Medicare premiums can increase with an increase in income

Many retirees and their financial advisers don’t realize that a perfectly reasonable investment decision can wind up costing thousands of dollars in Medicare premiums.The hit could last a year or more, but can often be avoided with proper planning. Ellen Schultz writes about this in the Wall Street Journal. Medicare Part B is medical insurance that covers doctors’ services, outpatient care, physical therapy and some home health care.

 

Since 2007, higher-income beneficiaries have been required to pay an income-adjusted surcharge. In 2010, individuals with income of more than $85,000 a year, and couples with incomes above $170,000, pay an additional amount ranging from $44 to $243 a month per person. The maximum monthly Medicare Part B premium per person is $354 for singles with income above $214,000 and couples with income above $428,000.Medicare premiums are based on “modified adjusted gross income,” which is adjusted gross income—that is, taxable income—and tax-exempt interest income. To determine the Medicare Part B premium, the Social Security Administration uses the recipient’s most recent tax return. In 2010, the premiums are based on returns filed in 2009 for the 2008 tax year. Taxpayers who are planning to exercise stock options or make withdrawals from 401(k)s or other deferred-compensation retirement accounts or  re-balancing a portfolio can bump up income and thus Part B premiums. But the impact can be mitigated with proper planning, such as offsetting gains with losses.  Read about this in the Wall Street Journal.