What to Know About Medicare Part B Premiums

With proper planning, you can avoid unnecessary surprises, and hopefully save money on Medicare B premiums

There are many things to look forward to as you contemplate the next chapter of your life; the chapter after full-time work comprised of travel, family, leisure and 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 to $460, per-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? You can 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 payments.  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.

As you prepare for the next chapter in your life that includes Medicare, it’s important to learn about your options, costs, and benefits so you can feel confident in the decisions you make. Understanding how Medicare Part B premiums are determined equips you to plan for or respond to an increase in premiums.

This article is intended for general informational purposes and does not constitute a recommendation of any type. Please seek advice from your tax, legal, and financial professional prior to taking action. Securities Offered through Destiny Capital Securities Corporation, member FINRA/SIPC.

Aaron Leatherwood, CPA, CFP, CWS, MS is a client wealth strategist for Destiny Capital. Aaron builds relationships with his clients by learning about them as well as their families, priorities, concerns, and the impact they want to have on the world. He then partners with his clients to help them achieve their desired outcomes. Learn more about him at http://bit.ly/aaron-leatherwood

Categories: Finance