Medicare Enrollment Blunders High Earners Need to Watch Out For

Millions of Americans rely on Medicare to cover healthcare costs, which can be among the highest expenses in retirement.

But the Medicare system can be insanely complex. This can be especially true for high earners, who often must pay more for coverage. But sometimes even making simple mistakes can mean costly penalties. And these penalties can follow you for life.

So it’s important to get Medicare right the first time. To do so, let’s explore some of the most common Medicare mistakes you can run into and how to avoid them.

Overlooking IRMAA

The income-related monthly adjustment amount (IRMAA) is a surcharge that high earners must pay on their Medicare Part B and Part D premiums.

Whether it applies to you depends on your modified adjusted gross income from a two-year lookback period. In other words, your 2024 figure affects your 2026 Medicare premiums.

You cross into income-related monthly adjustment amount territory in 2026 if your 2024 modified adjusted gross income breached certain thresholds. Those thresholds start at $109,000 for single filers and $218,000 for couples filing jointly.

Income-related monthly adjustment amount can boost Part B premiums to $689.90 per month and Part D premiums to up to an extra $91 per month.

Many events can unexpectedly push you into that territory. These include large Roth conversions, capital gains distributions, large bonuses, real estate sales, inheritances, and more.

So you need to strategically plan around these and other financial events before turning age 63. You’re generally eligible for Medicare once you reach age 65.

Luckily, there are many ways to avoid the income-related monthly adjustment amount hit. These include maximizing pre-tax retirement accounts like traditional individual retirement accounts and 401(k)s.

Ignoring Medicare Late-Enrollment Penalties

If you’ve received Social Security or Railroad Retirement Board benefits for at least four months before turning 65, you’re usually automatically enrolled in Medicare Part A and Part B. Combined, this is also known as Original Medicare.

But outside this exception, you would have a seven-month initial enrollment period that opens three months before the month you turn 65 and closes three months after.

If you fail to enroll within this window and don’t have qualifying coverage, you can face late-enrollment penalties that can last a lifetime.

If you don’t qualify for premium-free Part A and fail to enroll within your initial enrollment period, your late-enrollment penalty would be 10 percent of the Part A premium. The penalty applies for twice the number of years you were eligible and didn’t enroll. So that means enrolling 2 years late translates to 4 years of higher premiums.

Moreover, the Part B late enrollment penalty is 10 percent of the standard premium for every full 12 months you went without coverage. This will be in place for as long as you have Medicare.

The standard Medicare Part B premium for 2026 is $202.90 per month. But delaying enrollment for 36 months would trigger a 30 percent surcharge that would bring your costs to $263.77 per month.

But there’s also a late-enrollment penalty for Medicare Part D, which covers prescription drugs. You can get this coverage as a stand-alone plan or through a Medicare Advantage Plan.

You may enroll in Part D during your initial enrollment period, the annual enrollment period (Oct. 15–Dec. 7), or through a special enrollment period.

But if you go more than 63 consecutive days without creditable prescription drug coverage after you first become eligible, you’ll face a late-enrollment penalty equal to 1 percent of the national base beneficiary premium, which is $38.99 in 2026, for every month you went without it. This applies for as long as you have Medicare.

Overlooking Medigap Policies

Medigap policies can cover certain out-of-pocket costs that Medicare doesn’t. But timing is critical when it comes to costs.

You can apply for a Medigap policy during your initial enrollment period. For those who enroll in Part A when they turn 65 but delay Part B, the Medigap open enrollment period begins once they enroll in Part B.

During this time frame, insurers must sell you a policy at a standard rate regardless of your health history. But after that window closes, insurers can charge you more or even deny you based on pre-existing medical conditions.

Contributing to a Health Savings Account

A health savings account can be a highly efficient way to invest for future medical expenses and use funds to cover them tax-free.

But once you’re enrolled in Medicare, you and your employer are no longer allowed to contribute to your health savings account. If you ignore this rule, you’d face severe tax penalties.

However, you can still use the funds in your existing health savings account. These can cover qualified medical expenses tax-free, as well as Medicare premiums. You can also use the funds to cover Medicare-related expenses such as deductibles, copays, and coinsurance. But keep in mind, you can’t use health savings account funds to pay for Medigap premiums without facing taxes.

The Bottom Line

Medicare helps millions of Americans. But high earners may owe more through the income-related monthly adjustment amount. This is why it’s important to strategically plan around any major windfall or tax event when you’re age 63. You should also enroll in the different parts of Medicare during applicable enrollment periods to avoid penalties that can last a lifetime.

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