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.
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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