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Watch Out for This Medicare Part B Trap

MULTIZ321

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Watch Out for this Medicare Part B Trap
By John Grobe/ Retirement/ FedSmith/ fedsmith.com

"If you’re 65 or over and have elected to enroll in Medicare Part B, you need to watch out for Irma. Actually, it’s IRMAA, which is short for Income Related Income Adjustment Amounts.

IRMAA can increase the amount you pay for Medicare Part B based on your income. The higher your income, the more you will pay in Part B premiums.

Your Medicare Part B premium (normally $134 a month for new enrollees in 2017) could be as high as $428.60 per month if your Modified Adjusted Gross Income (MAGI) is above a certain level. MAGI can be higher than your AGI (adjusted gross income), or it could be the same – it won’t be lower...."

medicare.jpg



Richard
 

vacationhopeful

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And so the baby-boomer bubble is modifying Social Security with increasing costs and less benefits.

More retirees ... with less paying workers in the system. Or is it less dollars being collected as a larger population NOT reporting income.
 

Talent312

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And so the baby-boomer bubble is modifying Social Security...

Similar issues, but Social Security and Medicare premiums are two different things.

If your MAGI is less than $85,000 single or $170,000 married, you're not affected.
For most of us, no worries.
 

SmithOp

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Or is it less dollars being collected as a larger population NOT reporting income.

Not sure what you are basing this comment on, there may be more 1099 workers vs W-2 but its all reported, I doubt if the cash economy is changing much.




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VacationForever

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My husband was paying the highest bracket for IRMAA plus additional drug coverage due to high MAGI since he became eligible for Medicare. We sold our business last year and have close to zero income this year. Since Medicare uses income from 2 years prior to calculate, his Medicare B and D cost $504 per month this year. We thought he would be stuck with this for 2017 and 2018 until I read that we could write in to adjust it if we have a valid reason. We did and Medicare dropped his premium to $134, retroactive to Jan 2017. They required him to submit our income tax returns directly to Medicare when we file in 2018, which is fair.

Something to remember if anyone has an income drop.
 

bogey21

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I don't understand the title to this thread. IRMAA is the law. There isn't much you can do about it. In my case I am charged about double the minimum and am thankful that my income is such that I have to. What is to watch out for?

George
 

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I don't understand the title to this thread. IRMAA is the law. There isn't much you can do about it.

Actually, there are things you can do about it. I have been converting regular IRA holdings to Roth accounts. The transfer is a taxable event which causes our MAGI to go up. I have to keep the grand totals under $170K. Additionally, my wife wants to cash in a group of savings bonds that her mother bought years ago. The interest portion is taxable, and THAT will cause MAGI to go up. Finally, if you own stock in a company that gets bought out, you have to claim the capital gains that result from the transaction. (last year CHUBB was bought out by an English concern and renamed "CHUBB"). All these transactions need to be timed properly. Last year, I had to re-characterize (put back) some Roth IRA contributions into the regular IRA to get back below the $170K threshold. Annoying, but necessary.
 

rapmarks

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My husband was paying the highest bracket for IRMAA plus additional drug coverage due to high MAGI since he became eligible for Medicare. We sold our business last year and have close to zero income this year. Since Medicare uses income from 2 years prior to calculate, his Medicare B and D cost $504 per month this year. We thought he would be stuck with this for 2017 and 2018 until I read that we could write in to adjust it if we have a valid reason. We did and Medicare dropped his premium to $134, retroactive to Jan 2017. They required him to submit our income tax returns directly to Medicare when we file in 2018, which is fair.

Something to remember if anyone has an income drop.

You must not be on Medicare yet, because you would be paying that $504 also.


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VacationForever

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You must not be on Medicare yet, because you would be paying that $504 also.


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Yes. I am on Obamacare... with subsidies and cost sharing... only get to ride it for 1 year before the subsidies go away as my husband will start SS and RMD next year. I am so not looking forward to paying full rate until I reach 65. The alternative would be I am dead, so I am glad to be alive.
 

rapmarks

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Yes. I am on Obamacare... with subsidies and cost sharing... only get to ride it for 1 year before the subsidies go away as my husband will start SS and RMD next year. I am so not looking forward to paying full rate until I reach 65. The alternative would be I am dead, so I am glad to be alive.

