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سپتامبر 29, 2022

Some Medicare beneficiaries could face 2023 Part B premiums of $560.50

Shapecharge | E+ | Getty ImagesIf you’re a higher-income Medicare beneficiary, you may be paying less in extra premium charges in 2023 than you were this year.So-called income-related adjustment amounts, or IRMAAs, which are based on your tax return from two years earlier, kick in next year at $97,000 for single tax filers and $194,000 for joint filers (based on their 2020 return), up from $91,000 and $182,000, respectively.Additionally, with the standard Part B (outpatient care coverage) premium dropping by 3% next year to $164.90 from $170.10 in 2022, the IRMAAs also are less costly.The surcharges apply to both Part B and Part D (prescription drug coverage) premiums and affect about 7% of Medicare’s 64.3 million beneficiaries. The higher your income, the higher the charge. (See charts below.)Whether you have to pay the surcharge is based on your modified adjusted gross income as defined by the Medicare program: your adjusted gross income plus tax-exempt interest income.”You only have to go $1 over that [lowest] breakpoint and you’re subject to IRMAAs,” said certified financial planner Barbara O’Neill, owner and CEO of Money Talk, a financial education company. “If you’re close to that or close to going to a higher tier, you’ve really got to be proactive,” O’Neill said.In other words, there are some strategies and planning techniques that can help you avoid or minimize those IRMAAs. Here are four to consider:1. Focus on income streams under your controlWhile some income in retirement is generally set — i.e., Social Security and/or a pension — the key to avoiding IRMAAs is to focus on what income streams you can control, said CFP Judson Meinhart, senior financial advisor and manager of financial planning for Parsec Financial in Winston-Salem, North Carolina.”The key to keeping [your income] below the IRMAA brackets is planning ahead to know where your income is coming from,” Meinhart said.More from FA Playbook:Here’s a look at other stories impacting the financial advisor business.Be aware that the IRMAA determination is typically based on your tax return from two years earlier. If your income has dropped since then, you can appeal the IRMAA decision using Form SSA-44 and providing proof that you’ve experienced a “life-changing event” such as retirement, death of a spouse or divorce.2. Consider Roth IRA conversionsOne way to keep your taxable income down is to avoid having all of your nest egg in retirement accounts whose distributions are taxed as ordinary income, such as a traditional IRA or 401(k) plan. So whether you’ve signed up for Medicare yet or not, it may be worth converting taxable assets to a Roth IRA.Roth contributions are taxed upfront, but qualified withdrawals are tax-free. This means that while you would pay taxes now on the amount converted, the Roth account would provide tax-free income down the road — as long as you are at least age 59½ and the account has been open for more than five years, or you meet an exclusion.”You pay a little more now to avoid higher tax brackets or IRMAA brackets later on,” Meinhart said.It also helps that Roth IRAs do not have required minimum distributions, or RMDs, in the owner’s lifetime. RMDs are amounts that must be withdrawn from traditional IRAs, as well as both traditional and Roth 401(k) accounts, once you reach age 72.When RMDs from traditional accounts kick in, your taxable income could be pushed up enough that you become subject to IRMAAs, or to a higher amount if you already were paying the surcharge.”A lot of people get into trouble by taking no money out of their 401(k) plan or IRA, and then they have their first RMD and it puts them in one of those IRMAA brackets,” Meinhart said.3. Keep an eye on capital gainsIf you have assets that could generate a taxable profit when sold — i.e., investments in a brokerage account — it may be worth evaluating how well you can manage those capital gains. While you may be able to time the sale of, say, an appreciated stock to control when and how you would be taxed, some mutual funds have a way of surprising investors at the end of the year with capital gains and dividends, both of which feed into the IRMAA calculation. “With mutual funds, you don’t have a whole lot of control because they have to pass the gains on to you,” said O’Neill, of Money Talk. “The problem is you don’t know how big those distributions are going to be until very late in the tax year.”Depending on the specifics of your situation, it may be worth considering holding exchange-traded funds instead of mutual funds in your brokerage account due to their tax efficiency, experts say.For investments whose sale you can time, it’s also important to remember the benefits of tax-loss harvesting as a way to minimize your taxable income.That is, if you end up selling assets at a loss, you can use those losses to offset or reduce any gains you realized. Generally speaking, if the losses exceed the profit, you can use up to $3,000 per year against your regular income and carry forward the unused amount to future tax years.4. Tap your philanthropic sideIf you’re at least age 70½, a qualified charitable contribution, or QCD, is another way to keep your taxable income down. The contribution goes directly from your IRA to a qualified charity and is excluded from your income.”It’s one of the few ways you can really get money out of an IRA completely tax-free,” Meinhart said. “And when you’re 72, that charitable distribution can help offset your required minimum distributions.”The maximum you can transfer is $100,000 annually; if you’re married, each spouse can transfer $100,000. .

