Understanding Medicare When Retiring After 65

Understanding Healthcare When Retiring After 65

The Basics of Medicare

Medicare is the federal health insurance program that covers most people who are age 65 and older. It is composed of different parts that help cover specific services. 

Original Medicare is divided into hospital insurance (Part A) and medical insurance (Part B), which are run by the federal government. Medicare Part C (Medicare Advantage) and Part D (prescription drug coverage) are provided by private insurance companies approved by Medicare.

Below is a basic breakdown of the Medicare coverage options someone has available to them at age 65.

Medicare Coverage Breakdown

Source: medicare.gov

Coordinating Medicare Benefits When Working Past 65

Use Your Employee Benefits Manager as a Resource

We are often asked how to enroll in Medicare when someone is over 65 and wants to retire from their current employer. We often guide them to their employee benefits manager to determine whether they have a group health plan coverage (as defined by the IRS) and to see what portions of Medicare (if any) they are already enrolled in.

Individuals with group health coverage based on current employment may be able to delay Part A and Part B and won’t have to pay a lifetime late enrollment penalty if they enroll later.

Medicare Part A Eligibility

If they are eligible for premium-free Part A, they can enroll in Part A at any time after they are first eligible for Medicare. Their Part A coverage will go back (retroactively) 6 months from when they signed up (but no earlier than the first month they were eligible for Medicare).

If they were eligible for premium-free Part A, and they didn’t buy it when they first eligible, they may have to pay a penalty. They may be able to sign up for Medicare during what is called a “Special Enrollment Period” (SEP).

This is available to them anytime as long as they or their spouse are working and covered under a group health plan from your current employer.

Coordinating Medicare Benefits When Retiring After 65

If they are not enrolled in Part A and/or Part B. There is an 8-month SEP to sign up for Part A and/or Part B that starts (whichever happens first): The month after the employment ends or the month after group health plan insurance based on current employment ends. There usually is not a late enrollment penalty if you sign up during a SEP.

COBRA Coverage and Medicare

You may be able to get COBRA coverage, which continues your health insurance through the employer’s plan (in most cases for only 18 months.) Don’t wait until COBRA ends to enroll in Part B. If you don’t enroll in Part B during the 8 months after the employment ends you may have to pay a penalty for as long as they have Part B and you won’t be able to enroll until January 1–March 31 and have to wait until July 1 of that year before your coverage begins. This may cause a gap in health care coverage.

High-Deductible Health Plans and Medicare

Under IRS rules cannot contribute to an HSA any month when you are enrolled in any part of Medicare (Part A, B, or D). If your current employer coverage is a high-deductible health care plan you may want to consider enrolling in Medicare until you retire.

To avoid a tax penalty, they should stop contributing to your HSA at least 6 months before they apply for Medicare. Part A coverage will go back (retroactively) 6 months from when they sign up (but no earlier than the first month they are eligible for Medicare).

Keep Your Notice of Credible Coverage

If they are not enrolled in Part D. There is also a 2-month SEP after the month your coverage ends to sign up for a Part D Medicare Prescription Drug Plan.

If you decide to join a Medicare drug plan, you should the “Notice of Credible Coverage” you receive. You will get a “Notice of Credible Coverage” each year if you have drug coverage from an employer/union or other group health plan. This notice will let you know if your current drug coverage is “creditable.” Keep this notice.

Start By Understanding Your Current Coverage

Medicare is complex and there are many decisions one must make when choosing your healthcare coverage. If you are over 65 and still employed it is important to first understand when the coverage you currently have through your employer, which (if any) part of Medicare you are already enrolled in.

From there, you will have a better idea of what the next steps need to be taken, to avoid any penalties and more importantly make sure you have proper coverage.

Useful Medicare Resources

Medicare.gov provides a wide variety of resources including the Medicare and You handbook which is updated annually.


Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.


Gage Paul, CFP®, RICP®, EA
Gage Paul, CFP®, RICP®, EA

Gage Paul is a financial planner at Western Reserve Capital Management. He works with the firm’s clients to create sustainable financial plans and investment strategies.

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