Spring 2020 Newsletter – Debunking the Myths Part 2

Yes, it is a difficult time to earn your living speaking at conferences, financial advisor office meetings and client seminars at the country club.

I am still helping advisors solve the health care portion of their financial planning process with phone consultations. Many of these calls center on the optimal time to transition from employer provided group health insurance onto Medicare as well as providing a clear understanding of Medicare costs and coverage selections. A few common misconceptions or myths about Medicare consistently surface during these calls. Debunking these myths can have a significant, positive impact on managing retirement health care costs. 

Myth: Medicare will always look at my income from two years ago to determine my premiums.

Medicare Part B and Part D premiums increase based on income (see chart below). While it is true that Medicare’s default approach is to base premiums on Modified Adjusted Gross Income from two years prior, individuals can proactively instruct Medicare to use more recent income figures under certain circumstances. As I speak to 2020 retirees it is common that their incomes were substantially higher in 2018. It was often the peak of their career and stands in contrast to a retirement year in which income is earned for only a portion of the year.

It is a pleasure to walk these clients through form SSA-44, in which they document their “life changing event” (work stoppage or work reduction), provide a 2020 income estimate and lower their Medicare premiums by thousands of dollars.

Another frequent situation arises for individuals who get married during retirement. The joint tax filer brackets determining the premium are more favorable for joint filers than single filers (see chart below). For example,  a divorced or widowed client gets married in 2020. If the client files SSA-44to let Medicare know they married in 2020, they can use 2020 joint bracket levels instead of 2018 single brackets. Being proactive can translate into large Medicare savings. If you do not let Medicare know to use the current year joint bracket Medicare will automatically look at the income from two years prior. 

Increase your clients’ trust and confidence in you by providing a resource to give your clients peace of mind on retirement health care. To learn more schedule a client phone consultation.