Watch those Medicare Part B & Part D (Prescription Drug Coverage) Premiums: You May be Paying Higher Premiums than you Should!

May 31, 2016 sharkeyhowesandjaver Social Security, Tips Gross Income, IRS, Medicare, Modified Adjusted Income, Premiums, Seniors, Social Security

For our seniors 65+ and those caring for seniors…

Did you know that if your income has dropped significantly you may be eligible for a reduction of your Medicare Part B & and Part D (Prescription Drug Coverage) premiums?

If you’ve ever received a letter from Social Security telling you that your income level causes you to pay extra premiums on your Medicare Part B and Part D, then you should be aware of these rules.

The Social Security Administration receives data that is two-years old, specifically your Modified Adjusted Gross Income (MAGI), each year from the Internal Revenue Service (IRS) and uses this information to determine the amount of your monthly premiums. If your income has dropped below specific thresholds, your premiums will decrease and vice versa. See the chart below for a breakdown of income levels and premiums required in 2016.

(source)

The important thing to note is that you don’t have to wait for two years for Social Security to get updated information from the IRS. Instead, if you know your MAGI has dropped below the income threshold on which your current premiums are based, then you can file an appeal along with some required documentation of your current MAGI and request a review.

Required documentation is:

A copy of your filed tax return and an IRS transcript;
A letter or statement from the IRS stating they have corrected your tax information and explaining the correction;
Your amended tax return, along with a letter from the IRS accepting your amended return or an IRS transcript; Your copy of your tax return that shows an obvious IRS transcription error in tax-exempt interest income; or
Your declaration under penalty of perjury that you lived apart from your spouse for the entire year when you filed your income tax return as “married Filing separately”. (source)

If the Social Security Administration finds that you’ve been paying a higher premium than you should have been, then they will refund the excess within 30 days of notifying you of their findings. So don’t wait, keep an eye on your income level and if you’re due a reduced premium, get filing!

For additional information read publications, Medicare Premiums: rules for Higher-Income Beneficiaries (SSA Publication No. 05-10536) and Medicare Premiums: What You Can Do If you Think Your Income-Related Premium Is Incorrect (SSA Publication No. 05-10125).

Making Sense of the Social Security Kill Bill

December 7, 2015December 3, 2015 sharkeyhowesandjaver Economy, Investing, SH&J News, Social Security, Tips Budgeting, Retirement Planning, Social Security

Early this November, Congress surprised many when they introduced the Bipartisan Budget Act of 2015 causing Financial Advisors to revisit ways to maximize cumulative Social Security benefits for their clients. With the passing of this budget deal, we see the end to two Social Security claiming strategies that have benefited many individuals – File and Suspend and the Restricted Application.

The new rules for File and Suspend will take effect with all applications filed after April 30, 2016. We will see the end of filing a Restricted Application for anyone who is turning 62 after December 31, 2015. This leaves a 6 month window for clients to review their situation with their financial advisor to determine how the changes will affect them, and if they can still take advantage of these strategies before they go away.

The File and Suspend strategy was commonly used by married couples to allow one spouse to begin collecting their spousal benefit at full retirement age while allowing the higher earning spouse to delay and then maximize their own benefit at age 70. Under the new rules, any suspension application filed after April 30, 2016 will also suspend all dependent and/or spousal benefits that would have been paid off of the suspended record. In other words, a worker must now collect their own benefit in order to trigger benefits for their spouse or dependents.

Restricted Applications for spousal benefits were often filed by couples who both wanted to delay collecting their own benefits while taking advantage of a spousal benefit in the meantime. The new rules now state that anyone turning 62 in 2016 or later will no longer be eligible to file a restricted application when they reach full retirement age. Individuals who will be 62 by the end of 2015 will remain eligible to file a restricted application when full retirement age is attained. The caveat – if this strategy depends on one spouse filing and suspending after April 30, 2016, the strategy will not work and further planning with your advisor may be beneficial.

For Example: Mark and Mary are both 63 and remain eligible to file a restricted application for spousal benefits at full retirement age. Mark wants to delay collecting his benefits until age 70. However, he will turn 66 after April 30, 2016 at which point the option to file and suspend is no longer available and spousal benefits will no longer be paid off a suspended benefit. Mark will either have to take his own benefit at age 66 to give Mary the option to file a restricted application for spousal benefits, or Mary will have to forego her spousal benefit allowing Mark to delay his own benefit and vice versa.

Individuals fortunate enough to have already implemented these strategies will not see a change to their current benefits. On the other hand, individuals born after 1953 will be unable to take advantage of either claiming strategy and are encouraged along with anyone who will be 62 by the end of 2015 or 66 before April 30, 2016 to meet with their financial advisor to determine the most optimal claiming strategy before the window closes.

Source: Savvy Social Security Planning for Boomers, Social Security ‘Loopholes’ Closing