Retirement from a career of many years can open a open door to a new world. It may be self-employment, acquiring a franchise, or capitalizing on years of accumulated knowledge by becoming a consultant. Maybe you want a new career. Maybe you need a new career because finances demand it. The reason doesn’t matter.

In your pre-retirement life, an employer’s HR department likely took care of the intricacies of health insurance. This probably included choosing the insurer, the available options, and the amount of premium, if any, that the company would pay toward the cost.

Now, it all falls in your lap. And much of it will be very new and strange to you. You are accustomed to using health insurance, but not evaluating it or buying it. That’s why we are creating this series for you.

Electing Medicare or Delaying Medicare: The Basics

Currently, 65 is the magic age when many, even most, seniors enroll in Medicare. It is the tradition. But the timing of retirement changed when Covid raged in 2020 and 2021, bringing other factors into play, such as health risks, burnout, social changes, remote working,  leaving a job involuntarily, and later down the road, high inflation and financial losses in the stock market which decimated portfolios. The fallout: some seniors retired, some delayed their retirement, and others unretired.

While other considerations matter in deciding to retire– retirement lifestyle, living arrangements, health, preferred retirement age– healthcare coverage is a vital part of the retirement equation.  Understand that there are circumstances under which seniors do not have to enroll in Medicare and will not incur a penalty for not enrolling (as would otherwise be the case). One of the circumstances is when the senior has alternate health insurance. Because his or her involvement in health insurance transactions has been historically limited, confusion exists and dangers lurk.

Let’s start with an overview of Medicare to help the decision-making process for you.

Medicare Overview

Medicare is a federal health insurance program, funded by taxes, for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant or ALS (Lou Gehrig’s disease)).

There are 4 distinct parts of Medicare, but the scope of this article will focus on 2 of them: Part A and Part B.

• Part A covers hospitalization services including inpatient care at a hospital, skilled nursing facility, or hospice. Part A also covers services like lab tests, surgery, doctor visits, and home health care. If you or your spouse worked and paid Medicare taxes, there is usually no charge for Part A. It is therefore sometimes called “premium-free Part A”. However, it can be purchased if you are not entitled to it otherwise. To determine if you are entitled to it, check the Medicare Eligibility & Premium Calculator.

• Part B covers certain doctor’s services, medical supplies, outpatient care, and preventative care. Although there are some exceptions to this rule based upon income, the premium that most recipients pay for Part B is, as of the date of this article, about $174.70 per month. The premium can be greater for higher-income individuals.

Enrolling in Medicare

As a general rule, seniors are required to enroll in Medicare. But, the rules and exceptions tend to be confusing, so we will try to “net them out” for you:

• Individuals who are 65 are generally eligible for Medicare. If eligible, you can enroll during a period starting 3 months before the month that you will become 65 and, including your birth month, extending 3 months after you turn 65 (for a total of a 7-month window).
• If you do not enroll in time, you will have to wait until the next general enrollment period that extends from January 1^st through March 31^st. If you do that, coverage will not become effective until the following July 1^st. Additionally, if you are not entitled to “free-Part A” (described above), your premium will be 10% higher than it would otherwise be. The greater amount will be charged for twice the number of years you could have had Part A but did not.
• Part B is optional (but if you elect it, you pay a monthly premium for it). A senior does not have to take Part B as long as he or she is covered under their own or a spouse’s group health coverage, or a union plan.
• If the group coverage ends, or the employment ends from which the group coverage came, there is a “Special Enrollment Period” of 8 months during which to enroll in Part A and/or Part B without penalty.

The Bottom Line

A senior who is not yet ready to retire, is starting to plan a new career or business, or is looking down the road toward retirement and is concerned about health insurance must:

• Understand the insurance that he or she has
• Understand the scope and cost of Medicare
• Understand the varieties of private health insurance
• Understand how private health insurance works
• Understand what private health insurance costs
• Determine whether or not, based on these factors, private health insurance or Medicare is a better bet

By helping you to better understand the kinds of health insurance available in the marketplace, we hope to assist you in making the best decisions to meet your objectives.

This article has been updated January 2024 since it originally published April 2016.