
When you think of investments, you think of building your wealth and creating more money. But did you know that seniors who make investments can potentially pay more for their Medicare insurance?
Medicare is health insurance for those 65 years and older and others who qualify earlier due to Social Security Disability benefits. Whether you have Original Medicare, a Supplement, or a Medicare Advantage plan, you should get to know the facts about investments and Medicare premiums before you apply!
What is the cost of Medicare Part A?
Although Medicare is not free, those who worked 40 quarters (ten years) are typically happy to find that Part A is $0 for them. If you worked 40 quarters and paid payroll taxes, you will have a premium-free Part A. However, if you have between 30-39 quarters, you will pay the pro-rated Part A premium of $274 per month in 2022.
If you have less than 30 quarters, your monthly Part A premium will be $499 per month in 2022. There are many people who qualify for a $0 premium through their spouse if they have the qualified work history.
Regardless of your investments, it will not affect your Part A premiums, as they are based on your work history and not income.
Do my investments affect Part B?
You are responsible for your monthly Part B premium, regardless of your work history. Your monthly Part B premium is based on your modified adjusted household gross income (MAGI). The Social Security Administration (S.S.A) office looks at your tax returns from two years ago. So, if you apply for Medicare in 2022, S.S.A. will look at your 2020 tax returns.
Suppose your investments from two years ago put you in a high tax bracket. In that case, you will pay an income-related monthly adjusted amount (IRMAA) on top of your monthly Part B premium. Let’s look at an example.
You filed your taxes individually in 2020, and your income was $91K or less, or if you filed jointly and your income was $182K or less, you will pay the standard 2022 Part B monthly premium of $170.10. If your income surpasses $91K or $182K, you will be charged an IRMAA fee. If you are in the highest tax bracket, you will pay $578.30 per month for Part B in 2022.
The Social Security office reevaluates your Part B premium every year. So, if you are in a lower tax bracket next year, Medicare will make the necessary changes to your Part B premium.
The cost of Medicare Part D
Medicare Part D is drug coverage that comes from private insurance carriers. Even though the government does not provide Part D, your investments and income will determine your Part D premium. Those in a high-income tax bracket will be charged an IRMAA fee, just like Medicare Part B.
In 2022, the average rate for Part D is $33 per month. But, your IRMAA charge can be as high as $77.90 monthly if you are in the highest tax bracket. Like Part B, S.S.A. reevaluates your income every year and will adjust your IRMAA charges accordingly if your income changes.
Appealing IRMAA
Luckily, you can appeal IRMAA if you no longer make the same income as you did two years ago. Various life-changing events, such as retiring, divorce, or loss of income-producing property, can qualify you for an IRMMA appeal. You will file Form SSA-44 to the Social Security office and provide evidence of your new MAGI. Social Security will make the necessary changes to your Part B and Part D premiums if your appeal is approved.
Medicare Advantage plan premiums
Private insurance companies sell Medicare Advantage plans. You must have Part A and Part B to purchase one of these plans. Once you enroll in an Advantage plan, you will receive your Part A and Part B benefits through that plan. Many plans include a Part D drug plan, as well.
You will find that many Medicare Advantage plans can have premiums as low as $0. But you are still responsible for your Medicare premiums. So, if you are subject to IRMAA, you will still pay the IRMAA charges on top of your Part B and Part D premiums.
What is the cost of a Medicare Supplement?
Private insurance carriers also sell Medicare Supplements (Medigap plans). A Supplement works alongside Original Medicare, and your Supplement premium is separate from Original Medicare. Your Supplement premium is based on multiple factors, such as your gender, age, zip code, tobacco use, and the carrier. However, your income is not included in the calculation. So, no matter your past investments, they will not affect your Supplemental premium.
Summary
Your past, present, and future investments will affect your Medicare Part B and Part D premiums. If you are in a high-income bracket, you will be subject to IRMAA and will pay the extra amount as long as you remain in that tax bracket. However, if you no longer make that same high income due to a life-changing event, you can file an IRMAA appeal. Information like this can get confusing and overwhelming, which is why many beneficiaries enjoy working with a Medicare broker to help navigate this maze!