Understand What You Are Signing Up For- Medicare (Before You Do It)

Do not apply for Medicare in the next 3 to 6 years if you are not familiar with the hazards highlighted in this article. What you do (or don’t do) today matters in the future, when you sign up for Medicare.  I feel compelled to share real life experiences to help those in the early planning stages of “life after 65.” This includes people age 61, 62, and persons working and deferring Medicare until age 68, 70 and later. Before you reach Medicare, you should understand what you are signing up for.   This article is dedicated to the many, sad phone callers like this one:

“…I signed up for Medicare 2 months ago, and then applied for Medicare Supplement (medigap) insurance, as well as my Part D prescription drug plan.  I don’t understand why I just received an invoice for $1,482.00 from the Department of Health & Human Services…is this a monthly bill?  Is this my new supplemental insurance?”

The Problem

Individuals go to the Social Security Administration (SSA) to sign up for Medicare Part A & B.  Do you understanding everything you are signing up for?  Long before you reach Medicare, talk to your CERTIFIED FINANCIAL PLANNER™, as well as a local, independent agent.

“Best Advice:  Talk to your financial advisor and an independent agent when you turn 62.”

Whereas Medicare Part A is free for most people, Part B is not.  Medicare Part B enrollees pay a monthly premium representing about 25% of the Part B estimated program costs.  For 2022, this so-called, Standard premium is $170.10 per month.  The government subsidizes the rest, but…

The Cost is Greater Than You Think

In truth, many individuals residing in the Santa Clara Valley pay more, because the Standard Part B premium is adjusted higher for income:  this increased amount is called “IRMAA.”   My

observation during the last 12 months:  there is a real problem with SSA failing to educate applicants. Early education and understanding gives you a fair chance to delay Medicare, where possible, to reduce the IRMAA.  No offense intended for the good folks at SSA, but based on the sheer number of phone calls I receive… I think the organization can do better.

Introduction to IRMAA

Best Advice:  Talk to an independent agent and your financial advisor when you turn 62.  If you are working past age 65, initiate contact at least three years before you apply to Medicare or leave your current employer health plan.

IRMAA is the Acronym for Income-Related Monthly Adjustment Amount; there are two versions associated with Medicare:

1. IRMAA-B for Medicare Part B
2. IRMAA-D for Medicare Part D

The short introduction is, your cost to participate in Medicare Part B and Part D is higher if your income exceeds a certain threshold.  For 2022, you trigger the first IRMAA threshold at $91,000 (filing Single).  For greater detail, schedule a phone call or read Part 2 of this article.  The balance of this page will keep it simple.

Good-To-Know (Before You Reach Medicare)

Here is a “good-to-know” aspect of IRMAA:  the IRMAA calculation is based on IRS information provided to the Social Security Administration (SSA) from two or three years earlier.  You trigger an IRMAA when your income exceeds certain thresholds.  “Income” is based on your MAGI (line 11 of your 1040 Federal Income tax return), plus adjustments.  Fortunately, the IRMAA is not permanent and SSA recalculates your amount each year.  You may appeal the IRMAA in certain situations.

“The potential for an IRMAA should factor into the timing of receiving capital gains and your retirement date.”

The potential for an IRMAA should factor into the timing of taking capital gains.  Other factors include your retirement date, and ultimately your application for Medicare.  You have greater control of these factors the three or four years prior to retirement, so talk to an independent agent early in the process; definitely include your tax and financial advisors in the discussion.

Before You Reach Medicare

An independent agent can discuss mitigation strategies and options.  Perhaps you could work a few months longer than scheduled, while carefully avoiding late enrollment penalties (Part B and Part D).  Good agents are highly sought after, so start a conversation early, and build that business relationship before you need it.

408-252-7300

Would you like me to be your independent agent?  Call me at 408-252-7300 to discuss if we are a good fit.

Editor’s Note:  Marc Derendinger is an independent agent serving Santa Clara County residents for more than 30 years.  He helped the City of San Jose establish its first-ever group voluntary long-term care plan in 2001, served as an advisor to the State of California DHCS California Partnership for Long-term Care, and currently serves as insurance broker for the San Jose Police Officers’ Association.  Marc offers free assistance to new Medicare beneficiaries residing in California, at (408) 252-7300.

Schedule a Consult:  (408) 252-7300