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Retirement and Medicare: Important planning to start at age 62 or 63

## **Important Disclaimer:** *This information is for educational purposes only and does not constitute marketing of any specific Medicare plan. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options. This material is not affiliated with or endorsed by the federal Medicare program.*

**Medicare and Retirement Planning: What You Need to Know at Age 62 or 63**

**Quick Answer:** If you're 62 or 63, you're in the optimal planning window for Medicare — approximately two years before you become eligible at 65. This window matters because IRMAA surcharges on your Medicare premiums are based on your income from two years prior, meaning the income decisions you make right now directly affect what you'll pay when you first enroll. At 63, you still have time to implement strategies — like Roth conversions, retirement timing, and HSA management — that can save thousands of dollars in future Medicare costs. This guide walks through the most important planning moves to make in the two years before Medicare begins.

If you're 63 years old, you're in the perfect planning window for one of the most important transitions of your life: Medicare eligibility. The next two years offer a crucial opportunity to make strategic decisions that could save you thousands of dollars in healthcare costs and Medicare premiums throughout retirement.

Understanding Medicare's timing, income considerations, and coordination with your retirement planning can help you avoid costly mistakes and maximize your healthcare coverage options.

**Why Age 62–63 Is the Perfect Planning Window**

At 63, you have approximately 24 months before you become eligible for Medicare at age 65. This timing is ideal because:

• You can still make **strategic income decisions** that will directly affect your Medicare premiums
• You have time to **understand Medicare's structure** and plan accordingly
• You can **coordinate Medicare timing** with your retirement and Social Security decisions
• You can implement **income planning strategies** to potentially avoid or reduce IRMAA surcharges
• You have time to **sort out your HSA** before Medicare enrollment stops contributions

**Medicare's Structure: A Quick Overview**

Before diving into planning strategies, it's essential to understand what Medicare covers and how the pieces fit together. Medicare has four core parts plus an important supplement:

**Part A (Hospital Insurance)** Covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Most people receive Part A premium-free if they or their spouse worked and paid Medicare taxes for at least 10 years (40 quarters). The 2026 Part A deductible is **$1,736 per benefit period**.

**Part B (Medical Insurance)** Covers doctor visits, outpatient care, medical equipment, and preventive services. The 2026 Part B premium is **$202.90 per month** for most beneficiaries. Higher earners pay IRMAA surcharges — more on that below.

**Part C (Medicare Advantage)** An alternative way to receive Medicare benefits through a private insurance company. Must include Part A and Part B benefits; most include Part D prescription coverage. Often includes additional benefits like dental, vision, and wellness programs.

**Part D (Prescription Drug Coverage)** Covers prescription medications through standalone plans or included in Medicare Advantage plans. The 2026 Part D out-of-pocket cap is **$2,100** — once you hit that, your plan covers 100% of additional drug costs for the rest of the year.

**Medicare Supplement Insurance (Medigap) — The "Fifth Piece"** While not technically a Medicare part, Medigap policies work alongside Original Medicare (Parts A and B) to fill coverage gaps — copayments, coinsurance, and deductibles that Original Medicare leaves you responsible for. The most popular options for new enrollees are:

• **Plan G:** Comprehensive coverage; after the Part B deductible, nearly all costs are covered
• **Plan N:** Lower premium option with small copayments for office and ER visits

**Key planning point:** Medigap has a **six-month open enrollment period** starting when you turn 65 and enroll in Part B. During this window, you cannot be denied coverage or charged higher premiums due to health conditions. Once it closes, it doesn't reopen — and applying later may mean medical underwriting and potential denial. This is one of the most important deadlines in all of Medicare.

**Important:** You cannot have both Medicare Advantage (Part C) and Medigap — you must choose one path or the other.

For a full comparison of Medicare Advantage vs. Medigap, see our dedicated post on that topic.

**Critical Medicare Enrollment Periods**

**Initial Enrollment Period (IEP)**

Your Initial Enrollment Period is a **7-month window** that:

• Begins 3 months before the month you turn 65
• Includes the month you turn 65
• Extends 3 months after the month you turn 65

**Example:** If you turn 65 in June 2027, your IEP runs from March 1, 2027, through September 30, 2027.

**Late Enrollment Penalties**

Missing your enrollment deadlines can result in **permanent premium penalties**:

• **Part B penalty:** 10% premium increase for each 12-month period you were eligible but didn't enroll — for life
• **Part D penalty:** 1% of the national base beneficiary premium ($38.99 in 2026) multiplied by the number of months without creditable coverage — also permanent

These penalties are not one-time fees. They follow you for as long as you have Medicare coverage. The Part D penalty alone, if you go two years without coverage, adds about $9.40 per month permanently. For a full breakdown, see our dedicated post on the Part D Late Enrollment Penalty.

**IRMAA: The Income Planning Priority at Age 63**

One of the most important aspects of Medicare planning at age 62–63 involves understanding how your income will affect your Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amount).

