5 Smart Money Moves to Consider Before Signing Up for Medicare

2. Understand your Medicare enrollment options

Still working? Review your existing health coverage and see how it works with Medicare. If you’re working for a large employer with that provides your insurance, you may be able to postpone your Medicare enrollment without penalty.

If you don’t have insurance through your work or your spouse’s job or if your employer has fewer than 20 employees, you’ll need to sign up for Medicare within the seven-month initial enrollment period three months before the month of your 65th birthday to three months after.

If you miss this deadline and don’t qualify for a special enrollment period, you may permanently pay higher premiums or worse: If you land in the hospital or have other high-cost health care needs, you may have to pay all the bill yourself.

“There are certain finite timelines that you need to know,” says Andy Leung, a certified financial planner and private wealth adviser at Shelton, Connecticut-based Procyon. “You can’t back up, and you don’t get a mulligan.”

Ultimately, you’ll choose between two main options, but the details of the private pieces of each alternative can make your preferences far different from even your spouse’s top pick:

• Original Medicare, which the federal government manages, links Part A for hospital costs and Part B for medical services with a private Part D plan to cover prescription medications and a private Medigap plan that helps reduce your out-of-pocket costs. Original Medicare allows you to use any U.S. health care provider and medical facility that accepts Medicare, and you don’t need permission to see a specialist.
• Medicare Advantage bundles Parts A and B together through a private insurance company, often with Part D, and may offer coverage for dental, hearing and vision that isn’t included in original Medicare. The plans generally have a provider network that you must stay within to either get coverage or the best prices and may need approval, called prior authorization, to see a specialist, get certain tests and receive some treatment.

You can’t buy a Medigap plan if you choose Medicare Advantage. If you want to switch to original Medicare later and buy a Medigap plan, you’ll probably have to answer questions about your present health and lifestyle and give permission for an insurer to see your medical records. Based on that information, the company can charge you a higher premium or deny coverage altogether.

“When you’re 64 and looking at what is going to be your Medicare coverage, you need to be thinking about, ‘What coverage do I want now? And what coverage will I need when I’m 85?’ ” says health policy analyst Louise Norris at healthinsurance.org, an online insurance broker website. “There’s not necessarily a right or wrong answer, but you might not get another chance.”

If you travel frequently or plan to in retirement, consider whether a plan provides coverage in the places you’re visiting. You’ll want a plan that works with the doctors and hospitals you use and provides coverage for your prescriptions.

3. Stop health savings account contributions in time

Most people sign up for Part A at age 65 even if they’re working. The premium is free when they or their spouses have had Medicare taxes deducted from their pay for at least 10 years.

But if you want to keep your existing health insurance that has a high annual deductible — in 2026, a minimum of $1,700 for yourself or $3,400 for a family plan — and an out-of-pocket maximum of $8,500 for yourself or $17,000 for a family, you may already have a health savings account (HSA). You can stash up to $5,400 for you or up to $9,750 for your family in an HSA this year.

The contributions can lower your taxable income now and build money for future medical expenses, Atkins says. Unlike unused funds in flexible spending accounts (FSAs) that go to your employer, an HSA is yours to use or save through the years.

However, if you make such contributions after you enroll in Medicare, you’ll owe a 6 percent tax penalty. So don’t let the two overlap.

“If you end up making ineligible contributions to an HSA, then you have to go through this process or return those excess contributions, which can be timely and costly,” Atkins says.

If you work for an organization with 20 or more employees, you can delay signing up for Medicare entirely, keep your high-deductible health insurance and continue contributing your HSA account until six months before you apply for Medicare, he says. Just compare the options of signing up for Part A at 65 or keeping your high-deductible plan based on your health care needs.

You can sign up for Medicare any time after age 65 without penalty if you qualify for premium-free Part A. Your coverage will be retroactive as much as six months beforehand but not before your 65th birthday month.

“In a lot of cases, that makes sense, especially if the employer plan is really strong and you want the ability to keep contributing to that HSA,” Atkins says.

4. Be strategic about elective procedures

When transitioning from employer-provided insurance to Medicare, consider using your current coverage, which may be more comprehensive, to minimize out-of-pocket costs and avoid restrictions and deductibles that often come with Medicare, Atkins says.

“Consider any upcoming surgeries, such as knee replacements or hip surgery, to determine the cost of having the procedure under your current plan coverage or waiting until you have coverage under Medicare,” Valecka says. If you’ve already met your deductible or maximum out-of-pocket limit for the calendar year, completing these procedures before Medicare might be advantageous.

Another smart move before switching: Think about what your Medicare plan won’t cover, like dental work, hearing aids or specific diagnostic tests. If your present insurance will pay, arrange for what you need now, she says.

On the other hand, if Medicare will provide more generous coverage for an elective procedure or allow you a better choice of providers, waiting may make sense.

5. Budget for changes in costs and long-term care

No matter which Medicare plan you choose, your out-of-pocket costs will change as you get older.

“Personal savings play a really important role because while Medicare covers a lot, it definitely doesn’t cover everything,” Keating says. “You’ll still have premiums, out-of-pocket costs, prescriptions and things like dental or long-term care.”

The services at home or in an assisted living center that you’ll need when you become disabled, develop a chronic illness or suffer from memory loss can torpedo your savings if you haven’t planned for those costs. Nursing home care can run more than $100,000 year, according to CareScout, a subsidiary of insurer Genworth Financial that publishes the CareScout Cost of Care survey.

Medicare covers only short-term stays in a skilled nursing facility, such as a rehabilitation center, after a hospital stay.

“Long-term care costs are one of the most overlooked factors [in planning for health care in retirement], simply because it’s so expensive and people don’t always realize that Medicare won’t cover custodial long-term care,” Norris says.