By Harry Prabandham · Updated September 27, 2026
Retirement Planning
Medicare Planning: Enrollment, Costs, and Income Surcharges
Medicare starts at 65; signing up on time avoids lifelong penalties, and higher incomes pay surcharges (IRMAA) based on tax returns from two years earlier.
Medicare Planning: Enrollment, Costs, and Income Surcharges
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The short answer
- Medicare is federal health insurance that most people become eligible for at 65, regardless of whether they have retired.
- The key decisions are when to enroll, whether to pair Original Medicare with a Medigap policy or choose Medicare Advantage, and how income affects premiums.
- Missing an enrollment deadline without other qualifying coverage can add a penalty to premiums for life.
- Higher-income retirees pay income-related surcharges, so tax decisions in your early 60s can affect Medicare costs later.
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Full Guide
The short answer
- Medicare is federal health insurance that most people become eligible for at 65, regardless of whether they have retired.
- The key decisions are when to enroll, whether to pair Original Medicare with a Medigap policy or choose Medicare Advantage, and how income affects premiums.
- Missing an enrollment deadline without other qualifying coverage can add a penalty to premiums for life.
- Higher-income retirees pay income-related surcharges, so tax decisions in your early 60s can affect Medicare costs later.
What does each part cost in 2026?
- Part A (hospital) is premium-free for most people with 40 quarters of work; the 2026 inpatient deductible is $1,736 per benefit period.
- Part B (doctors and outpatient care) has a standard 2026 premium of $202.90 a month and a $283 annual deductible.
- Part D (prescription drugs) premiums vary by plan, and 2026 out-of-pocket drug costs are capped at $2,100.
- Medicare Advantage (Part C) plans are private alternatives that bundle A, B, and usually D, with their own networks and cost-sharing.
When should you sign up?
- The initial enrollment period is seven months: the three months before, the month of, and the three months after your 65th birthday month.
- If you or your spouse are actively working with employer coverage from a company of 20 or more employees, Part B can often be delayed without penalty.
- After that job or coverage ends, you generally have eight months to enroll in Part B; COBRA and retiree coverage do not extend that window.
- The Part B penalty is 10% for each full 12 months you were eligible but not enrolled, and it usually lasts as long as you have Part B.
Medigap versus Medicare Advantage
- Original Medicare with a Medigap policy allows any provider that accepts Medicare nationwide, with higher premiums and more predictable out-of-pocket costs.
- Medicare Advantage often has lower premiums but uses networks, prior authorization, and annual out-of-pocket maximums that vary by plan.
- Medigap is guaranteed issue during a six-month window starting when you are 65 and enrolled in Part B; later, most states allow medical underwriting.
- California gives Medigap policyholders an annual open enrollment period of at least 60 days, starting on their birthday, to switch to equal or lesser benefits.
How does income raise premiums?
- IRMAA adds surcharges to Part B and Part D premiums when modified AGI from two years earlier exceeds set thresholds.
- For 2026, surcharges start above $109,000 for single filers and $218,000 for joint filers, based on 2024 tax returns.
- 2026 total Part B premiums with IRMAA run from $284.10 to $689.90 a month per person; each threshold is a cliff, not a phase-in.
- After a qualifying life-changing event such as retirement, Form SSA-44 lets you ask Social Security to use more recent income.
How do HSAs fit with Medicare?
- You cannot contribute to an HSA for any month you are enrolled in any part of Medicare.
- Enrolling in Part A after 65 is usually retroactive up to six months, so many people stop HSA contributions six months before enrolling.
- Starting Social Security at or after 65 automatically enrolls you in Part A, which also ends HSA eligibility.
- HSA money can still pay Medicare Part B, Part D, and Medicare Advantage premiums tax-free, but not Medigap premiums.
Key takeaways
- Put your Medicare enrollment dates on the calendar before 65, especially if you plan to keep working.
- The Medigap-versus-Advantage choice is hard to reverse later, so compare networks, travel, and health needs carefully.
- Large income events two years before, such as a stock sale or Roth conversion, can raise IRMAA surcharges.
- Review Part D and Advantage plans each fall during open enrollment, October 15 to December 7.
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