The penalty of signing up late for Medicare

Q: When I turned 65, I did not join Medicare. Later on I was encouraged to sign up and did so in 1987. Today, I receive $851 a month in Social Security. But $97 is deducted for Medicare. I am told that includes a penalty and that this deduction will go on forever. Is that correct? I thought I had paid my "dues" all these years for Social Security.
Name withheld, New Port Richey, Fla.

A: Unfortunately, if you do not sign up for Medicare when you turn 65, you can be subject to penalties (surcharges) that will continue over your lifetime. Monthly premiums increase 10 percent for each year that you did not take Medicare after reaching 65.

But there is one important exception: If you continued to work past age 65 and received insurance through an employer-sponsored group health plan, you aren't required to sign up for Medicare until you leave your job. Unless that exemption applies to you, a Social Security spokesperson says, you will continue to pay the surcharge.

Q: What are your thoughts on home mortgages? A friend believes in carrying them as long as possible. I'm of the "old school" that dislikes debt. I am currently seeking a lower-interest-rate loan and I want to stay with a 15-year mortgage.
D.M., Portland, Ore.

A: While it's usually not advisable to carry a mortgage during your retirement years, some experts have reasons for keeping a mortgage going during your working years.

Ric Edelman, a financial planner in northern Virginia, says that with mortgage rates now so low, it makes sense to "lock in" a mortgage for many years.

Also, having a mortgage lets you use the 1040 "long form" for your taxes, which opens up possible interest deductions that you may not get with a standard deduction on the short form.

As far as considering a 15-year mortgage vs. a 30-year mortgage, Mr. Edelman prefers the longer time period, even though mortgage bankers often argue that you'll own your home in half the time and save big bucks in interest.

But if you invest the extra cash you would have paid monthly for the 15-year mortgage, you'll be able to build a hefty cash balance for emergencies or other contingencies. At the end of the 15-year period, you could always pay off the mortgage, he says. But even then, Edelman says he would "keep the cash out of the house."

Still, a 15-year mortgage may make sense for you, depending on your age, work situation, and personal distaste for debt.