How to avoid Medicare late enrollment penalties

It depends. Most people who’ve worked and paid taxes are eligible for premium-free Medicare Part A when they turn 65, even if they still have health insurance from an employer. So signing up right away makes sense.

Medicare Part B, on the other hand, requires that you pay a monthly premium ($185 or higher, depending on your income in 2025), so if you feel you don’t want it or need it, you may assume you can just delay your enrollment.²

But depending on your circumstances, it may be in your best interest to enroll in Medicare when you’re first eligible to avoid any late enrollment penalties.

As with any group insurance plan, Medicare needs healthy people paying premiums to help offset the cost of covering people who need to use more of its benefits.

If everyone waited until they needed a plan to enroll, costs would skyrocket. So you can delay enrollment in Medicare Part B or in a Part D prescription drug plan—and delay the monthly premiums—but you may pay a higher premium once you decide it’s time to enroll.

Here’s an overview based on the various parts of Medicare coverage:

• If you’re not eligible for premium-free Part A based on your work history, your monthly premium may increase if you don’t purchase it when you are first eligible
• In most cases, if you don’t sign up for Part B when you’re first eligible, you’ll have to pay a penalty—and not just upon enrollment. You’ll continue to pay that penalty for as long as you’re enrolled in Medicare Part B

There are exceptions to the rule, however. If you or your spouse is still working and has healthcare coverage through an employer or other creditable source, such as an individual healthcare plan or a state-established healthcare plan, you can wait to sign up for Part B or Part D without paying a penalty.¹

But once your employer coverage is gone, the only way to avoid a penalty is to enroll in Part B during what’s called a Special Election Period (SEP). That’s an 8-month period that begins when your employer coverage ends or you stop working, whichever comes first.

Medicare Part D coverage for prescription drugs may also charge a penalty for late enrollment. Again, this is only if you didn’t have creditable coverage from an employer or other source—such as TRICARE—and still delayed enrolling in Part D. Medicare calculates the penalty based on how long you chose to go without coverage.

For the most part, the same rules apply. If you are working past 65 and receiving healthcare coverage (along with at least 20 other plan members), you may choose to delay enrolling in Medicare with no penalties.

The bottom line:

When it comes to Medicare, there are a lot of rules.

Many of these rules are there to protect you, but a few can derail your enrollment plans if you’re not aware of them.

Know your Medicare rights and options. Know how SEPs work and whether they apply to your situation. And don’t underestimate the impact a late enrollment may have on your retirement plans.

To learn more, visit Medicare.gov and see 3 ways to avoid the late enrollment penalty.