Most individuals become eligible for Medicare beginning the month they turn age 65. Enrollment can begin as early as three months before your 65th birthday, and your Initial Enrollment Period lasts for seven months (the three months before your birthday month, your birthday month, and the three months after). Enrolling during this period is important unless you have qualifying employer-sponsored group health coverage that allows you to delay enrollment in Medicare Part B, a supplemental policy, and Part D policy without penalty.

Medicare consists of four separate parts. Medicare Part A provides hospital insurance and is generally premium-free for individuals who have worked and paid Medicare taxes for the required number of quarters. Medicare Part B covers physician services, outpatient care, and other medical services, and requires a monthly premium. If you are receiving Social Security benefits, your Part B premium can typically be deducted directly from your monthly benefit.

Once enrolled in both Medicare Part A and Part B, you may choose additional coverage to help manage healthcare costs. There are two primary options. Medicare Advantage (Part C) plans are offered by private insurance companies and combine your Medicare supplemental benefits into a single plan, often including prescription drug coverage. While these plans may have lower monthly premiums, they typically utilize provider networks, may require referrals or prior authorizations for certain services, and can result in higher out-of-pocket costs depending on your healthcare needs.

Alternatively, you may choose a Medigap (Medicare Supplement) policy, which helps pay many of the deductibles, copayments, and coinsurance not covered by Original Medicare. Medicare Supplement policies generally allow you to see any provider nationwide who accepts Medicare without network restrictions, making them an attractive option for individuals who travel frequently, live in multiple states throughout the year, or value greater flexibility in choosing healthcare providers. Individuals with a Medigap policy typically enroll separately in Medicare Part D, which provides prescription drug coverage.

Just when you thought the Medicare system couldn't get any more complex, there is another important planning consideration for individuals with higher incomes. The Social Security Administration applies an Income-Related Monthly Adjustment Amount (IRMAA) to Medicare Part B and Part D premiums when an individual's modified adjusted gross income (MAGI) exceeds certain thresholds. These income thresholds are adjusted annually and include multiple income brackets. Depending on your income, the surcharge can significantly increase your monthly Medicare premiums.

For IRMAA purposes, your MAGI or Modified Adjusted Gross Income is used to calculate where you fall in those brackets. MAGI uses a baseline of adjusted gross income (AGI), which includes wages and other earned income, pre-tax retirement account withdrawals, pension and annuity income, capital gains, taxable interest and dividends, business income, rental income, K-1 income, and the taxable portion of Social Security benefits. Your MAGI also adds back tax-exempt interest, such as interest earned from municipal bonds.

The Social Security Administration generally determines your IRMAA surcharge using the MAGI reported on your federal tax return from two years earlier. As a result, a large one-time event, such as selling highly appreciated investments, completing a Roth conversion, or receiving a significant bonus could temporarily increase your Medicare premiums two years later.

If you expect your income to decrease because of a qualifying life-changing event, such as retirement, reduction in work hours, loss of income-producing property, divorce, death of a spouse, or loss of a pension, you may be able to request a reduction in your IRMAA by completing Form SSA-44. For example, if your 2025 income was used to determine your 2027 Medicare premiums, but you retired in 2026 and expect your 2027 income to be substantially lower, Form SSA-44 allows you to report the life-changing event and estimate your lower current-year income so the Social Security Administration can recalculate your premiums.

Because Medicare premiums and IRMAA can have a meaningful impact on retirement cash flow, it is important to coordinate your Medicare decisions with your overall tax and retirement income strategy. If you expect to be subject to IRMAA or have any questions about Medicare in general, speak with your advisor to identify planning opportunities that may help in planning for Medicare costs and timeline with enrollment.