Domani Wealth Offices Closed September 24th                                                                    

All Domani Wealth offices will be closed on Tuesday, September 24, 2019 for employees and their families to enjoy a special Appreciation Event in recognition of the team’s work and dedication to providing quality service to clients throughout the year. If you have an urgent matter and need immediate assistance on this day, please contact your advisor on their cell phone.

We appreciate your understanding.

Medicare Premiums: How Are They Set and What Can You Do to Adjust Them

For those that are already retired and enrolled in Medicare, or those who are approaching enrollment, you should be aware of how the monthly Medicare Part B and Part D premiums are determined. If you’re already on Medicare, you are probably accustomed to paying your monthly premiums, but have you ever stopped to consider where these amounts came from?

How Are Your Medicare Premiums Determined?

The Social Security Administration determines your Medicare premiums for Parts B and D each year. These premiums are based on modified adjusted gross income (MAGI) from your tax return – generally from two years ago. For example, Social Security will determine your 2020 premiums at the end of 2019. Since you will not have yet filed your 2019 tax return at that time, they will base your premiums on the income from your 2018 tax return.

So how does Social Security know what your MAGI is to determine your Medicare premiums? Every year, the IRS sends this figure to them directly. So, depending on your individual situation, you may have experienced fluctuations in Medicare pricing as a result of fluctuations in your income year-over-year. The standard premium is adjusted slightly for inflation each year, and for 2019 the monthly base premium on Part B is $135.50. However, if your MAGI exceeds $85,000 (single tax return filer) / $170,000 (married filing jointly), then you will be charged an additional premium on Medicare Part B and Part D. Take a look at the chart below to see where you fall:

What if your situation now looks much different than it did two years ago? If your income has dropped significantly and you are being charged higher premiums based on your income from two years ago, you may be able to appeal to Social Security to have your premiums lowered. To go about doing this, you must first determine if you qualify to appeal. If you experienced one of the following “Life-Changing Events” that subsequently impacted your income, you may qualify*:

  • Marital Status Change – Marriage, Divorce, Death of Spouse
  • Work Stoppage or Reduction
  • Loss of Income-Producing Property (Not at your direction)
    • Does not include sales/transfers.
    • Includes disasters, arson, theft, eminent domain.
  • Loss of Pension Income
  • Employer Settlement Payment (due to employer’s closure, bankruptcy, or reorganization)

*It is important to note though, that some fluctuations in income do not qualify as acceptable causes for appeal in the eyes of the Social Security office. Large, one-time sales of property or stocks do not qualify as loss of income-producing property because the assets were sold at your discretion. Conversions of traditional IRAs to Roth IRAs are another situation in which you may experience a temporary spike in “income” on your tax return, but likewise, these cannot be appealed. The good news is that your premiums are recalculated each year, so any impact from unusually high-income years is only temporary.

Additionally, if your latest tax return on file with the Social Security Administration is out of date because you have either filed a more recent return or amended your originally filed return, you can request that your Medicare premiums are recalculated based on your updated tax return. You must first verify that all information is up to date with the IRS. After doing this, you can schedule an appointment with your local Social Security office to review the changes in your income.

How to Appeal to Have Your Premium Lowered

If you have experienced one of the defined “Life-Changing Events” above, you can appeal to Social Security with Form SSA-44 – Medicare Income-Related Monthly Adjustment Amount – Life Changing Event. On this form, you will have to identify your life-changing event, estimate your income for the current year, and provide some sort of documentation or evidence to support the validity of your claim. Examples of documentation include a marriage certificate, divorce decree, death certificate, letters from employer, pay stubs, insurance company statement of loss, letter from pension fund administrator, letter from employer regarding settlement terms, etc. Once Social Security has reviewed your appeal, if they approve of the change, your premiums will be adjusted going forward.

PLANNING TIPS:

Believe it or not, there are several ways you can proactively plan to ensure your income each year will not bump you into a higher bracket for Medicare premiums. Managing IRA distributions, deferring or accelerating capital gain and loss transactions, and taking advantage of certain deductions are all examples of ways to manage your income.

So, if you’re on Medicare, or about to apply for the first time, it’s worth doing a bit of planning to ensure that you are paying the lowest possible premium each month. If you have any questions or want to explore your options further, please do not hesitate to reach out to a Domani Wealth advisor today.

 

Sources:

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Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Domani Wealth, LLC-“Domani”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Domani.  Please remember that if you are a Domani client, it remains your responsibility to advise Domani, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Domani is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Domani’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Domani does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Domani’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

 

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