Retirement often means first dealing with Medicare, the federal health program for those 65 and older. But the rules are complex, and mistakes can be financially devastating.
Pitfall 1: Missing Your Initial Enrollment. You have a seven-month window around your 65th birthday to enroll. Miss it, and you face permanent late enrollment penalties and delayed coverage. If you're still working and have employer insurance, check how it interacts with Medicare before dropping coverage.
Pitfall 2: Permanent Late Penalties. Part A: If you pay a premium and sign up late, your premium can be 10% higher for twice the years you delayed. Part B: A 10% premium increase for each 12-month period you waited, lasting as long as you have Part B. Part D: Going 63+ days without drug coverage triggers a penalty that lasts as long as you have Part D.
Pitfall 3: Confusing Original Medicare with Medicare Advantage. Original Medicare (Parts A and B) is federal. Optional add-ons include Part D (drugs) and Medigap (supplemental). Medicare Advantage is private insurance that bundles Parts A, B, and usually D. Plans can change annually, and you can switch only during specific enrollment periods.
Pitfall 4: Losing Your Medigap Policy. If you switch from Original Medicare with Medigap to a Medicare Advantage plan, you lose that Medigap policy. Later, you may face higher costs or denial due to pre-existing conditions unless you qualify for a guaranteed issue period.