As the workforce evolves, an increasing number of Americans are choosing to remain employed beyond traditional retirement ages. Currently, as of 2023, the most recent numbers show that nearly 20% of adults ages 65 and older are still working, a 2% jump from where we were ten years earlier, in 2013, and a significant increase from a couple generations ago, according to the Pew Research Center.
For those who are 65 or older and still employed, the question of whether to enroll in Medicare or continue with employer-provided health insurance becomes a critical decision.
Here’s what you need to know about your Medicare options and obligations if you’re still working past 65. It’s important to understand your options because if you delay when you should have enrolled, you may face penalties, which can really add up.
[READ: Medicare Mistakes to Avoid.]
When Is Medicare Mandatory?
You generally must enroll in Medicare during your initial enrollment period, which is the seven-month window around your 65th birthday — three months before, the month of and three months after. If you’re receiving Social Security, you’ll be automatically enrolled. Otherwise, you must sign up manually to avoid late penalties.
Employer health coverage: working past 65
If you’re 65 or older and still working, your options depend in part on the size of your employer.
Here’s how it breaks down:
Large employers (20 or more employees)If you have health insurance from a large employer, either through your own plan or your spouse’s coverage, this plan will pay first before Medicare kicks in. In this scenario you can typically delay Medicare enrollment, both Part A and Part B.
However, it’s strongly recommended that you should enroll in Medicare Part A. Once you turn 65 and you have worked for at least 10 years, you qualify for premium-free Medicare Part A (hospital insurance) and, therefore, should enroll since there is no cost to you — even if you’re still working and have health coverage. Plus: By law, if you receive Social Security benefits and are eligible for Medicare, you must also have Medicare Part A.
“Medicare Part A can provide coverage for things not covered by your employer’s plan,” says Erin Nevins, president of USA Medicare Consultants in Greenville, New York. “You can wait to sign up for Medicare Part A until you retire or lose your employer health insurance, but there’s no downside for signing up as soon as you turn 65.”
Delaying Medicare Part B can make sense, though. Many people with employer-based health insurance choose to postpone enrolling in Medicare Part B (medical insurance) while they’re still employed. This allows them to avoid paying premiums for both Medicare and their employer’s insurance.
Small employers (fewer than 20 employees)In this case, Medicare enrollment is mandatory. And Medicare becomes the primary payer for your health care expenses, and your employer’s plan pays second. You must enroll in both Medicare Part A and Part B at age 65. In this scenario, Medicare will be your primary insurance and be the first to pay health care costs. Your employer’s insurance will then cover any remaining costs — or be the secondary insurance — that Medicare doesn’t cover.
Because it can be confusing, it’s highly recommended you speak with your employer’s HR department to understand how your specific health insurance plan coordinates with Medicare.
[READ: What Medicare Does Not Cover.]
Delaying Medicare Coverage After 65: Your Options
There’s several options to consider if you’re still working past age 65, depending on your situation.
Scenario 1: You (or your spouse) are still working and receive insurance benefits from the employer
If you’re still employed and covered under a large (20-plus) employer’s health plan, you have the option to delay signing up for Medicare parts A and B without facing penalties.
Next steps: Reach out to Medicare to inform them of your decision to opt out of Part B. (You can also opt out of Part A, but it’s generally not recommended.) The ideal time to do this is during the initial enrollment period, which begins three months before your birthday and ends three months after your birth month (it’s a seven month window). You can contact them at 1-800-MEDICARE or visit your local Social Security office.
Scenario 2: You will receive benefits from Social Security at age 65
Once you have enrolled in Social Security benefits at age 65, you can only defer Part B coverage, not Part A coverage. To delay Part B, you must decline it before your Medicare coverage begins, which is the month after you enroll or on your birthday.
Next steps: Contact Social Security at 1-800-772-1213 or visit an office. Afterward, you will likely need to return your Medicare card. (You should automatically get your Medicare card three months before your birthday if you’re receiving Social Security benefits.) If you keep the card, that means you agree to keeping and paying for Part B.