آگوست 22, 2022

A possible reduction for Medicare Part B premiums is still in play

Choreograph | iStock | Getty ImagesFor Medicare beneficiaries wondering whether their Part B premiums could be reduced, the waiting continues.More than three months after Health and Human Services Secretary Xavier Becerra ordered a reassessment of this year’s $170.10 standard monthly premium — a bigger-than-expected jump from $148.50 in 2021 — it remains uncertain when a determination will come and whether it would affect what beneficiaries pay this year.”A mid-course reduction in premiums would be unprecedented,” said Tricia Neuman, executive director of the Medicare policy program at the Kaiser Family Foundation.More from Personal Finance:
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Be sure to manage this risk as you near retirementA spokesperson for the Centers for Medicare & Medicaid Services said the agency continues to reexamine the premium and will announce further information when it’s available.About half of the larger-than-expected 2022 premium increase, set last fall, was attributed to the potential cost of covering Aduhelm — a drug that battles Alzheimer’s disease — despite actuaries not yet knowing the particulars of how it would be covered because Medicare officials were still determining that.By law, CMS is required to set each year’s Part B premium at 25% of the estimated costs that will be incurred by that part of the program. So in its calculation for 2022, the agency had to account for the possibility of broadly covering Aduhelm.Certainly the rationale for an increase that high is gone.Paul GinsburgNonresident senior fellow at the Brookings InstitutionThings have changed, however.Several weeks ago, CMS officials announced that the program will only cover Aduhelm for beneficiaries who receive it as part of a clinical trial. Additionally, the per-patient price tag that actuaries had used in their calculation last year was cut in half, effective Jan. 1, by manufacturer Biogen — to $28,000 annually from $56,000.”Certainly the rationale for an increase that high is gone,” said Paul Ginsburg, a nonresident senior fellow at the Brookings Institution and a health care policy expert. “The question would be what’s administratively feasible.”If a premium reduction occurs, there’s also the chance it could be applied for 2023 instead of 2022. There have been year-to-year drops in the Part B premium in the past for various reasons, including legislative changes to how the premium is calculated.”If I were administering this, I’d be concerned about setting a precedent for making changes in the middle of the year,” Ginsburg said.It’s also possible that lower-than-projected spending on Aduhelm could be at least partially offset by increased costs in other areas of Part B coverage, which includes outpatient care and medical equipment. While Medicare Part D provides prescription drug coverage, some medicines are administered in a doctor’s office — as with Aduhelm, which is delivered intravenously — and therefore covered under Part B.”Even if fewer people are using Aduhelm than originally projected and at a lower price than assumed, the actuaries may be inclined to take into account other changes that could moderate that amount,” Neuman said.Roughly 6 million Americans suffer from Alzheimer’s, a degenerative neurological disease that slowly destroys memory and thinking skills, and has no known cure. It also can destroy the lives of families and friends of those with the disease.Most of these patients are age 65 or older and generally enrolled in Medicare, which covers more than 63 million individuals. In 2017, about 2 million beneficiaries used one or more of the then-available Alzheimer’s treatments covered under Part D, according to the Kaiser Family Foundation. .

