Enrolling in Medicare is only part of a holistic retirement healthcare plan.  While Medicare covers a lot, retirees still face out-of-pocket expenses, rising premiums, and changes to coverage rules.  Individuals preparing to enroll can protect their income and lifestyle by learning about their options and preparing for unexpected healthcare costs. This guide reviews three important topics: when to enroll, coverage options, and some ways to fund the expenses Medicare doesn’t cover.

When to Enroll

When it comes to healthcare in retirement, timing is of the essence.  Eligibility for Medicare begins three months before an individual’s 65th birthday and lasts seven months. Those who miss that window without qualifying for a Special Enrollment Period (SEP) due to employer coverage will pay a late enrollment penalty on their Part B premium for the duration of their Medicare enrollment. That penalty is 10% for each 12 months of delayed eligible enrollment.  Planning enrollment around work and spousal coverage can avoid expensive penalties and gaps in care.

Premium and Coverage Costs

Medicare is not free.  Part A, which covers inpatient hospital stays, hospice care, limited home health care, and skilled nursing facility care, is premium-free for most individuals (those who have worked and paid into Medicare for 10 years). Still, it includes hospital deductibles ($1,676 per benefit period in 2025) and coinsurance.

All other parts of Medicare (B, C, and D) require monthly premiums. The standard monthly Medicare Part B premium (required for all Medicare enrollees) increased to $185 in 2025, with a deductible of $257.  For higher-income retirees, Income-Related Monthly Adjustment Amounts (IRMAA) apply, adding $74 to $443.90 per month depending on income level.

Part C (Medicare Advantage) remains relatively affordable, with average premiums around $17, and roughly 60% of enrollees pay $0. However, out-of-pocket maximums have risen—up to $9,350 for in-network care in 2025, with combined in- and out-of-network limits hitting $14,000.

There are a couple of paths to comprehensive coverage (with the understanding that some out-of-pocket expenses are inevitable.

• Original Medicare + Medigap + Part D: This path offers broad provider choice and caps unexpected costs through Medigap plans (six-month enrollment window after Medicare Plan B enrollment beginning at age 65).  While premiums are higher, there are fewer unexpected patient costs.
• Medicare Advantage (MA):  This option carries lower premiums and bundled benefits but limits provider access and is at higher risk of out-of-pocket exposure.

Weighing the predictable costs against the flexibility of each option can help individuals select their path.

Long-Term Financial Implications of Medicare and Out-of-Pocket Costs

Preparing for the monthly and annual costs of Medicare is only part of the pie.  Even with comprehensive coverage, many expenses remain uncovered, including dental, vision, hearing aids, long-term care, and certain prescriptions.

A 65-year-old retiring today will need approximately $172,500 in after-tax savings ($6,900 annually over 25 years) to cover lifetime health expenses that Medicare does not cover, according to a 2025 Fidelity estimate.  That figure excludes long-term care, which 70% of Americans will require at some point and can cost between $75,000 and $127,750 annually, depending on services. Also, a single major episode or a chronic condition (60% of Americans have at least one chronic illness) can double or triple expected out-of-pocket spending.

Here are strategies that can help bridge these gaps:

Maximize HSAs Before Enrollment

For those with a high-deductible plan who are still working, contributing to a Health Savings Account can offer triple tax benefits: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

Plan for IRMAA Impacts

High-income retirees can trigger IRMAA surcharges through withdrawals from tax-deferred accounts. Strategic use of Roth IRAs can help manage Medicare premiums in retirement.

Evaluate Long-term Care (LTC) Coverage

Consider LTC insurance or hybrid life insurance with LTC riders to protect assets from significant care expenses later in life.

A robust financial plan considers all potential out-of-pocket expenses over time, including long-term care. Pre-retirees should work with a financial advisor to plan for these costs, secure supplemental coverage, and employ strategic tools like health savings accounts (HSAs) and long-term care (LTC) insurance.

Policy Changes and Their Impact on Medicare Costs

The One Big Beautiful Bill Act (OBBBA) of 2025 reshaped several healthcare programs, including Medicare.  One notable change is the $2,000 annual cap on out-of-pocket prescription and drug costs under Medicare Part D, which phases in starting in 2025 and takes full effect in 2026. While this reduces long-term exposure, Part D premiums are projected to increase by 8%–12% as insurers adjust pricing.

The Act also expanded income thresholds for Medicare Savings Programs, enabling more middle-income retirees to receive partial help with Part B premiums. These are just two of many adjustments that underscore how Medicare rules and costs evolve year to year.  Learning about new legislative guidelines and working with a financial advisor to enhance retirement plan flexibility can help new and existing enrollees navigate the changing Medicare landscape.

Medicare is a foundation, not a full solution.  Decisions surrounding enrollment timing, coverage, and how to fund the costs Medicare doesn’t cover can determine your retirement security.  Our SHP Financial advisors help clients integrate Medicare decisions into a comprehensive retirement strategy. Contact us today to schedule a personalized review and learn how we can align your healthcare planning with your long-term financial goals.

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