than Medicare. To avoid the 10% lifetime penalty when you eventually enroll, your employer plan must meet Medicare’s standards for creditable coverage. You’ll need to obtain a letter from your employer’s benefits department confirming this. This documentation allows you to delay Medicare Parts A and B (and avoid the premium), and later enroll without penalty when you retire or lose your coverage. When you eventually retire or lose that coverage, you’ll qualify for a Special Enrollment Period (SEP).
• If your employer has fewer than 20 employees:
  You generally must enroll in Medicare Part A and Part B when eligible because Medicare becomes your primary coverage. Not enrolling could leave you with unpaid claims.
• If you’re on a Health Savings Account (HSA):
  You can’t contribute to an HSA once you enroll in any part of Medicare. Consider stopping contributions six months before enrollment to avoid tax issues.

Tip: Always contact your employer’s employee benefits department for documentation before making any enrollment decisions.

If you plan to stop working before age 65, your situation looks a little different. The next section explains how retiree medical coverage interacts with Medicare when you reach eligibility age.

Retiring Before 65? How Medicare and Retiree Plans Work Together.

If you retire before age 65, your former employer may offer a retiree medical plan to help you bridge the gap until Medicare eligibility begins. These plans can provide valuable coverage, but it’s essential to understand how they coordinate with Medicare once you reach 65.

When you become eligible for Medicare, Medicare typically becomes your primary coverage, and your retiree medical plan becomes secondary (supplemental). This means Medicare pays first, and your retiree plan helps cover remaining out-of-pocket costs like deductibles, copayments, or coinsurance.

Before turning 65, contact your former employer’s benefits administrator to clarify:

• Whether your retiree plan automatically transitions to secondary coverage when you enroll in Medicare.
• If you must actively enroll in Medicare Parts A and B to maintain your retiree medical benefits.
• Whether your retiree plan includes prescription drug coverage or if you need to enroll in a separate Part D plan.

Failing to enroll when Medicare becomes your primary coverage can result in unpaid claims or permanent late fees. Once Medicare begins, your retiree plan often shifts to wrap around your Medicare benefits, functioning similarly to a Medigap (supplemental) policy.

Enrollment Tip: If your retiree coverage ends when you turn 65, you’ll qualify for a Special Enrollment Period (SEP) that allows you to sign up for Medicare without penalty, as long as you enroll within eight months of losing that coverage.

Already Retired? Here’s When and How to Enroll.

If you’re retired, the process is more straightforward: you’ll typically enroll in both Part A and Part B when first eligible. Then you’ll decide whether to add a Part D prescription plan or choose a Medicare Advantage plan that includes drug coverage.

This is also when you’ll start thinking about Medicare Supplement Insurance (Medigap)—which helps cover out-of-pocket costs left by Original Medicare. We’ll explore that option in Part 3 of this series.

If You Are Already Receiving Social Security Benefits Before You Turn 65

• If you are receiving Social Security or Railroad Retirement Board benefits at least four months before your 65^th birthday, you do not need to apply separately. You’ll be automatically enrolled in Part A and Part B.
• If you’re disabled and receiving Social Security Disability Insurance (SSDI), you are automatically enrolled in Medicare Parts A & B after 24 months of receiving disability benefits.²

Even with the best preparation, Medicare can still surprise you. Here are some of the most common mistakes we see.

5 Common Medicare Mistakes

1. Missing enrollment deadlines and paying lifetime penalties.
2. Assuming Medicare covers long-term care. In most cases, it does not. Limited coverage for short-term skilled nursing care following a qualifying hospital stay is the exception.
3. Overlooking how Medicare interacts with employer insurance.
4. Failing to review coverage annually. Plans change every year, especially drug formularies and provider networks.
5. Not considering total costs. Premiums, deductibles, co-pays, and uncovered expenses all add up.

Avoiding these pitfalls can save you thousands of dollars and prevent frustrating gaps in care.

How Medicare Fits into Your Financial and Retirement Plan

For most retirees, Medicare decisions are financial decisions. The right strategy can help you preserve income, reduce taxes, and protect against rising costs.

Here’s how a financial planner helps:

• Ensures your Medicare timeline fits with your Social Security claiming strategy.
• Projects healthcare costs in your retirement budget.
• Coordinates Medigap or Advantage choices with cash flow and investment income.
• Incorporates tax planning to minimize the impact of healthcare costs on your overall income strategy, especially when considering IRMAA surcharges, Roth conversions, or RMD withdrawals
• Evaluates long-term care funding strategies.

The Bottom Line: Preparing for a Smooth Medicare Transition

Medicare can feel overwhelming at first, but with preparation and guidance, it becomes manageable.

• Start researching and gathering information three to six months before turning 65.
• Understand your enrollment periods and coverage options.
• Review your choices annually, especially during Open Enrollment (October 15–December 7).

In our next article, we’ll look more closely at the real costs of Medicare—including premiums, deductibles, and how those costs fit into your overall retirement income plan.

If you’d like help aligning your Medicare decisions with your financial goals, let’s talk. Sometimes, one conversation can bring clarity to years of uncertainty.

Next in this series: Understanding the Real Costs of Medicare
(Part 2 of 4: A deeper look at premiums, deductibles, and income-related costs.)

¹ Genworth Cost of Care Survey, 2024, released March 2025
₂ CMS.gov, Original Medicare (Part A & B) Eligibility and Enrollment