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Medicare Increase – Are you a 30 percenter?

Fixed income recipients may see substantial changes to their “net” take home of Social Security benefits in 2016. Social Security benefits are not likely to see a cost-of-living adjustment (COLA) for 2016 due to stagnant inflation during the year, but Medicare Part B premiums are scheduled to increase around 16%.

If you have already been receiving benefits, and are under the MAGI (modified adjusted gross income) threshold of $85,000 for singles and $170,000 for married, then you should not see an increase in your Part B premiums of $104.90 per month in 2015. This is due to a “hold harmless” provision that is designed to keep recipients’ net Social Security benefits from shrinking. This provision states that an increase in premiums cannot be more than the COLA for the year. Since there will be no COLA for 2016, your premiums cannot increase. This includes about 70% of all recipients.

But what about the other 30% of recipients? There are three questions that need to be asked:

  1. Is 2016 your first year eligible for Medicare?
  2. Did you choose to “File & Suspend” your Social Security benefits until age 70, and are not yet collecting benefits?
  3. Are you over the threshold of $85,000 for singles and $170,000 for married individuals?

If you answered “Yes” to any of these questions, chances are likely that your Medicare Part B premiums will increase in 2016. This is because only individuals under the MAGI threshold who have begun collecting benefits prior to 2016 are protected under the “hold harmless” provision. The remaining 30% of recipients will bare the costs of the increase. Click here for  an officially released table from the Centers for Medicare & Medicaid Services(CMS) for the anticipated increase of Part B premiums for 2016 for those not protected by the “hold harmless” provision.

So, for those unlucky individuals who fall into these categories, be prepared for a reduction of “net” Social Security benefits in 2016 and forward.

MAGI Simple Calculation = AGI + passive losses – passive income +non-taxable interest.

 

 

Are you 65 or older, have Medicare, and other insurance coverage such as a group health plan from an employer? Who is the “primary payer” responsible for paying your medical bills first?

When there’s more than one payer, “coordination of benefits” rules decide who pays first. The “primary payer” pays what it owes on your bills first, and then your provider send the rest to the “secondary payer” to pay. There may be a “third payer” in some cases.

Who the “primary payer” is depends on a number of things including the number of employees in the company that is providing the group health care coverage. Generally, your group health plan pay first if you’re 65 or older, covered by a group health plan through a current employer and the employer has 20 or more employees. Your health care provider should bill Medicare if the group health plan did not pay all of your bill. Medicare generally will pay first if your employer has less than 20 employees.

Medicare becomes your “primary payer” after you retire at 65 or older.

There are various situations and type(s) of coverage that determines who the “primary payer” will be. Situations and coverage include disability, COBRA coverage, medical expenses from an accident, workers’ compensation coverage or Veterans’ coverage.

Medicare has a 32 page booklet entitled “Medicare and Other Health Benefits: Your Guide to who Pays First” that’s available at www.medicare.gov/publications or by calling 1-800-MEDICARE (1-800-633-4227) to get the most current information. TTY users should call 1-877-486-2048.

 

The fastest growing segment of the labor force is workers over the age of 65,  according to the U.S. Bureau of Labor Statistics.

If you plan on working past 65, there are some issues to be aware of that author Mark Miller points out in his Wealth Management.com article:

Social Security timing: It doesn’t make sense to take Social Security in your first year of eligibility (age 62) if you continue to plan on working for two main reasons: 1) you will only receive 75% of your primary insurance amount and 2) there are penalties incurred on Social Security benefits if you earn income. For example, if you have earned income of more than $15,480 in 2014, you will be hit with a penalty of $1 for every $2 over that amount. These withheld benefits are given back after you reach full retirement age, but it does not make much sense to take the reduced benefits early. Instead, if you continue to work and can wait until the age of 70, you will receive 132% of the primary insurance amount for the rest of your life, and that is nearly double the amount you would receive at age 62. After age 70 benefits stop accruing.

Medicare filing: The article notes that Medicare benefits are by the far the most important and the most complicated. If you already receive Social Security benefits, the sign-up for Medicare is automatic. If not, your window to sign up is the three months before turning 65 up through the three months following. Failing to do so can result in expensive premiums down the road. For example, monthly Part B premiums jump 10% for each full 12 month period that a senior could have had coverage but didn’t sign up. If you plan on working past age 70, you can delay starting Medicare without penalty if you are insured based on your active work status by an employer with more than 20 employees. However, if you are self employed, or your employer has fewer than 20 employees, you should sign up at age 65.

Required Minimum Distributions (RMDs): RMD’s are mandatory from IRA accounts and 401(k)s (unless you are working for an employer who sponsors the plan) starting the year you turn 70.5. If you are working, you do not have to take RMDs from the 401(k) of your current employer; it is only required from former workplaces if they were never rolled over. These distributions can affect what tax bracket you will fall into, so it’s important to plan accordingly.

 

 





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