Medicare Par B Premiums

[gk10002000]

I was not aware that Medicare Part B premiums are based on previous last 2 years of AGI, says an article I was reading today.  Too lazy to go look into the details but as I am 61 and able to retire and will have all sorts of options about converting my traditional IRA to Roth, and setting what my AGI could be, not to mention taking some engineering contracts if I get bored, it seemed like an interesting topic.

[SpokaneAl]

That is true if you are a high income earner.

 

“If you must pay higher premiums, we use a sliding scale to make the adjustments, based on your modified adjusted gross income (MAGI). ... If you file your taxes as “married, filing jointly” and your MAGI is greater than $170,000, you'll pay higher premiums for your Part B and Medicare prescription drug coverage.”

 

 

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[SpokaneAl]

Also, if you wish to convert your traditional IRA to a Roth, you can do that at any time, or over time - you do not need to wait until you retire.


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[Langsuan Man]

Here is the IRMAA ( income related monthly adjustment amount) chart for 2018 and a chart showing how your MAGI (Modified adjusted gross income) is determined :

 

 

 

[gk10002000]

3 hours ago, SpokaneAl said:

Also, if you wish to convert your traditional IRA to a Roth, you can do that at any time, or over time - you do not need to wait until you retire.


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Oh yes, I am well aware of the IRA rules.  I make plenty of money now so I won't be converting anything until later years when my income is low.

[gk10002000]

3 hours ago, SpokaneAl said:

That is true if you are a high income earner.

 

“If you must pay higher premiums, we use a sliding scale to make the adjustments, based on your modified adjusted gross income (MAGI). ... If you file your taxes as “married, filing jointly” and your MAGI is greater than $170,000, you'll pay higher premiums for your Part B and Medicare prescription drug coverage.”

 

 

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Yes I know that.  But the article I read used the statement to the effect that when one starts Medicare the payments, presumably she meant the initial payments are based on previous 2 years AGI.  She didn't use MAGI which of course hints that the article was a bit off from the beginning. 

 

Anyway, I never heard of anything about two years averaging or any other calculation that uses 2 years for anything

[sfokevin]

While you can retire early at 62... Medicare eligibility starts at 65 

[SpokaneAl]

While you can retire early at 62... Medicare eligibility starts at 65 

Why is that sad?


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[sfokevin]

3 minutes ago, SpokaneAl said:

 

Why is that sad?


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Because if you retire from your employer at 62 you must find your own private insurance from 62-65... and with the AFCA being systematicly destroyed by the present administration finding affordable insurance is almost impossible for someone that age... 

[SpokaneAl]

Because if you retire from your employer at 62 you must find your own private insurance from 62-65... and with the AFCA being systematicly destroyed by the present administration finding affordable insurance is almost impossible for someone that age... 

 

If you choose to retire early, any expenses must be calculated as best as possible, and planned for. If the numbers don’t work, don’t retire early.

 

 

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[sfokevin]

1 hour ago, SpokaneAl said:

 

If you choose to retire early, any expenses must be calculated as best as possible, and planned for. If the numbers don’t work, don’t retire early.

 

 

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That will put a smile on someone’s face.. 

 

[Langsuan Man]

Even if you retire at 66 you will still have to pay your Medicare Part B premiums starting at 65 or pay the penalty for obtaining Part B "late" .  You will have to pay quarterly, until the premium can be automatically taken out of your social security payment  

 

They never changed the Medicare age when they upped the full retirement (SS) age 

[SpokaneAl]

Even if you retire at 66 you will still have to pay your Medicare Part B premiums starting at 65 or pay the penalty for obtaining Part B "late" .  You will have to pay quarterly, until the premium can be automatically taken out of your social security payment  

 

They never changed the Medicare age when they upped the full retirement (SS) age 

 

I did not begin drawing social security until I was 66.5 years old and, as a result, at 65 began paying my Medicare Part B monthly through auto debits from my checking account until I drew social security.

 

 

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[mania]

50 minutes ago, Langsuan Man said:

Even if you retire at 66 you will still have to pay your Medicare Part B premiums starting at 65 or pay the penalty for obtaining Part B "late" . 

You do not have to take Part B now or later it is your choice

[SpokaneAl]

You do not have to take Part B now or later it is your choice

Delaying will cost you.

“Those who do not sign up for Medicare Part B when they're first eligible and don't qualify for a Special Enrollment Period may be subject to a late enrollment penalty. This could mean paying a 10% higher monthly premium for every 12-month period that you were eligible for Part B but didn't enroll.”


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[mania]

1 hour ago, SpokaneAl said:

 

Delaying will cost you.

“Those who do not sign up for Medicare Part B when they're first eligible and don't qualify for a Special Enrollment Period may be subject to a late enrollment penalty. This could mean paying a 10% higher monthly premium for every 12-month period that you were eligible for Part B but didn't enroll.”


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Unless of course you plan to never enroll is what I am saying

 

It is not mandatory

 

[SpokaneAl]

Unless of course you plan to never enroll is what I am saying
 
It is not mandatory
 

That is true.


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[JimGant]

Quote

I was not aware that Medicare Part B premiums are based on previous last 2 years of AGI

It's not. It's based on your tax return 2 years back. Thus, your 2018 premiums are based on your 2016 AGI, as modified by those elements shown in the chart provided by Langsuan Man. If your MAGI is above the thresholds indicated, you'll get correspondence from the SSA folks explaining their numbers -- and giving you an opportunity to disagree.