**The Two-Year Look-Back Rule**

IRMAA is based on your Modified Adjusted Gross Income (MAGI) from **two years prior**. This means:

• Your **2027** Medicare premiums will be based on your **2025** tax return
• Your **2028** Medicare premiums will be based on your **2026** tax return

If you're turning 65 in 2027, the income you earn *right now* — in 2025 — directly determines whether you pay IRMAA in your very first year of Medicare.

**The 2026 IRMAA Thresholds**

Most Medicare beneficiaries pay the standard $202.90 Part B premium with no IRMAA surcharge. IRMAA kicks in for single filers with income above $109,000 and joint filers above $218,000. The surcharges can add $81.20 to $487 per month on top of your standard premium.

For the complete 2026 IRMAA bracket tables with every tier and dollar amount, see our dedicated post: **Understanding IRMAA: What Higher-Income Medicare Beneficiaries Need to Know for 2026.**

**The Cliff Effect — A Critical Planning Warning**

One of the most important things to understand about IRMAA is what happens when your income crosses a bracket threshold by even one dollar. A single filer earning $137,001 pays $1,736 more per year in Part B premiums than one earning $136,999. If both spouses are on Medicare, that cliff costs $3,472. Income management in the years before Medicare begins is genuinely worth the attention.

**Strategic Income Planning Opportunities at 62–63**

This is where the two-year planning window pays off. Here are the key strategies worth discussing with your financial advisor:

**Retirement Timing**

• Consider how your retirement date affects the income years that will determine your first Medicare premiums
• The income from your final working years flows into IRMAA calculations — a partial year of high income can push you into a surcharge tier even if you retire mid-year

**Roth Conversion Strategy**

• The years between retirement and Medicare enrollment can be ideal for Roth conversions, when your income may be lower
• Be careful not to push your MAGI into a higher IRMAA bracket during conversion years — the cliff effect makes precision important
• Roth conversions increase your current taxable income but reduce future Required Minimum Distributions (RMDs), which flow into future MAGI

**Social Security Timing**

• Social Security benefits are included in your MAGI calculation for IRMAA purposes
• Delaying Social Security beyond 65 reduces the income counted toward IRMAA in early Medicare years
• Coordinate Social Security claiming with Medicare enrollment timing carefully

**Capital Gains Management**

• Large capital gains (from selling a property, business, or investment portfolio) can push you into IRMAA territory even if your ordinary income is modest
• Spreading gains across multiple years — where possible — is worth considering in the years before Medicare begins

**Employer Health Insurance Considerations**

If you're still working at 65, you may be able to delay Medicare enrollment without penalty — but the rules depend on your employer's size.

**Large Employer Coverage (20+ Employees)**

• You can delay Medicare Part B enrollment without penalty if you have qualifying employer coverage
• You have a **Special Enrollment Period (SEP)** of 8 months after losing employer coverage to enroll in Part B without penalty
• COBRA does NOT count as qualifying coverage for this purpose — once you leave your employer, you must enroll within 8 months even if you elect COBRA

**Small Employer Coverage (Fewer Than 20 Employees)**

• Medicare becomes the **primary payer** at age 65, regardless of your employer coverage
• You should enroll in Medicare Part B at 65 even if you have employer coverage — failing to do so can leave gaps where neither insurer pays

**The COBRA Trap**

This is one of the most common and costly mistakes people make: COBRA is NOT considered qualifying employer coverage for Medicare purposes. If you leave your job at 65 or later and elect COBRA instead of enrolling in Medicare, you've started a clock — you have 8 months from your employer coverage ending to enroll in Part B without penalty. If you miss it, you wait for the General Enrollment Period (January–March) with coverage starting July 1 — and a permanent penalty added.

**Health Savings Accounts (HSAs) and Medicare: A Critical Interaction**

This is the planning issue that catches the most people off guard at 62–63, so read this carefully.

**You cannot contribute to an HSA once you enroll in any part of Medicare** — including Part A. This means:

• If you enroll in Part A at 65 (even if you delay Part B), your HSA contributions must stop
• If you delay Medicare past 65 because you have employer coverage, you can keep contributing to your HSA — but you must stop contributing at least 6 months before you plan to enroll, because Part A can be retroactive up to 6 months

**The 6-month HSA lookback trap:** When you enroll in Part A after 65, Medicare can make your Part A coverage retroactive for up to 6 months. If you contributed to your HSA during those retroactive months, those contributions become excess contributions — subject to taxes and a 6% penalty. This catches many people completely off guard.

**What to do with HSA funds you've already accumulated:**

• Before Medicare enrollment: use HSA funds for any qualified medical expenses
• After age 65: HSA funds can be used for any purpose (including non-medical), but non-medical withdrawals are subject to ordinary income tax (no longer the 20% penalty that applies before 65)
• Medicare premiums — including Part B, Part D, and Medicare Advantage premiums — are qualified HSA expenses after 65

For a deeper dive into the HSA + Medicare interaction, see our dedicated post on Medicare and Your HSA.