The alternative does put it in perspective


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I have substantial rollover IRAs and Keogh accounts, and my required minimum distributions will add substantial amounts to my AGI and MAGI. So even though I'll only be moving funds from those accounts to regular taxable investment accounts, one consequence will be a big increase to my Medicare B and D tax costs.
 

VacationForever

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I have substantial rollover IRAs and Keogh accounts, and my required minimum distributions will add substantial amounts to my AGI and MAGI. So even though I'll only be moving funds from those accounts to regular taxable investment accounts, one consequence will be a big increase to my Medicare B and D tax costs.
A problem most people would love to have...
 

Conan

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A problem most people would love to have...

No doubt true, but it's still painful for a married couple age 65+ to pay for healthcare in 2017:

Medicare B and D for two: $12,115
Medicare Supp for two: $4,000
Dental insurance for two: $1,300
Est. drug out-of-pocket: $500
Est. dental and eyeglass out-of-pocket: $2,000

Total: ~$20,000/year
 

VacationForever

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No doubt true, but it's still painful for a married couple age 65+ to pay for healthcare in 2017:

Medicare B and D for two: $12,115
Medicare Supp for two: $4,000
Dental insurance for two: $1,300
Est. drug out-of-pocket: $500
Est. dental and eyeglass out-of-pocket: $2,000

Total: ~$20,000/year

But then you are looking at more than $428K per year in income. Not a bad problem.

In my case, I have to plan for about $16K a year in premium for myself when I edge closer to 64. We do not foresee to ever need to pay more than the $134 per month in medicare premium (under $170K per year in income) unless one of us passes away.
 

isisdave

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I used to think that this was a "rich man's problem" and that paying more for Medicare B shouldn't be a big deal for those with that kind of "income," but Conan's posts reminded me that just moving money from a tax-deferred account counts as "income" and will trigger those higher premiums.

This seems unfair, because if that had been done before being on Medicare, there would be no such consequence. But since those are the rules, people considering converting from traditional to Roth etc. should consider this factor, which is not usually pointed out in those "should I convert my IRA?" articles.
 

Conan

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Conan's posts reminded me that just moving money from a tax-deferred account counts as "income" and will trigger those higher premiums....

And besides Medicare B and D tax surcharges and federal ordinary income tax on the required minimum distributions, there's also additional federal net investment tax, State income tax, and federal alternative minimum tax (nothing to do with tax shelters - - our AMT is based entirely on the State income tax we pay and our federal personal exemptions).
 

VacationForever

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And besides Medicare B and D tax surcharges and federal ordinary income tax on the required minimum distributions, there's also additional federal net investment tax, State income tax, and federal alternative minimum tax (nothing to do with tax shelters - - our AMT is based entirely on the State income tax we pay and our federal personal exemptions).
High state income tax is why we moved to a state without income tax before beginning required minimum distribution...
 
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Brett

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I used to think that this was a "rich man's problem" and that paying more for Medicare B shouldn't be a big deal for those with that kind of "income," but Conan's posts reminded me that just moving money from a tax-deferred account counts as "income" and will trigger those higher premiums.

This seems unfair, because if that had been done before being on Medicare, there would be no such consequence. But since those are the rules, people considering converting from traditional to Roth etc. should consider this factor, which is not usually pointed out in those "should I convert my IRA?" articles.

well it is (mostly) that's why there is a medicare surtax above $250,000 in income but that's scheduled to be repealed in the proposed tax cuts and health care changes. And even with the extra expenses Medicare is going insolvent in 2028 so prepare to be healthy after ten years
 

WinniWoman

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No doubt true, but it's still painful for a married couple age 65+ to pay for healthcare in 2017:

Medicare B and D for two: $12,115
Medicare Supp for two: $4,000
Dental insurance for two: $1,300
Est. drug out-of-pocket: $500
Est. dental and eyeglass out-of-pocket: $2,000

Total: ~$20,000/year


I would skip the dental insurance.
 

