The question every federal retiree asks, in some form, as they approach 65: “Do I have to take Medicare Part B?” The honest answer is: no, it is voluntary. The honest follow-up is: declining it without understanding the late-enrollment penalty, the Special Enrollment Period rules, and how Part B interacts with FEHB is the kind of decision that can quietly raise healthcare costs for the rest of your retirement.

The federal benefits system is unusual in that it does not require federal retirees to enroll in Medicare. Most private retiree coverage arrangements coordinate with Medicare as if the retiree is enrolled. The federal system allows you to stay on FEHB indefinitely, with or without Medicare, and the consequences of that choice are yours to manage.

What Part B actually covers.

Part B is the outpatient side of Medicare. It covers physician visits, outpatient hospital services, preventive care (including the wellness visit and many cancer screenings), durable medical equipment, ambulance services, mental health care in outpatient settings, and a long list of other services that come up frequently in retirement.

For a federal retiree with FEHB, Part B is the layer that pays doctor bills first when Medicare becomes the primary payer, with FEHB picking up most or all of what Medicare leaves behind. Without Part B, FEHB remains the primary payer, and the retiree pays the FEHB plan’s deductible and coinsurance directly. The math almost always favors having both.

The premium most people pay.

The standard monthly Part B premium for most beneficiaries is set annually by CMS. For 2026, the standard monthly premium is $202.90. Higher-income beneficiaries pay more through the Income-Related Monthly Adjustment Amount (IRMAA), which is a surcharge layered on top of the standard premium based on Modified Adjusted Gross Income from two years prior.

The IRMAA brackets are publicly published each year and they escalate quickly. A retiree whose MAGI crosses into the next bracket pays not only a higher Part B premium but also a higher Part D premium. For retirees with substantial TSP withdrawals or other income, IRMAA planning is one of the cleaner financial levers in the federal retirement picture.

The penalty for declining Part B without a valid reason.

The Part B late-enrollment penalty is one of the most consequential financial penalties in federal benefits, and one of the least understood. The penalty is 10% of the standard Part B premium for every full 12 monthsthe retiree could have been enrolled but was not. The penalty applies for life — it does not expire after a few years, it does not reset, and it is paid in addition to the regular premium.

The math is sobering. A retiree who delays Part B for 24 months without a valid SEP pays a 20% permanent surcharge on top of whatever the standard premium is at the time they eventually enroll. On 2026 numbers, that is roughly $40 per month, $481 per year, for life. Multiply across a normal retirement and the cost easily reaches five figures.

The Special Enrollment Period that protects active employees.

The penalty does not apply to federal employees who delay Part B enrollment because they are still working and covered by an Employer Group Health Plan (EGHP) through their own active employment. When that employment ends — at retirement — the retiree receives a Special Enrollment Period (SEP) of generally eight months from the loss of active employer coverage to enroll in Part B without a penalty.

The SEP is the safety net that makes the federal “FEHB without Medicare” working years possible. Retirees use it, and they avoid the late-enrollment penalty, provided they enroll during the SEP and meet the active employment / EGHP coverage test.

The SEP has a few specific rules. It applies when the individual is 65 or older and covered by an EGHP through current employment (their own or their spouse’s). It does not apply to COBRA coverage. It does not apply to retiree coverage. It does not apply to coverage through the marketplace. These are not nitpicks. They are the rules that determine whether the safety net is actually under you when you need it.

When delaying Part B actually makes sense.

For most federal retirees, the right answer is to enroll in Part B during the IEP or SEP, pay the premium, and let the Medicare-primary / FEHB-secondary coordination do its work. There are situations, however, in which a federal retiree may reasonably delay:

  • A retiree who is still covered by an employer plan through a spouse’s active employment and intends to enroll in Part B under that spouse’s SEP at the spouse’s retirement.
  • A retiree who is funding an HSA through an HDHP and is near the cutoff where the HSA contribution value exceeds the value of Part B enrollment. This is a short-term, time-limited calculation, not a long-term plan.
  • A rare case in which the retiree’s specific FEHB plan and health profile make Part B premium not worth the coordination benefit. This is rarer than the internet suggests, but it exists.

The general rule is: do not decline Part B out of inertia, and do not enroll in Part B out of inertia either. The decision deserves a deliberate look.

For more on how the SEP works mechanically, read how the Special Enrollment Period for Medicare Part B works.