جولای 16, 2022

Strategies can help you avoid paying extra for Medicare premiums

Morsa Images | DigitalVision | Getty ImagesFor some retirees, there’s an extra cost associated with Medicare premiums that can ambush their household budgets.Most Medicare enrollees pay the standard premium amounts for Part B (outpatient care) and Part D (prescription drugs). Yet an estimated 7% of Medicare’s 64.3 million beneficiaries end up paying extra because their income is high enough for income-related monthly adjustment amounts, or IRMAAs, to kick in, according to the Centers for Medicare & Medicaid Services.Whether you have to pay the surcharge is based on your modified adjusted gross income as defined by the Medicare program: your adjusted gross income plus tax-exempt interest income. For 2022, IRMAAs kick in when that amount is more than $91,000 for individuals or $182,000 for married couples filing joint tax returns. The higher your income, the larger the surcharge is.”You only have to go $1 over that [lowest] breakpoint and you’re subject to IRMAAs,” said certified financial planner Barbara O’Neill, owner and CEO of Money Talk, a financial education company. “If you’re close to that or close to going to a higher tier, you’ve really got to be proactive,” O’Neill said.In other words, there are some strategies and planning techniques that can help you avoid or minimize those IRMAAs. Here are four to consider:1. Focus on what you can control2. Consider converting to Roth IRA accountsOne way to keep your taxable income down is to avoid having all of your nest egg in retirement accounts whose distributions are taxed as ordinary income, such as a traditional IRA or 401(k). So whether you’ve signed up for Medicare yet or not, it may be worth converting taxable assets to a Roth IRA.Roth contributions are taxed upfront, but qualified withdrawals are tax-free. This means that while you would pay taxes now on the amount converted, the Roth account would provide tax-free income down the road — as long as you are at least age 59½ and the account has been open for more than five years, or you meet an exclusion.”You pay a little more now to avoid higher tax brackets or IRMAA brackets later on,” Meinhart said.It also helps that Roth IRAs do not have required minimum distributions, or RMDs, in the owner’s lifetime. RMDs are amounts that must be withdrawn from traditional IRAs as well as both traditional and Roth 401(k)s once you reach age 72.When RMDs from traditional accounts kick in, your taxable income could be pushed up enough that you become subject to IRMAAs, or to a higher amount if you already were paying the surcharge.”A lot of people get into trouble by taking no money out of their 401(k) or IRA, and then they have their first RMD and it puts them in one of those IRMAA brackets,” Meinhart said.3. Keep an eye on capital gainsIf you have assets that could generate a taxable profit when sold — i.e., investments in a brokerage account — it may be worth evaluating how well you can manage those capital gains. While you may be able to time the sale of, say, an appreciated stock to control when and how you would be taxed, some mutual funds have a way of surprising investors at the end of the year with capital gains and dividends, both of which feed into the IRMAA calculation. “With mutual funds, you don’t have a whole lot of control because they have to pass the gains on to you,” said O’Neill, of Money Talk. “The problem is you don’t know how big those distributions are going to be until very late in the tax year.”Depending on the specifics of your situation, it may be worth considering holding exchange-traded funds instead of mutual funds in your brokerage account due to their tax efficiency, experts say.For investments whose sale you can time, it’s also important to remember the benefits of tax-loss harvesting as a way to minimize your taxable income.That is, if you end up selling assets at a loss, you can use those losses to offset or reduce any gains you realized. Generally speaking, if the losses exceed the profit, you can use up to $3,000 per year against your regular income and carry forward the unused amount to future tax years.4. Tap your philanthropic sideIf you’re at least age 70½, a qualified charitable contribution, or QCD, is another way to keep your taxable income down. The contribution goes directly from your IRA to a qualified charity and is excluded from your income.”It’s one of the few ways you can really get money out of an IRA completely tax free,” Meinhart said. “And when you’re 72, that charitable distribution can help offset your required minimum distributions.”The maximum you can transfer is $100,000 annually; if you’re married, each spouse can transfer $100,000. .

