3 Reasons You Might Pay More for Medicare Than Expected

A lot of people wait until at least age 65 to retire since that's when Medicare eligibility typically begins. And while Medicare isn't free, with careful planning, you may be able to afford your costs without too much stress.

But some people end up with higher Medicare premiums than expected. Here are three reasons you, too, might end up in that boat.

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1. You missed your Medicare enrollment deadline

One of the most expensive Medicare mistakes you can make is failing to sign up on time. Your initial window to enroll spans seven months, starting three months before the month of your 65th birthday and ending three months after that month.

If you miss that window and sign up late, you'll face a 10% surcharge on your Part B premiums for each 12-month period you were eligible for coverage but didn't enroll. You could also face extra charges for delaying enrollment in a Part D drug plan.

Thankfully, those extra costs are avoidable. Simply pay attention to your Medicare enrollment window and don't be late. And if, come age 65, you're still working and covered by a group plan through your employer, just make certain it's a plan that qualifies for a special enrollment period.

2. You've chosen the wrong plan

In addition to original Medicare, which is Parts A and B, you'll need a Part D drug plan or an all-in-one Medicare Advantage plan. But choosing the wrong one could leave you paying more.

You're able to review your Medicare plan choices every year during fall open enrollment, so it pays to compare the all-in cost of coverage, including premiums, deductibles, and co-pays. You may find that making a switch allows you to lower your costs.

3. You have a high income

When you walk into a cafe to buy a sandwich, the person at the counter doesn't look at your IRA balance to determine what to charge you. Similarly, you'd think the cost of Medicare would be the same for all enrollees.

But higher earners in retirement can face surcharges on their Medicare Part B and Part D premiums known as income-related monthly adjustment amounts, or IRMAAs. Those surcharges could add hundreds of dollars per month to your costs.

One way to potentially reduce or avoid IRMAAs is to withdraw from retirement savings strategically. Another is to do Roth conversions ahead of retirement.

Roth IRA withdrawals do not count as taxable income. This means withdrawing large sums should not push you into having to pay IRMAAs.

Healthcare is likely to be one of your biggest expenses in retirement, but that doesn't mean you have to pay more than necessary for Medicare. Enrolling on time, carefully comparing your coverage options each year, and understanding how your income affects Medicare premiums could help you avoid added costs.

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