Medicare is a federally funded health insurance program that helps cover certain medical services once you’re age 65. It may sound simple, but it’s actually a complex program with many parts—and rules—which can vary by state. Consider learning as much as you can about Medicare before you turn 65—it can help you determine the right plan for you. Make sure you sign up during your open-enrollment window to avoid late penalties.

Today, almost 64 million Americans use Medicare. To receive benefits, you must be:

• Age 65 or older and a U.S. citizen for at least five years, 
• Someone with end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS), or
• Fully disabled and receiving disability benefits for at least two years through Social Security.

Know when you’re eligible to enroll 

Your initial Medicare enrollment begins three months before, and ends three months after, the month you turn 65. Delaying your enrollment can result in increased premiums for Parts A, B, and D. You can wait to enroll in Parts B and D without penalty if you still have health insurance through your or your spouse's employer (you should connect with your human resources team and the U.S. Social Security Administration to confirm). If you don't have a Part A premium, which is typical, there's no penalty for delaying enrollment, but there's also no downside to enrolling and receiving coverage at no cost.

Where’s Part C, you may ask? That comes into play when you compare your two primary Medicare options. Your first option is Original Medicare, which offers you more flexibility in piecing together the package that you want, especially when it comes to supplemental coverage. Your second option is Medicare Advantage (or Part C), which gives you a choice of several bundled plans. Both have advantages and disadvantages, depending on where you live, the types of coverage you need, and your finances.

Once you decide which Medicare package makes the most sense for you, you’ll be ready to review the providers in your area, including their monthly premium, out-of-pocket limits, costs for key services, and member ratings. If choosing a Part D provider, ask how much it will cost, which drugs are covered, whether there are any restrictions, and which pharmacies they use.

Note: Medicare doesn’t cover everything. Commonly excluded services include long-term care, most dental care, eye exams related to prescription glasses, and hearing aids. Long-term care coverage may be available through private insurance or Medicaid, if you’re eligible. Visit Medicare’s plan finder to compare your options and review "Medicare & You" for details about the program.

What's the difference between Medicare and Medicaid?

Medicaid provides health coverage to more than 83 million Americans, including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. To receive Medicaid benefits, recipients must meet financial and nonfinancial criteria. The program is funded jointly by states and the federal government, with the states administering the program based on federal guidelines. It's possible to be covered by both Medicare and Medicaid. 

Healthcare costs in retirement

Expect healthcare costs to be a large expense in your retirement budget. You may need over $360,000 in savings at age 65 to cover all the medical expenses you and your spouse will encounter. That’s why it’s important to have health coverage to help protect you.