Being a high-income beneficiary means you will likely pay more for your healthcare costs in retirement. Individuals and couples with higher incomes are assessed an adjustment which ultimately raises your premiums for Parts B and D..
Here are the seven things you should know if you are a high-income beneficiary.
1. You Have a Magic Number That Determines Whether You Will Be Assessed an Adjustment
Your magic number is known as your Modified Adjusted Gross Income (MAGI). The two numbers that make up your magic number can be found on your tax forms. Your tax-exempt interest (line 8b) and your adjusted gross income (line 37) added together equal your MAGI.
If you filed your taxes individually and your magic number is above $85,000, then you are a high-income beneficiary and will pay more for Parts B and D. You are also considered to be a high-income beneficiary if you filed jointly and your magic number is above $170,000.
2. Your Part B Premium Is Dependent Upon Your Magic Number.
Your magic number will land you into one of several income tiers in 2019. While most people pay $135.50 for Medicare Part B, individuals with higher incomes will fall in a higher tier.
High-income beneficiaries pay more than the base premium. Social Security will assess an Income-Related Monthly Adjustment Amount (IRMAA) that is added to the base Part B premium.
Beneficiaries with high incomes can pay anywhere from $54 to $325 more for their Part B premium.
3. There Are Five High-Income Tiers in Medicare.
There is a total of five higher income tiers that the Social Security Administration (SSA) uses to determine your Part B premium. If you are in any tier other than the first one, which is just the base premium, you are considered to be a high-income beneficiary and will pay more for your Part B premium.
High-income tier one includes people who have magic numbers between $85,001 and $107,000 (individually), while high-income tier five includes magic numbers that are $500,000 or more.
You can lookup your income tier and find your estimated premium here.
4. The SSA Uses Your Tax Forms from Two Years Prior.
When you first enroll in Medicare, the SSA will review the most recent tax forms they have on file. Usually, this means they will be looking at your tax forms from two years prior.
This means when you go to calculate your MAGI, be sure to look at the forms you filed two years before your Medicare enrollment date. For example, if you are enrolling in Medicare in 2019, review your 2017 tax forms to estimate your Medicare premiums.
5. Part B Isn’t the Only Part That Is Affected.
Being a high-income beneficiary doesn’t just mean your Part B premium is affected, your Part D premium is affected as well. Where your Part B premium is simply adjusted to higher flat rate, your Part D premium is made up of your regularly plan premium plus your IRMAA.
For example, a beneficiary who is in high-income tier one has an IRMAA of $12.40 that is added to their Part D plan’s premium.
6. You Can File for Reconsideration.
Often, beneficiaries who have a higher Part B premium aren’t making as much as their old tax forms say they do because they have since retired. Fortunately, the SSA reviews your tax forms at the end of each year, so your Part B premium is adjusted to the new correct amount.
However, you don’t have to wait until the end of the year to try and change your higher premium. If you have a decent reason why you shouldn’t be paying a high Part B premium, like the one described above, then you can submit a Request for Reconsideration.
7. Prepare Before You Enroll in Medicare.
Everyone should check their MAGI before it comes time to enroll in Medicare. This will prepare you for any possible higher premiums you may have. If you just assume that you’ll pay the base premium for Part B ($135.50 in 2019) but instead are told you have to pay $189.60 or $270.90, you could run out of savings faster than you anticipated.
Always do your research and educate yourself on what your Medicare will cost before enrolling. By learning your expected costs for Medicare ahead of time, you can put away more in savings to counter the high-premiums.