Medicare Sign-Up Rules

You are eligible for Medicare at 65, even if your normal retirement age for full Social Security benefits is later. (In 2010, the normal retirement age is 66.) You should sign up for Medicare Part A, which covers hospitalization costs, when you reach age 65. It's free. Enroll even if you continue to work and don't plan to sign up for Part B (the part of Medicare that covers doctors' visits and outpatient services), for which you must pay a monthly premium.

The initial enrollment period for Medicare Part B runs for seven months, starting three months before your birthday month and continuing for three months afterward. You can now sign up online -- go to www.socialsecurity.gov and click on “Retirement/Medicare” or contact the Social Security Administration (800-772-1213).

If you miss the seven-month sign-up window, you'll have to wait until the next general enrollment period, which runs from January 1 to March 31 each year, for benefits beginning the following July 1. You'll incur a 10% penalty for each year you delay beyond your initial enrollment period. The surcharge will be added to your monthly Part B premium, which is usually deducted from your Social Security benefits. If you are not yet collecting Social Security, you'll pay your Part B premium directly.

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Special enrollment rules apply if you're eligible for Medicare and still on the job. If you have health insurance through your employer or your spouse's employer, you aren't subject to the 10% late-enrollment penalty as long as you sign up for Part B within eight months of losing that coverage. Similarly, if you have employer-provided prescription-drug coverage, you can avoid the late-enrollment penalty for Part D. If you miss the initial seven-month enrollment period, you can sign up for prescription-drug coverage during the last six weeks of 2010 for benefits beginning January 1.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.