Want Lower Medicare Premiums in Retirement? 3 Things to Do.

Many people know to anticipate expensive healthcare costs in retirement. But you may be surprised by how much you end up paying in Medicare premiums.

The good news is that there are steps you can take to keep those costs down. Here are three things to do if you don't want to overpay for Medicare.

Image source: Getty Images.

1. Enroll on time to avoid surcharges

Your initial Medicare enrollment window is seven months long. It starts three months before the month you turn 65, and it ends three months after that month.

You'll have other opportunities to sign up for Medicare if you miss your initial enrollment window. But in that case, you risk surcharges for a late enrollment.

Specifically, you'll be hit with a 10% increase on your Medicare Part B premiums per 12-month period you were eligible for coverage and didn't enroll. And you could face surcharges on your Part D drug plan premiums for going too long without coverage as well.

So unless you qualify for a special enrollment period for Medicare (which may be the case if you're covered by a qualifying 0group plan of 20 or more employees at the time of your initial enrollment window), you may want to make a point to sign up on time.

2. Review your plan choices during open enrollment each year

Open enrollment, which runs from Oct. 15 to Dec. 7 each year, is an opportunity to review your Medicare plan choices and find more affordable coverage. This doesn't mean you're guaranteed to find a plan that saves you money. But if you don't look, you won't know.

Even if you're reasonably satisfied with your Medicare coverage, it pays to see what other options you have. There may be a Part D plan that gives you the same coverage you have now, only with lower premiums. The same could hold true if you have a Medicare Advantage plan.

3. Keep your savings in a Roth IRA

Medicare Part B charges a standard monthly premium that changes every year, while Part D plan premiums are based on the specific plan chosen. But you could end up paying more for your Part B and Part D coverage if you're hit with an income-related monthly adjustment amount, or IRMAA.

IRMAAs are surcharges imposed on higher earners. If you have a substantial income between Social Security and retirement plan withdrawals, your Medicare premiums could cost more.

One way to potentially avoid IRMAAs is to keep your retirement savings in a Roth IRA. Roth IRA withdrawals are tax-free and do not increase your adjusted gross income, thereby lowering the chances of IRMAAs, provided the rest of your income isn't so high.

If you're nearing retirement and have your savings in a traditional IRA or 401(k), you can look at doing a Roth conversion. But be aware that Roth conversions are a taxable event, and that if you're close to enrolling in Medicare, a large conversion in a single tax year could leave you paying IRMAAs temporarily.

Medicare may be an unavoidable expense in retirement, but there are steps you can take to keep your premium costs more manageable. If you don't want to pay extra, enroll on time, review your plan choices yearly, and be smart about where you house your nest egg.

The Motley Fool has a disclosure policy.