Scenario 3: You will not receive benefits from Social Security at age 65
If you do not plan on receiving benefits from Social Security at age 65 because you’re still working, you can delay both parts A and B without doing anything. That said, most people enroll in Part A without any negative complications. (If you enroll in Part B, you’ll need to pay a monthly premium, which can be a waste of money since you’ll also be paying a premium for your employer health insurance). If you have a health savings account that you intend to keep contributing to, however, delaying Part A can be a smart strategy because you can run into tax penalties.
Next steps: You don’t need to do anything to opt out of Medicare parts A and B. However, you are encouraged to sign up for Medicare after you stop working or once your employer-provided health insurance ends. You need to do this within eight months of losing coverage from your employer.
This is the period known as a special enrollment period, or SEP. You have eight months to sign up for Part A and Part B, and you have two months to enroll in a Medicare Advantage (Part C) or a Part D prescription plan.
Delaying Medicare Part D
Before you officially delay Medicare’s Part D, make sure you have creditable prescription drug coverage. This means that your employer’s health plan, or whatever health plan you’re using, such as COBRA, offers equal or better coverage than Medicare.
There are a few rules of the road to know about Part D:
— Even if you are perfectly healthy and don’t take prescription drugs (lucky you), you probably should enroll in Part D. Someday you may need to, and if it’s past the enrollment period, and you sign up, you’ll pay a Part D penalty (as you’ll read more about below).
— You can get a standalone Part D plan, where you aren’t enrolled yet in Part A or Part B.
— All Part D plans are different, with different premiums, so don’t sign up for the first plan you see. Take a look at the Best Medicare Part D prescription plans, according to U.S. News.
— If you have a Medicare Advantage plan (which would mean you’ve enrolled in Part A and Part B and aren’t delaying Medicare), you can get Part D through a Medicare Advantage plan.
What counts as creditable coverage?
Creditable coverage is an important concept to become familiar with.
Creditable coverage refers to a health insurance plan, such as your employer group plan or possibly COBRA, that has benefits and coverage equal (or better) than original Medicare Parts A and B or a Medicare prescription drug plan, also known as Part D. If your coverage is considered creditable, you can stay on your health plan and delay Medicare without incurring penalties down the road. Every year, you’ll receive a letter from your health plan, letting you know if the coverage is considered creditable.
But a heads up: If you have coverage through an employer that has fewer than 20 employees, the plan is typically not counted as creditable coverage. So you really should sign up for parts A and Part B. In that case, Medicare will be your primary insurance plan, and your employer’s insurance, secondary.
This means your employer prescription plan is at least as good as the standard Medicare Part D plan coverage. If your employer’s drug coverage isn’t creditable, you will need to enroll in a Part D plan during your initial enrollment period to avoid the Part D late enrollment penalty. You’ll also need to get either Part A or Part B to get a Part D plan.
[Read: How to Avoid Paying a Medicare Late Enrollment Penalty]
Medicare Enrollment Options and Penalties If You’re Working
| Scenario | Is Enrollment in Part A Mandatory? | Is Enrollment in Part B Mandatory? | Potential Penalty If Delayed? |
|---|---|---|---|
| Receiving Social Security/RRB benefits | Yes (automatic enrollment) | Yes (unless qualified for a special enrollment period) | Part B and/or Part D |
| Still working, covered by employer group health plan (20+ employees) | No, but strongly recommended | No (can delay parts B/D) | No (if coverage meets creditable coverage standards) |
| Still working, covered by employer group health plan (fewer than 20 employees) | Yes, Medicare Part A and Part B becomes your primary insurance; your employer’s insurance is secondary. | Yes, Medicare Part A and Part B becomes your primary insurance; your employer’s insurance is secondary. | If you don’t enroll, your employer can decide to not cover your health expenses. |
| Not retired, not collecting Social Security benefits, no group health coverage | No, but strongly recommended | Yes (mandatory to avoid penalty) | Part B and/or Part D |
[Read: When Can You Sign Up for Medicare?]
Enrollment Options
Plenty of people who are 65 or older continue to work — and thus don’t enroll in Medicare as soon as they’re able. If you missed your initial enrollment period
when you first became eligible for Medicare, individuals can sign up for Medicare Part A or Part B during the general enrollment period, which runs from January 1 to March 31 each year.
“Individuals cannot use the annual open enrollment period that runs from October 15 to December 7 to enroll in Medicare Part A or Part B. That enrollment period can only be used by people with Medicare to sign up for drug coverage or Medicare Advantage coverage or switch coverage,” says Nevins.
