FYI - 2019 Medicare Premiums

[Systems101]

FYI - Medicare premiums were published earlier this month. Seeart B costs which states in part:
QUOTED
"2019  -  The standard Part B premium amount in 2019 will be $135.50. Most people will pay the standard Part B premium amount. If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.

Part B deductible & coinsurance

You pay $183 per year in 2018 ($185 in 2019) for your Part B deductible. After your deductible is met, you typically pay 20% of the Medicare-approved amount for these:

• Most doctor services (including most doctor services while you're a hospital inpatient)
  
  
• Outpatient therapy
  
  
• Durable Medical Equipment (DME)"
  

My thoughts/interpretation:

These 2019 Part B monthly premiums are generally a few dollars higher than 2018, plus there is a new tier for income $500k+. (The standard premium in 2018 was $134 vs $135.5 in 2019).

 

Note that your 2017 tax return (filed in 2018) determines your 2019 premium.  If you have income that puts you even only one dollar over the income threshold, there is a step change in the cost.  So, if you were in the second tier rather than the first tier based in your 2017 tax return, then the cost goes up by 189.6-135.5 = 54.1 per month or $649.2 per year in 2019.  Also note that the income level is based on MODIFIED Adjusted Gross Income, which includes TAX EXEMPT income (=municipal bond income).

 

Your 2018 income will determine premiums in 2020.  I believe that both the thresholds and the premiums are subject to a further increase in 2020 vs 2019 (the tier thresholds had been frozen for several years). I saw one source (forget where) that estimated the 2020 premiums for each tier as:

2020: 141.1 / 197.5 / 282.2 / 366.9 / 451.5 / 479.7 (also subject to new presumably higher tier thresholds?)
but I cannot vouch for the accuracy. I think that medical inflation may have recently been less than what was assumed.

[Jeromedawg]

Thanks for the information Systems101. It affirms that what I remembered about the premiums and thresholds is still correct.

[skyrefuge]

And the joint filers have to pay the increased premium times two. The gov't knows that the withdrawals or RMDs on your retirement accounts will keep boosting your income and thus your Medicare premiums until you drop dead.

[SeattleCyclone]

And the joint filers have to pay the increased premium times two.  The gov't knows that the withdrawals or RMDs on your retirement accounts will keep boosting your income and thus your Medicare premiums until you drop dead.

The "times two" happens only if both filers are covered under Medicare.   Depending on how large your IRAs are, it may pay to pay the higher (IRMAA) Medicare premium in order to convert a much bigger chunk, at least so long as only one of you is paying the premium.  
 
For example, if one converts an extra $44K (raising MAGI from $170K to $214K), and only one of the filers is paying for Medicare, then that extra premium ($54/mo, $650/year) amounts to "just" a 1.5% surtax on the extra conversion amount.   That might be acceptable if it significantly reduces RMDs in the future.   But if both filers are paying for Medicare, two IRMAAs amount to a 3% surtax, which is less likely to be worth paying.

[Ybserp]

There are a lot of moving parts to this other than the Part B Surtax. One possible strategy is to complete all of your Roth conversions by age 70 and claim enhanced social security benefits at that time. If you have no other income at age 70 then your social security payments would avoid income taxes. There are many things to consider in this and everyone's situation is different.

[Nords]

And the joint filers have to pay the increased premium times two.  The gov't knows that the withdrawals or RMDs on your retirement accounts will keep boosting your income and thus your Medicare premiums until you drop dead.

The "times two" happens only if both filers are covered under Medicare.   Depending on how large your IRAs are, it may pay to pay the higher (IRMAA) Medicare premium in order to convert a much bigger chunk, at least so long as only one of you is paying the premium.  
 
For example, if one converts an extra $44K (raising MAGI from $170K to $214K), and only one of the filers is paying for Medicare, then that extra premium ($54/mo, $650/year) amounts to "just" a 1.5% surtax on the extra conversion amount.   That might be acceptable if it significantly reduces RMDs in the future.   But if both filers are paying for Medicare, two IRMAAs amount to a 3% surtax, which is less likely to be worth paying.

One of several reasons I have been and am gradually moving assets from my IRA to my ROTH every year is to reduce the RMD so that my medicare premiums stay within a rational boundary. I still have a couple of years to do this, and may actually continue to do it after I reach RMD withdrawal age just to keep the various taxes in check.
 
I started by moving all of my wife's IRA assets to her ROTH. That project is complete. This year I am moving some of my positions to the ROTH and probably can still do some more before the end of the year. I need to review my spreadsheet to see when I tip the scales.

[jim55]

Thanks for the post and good information. FYI... S.S paycheck will get 2.8%  raise in 2019 so will offset that small increase in Part B premium!