می 28, 2022

Choice between pre-tax and Roth 401(k) plans trickier than you think

Prathanchorruangsak | Istock | Getty ImagesWhether you’re a current employee or changing jobs, you may need to choose between pre-tax and Roth 401(k) contributions, and it may be trickier than you expect.Here’s the difference: Pre-tax 401(k) deposits reduce your adjusted gross income, and the money grows tax-deferred, meaning you’ll pay levies on withdrawals. By contrast, Roth 401(k) contributions don’t provide an upfront write-off, but earnings are tax-free.However, there may be other tax trade-offs, so you’ll need to weigh the pros and cons before diverting funds, financial experts say.More from Personal Finance:
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How to beat back rising prices with Memorial Day dealsRoughly 86% of 401(k) plans offered a Roth account in 2020, up from 75% in 2019, according to the Plan Sponsor Council of America.”In general, the goal is to take deductions at a higher tax rate and distributions at a lower one,” said certified financial planner Ken Waltzer, co-founder and managing partner of KCS Wealth Advisory in Los Angeles. If you plan on more income or higher taxes in retirement, tax-free withdrawals from Roth contributions may make sense, and tax-deferred contributions may be better if you expect lower earnings and levies.But that’s not always a winning strategy, according to Michelle Gessner, a Houston-based CFP and founder of Gessner Wealth Strategies.”Investors are quick to discard the idea of making Roth contributions if they are in a high tax bracket because they want the deduction that comes with a regular 401(k) contribution,” she said.However, the upfront write-off may not be worth it if you worry about the consequences of taxable required minimum distributions, she said. Social Security and Medicare costsWhen someone withdraws tax-deferred money from a 401(k), it boosts their income, which may trigger levies on Social Security and hike Medicare premiums. The formulas for Social Security taxes, Medicare Part B and Medicare Part D use so-called modified adjusted gross income, or MAGI.If half of your Social Security payments plus MAGI is more than $34,000 ($44,000 for a joint return), up to 85% of those benefits may be taxable.However, the bigger issue for retirees above certain income levels may be the surcharge for Medicare Part B, known as the Income Related Monthly Adjustment Amount, or IRMAA. While the base amount for Medicare Part B premiums is $170.10 for 2022, payments go up once income exceeds $91,000 ($182,000 for joint filers). The calculation uses MAGI from two years prior. Roth withdrawals, however, won’t show up on tax returns, said Gessner, meaning retirees don’t have to worry about these distributions causing Medicare premium increases.Diversify taxesSince no one can predict future tax rates, you may also consider creating a mix of pre-tax and after-tax funds from a diversification standpoint, experts say.”It is great when clients have both Roth and traditional retirement savings,” said Catherine Valega, a CFP and wealth consultant at Green Bee Advisory in Winchester, Massachusetts.If you have both pre-tax and after-tax funds, it may provide more options to craft an efficient retirement income plan, she said. .

فوریه 15, 2022

how to appeal higher premiums

Andrii Zastrozhnov | iStock | Getty ImagesIf you’re retiring and signing up for Medicare, there’s a chance you’ll be assessed extra monthly charges — at least at first.While most enrollees pay the standard premium amounts for Part B (outpatient care) and Part D (prescription drugs), about 7% of Medicare’s 63.3 million beneficiaries end up paying extra because their income is high enough for “income-related monthly adjustment amounts,” or IRMAAs, to kick in.However, that surcharge is based on your most recent tax return available — which may not accurately reflect a reduction in income when you retire. And although you can appeal IRMAAs, it’s generally not something you can do ahead of your Medicare coverage kicking in or before the Social Security Administration sends you a “benefit determination letter.”More from Personal Finance:
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