Proactively Avoiding Medicare Mistakes

Medicare is the federal health insurance program available to Americans at age 65, covering a range of medical services from hospital stays to doctor visits, preventive care, and prescription drugs. For most people, it becomes the foundation of their healthcare coverage in retirement, but navigating the program can be very complex. With multiple parts, enrollment deadlines, income-based surcharges, and coverage gaps that can reach into the tens of thousands of dollars annually, the decisions you make around Medicare can have a lasting impact on your financial plan. Getting it right requires more than just signing up on time. 

Medicare coverage is not a one-time checkbox; it's an ongoing part of your financial plan that needs to be assessed on a regular basis. If you're approaching 65 or have already enrolled, we encourage you to review your coverage and costs with your wealth consultant and tax advisor to make sure Medicare is working for you within your broader financial plan. 

1. Understand Your Enrollment Window 

Most individuals become eligible for Medicare at age 65 and have a 7-month initial enrollment window: the three months before your birthday month, your birthday month itself, and the three months that follow.¹ 

If you're already receiving Social Security benefits, you'll be enrolled in Medicare Parts A and B automatically. If not, you'll need to sign up proactively. 

Still working at 65? If you're covered by a health plan through your employer (or your spouse's employer), you can delay Medicare enrollment without penalty. You'll have a Special Enrollment Period to sign up once that employer coverage ends. Importantly, once you retire and lose that coverage, you have eight months to enroll in Medicare before penalties kick in.  

Missing that window is costly. Late enrollment penalties are not one-time fees — they follow you indefinitely: 

• Part A (hospital insurance): A 10% premium surcharge for twice the number of years you delayed. Delay two years, pay the penalty for four. 

• Part B (medical insurance): A 10% surcharge for every full 12-month period you went without creditable coverage. 

• Part D (prescription drugs): Roughly 1% of the national base beneficiary premium for each month you lacked creditable drug coverage, a penalty that compounds quickly and never ends.  

2. Know What Medicare Covers (and What It Doesn't) 

Original Medicare consists of two parts: 

• Part A covers inpatient hospital stays, skilled nursing facility care (up to 100 days), home health care, and hospice. 

• Part B covers doctor visits, outpatient services, lab work, and preventive care. 

What it does not cover is equally important to understand: most long-term care, routine dental, vision, hearing, and - in most cases - healthcare received outside the United States. 

You have two paths to fill those gaps: 

Original Medicare + Supplement: A Medigap (supplemental) policy layers on top of Parts A and B to cover cost-sharing like deductibles and coinsurance. You would add a separate Part D plan for prescription drugs. Many Medigap policies also include foreign travel emergency coverage, which is worth noting for clients who travel internationally. 

Medicare Advantage (Part C): An all-in-one alternative that often bundles drug coverage and may include dental, vision, and hearing benefits. The trade-off is that you're typically limited to a network of providers — something to evaluate carefully if you have long-standing relationships with doctors and specialists. 

3. Avoid the HSA Trap 

This is one of the most commonly overlooked pitfalls for individuals who continue working past 65. 

Once you enroll in Medicare, you can no longer contribute to a Health Savings Account (HSA) paired with a high-deductible health plan. The IRS treats any contributions made after Medicare enrollment as excess contributions, subject to a 6% excise tax annually until the excess amounts (plus earnings) are withdrawn. 

The timing here is subtle: if you sign up for Social Security at or after age 65, Medicare Part A enrollment is often retroactive by up to six months. That retroactive coverage can inadvertently create excess HSA contributions for months you thought were fine. 

The rule of thumb: Stop HSA contributions at least six months before you plan to enroll in Social Security or Medicare. Your advisor and tax professional should coordinate this before any enrollment decision is made. 

4. Plan for IRMAA — Especially Around Large Income Events 

If you are in a higher income bracket, you'll pay more for Medicare. The Income-Related Monthly Adjustment Amount (IRMAA) is a surcharge added to your Part B (and Part D) premiums based on your income from two years prior. 

In 2026, the standard Part B premium is $202.90 per month. That surcharge begins once income exceeds $109,000 for single filers or $218,000 for joint filers — and can reach as high as $689.90 per month at the top tier. 

This two-year lookback creates planning opportunities — and traps: 

Roth conversions and capital gains realizations can push you into a higher IRMAA bracket. Because you cannot request a new determination based on these types of income events, the surcharge sticks. Ideally, large taxable events like these should be timed at least three years before Medicare begins, and coordinated with your tax advisor to stay under the applicable thresholds. 

Life-changing events — the death of a spouse, divorce, stopping work, loss of a pension, or loss of income-producing property — do allow you to request a new IRMAA determination from the Social Security Administration. If any of these apply, don't assume the surcharge is fixed; consider filling out form SSA-44.  

Strategies to manage IRMAA over time: 

• Qualified Charitable Distributions (QCDs): For those over age 70½ with pre-tax IRAs, QCDs allow you to direct up to $100,000 annually to charity directly from the IRA. The amount counts toward your required minimum distribution but does not appear in adjusted gross income — reducing both your tax bill and your potential IRMAA exposure. 

• Health Savings Account distributions: If you built up an HSA before Medicare enrollment, qualified medical expenses drawn from that account are tax-free and don't increase your taxable income — an advantage over IRA withdrawals for covering healthcare costs in retirement. 
  

5. Don't Set It and Forget It 

Enrolling in Medicare is not a one-time decision. Plans change every year — benefits, formularies, provider networks, and premiums all shift. Open enrollment runs from October 15 through December 7 each year, and any changes take effect on January 1. 

Each fall, review the Annual Notice of Change from your current plan. Then take time to compare your options: 

• Are your doctors and preferred hospitals still in-network (critical for Advantage plans)? 

• Has your plan's drug formulary changed in ways that affect your prescriptions? 

• Are there newer plans in your area that offer better coverage or lower out-of-pocket costs? 

You can compare plans at Medicare.gov/plan-compare, call 1-800-MEDICARE (1-800-633-4227), or work with a licensed Medicare broker who can walk through your specific situation. Given the complexity, a coordinated review with your financial advisor, tax professional, and a Medicare specialist is worth the time each year. 

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