Retirement looks a lot different than it did a generation ago. Your parents’ idea of retirement might have included travel, new hobbies, spending time with grandkids, and possibly moving to a new community or senior housing.

Today, it’s more difficult for retirees to live this way. What used to be the retirement years, especially the earlier end of them, can look a lot like middle age. A new study from Merrill Lynch and Age Wave found that 72% of workers over the age of 50 prefer to continue working well past the traditional retirement age of 65. In fact, 47% of those past retirement age are still in the workforce.

If you plan to continue working past 65, you have a potentially complicated situation to consider: healthcare.

When you turn 65, you become eligible for Medicare. If you currently have health insurance through a past or present employer – or through your spouse, if you're married – how do you make the policies work together? First, you have to know how Medicare operates.

The Nuts and Bolts of Medicare

Medicare has four parts.Some are mandatory and others are optional, depending on your other healthcare coverage.

Part A. This segment covers hospital care. Also included are nursing care facilities and in-home hospice care. Most people receive Part A coverage free of charge at age 65.

Part B. Covers medical procedures and equipment, including doctor visits, surgery and preventative care. You may have to pay a monthly premium for Part B coverage. If you're enrolled in Medicare Part A, you're required to enroll in Part B if you don’t have “credible coverage” from another source – an employer or spouse, for example.

Part C. Also known as Medicare Advantage, Part C normally combines Parts A, B, and D into a program resembling an HMO. Private insurance companies administer Medicare Advantage.

Part D. This pays for prescription drugs and is also administered by private insurance companies.

(For an in-depth explanation of the four parts of Medicare, read Medicare 101: Do You Need All 4 Parts?)

Medicare Has Gaps

Traditional Medicare – defined as Parts A, B and D – has gaps in coverage. Part A has a $1,216 deductible, and Part B requires you to pay 20% of all expenses regardless of the total bill. Part D has the notorious "doughnut hole," which interrupts how drugs are paid for under Part D. You might reach a point when you have to pay as much as 72% of your prescription drug costs.

This all can add up to a sizable bill if you have a particularly bad health year. Because of these gaps, most people purchase additional insurance. There are two options: Medicare Supplement Insurance, also known as Medigap, is one choice. The other option to fill the gaps is a Medicare Advantage plan (Medicare Part C).

(For an in-depth explanation of Medigap and Medicare Advantage, read our article Medigap Vs. Medicare Advantage: Which Is Better?)

Should I Rely on Medicare or My Employer-Sponsored Plan?

Everybody over the age of 65 has to have health insurance – either through Medicare, a spouse or employer-sponsored coverage. Whether to stay with your employee plan or transition to a Medigap or Medicare Advantage plan is a matter of comparison. Compare deductibles, the maximum you would have to pay out of pocket and other plan features. Which plan gives you the best coverage for the best price?

It’s not just about the premiums. If your current doctors don't take Medicare, and you want to stay with them, stay with your employer-sponsored plan as long as they allow it.

Should you decide to stay with your employer plan, even if you are enrolled in Medicare, Part A, check with Medicare to see if you can delay enrolling in Part B. You may be able to hold off on paying Part B premiums because you are covered by employer-sponsored health insurance.

If you are married, check how this will affect your spouse. If you give up your employer-sponsored coverage, you and your spouse will have to pay for separate Medicare policies. If your spouse is under 65, he or she will have to find private coverage.

Finally, once you reach the age of 65, your employer or its insurance company may require you to file for Medicare. Check with your employer and/or insurer prior to turning 65 to see if your coverage will change.

Step by Step

Here’s how you might go about comparing plans:

Step 1: Talk to your employer to see if your current insurance will change at age 65.

Step 2: Gather all documents pertaining to your employer-sponsored insurance.

Step 3: Find a comparable Medicare plan – either traditional Medicare A, B, D plus Medigap, or a Medicare Advantage plan.

