It’s not an uncommon thing to have your health insurance coverage tied to your job. So when you leave your job for good to retire, you might also lose your health benefits.

That’s why Medicare is so important for retirees. Without it, the cost of health insurance later in life could be astronomical.

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But it’s important to understand the ins and outs of Medicare well before you retire so you know what to expect. Here are three essential things to keep in mind.

1. When eligibility begins

The earliest age to sign up for Social Security is 62. But Medicare eligibility doesn’t begin for another three years. So if your plan is to retire in your early 60s and collect Social Security right away, you might hit a snag due to not being able to get onto Medicare at the same time.

You should also know that your initial window to sign up for Medicare lasts seven months. It begins three months before the month of your 65th birthday and ends three months after that month. If you sign up a bit after turning 65, you should be eligible for retroactive coverage dating back to your 65th birthday.

2. How penalties and surcharges work

Failing to enroll in Medicare on time won’t just mean potentially going without proper health coverage. It could also mean paying more for Medicare for life.

For each year-long period you’re eligible for coverage but don’t sign up, you risk a 10% surcharge on your Part B premiums. That’s a cost that could add up substantially over time. Penalties can also apply when you’re late enrolling in a Part D drug plan.

You might also face surcharges on Medicare Part B due to being a higher earner. In 2025, single retirees with incomes over $106,000 and couples with incomes over $212,00 face income-related monthly adjustment amounts, or IRMAAs, that drive their Part B costs up. IRMAAs apply to Part D premiums as well.

There are steps you can take to reduce your chances of facing IRMAAs, like withdrawing from retirement accounts strategically. But they’re something to be aware of if you expect to enjoy a fairly generous income in retirement.

3. That coverage may be limited

Medicare might pick up the tab for a good number of healthcare expenses in retirement. But that doesn’t mean you’ll have every need covered.

Many enrollees are surprised to learn that Medicare will not pay for dental cleanings, eye exams, or hearing aids. However, if you opt to get coverage through Medicare Advantage, there’s a good chance your plan will cover these services.

Still, Medicare Advantage has disadvantages. Enrollees in these plans are commonly limited to specific provider networks, which could make it more challenging to get access to care. Plus, Medicare Advantage plans are notorious for requiring pre-authorization, which can delay critical patient care.

There’s a lot to know about Medicare ahead of retirement. Spend some time reading up on the program’s rules, costs, and coverage so you don’t face any unwanted surprises.

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