Every day, about 8,000 people will celebrate their 65th birthday this year. And, while the full retirement age for Social Security is now above 66, those who reach age 65 are automatically eligible for Medicare. The new availability of insurance under the Affordable Care Act has made this less of a triumph, but many boomers have been hanging on, just waiting for Medicare to cover their health care costs.

However, when you're doing retirement planning, you must be aware that Medicare covers only a portion of your retirement health care costs. Supplemental and drug policies add to your health care spending in retirement. And if you don't start out at the right time with the right policies, the increased costs over your lifetime are dramatic.

It's very important to understand all your choices and the sometimes limited time periods in which to make those decisions. At age 65, you are about to approach an intellectual challenge in understanding Medicare that rivals the attention you gave to taking the SAT's for college so many years ago! The time to start studying for this project is at least three months before you reach age 65. Procrastination can be expensive — even if you are still working and covered by an employer plan.

That's why several companies have set up services dedicated to assisting you, although the first place most people start is the official website, Medicare.gov. I think it is the best website the government has created; it's easy to understand and helpful. Start by clicking under "publications" to read the annual "Medicare & You" booklet, which has all the basics. You can also get this book in print from Medicare. Below are some key points — not complete, but important — to help you get an overall view of what you must do as you approach age 65.

The Basics of Medicare

There are actually four "parts" to Medicare.

— Part A is hospital insurance, for which you automatically qualify at age 65. You don't pay a premium for this, but you must enroll.

— Part B covers some, but not all, physician costs, outpatient services and tests. You pay a monthly premium for Medicare Part B, which is typically deducted from your Social Security check. But you can register for Part B at age 65 and pay the premiums monthly by check. Note: the amount of your Medicare Part B premium depends on your income, which is calculated based on your tax return of two years prior! So if you had income of more than $85,000 as a single (or $170,000 as a couple), your premium could be as much as $238 more a month!

— Supplement: Since Medicare does not cover everything, and does not cover all of the costs of the things it does cover, you should purchase a Medicare supplement, or Medigap policy. They are offered by many private insurance companies and come in "categories" each offering a higher degree of coverage. The most basic (and least expensive supplements) cover your deductible under Part A, and your copayments under Part B. Those are costs that can really add up. Some supplements cover the cost of care while temporarily traveling outside the country, something Medicare Part B does not cover. The Medicare.gov website does a good job of explaining and helping you search for supplement policies.

— Part D This is the prescription drug coverage you've heard so much about. With very few exceptions (those covered by Veterans insurance or private employer drug insurance), everyone must sign up for Part D drug coverage. The costs depend on the plan you choose and your income level. And books have been written about its complexity and the need for a computerized search — every year — to find the plan that best covers the drugs you are taking, even if you aren't taking any prescription meds!

— Medicare Advantage: Now if the above isn't complicated enough, there is a way to combine all of these coverages and costs through what is called Medicare Advantage — a sort of combo plan available in many states that covers just about all your potential expenditures. But these plans do limit you to the physicians and hospitals that are part of the plan.

Timing of Medicare

Even if you're still working and covered by an employer's plan, you need to start dealing with Medicare before your 65th birthday. In fact, you have a "window" of three months before and three months after your 65th birthday to enroll if you're not covered by a plan. Failure to do so can lead to expensive enrollment penalties for Part B and Part D — and these penalties in the form of increased premiums can last the rest of your life!

If you're still covered by an employer's plan, you must contact Medicare to coordinate your employer's coverage. And depending on your employer's size, you might be able to postpone enrolling.

One of the most expensive "penalties" you can pay for not paying attention is the cost of your supplement insurance. If you don't apply for a supplement plan within six months of your initial enrollment in Part B, you can be denied coverage from the most comprehensive supplements due to a preexisting condition or have to pay a much higher premium for your supplemental insurance.

Notice, all these penalties may last the rest of your life and impact your health care coverage — just because you didn't know the timing and the rules around your 65th birthday! That's why it pays to pay attention.

And these were just the "highlights" of the issues involved in signing up, or delaying signup, for Medicare. If you have a spouse or children under your employer coverage, the decision is more difficult. If you are using a COBRA policy from a former employer, there are special rules. If you have been covered under a state Medicaid plan, the transition is complex.

That's why you need help! Don't be too proud or too busy to ask.

Help with Medicare Enrollment & Options

As noted above, the Medicare.gov website is user-friendly and helpful. It has search engines to help you find supplement plans and Part D drug plans offered in your area. If you have the patience to spend some time there, you can learn everything you need. And you can directly research and purchase the plans you need online through links from this site.

There are also a number of private companies that have dedicated themselves to helping the burgeoning crop of retiring baby boomers. Websites such as eHealthMedicare.com help you through the process of choosing between Medicare Advantage and traditional Medicare, plus supplements and Part D plans that work together to fill your personal needs. They are compensated by the insurance companies whose policies they are registered to sell, and there is no additional cost to you for their services, which include speaking with one of their licensed agents who will help you select a plan that fits your needs and help you enroll.

Another company, ama.Allsup.com, has expanded from working to establish Social Security disability benefits to advising on Medicare plans. They work with individuals and financial planners, advising them on health care retirement planning. Their fees range from $200 to $800 for their services, which include a needs assessment, plan comparisons and assistance in enrollment.

A Never-Ending Project

It's worth taking the time to learn about the system because you will be living with it — hopefully for a long time. Every year there are certain time periods at the end of the year when you must review your coverage and compare it with the policy coverages and costs for the next year. The Part D drug plans change the covered drugs and the amount they will pay every year — so you must do another comparison each year. And even the standard supplement plans can change price each year, so a new search may yield a bargain.

Happy 65th birthday — and welcome to a new and complicated, but necessary chapter in your life. You've found a new use for all that spare time you gained in retirement. And that's The Savage Truth.

Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5's 4:30 p.m. newscast, and can be reached at www.terrysavage.com. She is the author of the new book, "The New Savage Number: How Much Money Do You Really Need to Retire?" "Terry answers readers' personal finance questions on her blog at www.TerrySavage.com. To find out more about Terry Savage and read her past columns, visit the Creators Syndicate Web page at www.creators.com.