Every day in contemporary America, more than 10,000 Baby Boomers reach Medicare age. Many of them are leaving the workforce for a variety of reasons, including health issues, as well as voluntary and involuntary retirement. As they attain Medicare Age (65), most will become Medicare participants, which requires payment of a monthly premium for Part B. Some will also opt into Medicare Part D for prescription drug coverage. Medicare coverage must be earned and is not free. Monthly premiums are deducted from Social Security benefit payments whenever possible.
Medicare beneficiaries should be aware of the cost of their monthly premiums, but many people have no clue, as premiums are deducted before Social Security benefits are electronically deposited into bank accounts. Out of sight, out of mind. While individual costs are readily available online at socialsecurity.gov, most Americans do not bother to establish an online account to review their personal benefits and costs. As a result, many new Social Security recipients are overpaying for Medicare premiums, at least for a year.
Overcharging can be easily prevented, and should be.
Total Medicare premium payments (both Parts B and D) for Social Security benefit recipients are based on household income. A base premium amount is paid by all beneficiaries, and higher income participants also incur added monthly surcharges called IRMAA, for Income Related Monthly Adjustment Amounts. Calculated total premiums are based on individual tax returns from years prior to retirement. This is simply a byproduct of the IRS not having the reporting ability to feed data to Medicare in a timely manner since tax returns always reflect prior years.
Situations resulting in artificially high IRMAA surcharges may be corrected when and if a participant incurs a covered “life-changing event.” Covered events are listed on the Social Security website (www socialsecurity.gov), on Form SA-44. Covered events include retirement, marriage, divorce, death of a spouse, work stoppage or income reduction, loss of income-producing property, loss of pension income, and employer financial settlements.
When significant income-reducing life changes occur, but will not be immediately communicated to IRS, temporary inequities can and do arise. IRS recognizes these situations and has installed procedures to immediately update individual information. Affected participants should file Form SA-44 to notify Social Security of the event. If the change in income affects IRMAA brackets, the IRMAA charge will be eliminated, reduced, and/or refunded based on the expected new annual income. Help yourself by being proactive.
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