All of that said, there is the special enrollment period that allows individuals to sign up for Medicare later, within eight months of losing employer coverage or leaving a job.
“Medicare-eligible individuals are encouraged to enroll in Medicare Part A during the initial enrollment period since the program does not charge monthly premiums and a Medicare ID number is assigned upon being enrolled,” Nevins says. “It makes it much easier to apply for Medicare Part B when the time comes if you’re already enrolled in Part A.”
Late Penalties
If you don’t time your Medicare enrollment correctly, you’ll pay for that mistake. The penalty for late enrollment in Medicare Part B is 10% of the standard monthly premium for each 12-month period that enrollment is delayed. (So just to be clear, if you wait two years, you’ll have a 20% penalty. Three years, a 30% penalty.) This penalty will be tacked onto the actual premium amount, usually paid each month for as long as the individual has Medicare.
“This penalty is permanent and is added to the actual premium amount, usually paid each month for as long as the individual has Medicare,” says Gretchen Jacobson, vice president of the Medicare program for the Commonwealth Fund, a foundation focused on health care policy in New York City. “There is also a late enrollment penalty for Medicare Part A if someone does not automatically qualify for Part A.”
One of the most common Medicare mistakes is not signing up on time. There are late-enrollment penalties for both Medicare Part B and Part D. If you delay enrolling in Medicare Part B, you’ll incur a permanent penalty of 10% of the standard monthly premium for each year of delayed enrollment.
“This penalty is permanent and is added to the actual premium amount, usually paid each month for as long as the individual has Medicare,” Nevins says.
It can all get confusing, but here’s a breakdown of the penalties you could encounter if you’re late to enrollment.
— Part A Penalty. Your monthly premium may be 10% more than it would have been. It isn’t forever, but for every year you delay it, you’ll pay the penalty for two years. So if you delayed enrollment for Part A for three years, you could end up paying a 10% higher premium for six years.
— Part B Penalty. An extra 10% for each year you didn’t enroll. This is a penalty you pay in addition to your premium. So in 2026, your standard Part B monthly premium is $202.90. If you were a year late, you’d pay your premium as well as $20.29. But that penalty is every month, so the entire year, you would pay a $223.19 premium.
— Part D Penalty. If you don’t join a Medicare drug plan when you first get Medicare or go 63 days or more without creditable drug coverage, you’ll pay an extra 1% for every month (12% per year). Depending on your income, your premium may rise as well.
Going Back to Work After Retirement
If you are retired and sign up for Medicare but decide to return to the workforce and receive health insurance through your job, you can cancel Part B at that time (and keep Part A). You can also drop Part D, as long as your new employer offers creditable prescription drug coverage.
Later, when you retire again, you’ll have a second six-month open enrollment window to sign up for Medicare Part B again.
Bottom Line
In an era where more seniors are staying in the workforce longer, understanding how Medicare interacts with existing employer health coverage is crucial. Making the right choice can save you from unnecessary penalties and ensure you maintain comprehensive health coverage during this critical period.
Before deciding to delay Medicare if you’re still working past age 65, it’s essential to assess your current employer’s health insurance plan, particularly regarding drug benefits and overall cost-effectiveness. Carefully evaluate your employer’s plan and compare it with what Medicare offers to make an informed decision that best suits your health care needs and financial situation.
FAQs About Medicare and Working After 65
Can I opt out of Medicare completely?
Yes, but you must withdraw from Social Security/RRB (U.S. Railroad Retirement Board) benefits, and you may face penalties later.
Is Medicare Part D (prescription drug coverage) mandatory?
No, but a penalty is assessed if you go 63 days or more without creditable drug coverage. If you can, it’s a good idea to enroll.
Do I have to enroll in Medicare if I am still working?
No, unless your employer has fewer than 20 employees. Your employer’s group health plan, in that case, will be considered your secondary insurance, and Medicare will be your primary plan.
What happens if I don’t enroll in Medicare at age 65?
You could face penalties, including a permanent Part B late-enrollment penalty as well as a Part D late-enrollment fee if you don’t have creditable drug coverage.
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Medicare Coverage: Can You Opt Out if You’re Still Employed? originally appeared on usnews.com
