September 16, 2025

Avoid These Seven Medicare Enrollment Mistakes and Protect Your Finances, #271

28 minutes

Are you turning 65 soon or starting to think seriously about healthcare in retirement? This week, I discuss the complicated world of Medicare—with a focus on the seven most costly mistakes people make when enrolling.

From missing crucial deadlines and underestimating penalties, to overlooking the true costs Medicare doesn't cover and getting tripped up by income-related surcharges, I give practical advice to help you avoid expensive pitfalls and make confident choices for your health and your wallet.

Whether you're working past 65, exploring Medicare Advantage and Medigap, or just want to sidestep penalties, this episode unpacks the essentials so you can enter retirement feeling prepared and protected. Let's get into the key rules, deadlines, and decisions every retiring listener needs to know!

You will want to hear this episode if you are interested in...

[04:17] Medicare enrollment guidelines & penalties.
[09:35] Understanding Medicare coverage gaps.
[11:55] Medicare enrollment and switching plans.
[17:15] Medicare premiums based on income.
[19:50] Avoid high medicare costs.
[23:16] How you can use HSA funds.
[24:56] Medicare costs and supplemental plans.

7 Medicare Mistakes that Could Cost You

Making the transition to Medicare at 65 is a big step for retirees. While the program does have plenty of benefits, it also comes with a few key complexities and deadlines that can trip up the unprepared.

1. Not Enrolling on Time

Despite common belief, Medicare enrollment isn't always automatic when you turn 65. You're only auto-enrolled if you've begun collecting Social Security at least four months before your 65th birthday. Otherwise, you must actively sign up to avoid lifelong late enrollment penalties—10% annually for Medicare Part B and 1% per month for Part D, the prescription drug plan.

Remember, if you're not covered by qualifying employer insurance (typically from a company with 20 or more employees), you must enroll during your Initial Enrollment Period (IEP), which starts three months before and ends three months after your 65th birthday month.

2. Misunderstanding Late Enrollment Penalties

Enrollment deadlines carry not just inconvenience, but long-term financial consequences. For every year you delay Part B, a 10% penalty is added to your premium—for life. For Part D, missing timely enrollment adds a 1% penalty per month delayed.

Even if you don't currently take prescription drugs, failing to enroll in Part D or lacking "creditable" drug coverage will trigger this penalty. Many people only find out about these charges after it's too late, so mark your calendar and stay ahead of these key windows.

3. Not Comparing Original Medicare and Medicare Advantage

Original Medicare doesn't cover everything, leaving you responsible for 20% of costs and lacking extras like dental or vision. Medicare Advantage, on the other hand, often bundles additional services and may come with lower or even zero premiums, thanks to how the government pays private insurers. However, these plans have different provider networks and coverage rules, so compare carefully based on your health needs, preferred providers, and annual costs.

4. Waiting to Enroll in a Medigap Policy

Failing to evaluate supplemental Medigap coverage during your initial eligibility window could lead to denial or much higher premiums later, especially if you develop health conditions. During the first six months after enrolling in Part B, you're guaranteed acceptance into any Medigap plan regardless of health. Afterward, insurers can impose restrictions or deny coverage. States like Connecticut, New York, and Massachusetts offer more flexibility, but most don't—making early action essential.

5. Ignoring IRMAA: Higher Premiums for Higher Incomes

Many retirees are surprised by IRMAA—the Income-Related Monthly Adjustment Amount—which increases Part B and D premiums if your income exceeds certain thresholds. These adjustments are based on your tax returns from two years prior.

Even a minor one-time income bump (like a large IRA withdrawal) could propel you into a higher bracket, doubling your premiums. Be proactive: monitor your adjusted gross income and consider strategies like Roth conversions, careful withdrawal timing, or appealing based on life-changing events like retirement.

6. Making HSA Contributions After Enrolling in Medicare

Once you sign up for Medicare Part A or B, both you and your employer must stop making contributions to a Health Savings Account (HSA) six months before enrollment. Over-contributing subjects you to a 6% excise tax for every year the excess remains. However, you can continue to use existing HSA funds for eligible medical expenses tax-free throughout retirement.

7. Underestimating Out-of-Pocket Costs

Even with Medicare, you'll face deductibles, co-pays, and services not covered (like long-term care, dental, and vision). Part A hospital stays have significant deductibles per benefit period, and Part B leaves you covering 20% of outpatient expenses.

Medicare Advantage and Medigap plans can help limit these expenses, but each comes with specific limits, provider restrictions, and rules. Without a supplemental plan, your maximum out-of-pocket exposure could reach $9,350 (in-network) or higher, depending on your plan.

Resources Mentioned