There are many things to look forward to as you contemplate the next chapter of your life, the chapter after full-time work: travel, family, leisure, more purposeful work. However, in all of my years offering advice and guidance, I have never heard of planning for Medicare as one of them. But with proper planning, you can avoid unnecessary surprises, and hopefully save money on Medicare B premiums.
The amount of your Medicare Part B premium is based on your Modified Adjusted Gross Income (MAGI). The higher your MAGI, the higher your potential premium. One thing to note about MAGI is that it is not universally applied. However, Adjusted Gross Income (AGI) is. AGI is a line item on your tax return, and everyone computes it using the same formula. The starting point for MAGI is generally AGI; then adjustments are made specific to the particular provision in question. In the case of your Medicare premium, MAGI is your AGI plus tax-exempt interest. To make things a bit more complicated, your MAGI from two years prior is used. For example, to determine your 2019 premiums, your MAGI reported on your 2017 tax return is used. This is repeated each subsequent year. The premiums for Medicare Part B generally range from $135 - $460/month. The increase in the premium is an Income-Related Monthly Adjustment Amount (IRMAA).
Is there anything you can do if you are paying a higher premium? Determine if you are eligible for an exception under a life-changing event. Life-changing events include marriage, divorce, death of your spouse, work stoppage or reduction, loss of income-producing property, loss of pension income, and employer settlement payment. One of the more common life-changing events that we see is work stoppage or reduction. If you work until the age of 65 or later and then retire and file for Medicare, you might pay higher premiums because your MAGI from two prior years (while you were working) is being used to determine your premium. If your MAGI is projected to be lower now that you are retired, you should be able to reduce your Medicare Part B premiums. If you have had a life-changing event and might be eligible for a lower premium, you can fill out Form SSA-44 and file it with the Social Security Administration office.
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