Medicare in plain English: the parts, the sign-up windows and the costs

If you retire early, you spend years arranging your own health insurance. Then, at 65, the bridge ends and Medicare begins. That sounds simple. It isn't quite: Medicare has several parts, a few one-time sign-up windows, and penalties that can last for life if you miss them.

Early retirees have one extra reason to pay attention. People who are still working at 65 often have an HR department reminding them. People who left work at 45 or 55 usually don't.

This is general education, not advice. uFIRE does not sell insurance. Medicare rules and costs change every year. Please check current details on Medicare.gov, with Social Security, or with your State Health Insurance Assistance Program (SHIP) before you decide.

The parts of Medicare

Part A: hospital insurance. Inpatient hospital stays, skilled nursing facility care after a hospital stay, hospice and some home health care. Most people pay no premium for Part A because they or a spouse paid Medicare taxes while working for at least 10 years. If you don't qualify, the 2026 Part A premium is $311 or $565 a month, depending on how long you or your spouse paid Medicare taxes (CMS). Part A still has costs when you use it: the 2026 inpatient hospital deductible is $1,736 per benefit period (same source). A benefit period isn't a calendar year: it ends once you've gone 60 days in a row without inpatient hospital or skilled nursing care, so you can owe this deductible more than once in a year (Medicare.gov, "Your Medicare Benefits").

Part B: medical insurance. Doctor visits, outpatient care, lab tests, preventive services and medical equipment. Almost everyone pays a monthly premium for Part B. For 2026, that's $202.90, with a $283 annual deductible (CMS). After the deductible, you generally pay a share of the cost.

Part D: prescription drugs. Sold by private insurers approved by Medicare. Premiums vary by plan. For 2026, no Part D plan's deductible can be more than $615, and once your out-of-pocket spending on covered drugs reaches $2,100, you pay nothing more for covered Part D drugs for the rest of the year (Medicare.gov).

Part C: Medicare Advantage. A private plan approved by Medicare that replaces Original Medicare (Parts A and B) for your coverage, and usually includes drug coverage too.

Two ways to put it together

Once you have Parts A and B, you choose between two broad paths.

Original Medicare, often with Medigap and Part D

You use Parts A and B directly, usually see any provider in the U.S. that accepts Medicare, and add a separate Part D drug plan. Original Medicare has no yearly limit on what you pay out of pocket (Medicare.gov). That's why many people add a Medicare Supplement Insurance (Medigap) policy, sold by private insurers, to help pay deductibles and coinsurance.

The timing matters. Federal law gives you a one-time, 6-month Medigap Open Enrollment Period that starts the first month you have Part B and are 65 or older. During it, insurers can't deny you a policy because of pre-existing health problems. After it ends, you may not be able to buy a Medigap policy, or it may cost more (Medicare.gov).

Medicare Advantage (Part C)

A private plan covers your Part A and Part B services, often with drug coverage and sometimes extras. Most plans use networks, so which doctors and hospitals you can use matters. Unlike Original Medicare, every Advantage plan has a yearly limit on what you pay out of pocket for covered Part A and Part B services, and the limit varies by plan. Premiums don't count toward it, and drug coverage has its own separate limit (Medicare.gov).

Neither path is right for everyone. People weigh premiums against out-of-pocket risk, how much they travel, which doctors they want to keep, and how easily they could switch later. A free, unbiased place to talk it through is your state's SHIP program.

When to sign up

Your Initial Enrollment Period

It lasts 7 months: it starts 3 months before the month you turn 65 and ends 3 months after. If you qualify for premium-free Part A, Part A coverage starts the month you turn 65 (or the month before, if your birthday is on the first of the month). For Part B, and for Part A if you have to buy it, coverage starts the month you turn 65 if you sign up before that month; if you sign up during your birthday month or the 3 months after, it starts the month after you sign up (Medicare.gov).

Early retirees, take note: if you've been getting Social Security benefits for at least 4 months before you turn 65, you're enrolled in Parts A and B automatically. If not, you have to sign up yourself through Social Security, and Medicare won't mail you enrollment information (Medicare.gov). Many early retirees wait to claim Social Security until after 65, so this is easy to miss. Put a reminder in your calendar for about three months before your 65th birthday month.

