Financial Basics · Healthcare

Medicare

Definition

Medicare is the federal health insurance program for Americans 65+. It has four parts: A (hospital), B (doctors/outpatient), C (Medicare Advantage private plans), and D (prescription drugs).

Why it matters in retirement

Medicare covers about 80% of most medical costs in retirement — but the remaining 20% can be unlimited without supplemental coverage. Understanding the parts, enrollment windows, and IRMAA surcharges is one of the highest-value decisions a pre-retiree can get right.

Key Numbers — 2026

Part A premium
$0 (most people)
Part B premium (2026)
$185.00/mo
Part B deductible
$257
Initial enrollment window
7 months

Pros

  • Universal 65+ coverage
  • No medical underwriting at initial enrollment
  • Low Part A cost for most
  • Guaranteed renewable

Cons

  • No out-of-pocket max (Original Medicare)
  • Doesn't cover dental/vision/hearing/LTC
  • IRMAA surcharges at higher incomes
  • Enrollment windows have harsh penalties

Common mistakes

  • Missing the initial enrollment window (lifelong Part B penalty)
  • Ignoring Part D (lifelong penalty, 1% per month delayed)
  • Assuming Medicare covers long-term care (it does not)
  • Not understanding IRMAA's 2-year lookback on income

Related

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