Leaving Your Job After 65? Avoid These Medicare Penalties
Retiring after 65 in Colorado gives you a special window to start Medicare without penalties, but the clock starts when your job or work coverage ends. Here is the timeline, the penalties and the mistakes to avoid.
Key takeaways
- If you had health coverage from your own or your spouse's current job, you get a Special Enrollment Period of 8 months to start Part B after the job or the coverage ends, whichever comes first.
- COBRA does not count as job-based coverage for Part B and does not extend that 8-month window (Medicare.gov).
- Missing the window can mean a Part B penalty of 10% for each full year late: in 2026 that is $20.30 more a month for one year late, for as long as you have Part B.
- Your one-time Medigap Open Enrollment starts the first month you have Part B and are 65 or older, so time Part B on purpose.
- Stop HSA contributions about 6 months before you apply for Medicare or Social Security, because Part A can be backdated up to 6 months.
If you are working past 65 in Brighton, Thornton or anywhere in Colorado and you have health insurance through your job, you can usually wait to start Medicare Part B without a penalty. The catch is what happens when the job ends. That is when a clock starts, and it is shorter and stricter than most people expect.
We meet people every year who did almost everything right: they kept their work coverage, they signed up for Part A, and then they took COBRA after retiring and assumed that kept them safe. It did not. A few months later they found a gap in coverage, a lifetime penalty, or both.
This guide lays out the timeline step by step, shows the 2026 penalty figures from Medicare's own rules, and covers the pieces people forget: Part D, Medigap timing and the HSA. Lisa takes a commonsense approach: ask questions, listen, then plan the dates together.
Can I delay Medicare if I am still working at 65?
Yes, if you have group health coverage based on current employment, your own or your spouse's. While that coverage lasts, you can delay Part B without a late penalty. Many people still take premium-free Part A at 65, but that choice affects HSA contributions, so check that first (see below).
Retiree coverage and COBRA are not coverage from current employment. They do not protect you from the Part B penalty, even though they may feel like the same plan you had at work.
How long do I have after my job ends?
You have 8 months to sign up for Part B, starting the month after the job or the group coverage ends, whichever happens first. To join a Medicare Advantage or Part D plan, the window is shorter: 2 full months after the month your employer coverage ends.
| Step | Window | What happens if you miss it |
|---|---|---|
| Sign up for Part B | 8 months after the job or group coverage ends, whichever is first | Part B penalty of 10% per full 12 months late, plus waiting for the General Enrollment Period |
| Join a Medicare Advantage or Part D plan | 2 full months after the month employer coverage ends | You may have to wait for Annual Enrollment, Oct 15 to Dec 7 |
| Keep creditable drug coverage | No gap of 63 days or more | Part D penalty of 1% of the national base premium per month without coverage |
| Buy a Medigap policy | 6 months starting the month Part B begins (age 65 or older) | Medical underwriting may apply later |
The simplest plan for most people: start Part B so it begins the day after your work coverage ends, and pick your Part D, Medicare Advantage or Medigap coverage to start the same day. No gap, no penalty, no surprise bills.
Why does COBRA cause problems with Medicare?
Because Medicare.gov says COBRA is not group health plan coverage for this rule, and getting COBRA does not change when your Part B Special Enrollment Period ends. If you take 18 months of COBRA and then sign up for Part B, you have already missed the 8-month window.
What COBRA does
- Keeps your old work plan for a limited time
- Can be useful for a spouse who is not yet 65
- You usually pay the full premium plus an administrative fee
What COBRA does not do
- It does not extend the 8-month Part B window
- It does not stop the Part B penalty from building
- It may pay little once you are eligible for Medicare, because Medicare is often expected to pay first
COBRA drug coverage can count as creditable for Part D if the plan says so in its creditable coverage notice. Keep that notice. It is your proof if Medicare ever asks.
What do the 2026 penalties cost?
The Part B penalty adds 10% of the standard premium for each full 12 months you could have had Part B and did not. In 2026 the standard premium is $202.90, so one year late adds $20.30 a month, and you pay it for as long as you have Part B.