If you miss it: the General Enrollment Period

You can sign up between January 1 and March 31 each year, with coverage starting the month after you sign up (Medicare.gov). But you may owe a late enrollment penalty.

The Special Enrollment Period, and why it rarely helps early retirees

If you (or your spouse) are still working and covered by that employer's group health plan, you can generally delay Part B without a penalty. You then have until 8 months after the job or the coverage ends, whichever happens first, to sign up (same Medicare.gov source).

That rule is for coverage based on current employment. COBRA and retiree health plans don't count, so they don't let you delay Part B without risking a penalty (Medicare.gov). If you retired at 50 and you're on a retiree plan or COBRA at 65, check the rules carefully.

After you're in: the yearly window

Each year, October 15 to December 7, you can switch between Original Medicare and Medicare Advantage or change Part D plans, with changes taking effect January 1 (Medicare.gov).

The penalties

Medicare's late penalties are not one-time fees. They're added to your premium, usually for good (Medicare.gov):

• Part B: 10% of the standard premium for each full 12-month period you could have had Part B but didn't, for as long as you have Part B. Medicare's own example: wait 2 full years without a Special Enrollment Period and you pay 20% extra.
• Part D: if you go 63 days or more without Part D or other creditable drug coverage after your Initial Enrollment Period, you pay an extra 1% of the national base beneficiary premium for each month without it. For 2026, that base premium is $38.99. The penalty lasts for as long as you have Medicare drug coverage.
• Part A: if you have to buy Part A and sign up late, your premium may rise 10%, for twice the number of years you didn't sign up.

IRMAA: the surcharge on higher incomes

If your income is above a threshold, you pay more for Part B and Part D. This is the Income-Related Monthly Adjustment Amount, or IRMAA.

For 2026, the standard Part B premium applies if your modified adjusted gross income was $109,000 or less (single) or $218,000 or less (married filing jointly). Above that, the 2026 Part B premium steps up through several brackets, from $284.10 to $689.90 a month (CMS).

The detail that matters for FIRE: Social Security generally uses your tax return from two years earlier. For 2026 premiums, that's generally your 2024 return (SSA). The income measure is modified adjusted gross income, which for IRMAA means your adjusted gross income plus tax-exempt interest (same source). So a large Roth conversion, a big capital gain or the sale of a business at 63 can raise your Medicare premiums at 65. If a life-changing event, such as stopping work, reduced your income, you can ask Social Security to use a more recent year with form SSA-44 (SSA).

Three things early retirees often miss

• HSAs and Medicare don't mix. Once you're enrolled in Medicare, you can't contribute to an HSA. If you sign up for Part A more than 6 months after turning 65, or apply for Social Security or Railroad Retirement benefits then (which also starts Part A), Part A coverage can be backdated up to 6 months. So Medicare.gov suggests stopping HSA contributions 6 months before you retire or apply for benefits (Medicare.gov). Money already in the HSA can still be spent; see The HSA as a long-term account.
• Medicare is individual. There are no family plans. If your spouse or partner is younger, they still need their own coverage until they reach 65. See Health insurance before Medicare.
• Leave the marketplace on time. HealthCare.gov says that once you have Part A or Medicare Advantage, you won't qualify for savings on a marketplace plan, and marketplace coverage doesn't end automatically when Medicare starts: you have to end it yourself (HealthCare.gov). Plan the switch, so you don't end up paying back subsidies.

Build it into your plan

Your health costs change when Medicare starts, so compare total premiums and expected out-of-pocket spending before and after 65. Medicare isn't free. A rough Medicare budget includes the Part B premium, a Part D or Advantage premium, a Medigap premium if you choose one, and out-of-pocket costs. Early retirees who plan big taxable events in their early 60s also budget for possible IRMAA.

Next step

Add your expected health costs, before and after 65, to your yearly spending, and see how they change your number.

Work out your FIRE number →

Related: Health insurance before Medicare and The Roth conversion ladder, explained.