Mistake #1: Missing Your Initial Enrollment Period
Your initial enrollment period, otherwise known as your IEP, is the seven-month window that surrounds your 65th birthday and is the first time most people are eligible to enroll in Medicare. Missing your initial enrollment opportunity can have some fairly hefty financial consequences, and some of them stay with you forever. For instance, failing to enroll in Medicare Part B when you are eligible means your premium will go up by 10% for every 12 months that you missed. This will not be reversed, so the longer you wait, the more financial compensation you face. Similarly, Medicare Part D charges a fee for each month that you were eligible but not enrolled or did not have other creditable coverage. That fee is calculated as one percent of the year’s national base beneficiary premium, which changes each year. In 2020, this fee amounts to $32.74.
Even if you don’t need to enroll in Medicare when you turn 65 because you have employer health benefits, there’s still action required on your part. You can opt to delay Medicare enrollment until your employment or coverage ends without the risk of late fees or penalties. The best way to prevent any fees from accumulating is to mark important deadlines or speak with an advisor to make sure you understand what the next steps are for your situation.
Mistake #2: Enrolling in Social Security Too Early
One misconception that comes up often in the Medicare discussion is automatically enrolling in Social Security at the same time. You are able to begin receiving your Social Security benefits when you turn 62, but you permanently lose a percentage of your benefits coverage for every six months that you enroll prior to your full retirement age. Currently, the full retirement age is 66, and it’s moving to 67 for individuals born after 1960. So that means that even though you might be enrolling in Medicare at age 65, it’s in your best interest to wait to enroll in Social Security at least until you reach full retirement age. If you are in a position to wait even longer, until the age of 70, you can earn even more benefits by doing so. For each month that you delay accepting benefits between full retirement age and age 70, Social Security benefits will increase by ⅔ of a percentage point, meaning eight full percentage points for every year. The delayed retirement credits stop accruing when you turn 70, so there’s no benefit to waiting beyond age 70, but if you can afford to wait, it can be worth your while to do so.
With that in mind, it’s up to each individual’s circumstances to determine whether delaying your Social Security benefits makes sense for you. For many people, taking benefits as early as possible is the right choice. For others, delaying can bring many financial perks. Consider your own situation, but don’t make the mistake of assuming you must begin taking your Social Security payments when you enroll in Medicare.
Mistake #3: Assuming Your Spouse’s Health Coverage Is Right For You
The adjustment to Medicare is an important one, particularly for couples in which one spouse’s employer-covered plan offered benefits for both people. In Medicare, this is not the case, and each individual person needs to enroll in the proper coverage for his/her needs. Assuming you are covered under your spouse’s plan or that your spouse’s plan will work right for your needs is certainly a mistake to avoid. Being on the same plan as your spouse or partner may seem like a way to streamline your Medicare enrollment process, but opting to be on the same plan as a spouse could result in improper coverage for your own health care needs. There are no discounts for having both individuals enrolled in the same plan and, if the coverage is not appropriate for both individuals, it could end up costing you more money in the end. Most importantly, if you have different prescriptions, health issues, or concerns, it’s very important to find coverage that will allow you to care for yourself in the best way possible, regardless of whether that means you are the same or different plan as your spouse. If you do shop for a plan that’s different than your spouse’s, be sure to check preferred pharmacies if you like to have all your medications filled at the same place. Some plans offer prescription coverage rates that vary based on where prescriptions are filled, so that is worth including in your plan comparison.