Michael: I have clients, a married couple where the wife receives $400 a month in Social Security benefits. Her husband has not yet claimed Social Security but will receive $3,900 a month when he claims at age 70. He has a severance package that will pay him $300,000 a year for four years after age 70. Will the wife lose all of her $400 monthly Social Security benefits due to increased Medicare premiums triggered by her husband’s severance package?
MBF: Once the husband claims his Social Security at 70, the wife should step up to a larger Social Security benefit based on up to half of his full retirement age benefit amount (not half of his larger amount at age 70). So she will have a bigger Social Security check to support higher Medicare premiums and surcharges that will be deducted directly from her monthly benefit.
Most retirees pay the standard Medicare Part B premium of $144.60 per month in 2020. But if your modified adjusted gross income is above a certain amount, you may pay a monthly high-income surcharge, officially known as an income-related monthly adjustment amount, or IRMAA. Medicare uses the income reported on your federal tax return from two years ago. MAGI consists of your adjusted gross income plus any tax-exempt interest.
Individuals with a MAGI of $87,000 or less in 2018, and married couples with a MAGI of $174,000 or less in 2018, pay the standard monthly Medicare Part B premium in 2020. People with incomes above those thresholds pay the standard Part B premium plus a high-income surcharge, ranging from $57.80 to $347 per month per person. Premiums and surcharges are per person so couples pay twice as much.
In 2020, a married couple with income between $376,000 and $750,000 would pay $462.70 per month per person for Medicare Part B, which pays for doctors’ fees and outpatient services. Their high income would also trigger surcharges on their Medicare Part D prescription drug plan and they would still need to buy a supplemental Medigap policy to cover the deductibles and co-payment that traditional Medicare does not cover.
If clients’ income subsequently declined, so would their Medicare premiums two years later.
Mary Beth Franklin, a certified financial planner, is a contributing editor for InvestmentNews.
A California team with four decades of combined experience and a Kentucky father-son practice headline this week's advisor movement.
From generative AI on trading desks to personalized portfolio tools, financial firms are spending big on AI, but measuring returns is proving harder.
The fast-growing RIA aggregator adds Transcend Capital Advisors, a multi-state firm with more than 1,000 client relationships.
Christopher Blotto moved this month to Janney Montgomery Scott.
Finturk also added new form-filling and cash sweep tools to its AI-first CRM platform, while Zeplyn builds advisor coaching into its own AI operating system
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
