These 3 Medicare moves could set you up for serious retirement savings

Once you retire, you may find that some of your expenses decrease. Your home could cost less if you manage to pay off your mortgage before retirement. And if you stop commuting to work every day, you might spend less money on gas and taxes. You may even be able to unload a car completely and get by using public transportation and your own feet.

But if there’s one big expense that tends to rise during retirement, it’s healthcare. And unfortunately, this is true even if you start your senior years in great physical shape.

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The good news, however, is that effectively managing your Medicare enrollment could lead to big health care savings during retirement. Here are three moves that could cut costs substantially.

1. Sign up when you should

The initial Medicare enrollment period lasts seven months. It starts three months before the month you turn 65 and ends three months after that month.

If you don’t sign up during the initial seven-month period, you’ll be able to sign up later. But by then, it may be too late to avoid the costly Medicare Part B penalty that could result.

Medicare enrollees are charged a 10% surcharge for a 12-month period in which they are eligible for coverage but fail to enroll. So, for example, right now, the standard Medicare Part B monthly premium is $174.70. But a 12-month delay in your enrollment could cost you $192.17 a month.

And the surcharge doesn’t just apply for a single year, it’s for life. So as the cost of Medicare Part B increases, so do the surcharge and total costs.

2. Sign up for Part A yourself while you still have employer coverage

If you’re covered by an eligible group health insurance plan during the initial Medicare enrollment window, you won’t automatically be penalized with a Part B surcharge for not enrolling then. Instead, you will receive a special enrollment period that begins once you leave your job or your eligible group health coverage ends. And as long as you sign up for Medicare during this time, you can avoid paying more for Part B because of the penalty (you might pay more as a higher earner, but that’s a different situation).

But even if you have eligible group health coverage at age 65, it might pay to enroll in Medicare Part A yourself. Unlike Part B, there’s generally no monthly premium for Part A. That doesn’t mean you won’t face costs like deductibles and coinsurance under Part A, but there’s usually no cost for the hospital coverage itself .

The advantage of enrolling in Medicare Part A only when you already have insurance is that it can serve as secondary coverage to your employer’s plan in the event of a hospital stay. If your primary plan leaves you on the hook for certain costs, they can be picked up or reduced once your Medicare coverage goes into effect.

That said, the only downside to enrolling in Part A is that you’ll have to stop contributing to a health savings account as a Medicare subscriber. This is true whether you sign up for Part A only or Part A plus Part B. Funding one of these accounts can take a good chunk of your income out of taxes, so you’ll need to weigh that loss against the benefit of adding coverage.

3. Enrolling in Medigap as soon as this option becomes available

There are numerous out-of-pocket costs you may face once your Medicare coverage begins. With Part A alone, you’re looking at an inpatient deductible of $1,632 per hospitalization this year.

That’s why it pays to sign up for Medigap, or supplemental insurance, as soon as you can. Medigap could pick up the tab for deductibles and other costs so you’re not forced to dig into your retirement savings every time you need expensive care.

Just as there is an initial enrollment period for Medicare, there is one for Medigap. It lasts six months and starts the first month you’re enrolled in Part B and you’re 65 or older.

During this window, you cannot be denied Medigap coverage because of a pre-existing condition. And you’re more likely to get the best premium rate you’re eligible for.

Like Medicare, you can enroll in Medigap beyond the initial enrollment window. And while you won’t face a late enrollment penalty per se, you may pay more for Medigap if you enroll after that initial six-month period.

The more you know about Medicare, the better equipped you will be to make smart decisions about your enrollment. This could in turn save you serious money in retirement, so do your research while you’re still working and have time to weigh your options.