9 Common Medicare Mistakes That Can Drain Your Retirement Savings

Medicare could be one of the most important financial decisions you make in retirement and one of the easiest to get wrong. While this government-sponsored health care program is designed to lower your costs and protect your savings after you leave the workforce, its maze of rules, deadlines, and coverage options trips up thousands of Americans every year. The wrong move might mean higher premiums, coverage gaps, or penalties that follow you for life.

Here are some of the most common Medicare mistakes and how to steer clear of them so you could get ahead financially in retirement.

Failing to sign up during your initial enrollment period

Anyone already receiving Social Security benefits will be automatically enrolled in Medicare Part A, which covers inpatient hospital care and stays at skilled nursing facilities, when they turn 65. Everyone else should enroll for Medicare Part A and B during their enrollment period, which opens three months before their 65th birthday and closes three months after. 

If you miss your sign-up date, you'll pay an extra 10% on your premium for every 12 months you go without Part B coverage. This year's premium is $202.90 per month, meaning you'd pay an extra $20.29 per month or $243.48 per year.

Assuming Medicare covers all medical expenses

Medicare Part A covers hospital stays, Medicare Part B covers routine health care costs, and Medicare Part D covers prescription medications, but don't make the mistake of thinking Medicare covers everything.

For instance, Medicare isn't dental or vision insurance, with the exception of a few limited circumstances. And while it helps pay for short-term hospital visits, it doesn't cover long-term care.

Delaying Medicare Part D without having creditable, qualifying coverage

Medicare Part D is the primary part of Medicare that covers prescription drugs. You can waive coverage temporarily if you have creditable prescription drug coverage (for instance, through an employer-sponsored health care plan).

But if you lack other coverage and go 63 or more consecutive days without creditable prescription drug coverage, you could face a late enrollment penalty. For every full month you went without coverage, you could pay an extra 1% of the year's base beneficiary premium, which is $38.99 for the 2026 tax year. That penalty is added to your monthly premium for as long as you have Part D coverage.

Choosing a Medicare Advantage plan without checking network coverage

Medicare Advantage, or Medicare Part C, is a private insurance alternative to Original Medicare. Unlike Medicare, which covers you at most hospitals and many doctors' offices across the country, Medicare Advantage plans work through networks. If you visit an out-of-network provider, you may be responsible for the full cost of any medical treatment yourself.

If you plan to enroll in a Medicare Advantage plan, be sure to carefully compare networks, providers, and prescription drug coverage to ensure your health care needs are adequately covered.

Not changing your Medicare Advantage plan during yearly open enrollment

If your medical needs change during the year or you discover that your current Medicare Advantage plan doesn't cover your preferred provider, you can switch plans during the annual open enrollment period, which typically takes place between Jan. 1 and March 31. You can also switch if you move outside your network's area.

Even if your current plan is working, it doesn't hurt to compare providers every year. You could find a new, more budget-friendly plan that fits your needs better.

Missing your Medigap enrollment window

Medigap insurance policies can help pay for services Original Medicare doesn't cover, but you only have six months to sign up for your preferred Medigap policies once your Medicare Part B coverage kicks in.

After that, you may still be able to sign up for certain policies, but you could be charged more. Alternatively, a company could deny you coverage based on pre-existing conditions.

Failing to appropriately plan for your long-term care needs

Medicare Part A can help pay for short-term hospital stays, but it doesn't help at all with long-term nursing home stays.

The median monthly cost of a nursing home is more than $10,500 per person, which amounts to approximately $126,000 per year. Costs that high could quickly drain your retirement savings, so be sure to budget ahead, as Medicare won't be able to contribute.

Not budgeting for IRMAA premium surcharges

If you earn above a certain annual threshold, you might be charged extra for your Medicare Part B and Part D plans. This surcharge, or income-related monthly adjustment amount (IRMAA), is based on your tax return two years prior, not on your income during the current tax year.

The surcharge can be quite high: Depending on your income level, your Part B premium could cost anywhere from $284.10 per month to nearly $690 per month.

Assuming you can't appeal a premium surcharge

Because your IRMAA costs are based on your tax return from two years ago, it could represent a financial hardship for you now for reasons like job loss, retirement, divorce, or the death of a spouse.

Fortunately, you can appeal to the Social Security Administration (SSA) with evidence of your changed circumstances and request that they use your current income instead.

Bottom line

When you sign up on time, choose plans with care, and thoroughly educate yourself about Medicare's ins and outs, Medicare does exactly what it should do: help you save money on health care expenses in retirement.

You can keep more money in your wallet in retirement by prioritizing your health as much as possible. Taking the time to walk with friends, cook healthy meals at home, and enjoy the great outdoors could contribute to your stress-free retirement.

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