It’s 7:46 pm on a Tuesday evening. You’re finished with dinner, and the dishes are done. Clad in pajamas and brushing your teeth, you realize that you’re not quite ready to go to sleep.
Ordinarily, you might read a book, but you just finished one and won’t start another until the weekend. Your mind drifts to your tablet; maybe you’ll watch something to wind down. You like mysteries and heard that there’s a new Agatha Christie series, but it’s only on Netflix. Confession time: You’re just about the only adult that you know without a Netflix subscription, but that ends now. With a quick app download and your credit card number handy, voila, the deed is done! You’re a subscriber, and it took all of five minutes. As the opening credits play, you marvel at how easy that was. No advanced planning required, just a few clicks and it’s done.
But not everything is like this. In particular, Medicare enrollment is not like signing up for Netflix. It’s not three clicks, a credit card number, and, ta da, you’re enrolled! For best results, advanced planning is often beneficial. There are costly Medicare enrollment pitfalls to avoid, which are often exacerbated by a lack of planning. Read on to learn more about a few of these common hazards.
1. Don’t Be Late; Timely Enrollment is Key.
Recall that Medicare is an individual health care insurance plan for American adults age 65+ (and sometimes younger adults with disabilities). Eligibility begins upon reaching age 65, but when does a person actually sign up? Most Medicare enrollment periods fall into two broad categories:
- Initial Enrollment Period (IEP) occurs when you first reach age 65. Your Medicare IEP spans seven months, beginning three months before your 65th birthday, including the month of your 65th birthday, and extending three months after your 65th birthday.1 If you enroll in Medicare during this window, you are a timely entrant, which helps you avoid a late enrollment penalty and the need to answer health underwriting questions that often lead to higher monthly premium costs.
- Special Enrollment Period (SEP) is for when you continue to work past age 65, stay on employer-sponsored health care coverage until your retirement, and then sign up for Medicare when employer coverage ends. Your Medicare SEP spans eight months, starting on the 1st of the month after your employer coverage ends.2 For example, if you retire on July 20th and your employer coverage ends on July 31st, your Medicare SEP begins on August 1st and ends on March 31st. If you enroll in Medicare during this window, you are a timely entrant and avoid both a late enrollment period and health underwriting questions.
If you do not enroll in Medicare during your IEP or SEP, a late enrollment penalty may apply. The penalty is an additional 10% of the standard Part B premium for each full 12‑month period that you delayed enrollment, and it’s typically added to your monthly premium for as long as you have Part B.3 Yes, this could be for the rest of your life! With Medicare Part B premiums starting at $202.90 per month in 2026, the 10% late enrollment penalty would cost you at least $20.29 per month, even more for higher-income Medicare participants.4
Additionally, as a late entrant, when you try to purchase a Medicare Supplement/Medigap Plan (Plans A-N), you will be required to answer health underwriting questions, which could drive your monthly premiums higher, especially if you have preexisting medical conditions.
2. Watch Your Income; Means Testing is a Cliff.
Recall that Medicare Part B (Medical) and Part D (Prescription Drug) coverage is “means-tested,” meaning higher-income participants pay higher premiums than lower-income participants. Medicare uses your income level (your Modified Adjusted Gross Income) from two years prior in determining your current year premiums.5 Thus, 2026 Medicare Part B and D premiums will depend on your 2024 income levels. For many newly-retired Medicare participants, their first few years of Medicare premiums can be more expensive than expected, because the annual income used to calculate these costs is from a year when the participant was working and earning salary, bonus, and other compensation. As income declines in retirement, so too may means-tested Medicare premiums.
The Medicare Part B & D means-tested amounts are from the tiered income table below, updated by Medicare annually. It’s important to be aware of your income levels each year, because just $1 of additional income can land you in a higher Medicare B & D cost tier for the next 12 months. Working with an advisor who can help you measure and plan for your income in the current tax year can be especially beneficial, particularly if you have multiple sources of income, such as wages/salary, Social Security benefits, retirement plan benefits (from an IRA, 401(k), pension plan, etc.), investment income (interest, dividends, and capital gains), rental income, farm income, business income, or self-employment income.
Chart Sourcing: https://www.medicare.gov/publications/11579-medicare-costs.pdf?mod=article_inline
3. Beware of Health Savings Account (HSA) Contributions.
Health Savings Account (HSA) contributions are an additional hazard when enrolling in Medicare. If you are on a “High Deductible” Health Plan + Health Savings Account health insurance policy before you enroll in Medicare at 65 or after, stop making HSA contributions six months before enrolling in Medicare. If you keep making HSA contributions after your Medicare coverage begins, they will be treated as prohibited excess contributions subject to penalty. The excess contribution dollars and any earnings generated by those contributions (interest, dividends) will be subject to a 6% excise tax for as long as the excess contributions remain in your HSA account.6
Though Medicare enrollment isn’t as simple as subscribing to Netflix, it doesn’t have to be an Agatha Christie mystery full of twists and turns. With a little advanced planning, you may be able to avoid these potentially costly pitfalls. What does it mean to be truly cared for? It means we understand your passions and use proven methods to help you reach your goals. Ready to learn more about Medicare and what enrollment could look like for you?
1 https://www.medicare.gov/basics/get-started-with-medicare/sign-up/when-does-medicare-coverage-start
2 https://www.ssa.gov/pubs/EN-05-10012.pdf
3 https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties
4 https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties
