How to Avoid a Sudden Increase in Medicare Costs
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If you’re married and planning for retirement, one of the big items you’ll need to make sure you cover is healthcare. According to Fidelity Benefits Consulting, a retiree couple will need approximately $260,000 in income to pay for basic medical expenses. That includes premiums for traditional Medicare parts B and D coverage, copayments and deductibles and other out-of-pocket expenses.
Most retirees pay Medicare premiums as a direct deduction from their Social Security checks. For those retirees, there is a “hold harmless” provision in the law that prevents an increase in Medicare premiums from reducing their Social Security checks. However, certain individuals are not covered by this provision, including:
- First-time Medicare enrollees,
- Insureds who are currently not receiving Social Security retirement benefits, and
- Retirees with high incomes.
Retirees whose incomes are determined to be high income are assessed on an income related monthly adjustment amount (IRMAA) in addition to their base premium. Their income equals their modified adjusted gross income (MAGI) two years prior. For example, 2017 premiums are based on 2015 MAGI. The IRMAA applies to both Medicare Parts B & D. The charts below show the breakpoints in income to determine the applicability of an IRMAA for Medicare Part B & D.
Medicare Part B