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Would it ever make sense to delay signing up for MediCare Part B ?
Old 03-20-2013, 09:28 PM   #1
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Would it ever make sense to delay signing up for MediCare Part B ?

Because Medicare Part B premium is based on look back on Federal Income Tax returns from 2 years prior to retirement, a person's Medicare Part B premium can be as high as $335.7 a month if the adjusted gross income prior to retirement was over $214000. There is a permanent penalty if one delay taking out MediCare Part B. But the gross income will usually drop after retirement. If a person is in very good health, and have some reserve in HSA, does it make sense to just take MediCare Part A for hospitalization cost, and delay signing up for part B for 2 years, when the premium will drop to $105 a month? ( using 2013 numbers)

To put it in actual numbers
If Part B premium is $335.7 a month , it will be $4028.4 a year or $8056.8 for 2 years. Or an overcharge of $2768.4 a year or $5536.8 for 2 years just because of the higher pre-retirement income.
If one delays taking Part B for 2 years, the basic monthly premium for Part B with penalty will be $126 a month, or $21 more a month or $252 a year. It will take 22 years for the penalty to become equal to the overcharge.
So if one wait till 67 to start signing up for Part B, the breakeven point is 89 years old.

The Math ignored premium increase, but it also did not take into account investing the overcharged amount into let say a well ran mutual fund to increase that $5536.8 overpayment of premium for 2 years.
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Old 03-20-2013, 09:57 PM   #2
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If your income goes down due to retirement or working less hours, then yo4SS and they don't charge as much as they would based upon the Tax return 2 years before. When went on Medicare in 2012 they based his charge on income in 2010. We showed him the 2011 tax return which showed lower income after retirement and they based the premium on the 2011 tax return instead.

I would not skip Part B in any event unless I had other insurance regardless of good health.
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Old 03-20-2013, 10:16 PM   #3
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IIRC, delaying signup for part B results in a permanent increase in premiums.
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Old 03-20-2013, 10:27 PM   #4
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Quote:
Originally Posted by gsparks2 View Post
IIRC, delaying signup for part B results in a permanent increase in premiums.
My calculation took that into account, it'll take 22 years for the increase to be equal to the 2 years of overcharge because of a high enough pre-retirement income (and a gross income of $214000 a year is actually not exactly in filthy rich territory).

Katsmeow, if a person retires within a year or so prior to 65, the tax return available to show MediCare when one has to take out Part B might not yet show the significant drop in income when one retires, specially if someone is born in months before April.
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Old 03-20-2013, 10:44 PM   #5
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Originally Posted by bondi688 View Post
My calculation took that into account, it'll take 22 years for the increase to be equal to the 2 years of overcharge because of a high enough pre-retirement income (and a gross income of $214000 a year is actually not exactly in filthy rich territory).

Katsmeow, if a person retires within a year or so prior to 65, the tax return available to show MediCare when one has to take out Part B might not yet show the significant drop in income when one retires, specially if someone is born in months before April.
Right, I did not read it carefully. The Medicare website describes a way to appeal the premium amount based on reduced income.
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Old 03-21-2013, 04:24 PM   #6
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Quote:
Originally Posted by gsparks2 View Post
Right, I did not read it carefully. The Medicare website describes a way to appeal the premium amount based on reduced income.
There is a form to be filled out that covers this situation. Looks like you can use the most recent tax return to show reduced income.

http://www.ssa.gov/online/ssa-44.pdf
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Old 03-21-2013, 04:44 PM   #7
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We are in the process of refining our retirement income stream now that DH plans to retire w/in the next two years. Our Fidelity AE stated that yes, the Medicare Part B premium is based on most recent income, however, it adjusts to current income after 2 years. Therefore, we expect to pay the max. $300+/month for the first two years, then the premium will be adjusted downward. Haven't checked into this, but it does make sense to me.
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Old 03-21-2013, 05:14 PM   #8
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I'm hoping it's less than 2 years.

Suppose, for example, that you retire part way through the year, and that this takes your MAGI below the threshold. Then, early on the in the following year, you file your return, and apply for the downward adjustment using the form I linked above.

Depending on exact timing, the increased premium would only apply for less than a year.

Possibly wishful thinking on my part?
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Old 03-21-2013, 09:55 PM   #9
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I was just so relieved to be told that we wouldn't be paying $300+ per person per month for Part B forever, that I wasn't listening too closely after that.
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