Q&A: IRMAA is not your friend

Dear Liz: My wife and I retired in 2019 and ran into IRMAA — Medicare’s income-related monthly adjustment amount, which increased our monthly premiums. I thought I’d done such a good job budgeting for retirement but missed this. A lot of couples have their best income years at the end of their career and then get blindsided by the cost of Medicare and the adjustment based on their previous income. I will say that the folks at the local Social Security office were very helpful, and they supplied us with forms for an exception based on our new income.

Answer: IRMAA can boost premiums substantially for singles with yearly income above $87,000 and married couples with incomes above $174,000. The increases for Medicare Part B, which covers doctor’s visits, range from $57.80 to $347 a person per month. The surcharges for Part D, which pays for prescription drugs, start at $12.20 and top out at $76.40 a person per month.

The adjustments are based on your income two years prior (so 2018 income determines 2020 premiums). You can appeal the increase if you’ve experienced a life-changing event. Retirement with a subsequent drop in income can be one such event. So can other work stoppages or reductions, marriage or divorce, the death of a spouse, loss of income-producing property or loss of pension income.

Even without IRMAA, healthcare costs can catch many newly retired people by surprise, especially if they previously had generous employer-subsidized coverage. Medicare doesn’t cover everything; it has deductibles and co-pays in addition to premiums, and excludes most vision, hearing and dental expenses.

How much you pay out of pocket depends on your health, where you live and what supplemental coverage you buy. A study by Vanguard and Mercer Health and Benefits estimated that a typical 65-year-old woman in 2018 could expect to pay $5,200, but her costs could range from $3,000 to $26,200. (The researchers say a 65-year-old man’s costs are typically about 3% lower.)

Monday’s need-to-know money news

Today’s top story: What the government shutdown means for home loans. Also in the news: How to stay afloat financially during the shutdown, how Medicare premiums could be the key to itemizing your taxes, and how to start investing right now.

What the Government Shutdown Means for Home Loans
Prepare for delays.

How to Stay Afloat Financially in a Federal Shutdown
Get ready to spend some time on the phone.

How Medicare premiums could be the key to itemizing your taxes — and saving money
Your premiums could be deductable.

How (and Why) to Start Investing Right Now
The sooner the better.

Tuesday’s need-to-know money news

shutterstock_62636899Today’s top story: Getting your credit ready for holiday shopping. Also in the news: Keeping your Social Security plan on track despite higher Medicare premiums, 3 points to add to your year-end financial checklist, and shopping tricks to make your budget last longer.

How to Get Your Credit Ready for Holiday Shopping
And make January bills a bit less painful.

Don’t let higher Medicare premiums derail your Social Security plan
Keeping your plan on track.

Add these 3 points to your year-end financial checklist
Three more to-dos.

Smart Shopping Tricks to Make Your Budget Last All Month
Stretching your dollar.

The 10 Best States To Enjoy An Early Retirement
Is your state one of them?

Q&A: Medicare premiums

Dear Liz: I wanted to comment on the person who was wondering why her multimillionaire friend receives less Social Security. One reason could be that higher-income people pay more for Medicare, the health insurance program for people 65 and older. Instead of the standard $104 a month that most people pay, my wife and I pay about $375 each per month for Parts B and D. So if the person writing to you is thinking about net Social Security checks, Medicare would make quite a difference.

Answer: That’s a very good possibility. Some people don’t make the distinction between Social Security and Medicare. They’re separate government programs, but Medicare premiums are typically deducted from Social Security payments.