Great news! Social Security announced a 2.8% COLA increase for 2019! Woah now…don’t go spending it all yet :/ Because Social Security has a rule called the ‘hold harmless provision’, you may not see all of that raise on your monthly check. Why? This rule prevents Medicare premiums from increasing by more than your Social Security check and a couple of years ago, that happened. Many recipients are still catching up to the Medicare increase from a few years ago.
More Social Security changes:
HIGHER INCOME EARNERS MAXIMUM INCOME LIMIT RISING:
Social Security taxes earned income at 6.2% for employers and 6.2% for employees, up to a certain earned income threshold. This is known as the Social Security ‘maximum taxable earnings’. For 2019, the maximum taxable earnings will increase by $4,500 — from $128,400 to $132,900.
EARNINGS TEST PENALTY LIMITS INCREASING:
There is a rule If you work before your ‘Full Retirement Age’ (FRA – 66 for most people in 2019), you can earn up to a certain amount without your benefits being affected. If you earn more, your benefit is penalized:
-The years before you reach FRA: You can earn up to $17,640/year
-You reach FRA age during 2019: You can earn $46,920/year
HOW MUCH EARNINGS CONSTITUTES ONE (1) SOCIAL SECURITY CREDIT:
It takes 40 ‘quarters of coverage’ (also known as credits) to qualify for Social Security (and Medicare) benefits. In 2019, one credit = $1,360 in earnings. You can only earn four (4) credits per year. This becomes important for those that need more quarters to qualify for FREE Medicare Part A premiums!
Hoffman Insurance Resources is an independent insurance brokerage agency specializing in Medicare and individual/family health plans. We are contracted with over 40 companies, Covered CA certified and Medicare certified with 13 carriers. Physically located in the Los Angeles area, we are also contracted in many states throughout the country. We pride ourselves on doing what’s right for our clients (whether we make money or not), educating you, being your advocate after the sale and exceeding your expectations. We accept only the insurance company commissions so there are NO extra charges for our assistance and guidance. From ObamaCare through MediCare…we truly Care! Check out our reviews on Yelp and Google🙂
We see this ALL the time! A client comes to us when they are turning 65 or ready to terminate their employer group plan. Since we educate our clients, we help them to figure out how much their Medicare premiums will be. Many times, our clients’ jaws hit the floor when we tell them what they will be paying. “But but but…I’m retiring and my income will be dramatically lower!”, is usually their response. Weeeelllll, Social Security and Medicare can care less about that little tidbit of info. What they look at is – what was your income TWO 2 years ago! The next response is, “OMG…that’s when our CPA and financial planner advised us to sell our rental property! And the next year, they suggested we convert our IRA to a Roth IRA!”. Yikes!! My guess is, the next conversation with those two professionals won’t go very well :/
Affectionately known as IRMAA, the Income Related Medical Adjustment Amount will be assessed on your Part B (Doctors/Outpatient) AND your Part D (Drugs) until you can PROVE your Modified Adjusted Gross Income (MAGI) is lower. Poor IRMAA…NO ONE WANTS TO DATE IRMAA! There are ways to avoid and eliminate IRMAA but you may have to pay higher costs until you can prove your income is lower. Many times, that may be till you file your taxes the next year. Unless you plan, you may be paying significantly higher rates for up to one year 🙁
For most people, here’s how it works:
1) Look at Line 37 of your personal tax return. That’s your AGI.
2) For your MAGI (good to check with your CPA for you exact MAGI), there are a lot of items to add back in but the two main ones that we see are:
Untaxed social security
3) Go to: https://debbiehoffman.com/medicareplans/ Scroll down for the IRMAA charts. Find your tax filing situation and you’ll easily what your IRMAA can possibly be.
How can you avoid or minimize IRMAA? During the 1 – 3 years before enrolling into Medicare:
THREE (3) years before you go onto Medicare:
Sell any property that will incur a capital gains.
Be finished converting IRA’s to ROTH IRA’s by this year.
TWO (2) years before you go onto Medicare:
Contribute as much as possible to your retirement accounts.
If your earnings are very high and you contribute the maximum to your retirement accounts, check with your financial planner and CPA about selling some assets at a loss during both years before applying for Medicare.
Consider buying rental property. Normally, you can count on the depreciation and expenses to fix up the property which many times will give you a loss during the first few years. AND the loss appears on the front page of your 1040 which lowers your MAGI!
Consider starting a business. Many times, you’ll have a loss those first few years with start-up costs and it can offset your earnings.
Consider holding off starting your Social Security benefits until your income will be lower.
If you have a lot of tax-exempt interest, consider moving those into a financial vehicle that can ‘defer’ the interest (a deferred annuity).
If there is no way to avoid it, when you can PROVE your income will be lower, file a reconsideration form with Social Security. When the time comes, file your taxes asap and run (don’t walk) to your local Social Security office with your taxes in hand and this form: https://www.ssa.gov/forms/ssa-44.pdf. Social Security will then adjust your Part B and Part D premiums to your normal MAGI.
Is your head about ready to explode? No worries! Just call us and we easily walk you through what to do. Better yet, have your CPA and financial planner call us and we’ll all work on together for you 🙂 Remember to reach out to us at AGE 62 or 3 years from when you will be applying for Medicare so we can really work our magic!
Hoffman Insurance Resources
By calling the number listed on this page, you will be reaching a licensed insurance agent. Debbie Hoffman and Melinda Gann are not connected with the Federal Medicare program.
Hot dog! We finally have a Social Security Cost of Living Adjustment increase! Social Security announced that beneficiaries should receive a whopping 2% increase for 2018. If you are receiving $1,500/mo, that equates to a $30 monthly increase. But hold the phone…will you REALLY see that entire increase in your check? Don’t spend all that money yet!
Many Social Security beneficiaries may not receive their raise!
About 70% of people who are receiving both Medicare and Social Security, have been protected from rising Medicare Part B increases by something called the “hold harmless” clause. Basically, the ‘hold harmless’ clause ensures that existing Medicare members don’t see their Part B premiums increase more than their Social Security COLA raise. Therefore, Social Security’s 2017 raise of 0.3%, kept Part B premiums from rising by more than 0.3% in 2017 for this group of beneficiaries.
2018 Part B premiums haven’t been announced yet but aren’t expected to increase much higher than 2017. Those who’ve been protected by ‘hold harmless’ could see some, or all, of their raise gobbled up by Medicare Part B in order to “catch them up” for the lower premiums they’ve paid in recent years.