Medicare may be one of the most important—and confusing—financial decisions you make in retirement.
Between enrollment deadlines, late penalties, Medicare Advantage, Medigap, prescription coverage, and income-based premiums, there are plenty of decisions to navigate. And because some choices can have long-term financial consequences, understanding the basics before you enroll is an important part of wise stewardship.
Eddie Holland, Senior Private Wealth Advisor and Partner at Blue Trust, as well as a CFP®, CPA, and Certified Kingdom Advisor®, recently joined Faith & Finance to help simplify Medicare and explain some of the most important planning considerations.
Understanding Medicare Parts A, B, C, and D
A good place to begin is with Medicare’s different parts.
Medicare Part A primarily covers hospital-related care, including inpatient hospital stays, skilled nursing care, and hospice. For people who have accumulated the required work credits through either their own employment or their spouse’s, Part A generally does not require a monthly premium.
Medicare Part B covers many medical services outside the hospital, including doctor visits, lab work, and outpatient procedures. Unlike Part A, Part B generally carries a monthly premium, and higher-income retirees may pay more.
Medicare Part D covers prescription drugs. Those enrolled in Original Medicare—Parts A and B—can generally purchase a separate Part D prescription drug plan.
Medicare Part C, better known as Medicare Advantage, is offered through private insurance companies. These plans combine Parts A and B and often include Part D prescription coverage as well. Some plans may also offer additional benefits such as dental or vision coverage.
Another option for those using Original Medicare is a Medicare supplement plan, commonly called Medigap. These private plans are designed to help cover some of the deductibles, copayments, and other expenses that Original Medicare does not pay.
Pay Close Attention to Enrollment Timing
Timing matters when enrolling in Medicare.
Your Initial Enrollment Period generally lasts seven months: the three months before the month you turn 65, your birthday month, and the three months afterward.
But turning 65 does not always mean you have to immediately leave employer-sponsored health coverage.
If you or your spouse are still working and you have qualifying employer coverage, you may have access to a Special Enrollment Period, allowing you to delay certain portions of Medicare without facing a late enrollment penalty. Holland notes that employer size and the nature of the coverage can affect how Medicare coordinates with the employer plan.
That makes it important to speak with your employer’s benefits or human resources department before making assumptions about which coverage should come first.
Employer Size Can Make a Difference
If your employer has 20 or more employees, the employer health plan may generally remain the primary payer while you continue working, potentially allowing you to postpone Part B and its monthly premium.
With an employer of fewer than 20 employees, Medicare may become the primary payer once you are eligible. In that situation, failing to enroll in Parts A and B could potentially leave gaps in coverage.
You should also verify whether your employer’s prescription drug coverage is considered creditable coverage for Medicare purposes. That can be especially important if you plan to delay Part D beyond age 65.
The larger lesson is simple: Medicare decisions should rarely be made in isolation. Your employer coverage, retirement date, spouse’s coverage, prescription needs, and other factors all need to be considered together.
What Is IRMAA?
For higher-income retirees, another important acronym to know is IRMAA, or the Income-Related Monthly Adjustment Amount.
IRMAA is an additional charge added to Medicare Part B and Part D premiums when modified adjusted gross income exceeds certain thresholds.
For 2026, Holland notes that IRMAA begins above $109,000 in modified adjusted gross income for single filers and $218,000 for married couples filing jointly. Medicare generally bases the surcharge on the most recent tax information available, which often means looking back two years. So, for example, 2026 Medicare premiums may be based on income reported on a 2024 tax return.
That two-year lookback can surprise people whose financial situation has recently changed.
If your income has fallen because of certain qualifying life-changing events, such as retirement, marriage, or widowhood, you may be able to request a reconsideration of the surcharge using Social Security Form SSA-44.
Roth Conversions Can Affect Medicare Premiums
IRMAA can also become an important consideration when planning Roth conversions.
Suppose you retire before age 65 and decide to convert a significant amount of traditional IRA money to a Roth IRA. The conversion increases your taxable income for that year.
Because Medicare looks back at previous tax returns when determining IRMAA, a large Roth conversion in the years immediately preceding Medicare enrollment could lead to higher Part B and Part D premiums later.
That doesn’t necessarily mean you shouldn’t complete the conversion. It simply means you should include the potential Medicare impact in the calculation.
Tax planning, retirement planning, and Medicare planning are often interconnected. A decision that makes sense in one area can create consequences in another.
Be Careful With HSA Contributions
Health Savings Accounts require special attention as you approach Medicare eligibility.
Once you are enrolled in Medicare, you can no longer contribute to an HSA. If you enroll around age 65, you need to coordinate the end of your HSA contributions with the beginning of your Medicare coverage.
The issue becomes even more important for those who enroll after age 65 because Medicare Part A coverage can sometimes be applied retroactively, potentially affecting HSA eligibility for previous months. Holland recommends understanding the retroactive period before enrolling so you don't inadvertently make excess HSA contributions.
Social Security can complicate matters further. If you begin receiving Social Security benefits, you may automatically be enrolled in Medicare Part A. Anyone who is still contributing to an HSA should account for that before applying for Social Security.
The good news is that money already accumulated in an HSA remains tax-advantaged and can still be used for many qualified medical expenses in retirement, including certain Medicare premiums. Holland notes, however, that HSA funds cannot be used tax-free to pay Medigap premiums.
What If One Spouse Reaches Medicare Age First?
Married couples can face another challenge when one spouse becomes eligible for Medicare while the other is still several years away.
If the older spouse continues working, the employer plan may continue covering both spouses. Some companies also provide retiree benefits that extend coverage to a younger spouse after the older spouse retires.
If employer coverage isn't available, COBRA may provide temporary coverage, although it can be expensive. Another possibility is purchasing insurance through the federal or state health insurance marketplace, where the younger spouse may qualify for premium subsidies depending on household circumstances.
Whatever option you choose, don't overlook the cost. If one spouse retires several years before the other reaches Medicare eligibility, higher healthcare premiums may need to become a deliberate part of the retirement budget.
Make Medicare Part of Your Larger Retirement Plan
Medicare isn't simply a healthcare decision. It can affect your taxes, retirement income, Social Security strategy, HSA contributions, and monthly spending.
That's why careful planning before age 65 can be so valuable.
Understand what each part of Medicare covers. Know your enrollment windows. Talk with your employer before leaving workplace coverage. Consider the impact of your income on Medicare premiums. And coordinate decisions involving HSAs, Roth conversions, Social Security, and your spouse's health coverage.
Medicare may be complicated, but you don't have to approach it blindly. Taking the time to understand your options can help you avoid costly mistakes, choose coverage that fits your circumstances, and steward the resources God has entrusted to you with greater wisdom and confidence.
On Today’s Program, Rob Answers Listener Questions:
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- I received a letter saying my student loans were placed in permanent disability status, but I never applied for that. How can I verify whether it’s legitimate and correct the situation if needed?
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