Medicare and Retirement Planning: What You Need to Know
Healthcare is one of the largest and most unpredictable expenses in retirement. Medicare covers most Americans starting at age 65 — but it does not cover everything, premiums can be significantly higher for higher-income retirees (IRMAA), and the gap between early retirement and age 65 requires a separate strategy. Understanding how Medicare fits into your retirement income plan is essential.
The Four Parts of Medicare
Part A
Covers
Hospital inpatient care, skilled nursing facility, hospice, some home health
Premium
No premium for most people (40+ quarters of Medicare taxes paid)
Key Detail
Deductible: $1,632 per benefit period (2024)
Part B
Covers
Outpatient care, doctor visits, preventive services, durable medical equipment
Premium
$174.70/month standard (2024); higher with IRMAA surcharge
Key Detail
Annual deductible: $240 (2024); 20% coinsurance after deductible
Part C (Medicare Advantage)
Covers
Alternative to Original Medicare — private plans that bundle A, B, and usually D
Premium
Varies by plan; some have $0 premium but may have higher out-of-pocket costs
Key Detail
Network restrictions apply; may require referrals
Part D
Covers
Prescription drug coverage
Premium
Varies by plan; IRMAA surcharge applies at higher incomes
Key Detail
Late enrollment penalty if you go without creditable drug coverage
IRMAA: The Hidden Medicare Surcharge
IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to Medicare Part B and Part D premiums for higher-income beneficiaries. It is based on your Modified Adjusted Gross Income (MAGI) from 2 years prior — meaning your 2024 income determines your 2026 Medicare premiums.
For Southeast Texas retirees taking large IRA withdrawals, Roth conversions, or receiving pension income, IRMAA can add thousands of dollars per year to Medicare costs. A large one-time income event — like selling a rental property or taking a large RMD — can trigger IRMAA for a single year.
| 2024 MAGI (Individual / Married) | Part B Monthly Premium | Part D Surcharge |
|---|---|---|
| Up to $103,000 / $206,000 | $174.70 | Plan premium only |
| $103,001–$129,000 / $206,001–$258,000 | $244.60 | +$12.90 |
| $129,001–$161,000 / $258,001–$322,000 | $349.40 | +$33.30 |
| $161,001–$193,000 / $322,001–$386,000 | $454.20 | +$53.80 |
| $193,001–$500,000 / $386,001–$750,000 | $559.00 | +$74.20 |
| Above $500,000 / $750,000 | $594.00 | +$81.00 |
2024 IRMAA thresholds. Amounts are per person — a married couple both on Medicare pays double. Thresholds are adjusted annually for inflation.
The Healthcare Gap: Retiring Before 65
Many Southeast Texas workers retire in their late 50s or early 60s — before Medicare eligibility at 65. This creates a healthcare gap that must be planned for. Options include:
COBRA Continuation
Continue employer coverage for up to 18 months after leaving your job. Typically expensive — you pay the full premium your employer was paying plus a 2% administrative fee.
ACA Marketplace Plan
Individual health insurance through healthcare.gov. Subsidies are available based on income — managing your income in early retirement can significantly reduce premiums.
Spouse's Employer Plan
If your spouse is still working and has employer coverage, joining their plan is often the most cost-effective option.
Retiree Health Benefits
Some large employers — particularly in the energy sector — offer retiree health benefits. These are increasingly rare but valuable when available.
Medicare Enrollment Timing: Critical Deadlines
Initial Enrollment Period (IEP)
7-month window: 3 months before your 65th birthday month, your birthday month, and 3 months after
Special Enrollment Period (SEP)
8-month window after you lose qualifying employer coverage or stop working. COBRA and retiree coverage do NOT qualify.
General Enrollment Period (GEP)
January 1 – March 31 each year, if you missed your IEP and do not qualify for SEP. Coverage begins July 1. Late enrollment penalty applies permanently.
Medicare Planning for Southeast Texas Retirees
Southeast Texas retirees — particularly those with pension income, significant IRA balances, or rental property — need to plan carefully around IRMAA. A Roth conversion that pushes income over an IRMAA threshold can cost an additional $1,000–$5,000 per year in Medicare premiums for two years.
Richard Placette II coordinates Medicare planning with income planning — modeling the interaction between IRA withdrawals, Roth conversions, Social Security timing, and IRMAA thresholds to minimize total healthcare costs in retirement.
Frequently Asked Questions
When should I enroll in Medicare?
You are eligible at 65. Your Initial Enrollment Period is a 7-month window around your 65th birthday. If you have qualifying employer coverage, you can delay without penalty. Missing the window without qualifying coverage results in a permanent late enrollment penalty on Part B premiums.
What is IRMAA?
IRMAA is a surcharge added to Medicare Part B and Part D premiums for higher-income beneficiaries. It is based on your MAGI from 2 years prior. In 2024, surcharges begin when individual income exceeds $103,000. Managing IRA withdrawals and Roth conversions can help minimize IRMAA.
What does Medicare not cover?
Original Medicare does not cover dental, vision, hearing, long-term care, or most care outside the US. Many retirees add a Medigap (Medicare Supplement) policy to cover out-of-pocket costs, or choose Medicare Advantage which may include some of these benefits.
How much should I budget for healthcare in retirement?
Fidelity estimates the average 65-year-old couple needs approximately $315,000 for healthcare costs in retirement (2023), not including long-term care. This includes Medicare premiums, out-of-pocket costs, and services not covered by Medicare.
Can I delay Medicare if I am still working at 65?
Yes, if you are covered by an employer group health plan through your own active employment (or your spouse's). When you retire or lose that coverage, you have an 8-month Special Enrollment Period. COBRA and retiree health coverage do NOT qualify for this exception.
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Planning for Healthcare Costs in Retirement?
Richard Placette II coordinates Medicare planning with your income strategy — minimizing IRMAA surcharges, managing the healthcare gap, and building a retirement plan that accounts for real healthcare costs. Free consultation.
About the Author: Richard Placette II is a licensed financial advisor with MRB Capital Group in Lumberton, Texas. Verifiable on FINRA BrokerCheck and SEC IAPD. This content is for informational purposes only and does not constitute investment or tax advice.