Medicare Planning: A Complete Guide for Pre-Retirees

Medicare is one of the most important financial decisions you'll make as you approach retirement — and one of the most confusing. The alphabet soup of Parts A, B, C, and D, combined with Medigap supplements and enrollment windows, leaves many people overwhelmed.

This guide cuts through the complexity and gives you a clear roadmap for making smart Medicare decisions.

The Basics: What Medicare Covers

Part A — Hospital Insurance

• Inpatient hospital care
• Skilled nursing facility care (limited)
• Hospice care
• Home health care (limited)

Cost: Most people pay $0 in premiums for Part A if they (or their spouse) worked and paid Medicare taxes for at least 10 years.

2026 Part A deductible: $1,676 per benefit period

Part B — Medical Insurance

• Doctor visits and outpatient care
• Preventive services
• Durable medical equipment
• Mental health services

2026 Standard Part B premium: $185/month (higher for high-income beneficiaries) 2026 Part B deductible: $257/year

Part C — Medicare Advantage

Medicare Advantage plans are offered by private insurers and bundle Parts A and B (and usually Part D) into a single plan. They often include additional benefits like dental, vision, and hearing.

Pros: Often lower premiums; additional benefits; out-of-pocket maximums Cons: Network restrictions; prior authorization requirements; coverage can change annually

Part D — Prescription Drug Coverage

Standalone prescription drug plans available through private insurers. If you don't enroll when first eligible and don't have creditable drug coverage, you'll pay a late enrollment penalty for life.

2026 Part D out-of-pocket cap: $2,000 (new under the Inflation Reduction Act)

When to Enroll: Critical Windows

Initial Enrollment Period (IEP)

A 7-month window: 3 months before your 65th birthday month, your birthday month, and 3 months after.

Enroll during the first 3 months to ensure coverage starts on your birthday month.

Special Enrollment Period (SEP)

If you're still working at 65 and covered by employer insurance, you can delay Medicare enrollment without penalty. You have an 8-month SEP after your employer coverage ends.

Important: COBRA and retiree health coverage do NOT qualify as employer coverage for SEP purposes.

General Enrollment Period (GEP)

January 1 – March 31 each year. Coverage begins July 1. Late enrollment penalties apply.

Annual Enrollment Period (AEP)

October 15 – December 7 each year. You can switch between Original Medicare and Medicare Advantage, or change Part D plans.

Late Enrollment Penalties

Missing your enrollment window has permanent consequences:

• Part B penalty: 10% added to your premium for each 12-month period you were eligible but didn't enroll — for life
• Part D penalty: 1% of the national base beneficiary premium for each month you went without creditable coverage — for life

These penalties add up quickly. A 2-year delay in Part B enrollment adds 20% to your premium permanently.

Medigap (Medicare Supplement) Insurance

Original Medicare (Parts A and B) has significant cost-sharing — deductibles, copays, and no out-of-pocket maximum. Medigap plans fill these gaps.

Key Medigap plans:

• Plan G: Most comprehensive; covers everything except the Part B deductible
• Plan N: Lower premium; small copays for some services
• Plan K/L: Lower premium; higher cost-sharing

Best time to buy Medigap: During your 6-month Medigap Open Enrollment Period (starts when you're 65 and enrolled in Part B). During this window, insurers cannot deny coverage or charge more due to health conditions.

Medicare and Working Past 65

If you're still working at 65 with employer coverage:

• You can delay Part B enrollment without penalty
• Coordinate with your employer's HR to understand how Medicare interacts with your group plan
• Employer plans with 20+ employees are primary; Medicare is secondary
• Employer plans with fewer than 20 employees: Medicare is primary

Planning Ahead

Medicare planning should start at least 2–3 years before your 65th birthday. Key steps:

1. Understand your current coverage and when it ends
2. Research Medicare Advantage vs. Original Medicare + Medigap
3. Identify your prescription drug needs for Part D planning
4. Understand how Medicare affects your HSA contributions (you cannot contribute to an HSA once enrolled in Medicare)

Our team helps individuals and families navigate Medicare enrollment and coordinate it with their overall retirement income plan.

Schedule a Medicare planning consultation with Anderson Financial Group.

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Anderson Financial Group provides independent insurance and financial planning. We are licensed to advise on Medicare supplement and Medicare Advantage plans.