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Q&A: Avoiding Medicare sign-up penalties

September 16, 2019 By Liz Weston

Dear Liz: Someone recently asked you if signing up for Medicare is mandatory. Your answer implied no, one does not have to sign up at 65. However, it is my understanding that if a person does not enroll when first eligible, they will be hit with large penalties on their Medicare premiums if they sign up later. Am I missing something?

Answer: Not at all. That answer was too short and should have mentioned the potentially large, permanent penalties most people face if they fail to sign up for Medicare Part B and Part D on time.

To review: Medicare is the government-run healthcare system for people 65 and older. Part A, which covers hospital care, is free. Medicare Part B, which covers doctor’s visits, and Part D, which covers prescriptions, typically require people to pay premiums. Many people also buy Medigap policies to cover what Medicare doesn’t, or opt for Medicare Part C. Part C, also known as Medicare Advantage, is an all-in-one option that includes everything covered by Part A and Part B and may include other benefits.

There’s a seven-month initial enrollment period that includes the month you turn 65 as well as the three months before and three months after.

People who don’t sign up when they’re first eligible for Part B usually face a penalty that increases their monthly cost by 10% of the standard premium for each full 12-month period they delay. For Part D, the penalty is 1% of the “national base beneficiary premium” ($33.19 in 2019) times the number of full months the person was uncovered.

People who fail to enroll on time also could be stuck without insurance for several months because they may have to wait until the general enrollment period (Jan. 1 to March 31) to enroll.

People typically can avoid these penalties if they have qualifying healthcare coverage through a union or an employer (their own or a spouse’s). When that coverage ends, though, they must sign up within eight months or face the penalties. Also, they might not avoid the penalties if their employer-provided coverage becomes secondary to Medicare at 65, which can happen if the company employs fewer than 20 workers. Anyone counting on union or employer coverage to avoid penalties should check with the company’s human resources department and with Medicare to make sure they’re covered.

The original letter writer had no income to pay Medicare premiums, so the answer also should have included the information that Medicaid — the government healthcare program for the poor — might help pay the premiums. People in this situation should contact the Medicaid office in their state. (Medicaid is known as Medi-Cal in California.)

Filed Under: Medicare, Q&A Tagged With: follow up, Medicare, penalties, q&a, Social Security

Friday’s need-to-know money news

September 13, 2019 By Liz Weston

Today’s top story: Decode your credit card’s fine print like a pro. Also in the news: How to turn your upside-down car loan right-side up, a handy trick to help you save more for your next vacation, and what to do if your credit score drops.

Decode Your Credit Card’s Fine Print Like a Pro
Understanding the small type.

Is Your Car Loan Upside-Down? How to Steer Back to Safety
Don’t get pulled off the road.

Try this handy trick to help you save more for your next vacation
It’s all in the name.

What to Do if Your Credit Score Drops
Make sure there isn’t a security issue.

Filed Under: Liz's Blog Tagged With: car loans, credit card terms, Credit Score, tips, vacation savings

Thursday’s need-to-know money news

September 12, 2019 By Liz Weston

Today’s top story: Moving to escape taxes? Make sure it’s a clean break. Also in the news: 4 smart ways to split bills with friends while traveling abroad, 5 auto-buying tips from a former undercover car salesman, and 7 tips for becoming an ethical shopper.

Moving to Escape Taxes? Make Sure It’s a Clean Break
You could face a residency audit.

4 Smart Ways to Split Bills With Friends While Traveling Abroad
Thinking outside the app box.

5 auto-buying tips from a former undercover car salesman
Don’t get taken for a ride.

7 tips for becoming an ethical shopper
Finding companies that align with your values.

Filed Under: Liz's Blog Tagged With: auto-buying tips, ethical shopping, relocating, residency audit, Taxes, traveling abroad with friends

Wednesday’s need-to-know money news

September 11, 2019 By Liz Weston

Today’s top story: What to do if you lose your credit card. Also in the news: Chime and Varo launch free programs to pay account overdrafts, half of student loan borrowers fear they’ll be in debt forever, and why you should never spend the money a bank accidentally deposits into your account.

What to Do If You Lose Your Credit Card
Don’t panic, but act quickly.

Chime, Varo Launch Free Programs to Pay Account Overdrafts
New programs from the mobile banks.

Half of student loan borrowers worry they’ll be in debt forever, study finds
Graduates have major financial regrets.

If the Bank Accidentally Deposits Money in Your Account, Don’t Spend It
Fight the temptation.

Filed Under: Liz's Blog Tagged With: accidental deposits, Chime, Credit Cards, financial regrets, lost credit card, overdraft fees, student loan borrowers, Student Loans, Varo

Tuesday’s need-to-know money news

September 10, 2019 By Liz Weston

Today’s top story: How to make living in a new place a reality. Also in the news: How one couple paid off $300k of debt in three years, what workers can learn from retirees’ regrets, and the average FICO score hits an all-time high.

Dreaming of Living in a New Place? Here’s How to Make It a Reality
One step at a time.

How I Ditched Debt: Small Wins Help Achieve a Big Dream
How one couple paid off over $300K in three years.

What Workers Can Learn From Retirees’ Regrets: Save More Now
The sooner, the better.

Average FICO score hits all-time high
The nation’s average score is now 706.

Filed Under: Liz's Blog Tagged With: debt diary, FICO scores, moving, real estate, Retirement, retirement savings, tips

Moving to escape taxes? Make it a clean break

September 10, 2019 By Liz Weston

Breaking up can be hard to do if the other party doesn’t want to let you go. People who move out of high-tax states may learn this the hard way — through a residency audit.

States such as New York, California and Illinois use the audits to claim that your recent interstate move was just a tax dodge and that you still owe their state income taxes. Proving you’ve actually moved and plan to make the new place your permanent home — yes, the burden of proof is on you in a residency audit — often requires far more than flashing your new driver’s license or spending a certain number of days outside the old state. In my latest for the Associated Press, how to prepare for a residency audit.

Filed Under: Liz's Blog Tagged With: moving, residency audit, Taxes

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