VacationForever

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I would skip the dental insurance.

Good point. It is usually something that breaks even / a wash IF not already covered by a Medicare Advantage plan for cleanings per year. Skipping will be a money saver.

After our move, we were relooking at Medigap / Supplement Plan F and Medicare Advantage plans. We started with wanting a Medigap plan F for my husband but because it has been more than 2 years after going on Medicare, he was stuck with all sorts of interviews and requirements for doctor to send in records to the insurer. In the end, they approved it for twice their base/tier 1 rate. Well, we could not justify paying another 6K per year, just for the supplement and additonal drug plan. It turned out that many of our new neighbors and friends love the Medicare Advantage plan that they have here that cost nothing - no premium, no co-pay, most drugs cost 0, free fitness club membership, 2 dental cleanings per year, $50 credit every quarter to buy OTC stuff.. He used to have Kaiser in Ca and stiil had to pay a premium, co-pay, labs and there was no included dental. He is 5 months in this new system and it is as good as Kaiser, better in some ways and not as good in other ways. His whole doctor system is better than my Anthem Blue Cross Blue Shield plan in terms of use of technology and accessibilty to his medical support staff.

We bought dental plans for both of us this year and we are looking at dropping his for next year.
 
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Luanne

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I would skip the dental insurance.
Dh and I dropped dental a couple of years ago. Of course that was the year that I needed to have a wisdom tooth extracted and he had to have several fillings redone. But, most years it doesn't make sense to pay the insurance.
 

Talent312

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Medicare - Not yet 65, but when time comes, will do a Medicare Advantage Plan.
Until then, I have a state employee/retiree plan which is ~$725/mo (incl. drugs)
... reduced by a $150 state subsidy.

DW elected original Medicare w-Supplement Plan F... $134 + $210/mo (BCBS).

Dental - Just retired, I continued our group-dental plan under COBRA - $60/mo.
A private plan (Delta, Humana, BCBS...) would cost 2x that for similar benefits.
So that decision get put off for 18 months.

.
 

carl2591

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A lot of fulltime RV'er and folks that live out in the southern west, go down to Yuma and cross border to Algodone's for dental care, Rx drugs, eye glass and exams etc. The cost is a lot less and quality is as good or better than US doctors.
http://www.dentistsofalgodones.com/index.html

here is a great set of articles by a, shall we say well to do, couple that travels full time in a large motor home.
http://wheelingit.us/2013/01/16/getting-dental-work-in-mexico-part-i-clarifying-myths-facts/

they run buses from phoenix and other areas down there weekly.
 

Carol C

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Good point. It is usually something that breaks even / a wash IF not already covered by a Medicare Advantage plan for cleanings per year. Skipping will be a money saver.

After our move, we were relooking at Medigap / Supplement Plan F and Medicare Advantage plans. We started with wanting a Medigap plan F for my husband but because it has been more than 2 years after going on Medicare, he was stuck with all sorts of interviews and requirements for doctor to send in records to the insurer. In the end, they approved it for twice their base/tier 1 rate. Well, we could not justify paying another 6K per year, just for the supplement and additonal drug plan. It turned out that many of our new neighbors and friends love the Medicare Advantage plan that they have here that cost nothing - no premium, no co-pay, most drugs cost 0, free fitness club membership, 2 dental cleanings per year, $50 credit every quarter to buy OTC stuff.. He used to have Kaiser in Ca and stiil had to pay a premium, co-pay, labs and there was no included dental. He is 5 months in this new system and it is as good as Kaiser, better in some ways and not as good in other ways. His whole doctor system is better than my Anthem Blue Cross Blue Shield plan in terms of use of technology and accessibilty to his medical support staff.

We bought dental plans for both of us this year and we are looking at dropping his for next year.

There are dental supplemental plans that help with the cost of dental...and they include two discounted cleanings/checkups per year. Mine is with Aetna, my dentist is the one who told me about it. I paid $179 for both hubby and I to be on this dental. discount plan for a year. In a year when you need to get real work done, there is considerable out-of-pocket savings. Hubby had to get two bridges in a year along with a crown, and we saved easily a thousand bucks.
 
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