Key Takeaways
- A 38-year-old federal employee told Your Money, Your Wealth that he’d get a pension at 50, which he projects at $76,000 a year, and could keep his health insurance until Medicare.
- Retiree health plans don’t count as coverage from a current job, so his plan won’t let him put off Medicare Part B past 65 without a penalty.
- If he signs up three full years late, his premium goes up 30%. At 2026’s $202.90 premium, that’s $60.87 a month or $730.44 a year, usually for life.
- He can avoid the penalty by signing up in the 7-month window around his 65th birthday, even if he keeps the retiree plan.
Keeping your health plan when you retire early is one of the best perks a job can come with. But if you’re still on that plan at 65 and skip Medicare Part B, you could end up paying a penalty for the rest of your life.
A pension at 50, and his health plan until Medicare
A 38-year-old federal employee laid out a plan most workers would envy in a question Andi Last read out on the Nov. 3 episode of Your Money, Your Wealth. He’d qualify for a pension at 50 that he projects will pay $76,000 a year. And as he put it: “If I retire at 50, I qualify for the same health insurance I have until Medicare with minimum premiums.” He isn’t sure he can stay in the job that long (whether to leave sooner was his real question for the show). But if he does, that’s 15 years of coverage before Medicare enters the picture. The catch comes at 65.
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Retiree coverage doesn’t count for Part B
Medicare gives you 7 months to sign up for Part B the first time, starting 3 months before the month you turn 65 and ending 3 months after it. You can put Part B off past that without a penalty only while you or your spouse are still working and you’re covered by a group health plan through that job. Then you sign up in the 8 months after that coverage ends. But retiree health plans and COBRA don’t count as coverage from current employment, so when he turns 65, his federal retiree plan won’t give him that extra time. If he misses the 7-month window, his next chance is the General Enrollment Period, January 1 to March 31 of each year. And since the penalty adds 10% to the premium for each full 12-month period he could have signed up but didn’t, the bill grows every year he waits.
Three years late costs $730.44 a year
Say he skips Part B at 65 and signs up three full years later. That’s 10% for each of the three years, or 30% on top of the standard premium. At this year’s $202.90 a month, the penalty comes to $60.87 a month, or $730.44 a year on top of the premium itself. And since the penalty is usually charged for as long as he has Part B, he’d pay it for the rest of his life.
Of course, the premium will have changed by the time he’s 65, about 27 years from now. But the 30% comes from the same standing rule, so a late start would cost him the same share of whatever the premium is then.
Sign up at 65, even with the retiree plan
The simplest way to avoid the penalty is to sign up for Part B inside that first 7-month window, even if he keeps the retiree plan. That means paying the Part B premium from 65 on (this year’s is $202.90 a month). That’s a real cost next to a plan he describes as having minimum premiums. He has one way around it, through his husband, who’s a year younger: if his husband is still working when he turns 65, and he’s covered by a group health plan through that job, he can wait without a penalty.
Anyone already past 65 on a retiree plan without Part B is in a different spot. Medicare’s open enrollment runs through Dec. 7, but the next window for Part B opens on Jan. 1. Signing up in that one, rather than a year later, can keep another 10% off the bill for good.
He has 27 years. Plenty of early retirees don’t
For a 38-year-old, all of this is a long way off. But the 10% a year is standing law, and it works the same way for anyone retiring early on a former employer’s health plan today. My take: if that’s you, put your Part B window on the calendar now. A penalty that usually lasts for life is a steep price for a few years of skipped premiums. The next figure to watch is 2027’s premium. CMS put out this year’s on Nov. 14 last year, so it shouldn’t be long.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
