4 major Medicare mistakes

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About 10,000 baby boomers are turning 65 every day, becoming eligible for Medicare and considering retirement.

Here are four potentially serious mistakes that many boomers are making when they sign up for Medicare, according to Medicare advisory service Allsup. This will affect their retirement planning as they get older.

Bad timing. Medicare guidelines are clear. You get a six-month window to sign up — three months before your 65th birthday and three months after — but some people can’t seem to get the timing right. Signing up in hopes of getting coverage early doesn’t work, and signing up late — even though you’re still working — could mean you face penalties. “Timing is a critical factor. It pays to pay attention,” says Paula Muschler, Allsup Medicare Advisor manager.

Taking COBRA and ignoring Medicare Part B. If you are 65 or older when you leave your employer and your employer offers you the opportunity to keep your health insurance through the Consolidated Omnibus Budget Reconciliation Act, or COBRA, chances are you should say “no thanks.” That’s because Medicare expects you to sign up and start paying for Part B within eight months after you leave your employer. If you take COBRA and miss the grace period, then you can’t sign up until Jan. 1 and coverage won’t start until July 1. Plus, you’ll pay a Part B penalty — probably 10 percent — for the rest of your life.

Failure to shop for coverage. For most people, their first Medigap choice is their lasting choice because their options diminish once they’ve made an initial selection. In many states, it is particularly difficult to switch from one Medigap plan to another because insurers can charge higher rates, impose conditions or even refuse Medicare recipients who are shopping around. Before you enroll in any Medicare plan, ask for information and read what you’re sent carefully. “People should make an effort to initially enroll in a plan that best meets their needs,” Muschler says. “If you don’t choose carefully, you could pay too much or get coverage that doesn’t really meet your needs” — and find it hard to extricate yourself.

Choosing Medicare Advantage because it seems easier. Medicare Advantage plans offer all-in-one options that are very similar to the health care coverage many people had at work. Traditional Medicare with a Medigap plan and Part D prescription drug insurance is more complex, but Muschler says it probably is the right choice for someone with a chronic condition or a serious illness. That’s because you can see any participating physician anywhere, making second opinions and alternative treatments more affordable options. Most Medicare Advantage plans are less flexible, and you’ll have to pay extra under most plans if you go outside your network for any reason.