Step 4: Figure out which plan is a better value by comparing prices and benefits.

Step 5: Consider other factors, such as spousal insurance, whether you'd have to change your doctors, etc.

Step 6: Get a second opinion from a trusted insurance agent or consultant.

Who Pays First?

Harriet Hoffman, an independent consultant in New York City and owner of Make the Right Choice: Your Medicare & Social Security Benefits, explains that if more than 20 employees work for a company, the group health plan pays first. Medicare serves as a secondary policy and may pay all or a portion of the remaining expenses.

For companies with fewer than 20 employees, Medicare is probably the primary insurer, which means you may want to switch doctors if yours don't take Medicare.

Talk to your employer to see who the primary insurer is in your case. For more detailed information about who pays first, consult “Your Guide to Who Pays First” at

Is Medicare as Bad as People Believe?

According to Hoffman, not at all. "Medicare is the reason why people over 65 are less likely to live in poverty than any other age group." She says that doctors, especially in larger population areas, aren't ditching Medicare patients any faster than they are dropping traditional insurance plans, and Medicare networks can easily be as large or larger than those of some private insurers' networks.

According to Joseph Graves, insurance agent and founder of the firm I Hate Buying Insurance, Medicare is a seamless, national network that may give patients access to some specialty hospitals that private insurance does not.

The Bottom Line

The older you get, the higher your chances of having medical issues. If you opt for Medicare instead of your employer plan – or work in a small company where Medicare becomes your primary insurer – be sure to fill in the gaps. Compare one of the Medicare Advantage or Medigap policies to your company-sponsored insurance plan to see which is the best deal for you.

“If the employee is having to pay a large share of their company insurance premium or has a large deductible, Medicare could be a less expensive option,” says Hoffman. “Otherwise, the employee would usually be better off remaining on the company plan and deferring enrollment in Part B until they leave the employer.”

Ask your insurance agent or independent consultant to help you compare and make the right choice based on your specific needs.

Related Articles
  1. Retirement

    Five Distinct Features of Medicare Advantage

    Should seniors opt for the flexibility of Medicare or the often broader coverage or lower cost of Medicare Advantage programs through a private insurer? Consider the following.
  2. Insurance

    Buying Private Health Insurance

    Getting your own policy isn't easy or cheap but in some cases, it's well worth the effort.
  3. Budgeting

    Getting The Most From Your Health Insurance Policy

    Don't get stuck with high out-of-pocket costs. Read on to see how you can save your money.
  4. Insurance

    What Health Insurance Covers

    It's rare to have a health insurance plan that covers all the bases, so make sure you know where you're protected and when you will have to pay.
  5. Insurance

    How To Assess A Group Health Insurance Plan

    Not all group healthcare plans will match up with your needs. Comparing coverage and costs will help you determine what you need and how much it should cost you.
  6. Options & Futures

    Getting Through The Medicare Part D Maze

    Having trouble sorting through your prescription drug coverage options? We offer some solutions to the confusing process of selecting the right Medicare Part D coverage for you.
  7. Insurance

    What Does Medicare Cover?

    Don't assume you're insured. Find out what you can expect from this healthcare program.
  8. Insurance

    Explaining Indemnity Insurance

    Indemnity insurance is an insurance policy that protects business owners and employees from losses due to failure to deliver expected services.
  9. Retirement

    Find an Affordable Timeshare on a Retiree's Budget

    Vacations can be expensive, especially on a fixed income. These tips will help you buy a share in a getaway property that's not too pricey.
  10. Retirement

    What to Do When Your Doctor Doesn't Take Medicare

    Stay and pay the full fee? Cut and run to another provider? Five ways to cope when Medicare threatens to break up you and your medico.
  1. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  2. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  3. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  4. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  5. Are Cafeteria plans exempt from Social Security?

    Typically, qualified benefits offered through cafeteria plans are exempt from Social Security taxes. However, certain types ... Read Full Answer >>
  6. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!