**Retiree Health Benefits**

If your employer offers retiree health benefits:

• Review how your retiree coverage **coordinates with Medicare** — most retiree plans become secondary to Medicare at 65
• Some retiree plans **require Medicare enrollment** to maintain coverage
• Understand whether your retiree plan counts as **creditable drug coverage** for Part D purposes — if not, you'll need a standalone Part D plan to avoid the late enrollment penalty

**Action Plan for 62–63 Year Olds**

**Right Now:**

• Review your **projected retirement income** from all sources
• Estimate your **MAGI** for the years that will affect your Medicare premiums (the two-year look-back)
• Evaluate your **current employer health coverage** and understand your options
• Consider **income planning strategies** with your financial advisor — Roth conversions, capital gains timing, retirement date

**12–18 Months Before Age 65:**

• Attend Medicare education sessions or workshops
• Research Medicare plan options in your area using Medicare.gov's Plan Finder
• Understand Medigap insurance and your 6-month open enrollment window timing
• Create a **healthcare budget** that includes premiums, deductibles, and out-of-pocket costs
• Begin winding down HSA contributions if you plan to enroll in Medicare at 65

**3–6 Months Before Age 65:**

• Enroll in Medicare during your Initial Enrollment Period
• Choose between Original Medicare and Medicare Advantage
• Select a Part D prescription drug plan if choosing Original Medicare
• Consider Medigap insurance during your open enrollment window
• Stop HSA contributions before Part A begins

**Common Planning Mistakes to Avoid**

**Frequently Asked Questions**

**Why does Medicare planning start at age 62 or 63?**

Because IRMAA surcharges — which can add $81 to $487 per month to your Medicare premiums — are based on your income from two years prior. At 63, the income years that will determine your first Medicare premiums are happening right now. Strategic decisions about retirement timing, Roth conversions, and capital gains in your early 60s directly affect what you pay at 65. That's the planning window.

**Can I delay Medicare if I'm still working at 65?**

Yes — but only if you have qualifying employer coverage from an employer with 20 or more employees. In that case, you can delay Part B without penalty and use your employer coverage as primary. You have 8 months after losing that coverage to enroll in Part B without penalty. COBRA does not count as qualifying coverage for this purpose.

**How does Medicare affect my HSA?**

You cannot contribute to an HSA once you enroll in any part of Medicare, including Part A. Additionally, when you enroll in Part A after age 65, coverage can be retroactive up to 6 months — meaning HSA contributions made in those months become excess contributions subject to taxes and a 6% penalty. Stop contributing at least 6 months before you plan to enroll. See our dedicated HSA + Medicare post for full details.

**What is the Part A deductible in 2026?**

The Medicare Part A inpatient hospital deductible is $1,736 per benefit period in 2026. Note that this is per benefit period, not per year — if you have multiple hospitalizations in separate benefit periods, the deductible applies each time.

**What's the difference between Medicare Advantage and Medigap, and which should I choose at 65?**

Medicare Advantage bundles your coverage through a private insurer with networks, lower premiums, and often extra benefits. Medigap supplements Original Medicare with more predictable costs and no network restrictions. The right choice depends on your health, your doctors, your budget, and whether you travel or spend time in multiple states. For a full comparison, see our dedicated Medicare Advantage vs. Medigap post.

**What happens if I miss my Initial Enrollment Period?**

If you miss your IEP without qualifying employer coverage, you wait for the General Enrollment Period (January 1–March 31 each year), with coverage starting July 1. More importantly, you'll face a permanent late enrollment penalty — 10% added to your Part B premium for every 12-month period you were eligible but didn't enroll. That penalty never goes away. Missing the IEP is one of the most costly Medicare mistakes a new beneficiary can make.

**The Bottom Line on Medicare Planning at 62–63**

Medicare will likely be your primary health insurance for the rest of your life. The planning decisions you make at age 62–63 — the income you manage, the HSA contributions you wind down, the enrollment windows you protect — can have lasting financial impacts measured in thousands of dollars per year.

The good news: at 62 or 63, you still have time. Use these two years wisely to:

• **Understand your Medicare options** so you can choose the right path at 65
• **Plan your income** to minimize IRMAA surcharges in your first years on Medicare
• **Coordinate your HSA** so you don't trigger penalties or lose contribution years unnecessarily
• **Protect your enrollment windows** — especially the IEP and the Medigap open enrollment period
• **Avoid the COBRA trap** and the small-employer rule surprises

Medicare planning isn't just about healthcare — it's about preserving your financial security throughout retirement.

**Need Additional Help?**

For official Medicare information and planning assistance:

• Visit **Medicare.gov** for comprehensive Medicare information and the Plan Finder tool
• Call **1-800-MEDICARE** for personalized assistance
• Contact your local **State Health Insurance Program (SHIP)** for free, unbiased counseling
• Review the **Medicare & You handbook** sent annually to all beneficiaries
• Speak with a **licensed insurance professional** familiar with Medicare planning

**Required Compliance Disclaimers:**

*For agent use only. Not affiliated with the U.S. federal government or federal Medicare program. This information is provided for educational purposes only and does not constitute marketing of any specific Medicare plan.*

*For official Medicare information, please visit Medicare.gov or call 1-800-MEDICARE. You can also contact your local State Health Insurance Program (SHIP) for personalized assistance.*

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