Millions of seniors today are enrolled in Medicare and rely on the program to cover their health-related needs. But the Medicare decisions you make have the potential to influence your retirement finances in a very big way. Here are three to think about carefully before moving forward.
1. When to sign up
Medicare eligibility begins at age 65. But your initial enrollment window starts three months before the month of your 65th birthday and ends three months after that month. All told, you have a seven-month period to sign up.
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If you opt out of Medicare during that initial enrollment window, you may not face any financial penalties if you're covered by a qualifying group health plan through a job (yours or a spouse's plan). But if you don't have that qualifying coverage, enrolling late in Medicare could result in lifelong surcharges on your Part B premiums. Those could really hurt your finances, so you may want to make a point to sign up on time if you're not covered by a qualifying group plan.
2. Original Medicare or Medicare Advantage?
As a Medicare enrollee, you get to choose between original Medicare (Parts A and B plus a Part D drug plan) and Medicare Advantage. The latter's plans are offered by private insurers, and their costs and coverage can vary. However, many Medicare Advantage plans offer benefits beyond what original Medicare provides.
Signing up for Medicare Advantage could be a smart financial decision -- or not -- and the answer might largely depend on your health. It's important to weigh your options carefully from the start because while it's possible to move from original Medicare to Medicare Advantage and vice versa during your senior years, not signing up for original Medicare from the start could have consequences.
Specifically, if you sign up for an Advantage plan early on versus original Medicare, you might lose out on the opportunity to secure affordable Medigap coverage, otherwise known as supplemental insurance. A Medigap plan can help pick up some of the costs you might incur under original Medicare, such as deductibles and coinsurance.
3. Whether to participate in open enrollment year after year
You might start by enrolling in original Medicare, along with a Part D drug plan. And you may, over time, get used to that Part D plan and decide to stick with it for the long haul. But continuing your coverage under the same plan every year, rather than exploring other options during annual fall open enrollment, could leave you paying more for Part D -- or for the specific drugs you take -- than is necessary.
Similarly, sticking to the same Medicare Advantage plan year after year, rather than exploring alternative options, could be harmful to your finances. Even if you end up with a plan that seems to work for you, it's always a good thing to do some research during open enrollment to see what else is out there.
Make the right calls
Many people find that money is tight during retirement, so it pays to do what you can to make your healthcare coverage as affordable and cost-effective as possible. That means making sure to sign up for Medicare on time, choosing the right plan, and researching alternative plans that may be more suitable as your personal health-related needs change over time.
Generally speaking, the more you read up on Medicare, the better equipped you'll be to make savvy decisions. So it pays to start researching Medicare long before you're eligible to enroll.
