Tax season is over and both the daffodils and the dandelions are blooming in the park I can see out my window.
Time for some retirement planning spring cleaning. Start by tidying up your knowledge and expectations about the cost of Medicare.
Since 2007, higher-earning Medicare recipients have been subject to income-related monthly adjustment amount, or IRMAA. IRMAA charges individual filers who earn more than $85,000 and joint filers who make more than $170,000 an increased amount for Medicare Part B.
While most recipients pay 25 percent of the actual cost of Medicare Part B with general tax revenues covering the rest, higher-income recipients pay between 35 percent and 85 percent of the actual cost. That translates into monthly premiums that range between $104.90 for most people up to $335.70 for individual filers making more than $214,000 and couples earning more than $428,000.
On top of that, the Affordable Care Act added the same percentage surcharges to Part D prescription drug plans. It also froze IRMAA at 2010 levels through 2019. That means that while most people pay the plan premium alone, people who earn at the higher levels pay between $11.60 a month and $66.60 a month additional.
You may think that you aren't going to be affected by this because your income won't be high enough, but you may be surprised -- at least for a year or two. For instance, if you reach retirement and get severance, or your company gives you your accumulated sick time in a lump sum, you may find that your income for at least one year will push you into paying higher Medicare costs.
Social Security outlines some circumstances in which you might be exempt from IRMAA, even though your income would appear to put you in that category:
- You married, divorced or were widowed.
- You stopped working or reduced your work hours.
- You lost income-producing property due to a disaster or other event beyond your control.
- You experienced a cessation, termination or reorganization of an employer's pension plan.
- You received a settlement from an employer or former employer that closed, went bankrupt or was reorganized.
If any of these circumstances apply to you, contact Social Security with paperwork proving your circumstances. When in doubt, appeal anyway. It can't hurt.