Source: Calculated from the 2026 standard Part B premium (CMS) and the 10% per year rule (Medicare.gov), rounded to the nearest ten cents.
The Part D penalty works differently. If you go 63 days or more without Part D or other creditable drug coverage, the penalty is 1% of the national base beneficiary premium ($38.99 in 2026) for each full month without coverage. Twelve months without coverage adds $4.70 a month in 2026, and 24 months adds $9.40. The base premium can change each year, so the dollar amount can change too.
When should I buy a Medigap policy?
Buy it during your Medigap Open Enrollment Period: the 6 months that start the first month you have Part B and are 65 or older. During those months an insurer cannot refuse to sell you any Medigap policy it offers or charge more because of your health.
Medicare.gov notes that this window starts once you sign up for Part B, even if you still have employer coverage. That is why we usually suggest waiting to start Part B until your work coverage is ending, if your employer plan pays first. Starting Part B early can use up the Medigap window before you need it.
What should I do in the 3 months before I retire?
- Get it in writing. Ask your employer for the date your group coverage ends and for a completed CMS-L564 (Request for Employment Information) form, which proves you had job-based coverage.
- Find your drug coverage notice. Your employer plan sends a yearly creditable coverage notice for Part D. Keep it.
- Stop HSA contributions. Medicare.gov says to stop contributing about 6 months before you apply for Medicare or Social Security, because premium-free Part A can be backdated up to 6 months, but no earlier than the month you first became eligible.
- Apply for Part B through Social Security with form CMS-40B and the CMS-L564, timed so Part B starts the day after work coverage ends.
- Choose your coverage: Medicare Advantage, or Original Medicare with a Medigap policy and a Part D plan. Line up the start date with Part B.
- Plan for a younger spouse. A spouse under 65 may need COBRA or an individual plan through Connect for Health Colorado. People who have Medicare cannot use Connect for Health Colorado for themselves.
For a free, no-obligation review of your own situation, call Lisa at (303) 887-8584. Medicare.gov and 1-800-MEDICARE can also answer questions about your Medicare record.
The bottom line
Retiring after 65 is simple if you set the dates on purpose: Part B starts the day after work coverage ends, drug coverage has no 63-day gap, your Medigap window opens when you need it, and HSA contributions stop 6 months early. Miss the 8-month window and the penalty is real: $20.30 a month for one year late in 2026, for life.
Frequently asked questions
How long do I have to sign up for Part B after I stop working?
8 months after your job or your group health coverage ends, whichever happens first. COBRA does not extend that window.
Does COBRA count as creditable coverage for Medicare?
Not for Part B. Medicare.gov says COBRA is not group health plan coverage for the Part B Special Enrollment Period. COBRA drug coverage can count as creditable for Part D if the plan's notice says so.
What is the Part B penalty in 2026?
10% of the standard premium for each full 12 months you were late. With the 2026 premium of $202.90, one year late means $223.20 a month instead, for as long as you have Part B.
When should I stop contributing to my HSA before Medicare?
Medicare.gov advises stopping about 6 months before you apply for Medicare or Social Security, because premium-free Part A can start up to 6 months before your application date, but no earlier than the month you first became eligible.
Sources
- Medicare.gov: When does Medicare coverage start? Centers for Medicare & Medicaid Services
- Medicare.gov: Special Enrollment Periods Centers for Medicare & Medicaid Services
- Medicare.gov: Avoid late enrollment penalties Centers for Medicare & Medicaid Services
- 2026 Medicare Parts A & B Premiums and Deductibles Centers for Medicare & Medicaid Services
- Medicare.gov: When can I buy a Medigap policy? Centers for Medicare & Medicaid Services
- Medicare.gov: Working past 65 Centers for Medicare & Medicaid Services
Please note: We do not offer every plan available in your area. Currently we represent 10 organizations which offer 106 products in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.Headwaters Health and Wealth is not connected with or endorsed by the United States government or the federal Medicare program. Medicare has neither endorsed nor reviewed this information. This article is general information, not medical, tax or legal advice.
