Is it a good idea to get Medicare if you’re still working at 65?

If you’re 65 or older, still working and are covered by employer health insurance, it can make sense to sign up for Medicare now. Enrollment might reduce your out-of-pocket costs.

Millions find themselves in this situation. The proportion of Americans ages 65 to 74 who are working is projected to reach 30.2% in 2026, according to the Bureau of Labor Statistics.

But Medicare is complicated, and there are a lot of caveats and some surprise expenses to be avoided. So for working people 65 or older, here’s help with figuring out when to enroll in Medicare and how to avoid costly late-enrollment penalties and gaps in coverage.

A note for married couples where one spouse is covered by the other’s employer insurance: The information provided here also applies to you when you turn 65.

The cost equation: Will Medicare save you money?

If your employer (or your spouse’s employer) requires you to pay a large portion of the premium on your group health insurance, you may find Medicare cheaper and the coverage adequate. So compare your current coverage and out-of-pocket expenses — including premiums, deductibles, copays and coinsurance — with your costs and benefits under Medicare, which may also pay some expenses not covered by your group plan.

Medicare Part A: If it’s free, why not take it?

If by the time you reach 65 you’ve worked a total of approximately 10 years over your career, you’re entitled to premium-free Medicare Part A, which pays for inpatient hospital charges and more.

Why sign up for more hospital insurance when an employer plan already provides good coverage at low cost to you? Because in some cases, Medicare Part A may cover what your employer plan does not.

Also see: Why isn’t your 401(k) doing better? The reason may surprise you

But as with so many aspects of Medicare, there are caveats, exceptions and potential pitfalls.

If the employer has 20 or more employees: If your or your spouse’s employer has 20 or more employees and a group health plan, you don’t have to sign up for Medicare at 65 if it doesn’t make financial sense. (Although, a reminder: Part A is free for most people.)

If the employer has fewer than 20 employees: If your or your spouse’s employer has fewer than 20 employees and the health coverage is not part of a multiemployer group plan, at age 65 you must enroll in Medicare Part A, which will be your primary insurance. “Primary” means that Medicare pays first, and then the employer insurance kicks in to pay whatever might be covered under that policy but was not covered by Part A.

If you have an HSA and want to keep contributing: If you’re saving to a Health Savings Account and wish to keep doing so, you must delay enrollment in Medicare Part A (or Medicare Part B), because Medicare enrollees can’t contribute to an HSA. In fact, to avoid a tax penalty, you should plan to stop making HSA contributions at least six months before signing up for Medicare.

Potential penalties: If you don’t enroll in Medicare Part A at age 65 and neglect to sign up within eight months of stopping work or losing employer coverage (whichever comes first), you may have to pay a penalty. In any case, you should sign up for Part A before your employer coverage ends to avoid a gap in your health coverage.

Before delaying Part A: Before delaying Medicare, consult with your or your spouse’s benefits administrator to be sure you understand how your group plan will cover you without Part A when you reach age 65.

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Medicare Part B: Delay to avoid premiums

If you’re 65 or older and you or your spouse still have employer health coverage, you will probably want to delay enrolling in Medicare Part B, which pays for doctor visits and many other outpatient services. Why? Because unlike Medicare Part A, everyone pays a premium for Part B, so it’s never a free add-on.

As with Part A, your particular circumstances can influence your decision, and there are pitfalls to avoid:

If the employer has 20 or more employees: If your or your spouse’s employer has 20 or more employees and a group health plan, you’re not required to sign up for Medicare at age 65. But the clock starts ticking once you stop working or lose your employer coverage (see below), so don’t miss your window.

If the employer has fewer than 20 employees: If your or your spouse’s employer has fewer than 20 employees and the health coverage is not part of a multiemployer group plan, at age 65 you must enroll in Medicare Part B, which will be your primary insurance.

If you have an HSA and want to keep contributing: If you have an HSA and want to continue making contributions to it, you must delay signing up for Medicare Part B. Stop making contributions to your HSA at least six months before you sign up for Part B. And you’ll want to sign up for Medicare at least a month before you stop work or lose employer coverage.

Potential penalties: You must sign up for Medicare Part B within eight months of stopping working or losing employer coverage. Failing this, your premiums may include a penalty — for the rest of your life. In addition, you may have to wait to enroll in Medicare, resulting in a risky gap in health care coverage.

Before delaying Part B: Before you decide to postpone enrollment for Medicare Part B, consult with your or your spouse’s benefits administrator on how your group policy will cover you at age 65 and beyond.

Related: How to pay for healthcare costs in retirement

Special situations: Previous employers, military, vets

If you have health insurance from a previous employer, such as your or your spouse’s COBRA or retiree health coverage, you need to enroll in Medicare Parts A and B when you turn 65.

Also see: Expand Medicare benefits? What public opinion says

If you have health benefits as a military service member or veteran, such as TRICARE or CHAMPVA, you should consult with those programs to determine when to enroll in Medicare.

It’s complicated, so get all the advice you need.

Medicare processes and rules are complex and rife with exceptions; if you overlook something in the enrollment rules, you may pay a high price in terms of both penalties and gaps in coverage. So you should consult with Medicare and with the benefits administrator for your employer coverage — before you enroll or decide to delay enrollment.

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John Rossheim writes for NerdWallet. Email: USexpansion@nerdwallet.com.