I switched firms in 2015. I had what I consider to be a very extended "new guy" hazing period from 2015 to 2020, where I had to teach all the firm's Medicare classes. After teaching more than 500 classes to retirees, this is the one topic I've refused to teach again.
For every Medicare rule, there was an exception. The plans changed every year and varied from state to state. Sitting in an office in Virginia, where I can see across the river to D.C. and Maryland, this is an issue.
Not to mention the complex interplay between the various federal employee health benefits for retirees and Medicare.
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The "Medicare and You" handbook that gets updated every year and explains the system runs 125 pages. I have come to believe that to truly master Medicare advice, you must devote all your time to it.
We provide general advice and incorporate costs into financial and income plans but have developed relationships with Medicare consultants to provide a more in-depth service for our clients.
This article is meant to help you gain a general understanding of how the system works and what to do, and when, while transitioning to Medicare.
Medicare Part A: What is it?
Part A is hospital insurance. It is most commonly used for inpatient hospital stays. While it does provide for limited skilled nursing facility care, there are limits during each benefit period. This is not a good solution to plan for long-term-care expenses.
It also covers certain hospice expenses for those with life expectancies of less than six months.
What does it cost?
For most people, it is free. The qualification rules are the same as they are for Social Security retirement benefits. You have to have paid in for 40 quarters or 10 years, or be married to someone who has.
If you do not qualify, premiums are quite expensive and should be figured into your financial plan.
When should you enroll?
Assuming you qualify, you should enroll in the plan at 65, regardless of whether you're still working. Because the coverage doesn't cost anything, there is little downside to enrolling.
The most common exception to this is if you are currently contributing to a health savings account (HSA).
Medicare Part B: What is it?
Part B is medical insurance or physician coverage. Think of Part A as inpatient hospital care and Part B as outpatient medical care. Part A and Part B together are known as "original Medicare."
What does it cost?
A lot, but maybe less than what you pay privately. Medicare Part B premiums are based on your income.
More specifically, they are based on your modified adjusted gross income (MAGI) from two years prior. For example, your 2025 premium is based on your gross income from 2023.
You may also have to pay a surcharge known as the income-related monthly adjustment amount (IRMAA) if your income exceeds a certain amount. Here is the schedule of costs, which is based on your income two years ago:
File Individual Tax Return | File Married, Joint Tax Return | File Married, Separate Tax Returns | 2025 Medicare B Premium |
|---|---|---|---|
$106,000 or less | $212,000 or less | $106,000 or less | $185.00 |
Above $106,000 up to $133,000 | Above $212,000 up to $266,000 | Not applicable | $259.00 |
Above $133,000 up to $167,000 | Above $266,000 up to $334,000 | Not applicable | $370.00 |
Above $167,000 up to $200,000 | Above $334,000 up to $400,000 | Not applicable | $480.90 |
Above $200,000 and less than $500,000 | Above $400,000 and less than $750,000 | Above $106,000 and less than $394,000 | $591.90 |
$500,000 or above | $750,000 or above | $394,000 or above | $628.90 |
Source: Medicare.gov
We do a lot of planning around IRMAA brackets for our clients. Often, we are doing Roth conversions up to these limits, or adjusting income sources to stay under the next premium jump.
We rely on both financial planning software and tax planning software to do this. You can access a free version of that planning software online.
When should you enroll?
This is much more complicated than the Part A decision because of the cost. However, in most situations you'll sign up for both Part B and Part D at the same time, so I'll cover both here.
If you're already retired: You should enroll during your initial enrollment period (IEP), which is a seven-month period beginning three months before your 65th birthday.
While Medicare Part B can get expensive, if you retired before 65 and have a marketplace plan, it's likely cheaper than what you currently have.
If you're still working: You'll have to compare Part B and Part D (prescription drug coverage) to the coverage you currently have.
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So long as you have a "creditable" plan, you will not be penalized for delaying enrollment until you retire. In my career, I have come across only one employer plan that was not creditable.
Technically, you have an eight-month window to enroll for Part B and a 63-day period for Part D, but if you are retiring, you'll want to enroll sooner rather than later to avoid any gaps in coverage.
Medicare Part D: What is it?
Prescription drug coverage. Unlike original Medicare, Part D coverage is offered by private insurers, and you'll want to pick the plan that suits your prescription drug needs and your budget.
What does it cost?
The plans vary in cost. There is an added wrinkle here: Medicare Part D also has income adjustments, but they are not nearly as punitive as those for Part B. Those added costs are shown below:
File individual tax return | File married, joint tax return | File married, separate tax returns | 2025 Medicare Part D Premium |
|---|---|---|---|
$106,000 or less | $212,000 or less | $106,000 or less | Your plan premium |
Above $106,000 up to $133,000 | Above $212,000 up to $266,000 | Not applicable | $13.70 + your plan premium |
Above $133,000 up to $167,000 | Above $266,000 up to $334,000 | Not applicable | $35.30 + your plan premium |
Above $167,000 up to $200,000 | Above $334,000 up to $400,000 | Not applicable | $57.00 + your plan premium |
Above $200,000 and less than $500,000 | Above $400,000 and less than $750,000 | Above $106,000 and less than $394,000 | $78.60 + your plan premium |
$500,000 or above | $750,000 or above | $394,000 or above | $85.80 + your plan premium |
Source: Medicare.gov
Medicare Advantage
You're probably wondering where the missing letter C is. Medicare Part C is also known as Medicare Advantage.
Think of this more like a prix fixe menu. Medicare Advantage plans are offered by private insurance companies and typically include your hospital, physician and drug coverage in one plan.
If you've ever watched The Price Is Right, you've probably seen enough Medicare Advantage commercials to last a lifetime.
Related Content
- Medicare Premiums 2026: Projected IRMAA Brackets and Surcharges for Parts B and D
- How to Appeal the IRMAA for Medicare Parts B and D
- Five Medicare Changes Coming in 2026
- Is Medicare a Good Reason to Wait Until 65 to Retire?
- Should You Still Wait Until 70 to Claim Social Security?
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