Medicare is likely one of the most valuable assets you have in retirement, yet it comes with a rulebook so complex that even financial pros sometimes get tripped up. The stakes are high: a single missed deadline or misunderstood rule can lead to lifetime penalties, coverage gaps, or surprise medical bills totaling thousands of dollars.

For 2026, the landscape has shifted again. With the standard Part B premium rising to $202.90 per month and new rules for prescription drug coverage, “setting and forgetting” your healthcare plan is no longer an option. Whether you are approaching 65 or have been enrolled for years, avoiding these common pitfalls is the surest way to protect your retirement savings.

Mistake #1: Thinking COBRA Counts as “Creditable Coverage”

This is arguably the most dangerous and expensive mistake new retirees make. When you leave your job, you might elect COBRA to keep your employer’s health insurance for up to 18 months. You might think, “I have health insurance, so I don’t need to sign up for Medicare Part B yet.”

This is false.

Medicare does not consider COBRA to be “creditable coverage” for Part B. If you are 65 or older and lose your job-based insurance, you have an 8-month Special Enrollment Period (SEP) to sign up for Medicare Part B. This clock starts the month your employment ends—not when your COBRA coverage ends.

If you wait until your COBRA runs out (after that 8-month window), you will face:

• A Lifetime Penalty: Your Part B premium will go up by 10% for every full 12-month period you delayed.
• A Coverage Gap: You may have to wait until the General Enrollment Period (January 1 – March 31) to sign up, leaving you uninsured for months.

Mistake #2: Missing Your Initial Enrollment Period (IEP)

If you are turning 65 and don’t have coverage from a current employer (yours or a spouse’s), you have a 7-month window to sign up for Medicare. This is called your Initial Enrollment Period (IEP).

It works like this:

• 3 months before your birthday month
• Your birthday month
• 3 months after your birthday month

If you miss this window, you can’t just sign up whenever you want. You will likely have to wait for the General Enrollment Period, which runs from January 1 to March 31 each year, with coverage starting the month after you sign up. Plus, you’ll get hit with that 10% permanent penalty on your Part B premiums for every year you were late.

Example: If you delay enrollment for two years, you could pay a 20% penalty every single month for the rest of your life. With the 2026 standard premium at $202.90, that’s an extra $40+ per month—forever.

Mistake #3: Contributing to an HSA After Applying for Medicare

Health Savings Accounts (HSAs) are fantastic tools for retirement, but they don’t mix with Medicare. Once you enroll in any part of Medicare (Part A or Part B), you are no longer eligible to contribute to an HSA.

The Hidden Trap: The “6-Month Lookback”
If you delay enrolling in Medicare until after age 65, coverage for Part A is retroactive for up to 6 months. This means if you apply for Medicare at age 66, your Part A coverage legally started 6 months ago.

If you contributed to your HSA during those retroactive 6 months, the IRS considers those “excess contributions.” You will be subject to income tax on that money plus a 6% excise tax penalty.

Mistake #4: Not Checking Your Hospital Status (“Observation” Trap)

You can spend three days in a hospital bed, eating hospital food and seeing doctors, and still be considered an “outpatient” under Observation Status.

Why does this matter? Because Medicare Part A only pays for skilled nursing facility (rehab) care if you have had a qualifying 3-day inpatient hospital stay. Observation days do not count toward this 3-day rule.

If you are discharged to a rehab center after an “observation” stay, Medicare won’t pay a dime. You could be stuck with a bill for $10,000 or more for your nursing home stay.

What to do: While you or a loved one are in the hospital, ask the doctor or case manager every single day: “Am I admitted as an inpatient, or am I under observation?” If you are under observation, ask if the doctor can formally admit you, or be prepared for out-of-pocket costs for rehab.

Mistake #5: Assuming Your Employer Drug Plan is Still “Creditable” in 2026

This is a new and critical warning for 2026. Medicare requires you to have “creditable” prescription drug coverage—meaning your plan is at least as good as the standard Medicare Part D plan. If you go 63 days without it, you face a permanent Part D late enrollment penalty.

The 2026 Change: Due to the Inflation Reduction Act, the standard Medicare Part D plan has improved significantly (including a new $2,000 out-of-pocket cap for 2025/2026). As a result, the bar for “creditable coverage” has been raised. Many employer plans that qualified as “creditable” in the past may no longer meet the stricter 2026 standards.

How to Protect Yourself:

• Every September, your employer must send you a “Notice of Creditable Coverage.” Read it.
• If your employer plan is no longer creditable, you must enroll in a Medicare Part D plan during the Open Enrollment Period (Oct 15 – Dec 7) to avoid future penalties.

Mistake #6: Missing the Medigap Open Enrollment Window

Medicare Supplement (Medigap) plans cover the “gaps” in Original Medicare, such as the 20% coinsurance you would otherwise pay for doctor visits and chemotherapy.

The golden window to buy a Medigap plan is the 6-month period that starts the month you are 65 and enrolled in Part B. During this time, you have a “guaranteed issue right.” Insurance companies cannot deny you coverage or charge you more due to pre-existing health conditions.

If you miss this window and try to buy a policy later, companies can medically underwrite you. They can charge you higher premiums or deny you coverage altogether based on your health history.

“The biggest shock for many seniors is realizing they can’t just switch to a Medigap plan whenever they want. Once that initial window closes, your health usually determines your eligibility.” — Expert Note from EasySeniorsClub

Mistake #7: Being Blindsided by IRMAA Surcharges

Medicare isn’t the same price for everyone. If you have a higher income, you will pay an extra surcharge on your Part B and Part D premiums, known as the Income-Related Monthly Adjustment Amount (IRMAA).

Medicare uses your tax return from two years prior to determine your premium. For 2026, they are looking at your 2024 tax return.

2026 IRMAA Thresholds (Verified):

• Individuals: Surcharges apply if Modified Adjusted Gross Income (MAGI) is over $109,000.
• Married Couples: Surcharges apply if MAGI is over $218,000.

If you sold a home, converted a Roth IRA, or cashed out investments in 2024, it could spike your income and trigger this surcharge. However, if you had a life-changing event (like retirement, divorce, or death of a spouse) that reduced your income since then, you can file form SSA-44 to request a recalculation.

Mistake #8: Putting Your Plan on “Auto-Pilot” During Open Enrollment

It’s tempting to ignore the mountain of mail you get during the Annual Enrollment Period (October 15 – December 7). But failing to review your plan is a costly error.

Insurance companies change their plans every year. For 2026, verify these details:

• Formularies: Did your plan drop one of your expensive medications from its covered list?
• Networks: Is your doctor or local hospital still in-network?
• Premiums & Deductibles: The standard Part B deductible for 2026 is $283. Ensure your total out-of-pocket costs still make sense for your budget.

According to the Kaiser Family Foundation, nearly 70% of Medicare beneficiaries do not compare plans during open enrollment, often overpaying by hundreds of dollars a year.

Final Thoughts

Medicare is a powerful tool for protecting your health and wealth, but it rewards those who pay attention to the details. You don’t need to become a scholar on government regulations, but avoiding these eight specific mistakes will put you far ahead of the curve.

Take a moment today to check your current enrollment status, review your employer’s drug coverage notice, or mark your calendar for the next enrollment window. A small amount of proactive planning now can save you thousands in avoided penalties and medical bills later.

This article provides general financial education and information only. Everyone’s financial situation is unique—what works for others may not work for you. For personalized advice tailored to your retirement needs, consider consulting a qualified financial professional such as a CFP or CPA.

Last updated: February 2026. Benefit amounts, tax rules, and program details change annually—verify current figures with official government sources like Medicare.gov and SSA.gov.