Medicare is one of the most important benefits for older Americans, yet it’s also one of the most misunderstood. While signing up for Medicare might seem like a straightforward task, the reality is more complex. With multiple parts, enrollment windows, and potential penalties, it's easy to make missteps that can cost you time, money, and coverage.
As part of our comprehensive financial planning services at Northstar Financial Planners, we help clients make informed decisions about Medicare. Whether you're approaching age 65 or already enrolled, understanding the common pitfalls can help you steer clear of unpleasant surprises.
Here are some of the key Medicare mistakes and how to avoid them.
1. Missing Your Initial Enrollment Window
You first become eligible for Medicare at age 65. Your initial enrollment period (IEP) starts three months before your 65th birthday, includes your birthday month, and continues for three months after.
If you don't sign up for Medicare Part B (which covers outpatient care, doctors’ visits, and preventive services) during this window—and you’re not covered by a qualifying employer health plan—you could face a late enrollment penalty.
Tip: Mark your calendar well in advance. If you're still working and have employer coverage, talk to your HR department or a financial advisor about whether that coverage is considered "creditable" and whether you need to enroll in Part B.
2. Underestimating IRMAA (Income-Related Monthly Adjustment Amount)
IRMAA (or income-related monthly adjustment amount) is a surcharge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. It's based on your modified adjusted gross income (MAGI) from two years prior. That means your 2023 tax return will affect your 2025 Medicare premiums.
For example, in 2025, if your 2023 MAGI exceeds $106,000 (individual) or $212,000 (married filing jointly), you'll pay more than the standard premium.
Tip: If you’ve experienced a life-changing event, like retirement or reduced income, you can file an appeal (form SSA-44) to potentially lower your IRMAA. Planning ahead with your financial advisor can help manage your income to avoid or reduce these surcharges.
3. Assuming Medicare Covers Everything
While Medicare provides essential health coverage, it doesn't cover everything. Original Medicare (Parts A and B) does not include:
Most dental care
Vision and hearing exams
Long-term care
Prescription drugs (you’ll need Part D or a Medicare Advantage plan with drug coverage)
This can lead to unexpected out-of-pocket costs if you're not prepared.
Tip: Consider purchasing a Medigap (supplemental) policy or a Medicare Advantage plan (Part C) that offers broader coverage. Work with a financial advisor to compare costs and benefits based on your health history and future needs.
4. Delaying Part D Enrollment Without Creditable Coverage
Many people think they don’t need prescription drug coverage because they’re not taking medications. However, if you delay signing up for Medicare Part D without having creditable drug coverage (comparable to Medicare's standard), you’ll incur a permanent late enrollment penalty. This penalty grows the longer you go without coverage.
Tip: Even if you’re not taking any prescriptions, it may be wise to enroll in a basic Part D plan to avoid penalties and be protected in case your needs change.
5. Not Reviewing Plans Annually
Medicare plans—especially Medicare Advantage and Part D—can change every year. Your premiums, copays, covered medications, and provider networks may all shift from one year to the next.
Tip: Review your plan during the annual open enrollment period (October 15 to December 7). Even if you’re happy with your current coverage, it’s worth checking to make sure it still meets your needs and budget.
6. Overlooking Coordination with Other Coverage
If you or your spouse is still working and covered under an employer group health plan, figuring out how that coverage interacts with Medicare can be confusing. Medicare may or may not be the primary payer depending on the employer’s size.
Tip: Talk with your benefits administrator and a financial advisor to avoid gaps or duplications in coverage.
Planning for Medicare Is Planning for Your Future
Navigating Medicare is more than just checking a box at age 65—it’s a key part of retirement planning. Your healthcare choices will affect not only your well-being but also your finances. As your income, health status, and available plans evolve, staying informed and proactive is essential.
At Northstar Financial Planners, we help clients make Medicare decisions within the context of their broader financial lives. From evaluating IRMAA impacts to coordinating coverage with retirement income strategies, we help ensure your Medicare plan aligns with your goals.
Remember: You don’t have to figure it all out alone. Medicare is complicated, but with the right guidance, you can avoid costly missteps and make confident choices.
Schedule a chat with a fee-only, fiduciary financial advisor.
This material was written in collaboration with artificial intelligence (ChatGPT) derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.