Working After 65? Delay Medicare Without Penalties—Here's How.

If your company has 20+ employees and offers "creditable" heath and drug coverage, you may safely delay Medicare Parts B & D—no penalties—until you retire. Work at a smaller firm? Enroll at 65 and halt HSA deposits six months pre-Medicare.

Employer Coverage vs. Medicare • Part A, HSAs & Timing • Avoiding Lifetime Penalties • Special Enrollment Period (SEP) • COBRA & Retiree Plan Traps • Spouse & Dependent Coverage • Plan Ahead

Retirement at 65 isn't necessarily the norm anymore. Maybe you love your job and want to keep working. Maybe your retirement savings could use a boost. Or perhaps you're holding out for those bigger Social Security checks that come if you wait until you're 70. Whatever your reason, working past 65 means making some strategic decisions about Medicare.

And let's be honest–Medicare decisions aren't exactly easy. They're the "if I mess this up, I could pay penalties for the rest of my life" kind. So, let's dive into what you need to know about delaying Medicare enrollment when you continue working past 65.

Don't worry, we'll break this all down step-by-step to help you avoid costly mistakes.

1. Employer Coverage vs. Medicare

First things first: not all employer health coverage plays nicely with Medicare. Some employer plans expect you to enroll in Medicare at 65 regardless of your work status, while others are perfectly fine with you postponing Medicare enrollment.

The Magic Number: 20 Employees

Your employer's size determines whether your workplace insurance or Medicare becomes the "primary payer" (the one that pays first when you have medical bills):

• If your employer has 20 or more employees, your employer plan remains primary. This means you can delay enrolling in Medicare Part B (which covers doctor visits and outpatient care) without penalties. You're in what Medicare calls a "Special Enrollment Period" as long as you're actively working with creditable coverage. 
• If your employer has fewer than 20 employees, Medicare becomes primary at age 65—even if you have employer coverage. In this case, not enrolling in Medicare could leave you with serious coverage gaps, because your employer plan will expect Medicare to pay first. If Medicare isn't there to pay (because you didn't enroll), you could be stuck with the bill.

What Does "Creditable Coverage" Actually Mean?

Creditable coverage refers to health insurance that meets Medicare’s minimum requirements. There are two key parts:

• Part B (Medical Insurance): Employer-sponsored health coverage is considered creditable if it is a group health plan based on current employment.
• Part D (Prescription Drug Coverage): Your employer’s drug plan is creditable if it covers, on average, as much as Medicare’s standard prescription drug plan.

🔑 Key Takeaway: If your employer doesn't offer creditable coverage and you delay Medicare, you could face      permanent penalties when you finally sign up.

2. Part A, HSAs & Timing

Medicare Part A (which covers hospital stays) is often premium-free if you or your spouse have worked and paid Medicare taxes for at least 10 years. That may sound like a great deal, but there's an important financial consideration that can catch many people off guard—Health Savings Accounts (HSAs).

The HSA-Medicare Rule You Need to Know

The moment you enroll in any part of Medicare—including "free" Part A—you are no longer allowed to contribute to an HSA. If you continue making HSA contributions after enrolling in Medicare, you could face tax penalties and unexpected costs.

Timing Matters: The 6-Month Rule

To avoid these penalties, the IRS recommends stopping HSA contributions at least six months before enrolling in Medicare. Why? Because Medicare Part A can retroactively cover you for up to six months before your enrollment date (but no earlier than when you turned 65). If you make HSA contributions during that retroactive period, they could be considered excess contributions, triggering tax penalties.

Real-Life Example: Lisa's Smart Move

Lisa is 64 and loves the tax advantages of her HSA. She wants to keep contributing to it for as long as possible. Since enrolling in any part of Medicare would stop her from making contributions, she decides to delay Medicare enrollment until she retires. By doing this, she can continue saving tax-free for medical expenses without penalty.

🔑 Key Takeaway: Should You Delay Medicare for Your HSA? 

• If you're still working and have a high-deductible health plan (HDHP) with an HSA, delaying Medicare may be a smart move.
• Once you stop working, you have eight months to enroll in Medicare to avoid late penalties.
• To avoid IRS penalties, stop HSA contributions at least six months before Medicare enrollment.

3. Avoiding Lifetime Penalties

Medicare’s late enrollment penalties aren’t just one-time fees—they stay with you for life. If you delay signing up for Medicare without having the right type of coverage, you could face higher monthly premiums…forever. Let’s break it down:

Part B Late Enrollment Penalty (Doctor & Outpatient Services)

If you don’t enroll in Medicare Part B when you’re first eligible and don’t have creditable employer coverage, your monthly premium goes up by 10% for every full year you delay.

• This penalty lasts for as long as you Medicare—not just for a year or two.
• Even if you decide later to enroll, the extra cost never goes away.

👉 Example: Greg turned 65 but skipped signing up for Part B because he thought he didn't need it.         Five years later, at 70, he finally signed up. His Part B premium is now 50% higher because he           has to pay an extra 10% for each of the five years he wasn't signed up. Plus, he still has to pay           the standard Part B premium. So, what is Greg's monthly Part B premium now? $185 (2025 Part B         premium) + $92.50 (50% penalty) = $277.50.

Part D Late Enrollment Penalty (Prescription Drugs)

If you don’t sign up for Medicare Part D when first eligible and go 63 or more days without creditable drug coverage, you’ll face a penalty of an extra 1% of the national average Part D premium for every month you delay. This amount gets added to your monthly Part D premium permanently.

