In 2024, the standard monthly Premium for Medicare’s Part B is $174.70 per month per person. Higher Income Medicare recipients may have to pay higher premiums. “Higher Income” taxpayers for Medicare purposes refers to married couples with Modified Adjusted Gross Income (MAGI) exceeding $206,000 in annual income, and single Medicare recipients with annual MAGIs over $103,000. For Medicare purposes, your MAGI is your Adjusted Gross income (AGI) with tax-exempt interest income added back in.
If your MAGI exceeds the thresholds outlined in the chart below, you’ll pay higher Part B and Part D premiums. For example, if you’re a married couple filing jointly and your MAGI exceeds $206,000 by one dollar, your Part B premium will jump from $174.70 per month to $244.60 a month per person, or an increase of $60 per month per person. As you may notice, for a Single Filer, if your MAGI exceeds $103,000 by one dollar, the monthly premium also rises to $244.60.
Furthermore, if you have a Part D Prescription Drug Plan, Medicare will add $12.49 per month to your Part D monthly Plan Premium (PP). This program is called Income Related Monthly Adjustment Amount or IRMAA. This program is an effort to levy higher premiums on individuals with high income who can well afford the government subsidized Medicare Health coverage.
As you may also notice in the Table below, as your MAGI rises and exceeds various thresholds, your Part B and Part D premiums continue to rise accordingly.
——–Annual Income (MAGI)——
Prem./month (Part B) Single Married Filing Jointly Prem./Mo. (Part D)
|
$174.70 |
≤ $103,000 |
≤ $206,000 |
Your Plan Premium |
|
$244.60 |
$103,001-$129,000 |
$206,001-$258,000 |
PP + $12.90 |
|
$349.40 |
$129,001-$161,000 |
$258,001-$322,000 |
PP + $33.30 |
|
$454.20 |
$161,001-$193,000 |
$322,001-$386,000 |
PP + $53.80 |
|
$559.00 |
$193,001-$500,000 |
$386,001-$750,000 |
PP + $74.20 |
|
$594.00 |
≥$500,000 |
≥$750,000 |
PP + 81.00 |
Most retirees assume that their incomes will be well below these thresholds, so the potentially higher Medicare premiums are not a concern. However, when the Social Security Administration (SSA), which administers Medicare, examines whether a person’s MAGI exceeds the various thresholds, they generally look two years back. So, for someone who just retired, the SSA is possibly using income two years back to identify whether the higher premiums for Medicare Parts A and D apply. For many, the earner years immediately preceding retirement are their highest earning years, with possibly unpaid vacation, unused sick days and other income added in. Thus, many who are not “high income earners” in retirement may have to pay higher Part B and Part D Medicare premiums as if they were.
The good news is that there is a way to remedy the situation, but the retiree must proactively file Form SSA-44 with the SSA to indicate that they’ve retired. Upon receiving it, the SSA will reduce the retiree’s Medicare premiums taking their current income into account. Additional situations that can qualify a Medicare Beneficiary to pay only the standard premiums, include:
- You married, divorced, or became widowed.
- You or your spouse lost income-producing property because of a disaster or other event beyond your control.
- You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan.
- You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.
However, if you simply had a financial windfall, (e.g., you sold a piece of investment property at a great profit and your MAGI rose accordingly) this would be not considered one of the “life changing events” noted above. Thus, you would likely pay higher Medicare Part B and D Premiums as your substantially higher annual MAGI in the year of the sale could thrust your income to higher Part B and Part D premium territory. None the less, if your MAGI fell the next year below the requisite income thresholds, you would again be eligible for “normal” Part B and Part D Medicare premiums.
These rules remind us that “retirement planning” is something that continues into retirement and reminds us how important it is to keep track of current rules and how they may affect your income, and thereby, your standard of living in retirement.