You are not required to enroll on Medicare at 65, but in most cases, it is important that you do so to avoid penalties or delays in coverage down the road.
Individuals who are going to continue to work past 65 and have an employer group insurance plan are able to delay their Medicare without a penalty while that coverage remains in place. The key here is that the group coverage plan has to be through active employment (either yours or your spouse’s) and the employer must have at least 20 employees.
If your scenario meets the above, then you can absolutely delay Medicare Part B and enroll whenever that employer coverage ends (probably at retirement) using an SEP or “special election period”. This SEP would allow you to start your Medicare without any delays or penalties once your employer coverage terminates.
If you have health insurance through a company with fewer than 20 employees, you generally should sign up for Medicare at 65 to avoid penalties down the road. This is regardless of whether you stay on the employer plan. If you choose to remain on it, Medicare would be your primary insurance.
Additionally, anyone who gets insurance through the public health exchange – either healthcare.gov or a state marketplace – is expected to switch to Medicare at age 65.
If your scenario does not meet the description above, then you will need to enroll in Medicare A & B when you turn 65 to avoid any delays or penalties to your coverage. You have a 7-month window consisting of the three months leading up to your birth month, the month of, and three months after your birth month. This window is called your “initial enrollment period” or IEP. During this time, you will enroll into Medicare A & B to start the first of the month of your birthday.
For those that choose not to enroll when first eligible, and do not qualify for delay without a penalty, there will be both a restricted enrollment period and a penalty going forward. At which point they do decide to enroll in Medicare they will have to do it under the “general enrollment period” or GEP Jan 1 – Mar 31. Any GEP enrollment will not take effect until July 1 of that year. In addition to waiting for the enrollment period and start date, there will also be a 10% penalty. This penalty is in the form of an increase in your monthly premium by 10% for each year you fail to enroll.
Though you don’t need to enroll in Medicare at age 65 if you have coverage through a qualified group health plan, doing so might make sense if that plan isn’t heavily subsidized by your employer. Figure out what you’re paying for group health coverage and what your benefits look like under that plan, and then compare it to what you’ll pay under Medicare, taking into account the cost of everything from premiums to coinsurance to deductibles to copays.
Keep in mind that for comprehensive coverage under Medicare, you’ll need a Part D drug plan to accompany Parts A and B. Still, you might find that signing up for Medicare at 65 makes the most sense financially, even if you’re entitled to a special enrollment period later on.
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