👉 Example: Sarah waited 20 months before signing up for Part D. Now, she pays an extra 20% on           top of her monthly premium—for life. What does that mean for Sarah? $36.78 (2025 Part D base           premium) + $7.35 = $44.13.

🔑 Key Takeaway: Delaying Can Be a Costly Mistake

• If you have employer-provided insurance that's creditable, you're safe.
• If you don't have creditable coverage, enroll in Medicare as soon as you're eligible to avoid lifetime penalties.

Skip the guesswork. Check your "still-working" Medicare timeline in ALEX® now. 

4. Special Enrollment Period (SEP)

 If you delay enrolling in Medicare because you’re still working and have employer coverage, don’t worry—you won’t face penalties as long as you enroll on time. Medicare offers an 8-month Special Enrollment Period (SEP) to sign up without penalties once you leave your job or lose your employer health insurance. 

How Long Do You Have to Enroll?

For Part B: You have 8 months from the time you stop working or lose your employer coverage—whichever comes first.

For Part D: You only have 2 months after losing employer drug coverage to enroll in Medicare Part D.

🔑 Key Takeaway: Timing (and Preparation) is Everything

• If you qualify for a Special Enrollment Period, use it wisely to avoid lifetime penalties.
• Act fast on Part D—you have much less time to enroll compared to Part B.
• If you know when you're going to retire, or at least have a general idea, plan ahead. Research Medicare plan options so you're ready when it's time.

Missing these deadlines could leave you with higher costs forever, so mark your calendar and enroll on time.

5. COBRA & Retiree Plan Traps

If you're leaving a job and thinking about using COBRA or a retiree health plan instead of signing up for Medicare, be careful—these options might not provide the coverage you think they do.

COBRA is NOT Creditable Coverage for Medicare

Many people assume COBRA (which lets you keep employer health insurance for a limited time after leaving a job) will let them delay enrolling in Medicare Part B without penalties. That’s a costly mistake.

• COBRA does NOT count as creditable coverage for delaying Medicare Part B.
• If you rely on COBRA and don't sign up for Medicare, you could be hit with lifetime late enrollment penalties.
• Once you qualify for Medicare, COBRA only pays secondary to Medicare—even if you haven't signed up yet. This could leave you with big out-of-pocket costs.

👉 Example: Jake, 66, retires and chooses COBRA instead of enrolling in Medicare Part B. When               COBRA runs out after 18 months, he tries to sign up for Medicare—but now faces a 10% penalty           for each full year he delayed. That means he’ll pay an extra 20% on his Part B premium for life.

Retiree Health Plans & Medicare

If you have a retiree health plan, it usually requires you to enroll in Medicare to provide full benefits.

• Many retiree plans assume you have Medicare and will only cover what Medicare doesn't.
• If you don't sign up for Medicare, your retiree plan may pay far less—or nothing at all.

👉 Example: Susan has a retiree health plan from her former employer. She doesn’t enroll in                       Medicare because she assumes her retiree coverage will take care of everything. Later, she learns       that her plan only supplements Medicare—meaning it won’t pay for services Medicare would             have covered. She ends up with huge medical bills.

🔑 Key Takeaway: Talk to HR and don't Fall into the COBRA Trap

• COBRA is not a substitute for Medicare Part B—enroll in Medicare when you leave work.
• Retiree plans usually require Medicare enrollment to provide full benefits.
• Talk to someone from your employer's Human Resources benefits team before you retire to make sure you understand the steps you need to take.
• Avoid lifetime penalties and gaps in coverage by signing up for Medicare as soon as you're eligible after leaving your job.

Use our "Ask HR" Checklist to make sure you ask all the right questions and get the answers you need to make an informed, confident decision.

👉 Download the checklist 

6. Spouse & Dependent Coverage

When you switch to Medicare, it's important to remember that Medicare only covers you—not your spouse or dependents. If your family is on your employer-sponsored health plan, they could lose their coverage once you transition to Medicare.

What are Their Options?

If your spouse or dependents rely on your job-based health insurance, they'll need a new plan when you switch to Medicare. Here are a few possibilities:

COBRA (Temporary but Expensive)

• Allows your spouse and dependents to stay on your former employer's plan for up to 36 months.
• Can be very costly, as they'll pay the full premium (what you and your employer paid) plus an administrative fee.

Spouse's Employer Plan (Best if Available)

• If your spouse is still working and has employer-sponsored coverage, they may be able to add dependents to their plan.
• Check the employer's policy, as some plans only allow changes during open enrollment or a qualifying life event.

Marketplace Insurance (Affordable with Subsidies)

• Your spouse and dependents can enroll in an individual plan through the Affordable Care Act (ACA) Marketplace.
• Depending on income, they may qualify for premium subsidies to reduce costs.

👉 Example: Mike, 66, plans to retire and enroll in Medicare, but his wife, Lisa, is only 60 and relies           on his employer plan. She considers COBRA but finds it too expensive. Instead, she enrolls in a           Marketplace plan with a subsidy, making her coverage more affordable.

🔑 Key Takeaway: Plan Ahead for Your Family

• Medicare won't cover your spouse or dependents, so explore their options early.
• COBRA is a short-term fix but can be costly.
• A spouse's employer plan or ACA Marketplace insurance may be better long-term solutions.

Plan Ahead—Lock in Savings

Let ALEX Do the Heavy Lifting

Your Medicare move today can save thousands tomorrow. ALEX is your plain-English Medicare sidekick—no jargon, no sales pitch, just answers tuned to your job status, HSA, and family needs. One quick chat and you’ll know exactly when to enroll and what it’ll cost.

Ready to lock in savings and skip surprises?

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