2 Ways to Avoid Medicare Surcharges in Retirement

One of the biggest expenses you might encounter as a retiree is none other than healthcare. And a big part of that stems from the fact that there are many costs associated with Medicare coverage.

For one thing, you'll pay a premium for different parts of Medicare -- namely, Part B, and in some cases, your Part D drug plan or Medicare Advantage plan. There are also deductibles and coinsurance to budget for.

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The more you can do to keep your Medicare costs down, the easier a time you might have financially once you stop working and move over to a fixed income. And so it helps to avoid being charged extra for Medicare. Here are two ways to avoid surcharges on your Medicare premiums.

1. Enroll on time

Your initial window to sign up for Medicare lasts seven months, beginning three months before the month of your 65th birthday and ending three months after that month. If you don't sign up during that period, you risk a late enrollment that results in lifelong surcharges.

Specifically, you'll face a 10% surcharge on your standard monthly Medicare Part B premiums for each 12-month period you delay coverage after being eligible to enroll. You'll also face surcharges on your Part D premiums for going 63 days or more without prescription coverage.

Pay attention to your Medicare enrollment dates so you don't cost yourself more money needlessly.

2. House your retirement savings in a Roth IRA

Hopefully, you're doing your part to build a retirement nest egg to supplement your Social Security benefits. It's important to choose the right home for your savings, as that could have an impact on what Medicare costs you.

Higher earners face surcharges on their Medicare Part B and Part D premiums known as income-related monthly adjustment amounts, or IRMAAs. The income thresholds for IRMAAs change annually. In 2026, they apply to single tax-filers with an income over $109,000 and joint filers with an income over $218,000.

But if you keep your retirement savings in a Roth IRA, you can potentially avoid IRMAAs. Roth IRA withdrawals don't count as taxable income and therefore aren't counted in the IMRAA formula.

Medicare might end up being one of your biggest retirement expenses, so it's best to do what you can to avoid having to pay more for it. Enrolling in a timely manner and choosing the right retirement account could be your ticket to keeping your costs down.

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