While some of your expenses may decrease in retirement, your healthcare costs may inevitably go up. That could come as a result of aging or losing an employer health insurance plan that had fantastic benefits.
The good news is that there are steps you can take to lower your healthcare bills as a Medicare enrollee. But if that's your goal, it's important to avoid these three mistakes.
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1. Signing up late
You might think that a late Medicare enrollment is no big deal. In reality, it could cost you money for the rest of your life.
Your initial Medicare enrollment window is seven months long, giving most people ample time to sign up before having to worry about surcharges. That period starts three months before the month of your 65th birthday, and it ends three months after that month.
If you don't sign up for Medicare when you're first eligible, rest assured that you'll have opportunities to enroll in the future. But you may not get to control the timing of your enrollment if you miss your initial window, since you'll then typically be limited to Medicare's general enrollment period, which runs from Jan. 1 through March 31 every year.
Meanwhile, signing up late for Medicare could result in a 10% surcharge on your Part B premiums for each 12-month period you were eligible for coverage but didn't enroll. And that surcharge doesn't go away -- ever. So if you want to avoid it, pay attention to when you're supposed to enroll in Medicare initially and make that happen.
2. Choosing the wrong coverage
Once you're eligible for Medicare, you can choose your specific coverage. That could mean sticking with original Medicare and adding a Part D drug plan. Or, it could mean getting an all-in-one Medicare Advantage plan.
It's important to choose the coverage that's best for your situation, and to review your plan choices each year during Medicare's fall open enrollment period. Selecting the wrong plan could leave you with higher costs.
When comparing plan options, be sure to look at factors such as:
- Monthly premium costs
- Deductibles
- Maximum out-of-pocket limits (which don't apply to original Medicare but do apply to Medicare Advantage plans)
3. Not buying Medigap right away
If you sign up for a Medicare Advantage plan, you'll have a maximum out-of-pocket limit you're responsible for each year. But if you stick with original Medicare, there's no limit to your out-of-pocket spending.
That's why it's important to buy Medigap coverage, which is supplemental insurance that could pick up the tab for costs like deductibles and coinsurance. And your initial window to do so lasts six months and starts the first day of the month in which you're 65 and enrolled in Medicare Part B.
If you don't buy Medigap during that initial six-month window, a couple of things might happen. First, going without supplemental insurance could leave you grappling with very expensive bills. Secondly, buying Medigap beyond your initial enrollment window could leave you paying more for it, since at that point, you'll be subject to underwriting and insurers can charge you more based on your health.
The less you have to spend on healthcare in retirement, the more money you'll have to enjoy your life. Do your best to avoid these Medicare mistakes that could drive your healthcare bills through the roof.
