Medicare provides critical health benefits to millions of seniors, and those benefits kick in once you turn 65. In fact, your initial window to sign up for Medicare starts three months before the month of your 65th birthday, and it ends three months after that month.
It's advisable to sign up for Medicare during your initial seven-month enrollment window for a couple of reasons. First, securing coverage in a timely manner could help you avoid having to pay for medical services out of pocket -- a consequence of not having insurance. Secondly, signing up for Medicare on time could help you avoid costly penalties that wreak havoc on your retirement budget.
Medicare Part A, which covers hospital care, is generally free for enrollees. Part B, which covers outpatient services and diagnostics, charges a premium. The standard monthly Part B premium changes from year to year, and higher earners in retirement are often subject to a surcharge due to their income. But if you're a lower earner who doesn't enroll on time, you might face a surcharge, too. Specifically, Medicare will tack 10% onto the cost of your Part B premiums for each 12-month period you were eligible to enroll but didn't.
But what happens if you didn't enroll in Medicare during your initial seven-month window? When's your next chance to sign up for coverage?
The answer is that you can, in fact, enroll in Medicare right now. But don't expect your coverage to start right away, and don't be surprised if your premiums cost more.
Medicare's general enrollment period
Each year, Medicare runs a general enrollment period that begins on January 1 and ends on March 31. You can sign up for Medicare Parts A and B during that enrollment period if you failed to sign up for coverage when you were first eligible, or if you aren't eligible for a special enrollment period.
If you enroll in Medicare between now and March 31, your coverage won't begin until July 1, 2020. Furthermore, you may be subject to penalties that raise your Part A and B costs.
Generally speaking, if you have 10 years of work under your belt and paid Medicare taxes during that time, you're eligible for free Part A coverage in retirement. But if you're subject to Medicare Part A premiums because you don't meet that requirement, then you could face a surcharge on those premiums by enrolling in Part A late -- specifically, 10% per 12-month period you could've had Part A coverage but didn't sign up for it. And you could face a similar penalty if you're enrolling late in Part B.
What about Medicare Part D?
You can't sign up for a Part D drug plan during Medicare's general enrollment. You can, however, sign up for one between April 1 and June 30 once you've enrolled in Parts A and B. That drug plan will then take effect on July 1.
Keep in mind that there are penalties for signing up late for Part D, too. Specifically, you'll be charged 1% of the national base beneficiary premium (which is $32.74 in 2020) times the number of full months you don't have a drug plan in place. If you go 18 months without Part D, you'll be looking at a penalty of $5.90 per month.
If you already missed your initial enrollment window for Medicare, be sure to get moving on securing coverage in the coming weeks. And if you're not yet eligible to sign up for Medicare, find out when your initial enrollment period begins so you don't risk missing it and incurring costly penalties that haunt you throughout retirement.