News

How to Avoid a Medicare Premium Hike

Distressed Patriotic Flag Unisex T-Shirt - Celebrate Comfort and Country $11.29 USD Get it here>>


By Elliot Raphaelson
From Tribune Content Agency

Many people are surprised when they find that the cost of their monthly Medicare premium has increased because of an increase in their Modified Adjusted Gross Income (MAGI).

The increase in cost can be significant. For example, in 2022 if your MAGI on a joint return in 2020 was greater than $182,000, even by one dollar, your income-related monthly adjustment amount (IRMAA) increased from $170.10 to $238.10. That is an increase of 40 percent. If your MAGI was over $228,00, then your monthly premium increased to $340.20. In 2022, the total monthly premium can be as high as $578.30 if your joint return MAGI is as high as $750,000.

Your premium is based on your MAGI from two years prior. So, in 2023, your monthly premium will be based on your tax return from 2021. By planning properly, you can exert some control over future Medicare premiums.

For example, if you know your joint income will be high in a year, then you may want to postpone taking a planned Roth conversion or reduce the planned amount. Another option is selling some stocks, bonds or mutual funds at a loss if you don’t intend to keep those securities for the long term.

Another way to avoid Medicare premium hikes is to plan ahead to minimize required minimum distributions (RMDs). When you reach age 72, you will be facing mandatory distributions if you have taxable retirement accounts. (Note: Under the recently passed SECURE Act 2.0, the age threshold for RMDs will rise to 73 in 2023 and eventually to age 75.) In your 60s, if there are years in which your income is lower, or stable, those are the years you should consider Roth conversions, so that you will face smaller RMDs after you reach age 72.

Another way to reduce MAGI is through charitable contributions. Many individuals who have to take RMDs do not take advantage of the charitable contributions they make. This is because in recent years the standard deduction has increased significantly, and many family units no longer itemize their deductions, and use the standard deduction.

If you are required to take RMDs, and you make charitable contributions yet you don’t itemize, then you should definitely use the qualified charitable distribution (QCD) option. By using QCDs, you reduce your taxable income by the amount of your contribution up to $100,000 per year. You have to instruct the custodian of your traditional IRA to make the charitable contribution directly from your IRA account to the qualified charity of your choice. Your MAGI will be reduced by the amount of your charitable deduction.

There are some events that result in higher than anticipated MAGI. For example, in the case of a divorce or a spouse death, MAGI may be unusually high. Other life events such as a job loss or reduction in hours worked can lead to hardship regarding making the IRMAA premium. By filing Form SSA-44 with Social Security, if approved, you may be able to have your IRMAA reduced.

Some activities that can result in unexpected increases in income and higher IRMAAs are ones that you can control or avoid. For example, you may want to pay off your mortgage early, or reduce a large percentage of your outstanding mortgage. If you withdraw a large amount from a taxable retirement account in one year in order to do so, you could be pushing yourself into a higher IRMAA. To avoid this, you could consider reducing the mortgage gradually over several years, or using assets other than from a taxable retirement account.

Bottom line: If you are not careful, you can increase your monthly Medicare cost significantly. Plan ahead and look at alternatives that will keep your monthly Medicare costs more stable.

(Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.)

©2022 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.

Tribune News Service



Source link

TruthUSA

I'm TruthUSA, the author behind TruthUSA News Hub located at https://truthusa.us/. With our One Story at a Time," my aim is to provide you with unbiased and comprehensive news coverage. I dive deep into the latest happenings in the US and global events, and bring you objective stories sourced from reputable sources. My goal is to keep you informed and enlightened, ensuring you have access to the truth. Stay tuned to TruthUSA News Hub to discover the reality behind the headlines and gain a well-rounded perspective on the world.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.