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3 Medicare Mistakes That Could Wreck Your Retirement

By Katie Brockman - Updated Mar 20, 2020 at 3:39PM

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You may not even realize you're making these errors until it's too late.

Medicare is a crucial part of retirement, yet 72% of Americans say they wish they better understood how the program works, according to a survey from Nationwide.

Healthcare expenses can be significant in retirement, so not fully understanding Medicare could be a costly mistake. And these three mistakes in particular could throw off your entire retirement plan.

Senior man talking to a doctor

Image source: Getty Images.

1. Assuming Medicare will cover all your healthcare costs

Medicare will help cover some of your medical expenses in retirement, but it doesn't cover everything. For one, you'll still be responsible for all premiums, deductibles, co-insurance, and co-pays. With Medicare Part A, you typically won't pay a premium, but you will face a deductible of $1,408 per benefit period. With Part B, the standard premium is $144.60 per month with a deductible of $198 per year.

But keep in mind that Medicare Parts A and B do not cover prescription drugs or routine vision and dental care. For that type of coverage, you'll need to enroll in Medicare Part D or a Medicare Advantage plan at an additional cost.

In addition, Medicare typically doesn't cover long-term care, which can be incredibly expensive. The average semiprivate room in a nursing home costs just over $6,800 per month, according to the U.S. Department of Health and Human Services. Without help from Medicare, you may be left to foot this massive bill on your own. Before you retire, it's a good idea to factor these costs into your retirement plan or consider signing up for long-term care insurance.

2. Not researching your plan options each year during open enrollment

Medicare open enrollment runs from Oct. 15 to Dec. 7 each year, and during this time, retirees can make changes to their plans. That could include switching from Original Medicare (Parts A and B) to a Medicare Advantage plan or vice versa, changing from one Advantage plan to another, or adding Part D coverage.

If you're already enrolled in Medicare, it can be tempting to stick with your same plan year after year because it's easier. But by not researching all the different options available to you, you could be missing out on a chance to save money. Especially when it comes to Advantage plans, prices can change frequently. So while your current plan may have been the best choice last year, there may be a different plan with better coverage and lower premiums available now. If you don't take some time to see what's out there, you could unknowingly be wasting money.

3. Not signing up for Medicare when you're initially eligible

When you become eligible for Medicare, you'll need to sign up for coverage during your initial enrollment period (IEP), which starts three months before the month you turn 65 and ends three months after the month you turn 65.

If you don't enroll during your IEP, you could face a penalty of 10% of your Part B premium. Also, the longer you go without enrolling in coverage, the higher your penalty will be. Typically, you'll also need to continue paying the penalty for as long as you have Part B coverage.

But if you're not ready to enroll in Medicare at 65, you may qualify for a special enrollment period. For example, if you (or your spouse) are still working at age 65 and are covered by insurance through your employer, you can wait to sign up for Medicare until after you leave your job.

Medicare can be confusing, but the more you understand about it, the better decisions you'll be able to make so that your retirement fund lasts longer. By avoiding these common mistakes, you can save money and make sure you're as prepared as possible for your senior years.

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