How to Avoid Medicare Late Enrollment Penalties Forever

Turning 65 is a major milestone, but it often comes with a mountain of paperwork and confusing jargon. Among the most stressful aspects of Medicare are the hidden 'late enrollment penalties' that can catch retirees off guard.

Fortunately, these costs are entirely avoidable if you know the rules. In this article, we’ll break down exactly what these penalties are and how you can protect your retirement budget from unnecessary lifelong fees.

Whether you're still working or plan to retire this year, understanding the 2026 penalty structures for Parts A, B and D is essential for your financial health.

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Here's what you need to know to stay penalty-free.

How to avoid the penalties

The best defense is a good timeline. By either enrolling when you first become eligible during your initial enrollment period (IEP) or confirming you have credible coverage from an employer group health plan, you will avoid all late penalties.

The IEP is a 7-month window centered around the month you turn 65. It includes: the 3 months before the month you turn 65, the month you turn 65 and the 3 months after the month you turn 65.

If you claimed Social Security benefits before age 65, you will be enrolled in Parts A and B automatically.

Here are the three main ways to avoid extra costs:

• Enroll during your Initial Enrollment Period (IEP): This is the 7-month window around your 65th birthday (3 months before, your birth month, and 3 months after).
• Have "Creditable Coverage": If you're still working and have health insurance through an employer (yours or your spouse's), you can often delay Part B and Part D without penalty. 
• Use a Special Enrollment Period (SEP): If you are still working, you have an eight-month window to sign up for Part B and a 63-day window for Part D after your employer coverage ends.

What counts as creditable coverage?

Not all employer-provided health care is considered creditable coverage. However, what qualifies as creditable coverage is straightforward. To avoid penalties while working past 65 due to having "creditable coverage" in 2026, your policy must be:

1. Group health insurance from an employer with 20 or more employees.

2. A plan that includes drug coverage that is expected to pay at least as much as Medicare’s standard Part D plan.

Notice of Creditable Coverage. Employers and unions that provide prescription drug coverage to Medicare-eligible employees must notify these employees as to whether the drug coverage they have is creditable or noncreditable.

If you're notified that your coverage will be "noncreditable," you need to start shopping for a Part D plan and enroll before you're liable for penalties.

Note: COBRA and retiree health plans are not considered creditable coverage for Part B, because you're no longer employed and/or covered by an employer-provided policy.

Read The 7-Month Deadline That Determines Your Lifetime Medicare Premiums to learn about enrolling in Medicare for the first time and the role/impact of employer-provided health care in greater detail.

Medicare Part A penalty: An extra 10% monthly

While most people get Part A for free, those who have to buy it face a 10% penalty if they sign up late.

• The penalty: An extra 10% added to your monthly premium.
• Duration: Unlike Parts B and D, this one isn't for life. You pay it for twice the number of years you were late. In other words, you must pay this for twice the number of years you were eligible but didn't sign up. For example, if you enrolled one year late, you pay the penalty for two years.
• 2026 costs: For those who don't qualify for premium-free Part A, the full premium is $565 per month. The penalty would add about $56.50 to that monthly bill.

Medicare Part B penalty: A lifetime surcharge

This is the "expensive" penalty because for most people, it never goes away.

• The penalty: An extra 10% for each full 12-month period you could have had Part B but didn't.
• Duration: Permanent. You pay this for as long as you have Medicare Part B.
• 2026 costs: The standard premium in 2026 is $202.90/month. If you wait two years to sign up, your penalty would be 20%, adding $40.60 to your monthly premium forever.

Part D: A 'ghost' penalty

Even if you don't take any medications now, Medicare requires you to have "creditable" drug coverage. The Part D penalty is harder to estimate because it's calculated using a "National Base Beneficiary Premium," which changes yearly. This is because Part D premiums vary by insurer and the extent of coverage. It would be too onerous to calculate penalties individually.

• The penalty: 1% of the "national base beneficiary premium" for every month you went without coverage.
• Duration: Permanent. You pay this for as long as you have Medicare Part D.
• 2026 costs: The base premium for 2026 is $38.99. If you went 24 months without coverage, your penalty would be 24% of that base ($38.99 times 0.24 equals $9.40 extra per month).

Set a reminder, save forever

While the threat of permanent penalties sounds intimidating, they're easily avoided with a bit of organization. The bottom line? Medicare rewards those who plan ahead.

As long as you have creditable coverage or sign up when you first become eligible during your IEP, these extra costs will never touch your bank account. Don't leave your retirement savings to chance — mark your calendar today and consult with a Medicare specialist if you’re unsure about your status.

Related Content

• Turning 65 in 2026? Here Is Exactly How to Sign Up for Medicare
• The 7-Month Deadline That Determines Your Lifetime Medicare Premiums
• What You Will Pay for Medicare in 2026
• Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D