See this article about how 'life changing events' since 2 years ago might successfully argue to reduce your premium:

https://health.usnews.com/health-news/medicare/articles/2014/11/13/how-high-income-earners-can-avoid-surprises-on-medicare-premiums

 

Edited January 15, 2018 by JimGant

[mania]

24 minutes ago, JimGant said:

It's not. It's based on your tax return 2 years back. Thus, your 2018 premiums are based on your 2016 AGI, as modified by those elements shown in the chart provided by Langsuan Man.

 

Even if you had no income for previous years & using the chart Langsuan posted... $134/month is still the minimum yes?

Edited January 15, 2018 by mania

[ubonjoe]

31 minutes ago, mania said:

Even if you had no income for previous years & using the chart Langsuan posted... $134/month is still the minimum yes?

Still $134 according to this post in another topic.

 

[SpokaneAl]

Still $134 according to this post in another topic.[/url]     

 

 The cost of Medicare Part B depends on whether one is drawing social security or not. If one is drawing social security the hold harmless clause has kept the part B premiums artificially low because any premium increase cannot result in a social security recipient’s benefits to decrease as a result. 

 

However, if one is enrolled in Medicare Part B and not drawing social security, then those part B premiums were allowed to rise.

 

The result has been a disconnect between the two groups of Part B enrollees, with non social security recipients paying more for Part B coverage than enrolled social security recipients.

 

With the most recent rise in social security benefits, much, if not all of that increase in benefits were eaten up by part B premium increases.

 

“The standard Part B premium amount in 2018 will be $134 (or higher depending on your income). However, some people who get Social Security benefits pay less than this amount ($130 on average).”

 

 

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[gk10002000]

18 hours ago, JimGant said:

It's not. It's based on your tax return 2 years back. Thus, your 2018 premiums are based on your 2016 AGI, as modified by those elements shown in the chart provided by Langsuan Man. If your MAGI is above the thresholds indicated, you'll get correspondence from the SSA folks explaining their numbers -- and giving you an opportunity to disagree.

See this article about how 'life changing events' since 2 years ago might successfully argue to reduce your premium:

https://health.usnews.com/health-news/medicare/articles/2014/11/13/how-high-income-earners-can-avoid-surprises-on-medicare-premium

 

Great article link, thanks:  That pretty much puts a firm date on my retirement.  If I don't punch out this year, I certainly will 2 years from now when I a 63 and I will check the dates to make sure it is two tax return years from when I hit 65.   I make a lot with Northrop and under this two year thing I would be way over the income thresholds.  Do they ever lower your premiums as time goes on and one is retired and not making that much?  It really isn't a life changing event, well I guess a job going away is , but I would hope the system just kind of checks your returns? 

 

" The federal government looks at the modified adjusted gross income in the latest returns filed with the Internal Revenue Service (typically two years back) to determine if you must pay an income-related premium. "

[Langsuan Man]

48 minutes ago, gk10002000 said:

Do they ever lower your premiums as time goes on and one is retired and not making that much?

Yes, they recalculate every year and notify you of the decision amount

[gk10002000]

The interesting kicker here is my MAGI.  I get a fair amount of tax free income from my regular brokerage account that over the years I put a lot into tax free municipal bonds, municipal ETFs etc.  The MAGI calculations include those.  MAGI is also used for determining VA medical benefits.  The system is making me think of more ways to re-allocate my portfolio.  In any case it looks like December 2019 is my retirement date.  That gets me 3 years with the company so I can keep their 401k contributions, and will give me two full tax years before I am 65.  Although the higher medicare premiums aren't really a big factor, but all things being equal a little planning can benefit me.

 

Thanks everybody.

[JimGant]

Quote

Do they ever lower your premiums as time goes on and one is retired and not making that much?

Only if you fall below those MAGI triggers, after having been above them. But if you're just a poor married couple, with a MAGI always below $170,000 (for now), you still aren't gonna go below $134 base, even if you don't file a tax return 'cause you're broke. And that base $134 certainly will rise in the future.

[Langsuan Man]

2 hours ago, gk10002000 said:

all things being equal a little planning can benefit me.

You are lucky that you are finding out about MAGI now

 

I paid a CPA for a consult on how I could reduce my tax bill from my IRA's and his suggestion was to start withdrawing before I hit Required Minimum Distribution.  Unfortunately he failed to mention that my Tax free municipals were not tax exempt as far as Medicare / Social Security was concerned. 

 

This despite having my portfolio on hand so I was hit with IRMAA right off the bat 

[gk10002000]

On 1/16/2018 at 12:38 AM, Langsuan Man said:

You are lucky that you are finding out about MAGI now

 

I paid a CPA for a consult on how I could reduce my tax bill from my IRA's and his suggestion was to start withdrawing before I hit Required Minimum Distribution.  Unfortunately he failed to mention that my Tax free municipals were not tax exempt as far as Medicare / Social Security was concerned. 

 

This despite having my portfolio on hand so I was hit with IRMAA right off the bat 

Yeah.  I was lucky to have some good counsel and advice over the years.  And way back when I was in the Air Force I was the assistant tax advisor for our group.  I am far from an expert but I learned the basics.  And my portfolio has a lot of tax free muni bonds, ETFs and funds.   The interesting thing about MAGI is how common it is but rarely mentioned except in the fine print.  How much of your social security is taxed or not, whether you are eligible for VA medical benefits or not or co pays, Obamacare uses the MAGI but you won't find that on the front page of most "expert" articles.