|
Submitted by: Amy Rose Herrick
Amy's skills combine Tax Planning, Income structuring, Cash Flow, Divorce Settlements, Debt configuration, Estate Plans, Portfolio Planning and Distribution Alternatives. She assisted an institutional investor base from '86-90, then focused her practice in '91 to the present for individuals and small business exclusively. Amy holds various professional licensing in several states. She has provided planning advice to multiple media outlets including Newsweek. Interviews are available.
Major changes are being implemented on how Medicare Part Premiums will be charged to eligible seniors starting in 2007. In the past, all participants paid a flat 25% and the Federal Government paid the other 75%. Those days are now history. Congress has enacted this step as a way to help pay for this huge annual liability by tapping into the cash resources of what had been carved out as “wealthier” participants.
It is projected these increases will only effect about 4% or 1.6 million beneficiaries. You could say those affected are truly in the minority of retirees today financially.
How much more is this going to cost?
For most participants the cost will only be the annual $5 increase to $93.50 a month.
Singles with Modified Adjusted Gross (MAG) incomes between $80,001-100,000 will pay $105.80 a month. The next increase occurs at $100,001 - 150,000 with premiums of $124.40 a month. If you have income up to $200,000, you will pay $142.90 a month. Finally, at the top end expect $161.40 in premiums for Medicare Part B.
Couples with MAG incomes between $160,000-200,000 will pay $105.80 a month. The next increase occurs at income up to $300,000 with premiums of $124.40 a month. If you have income up to $400,000, you will pay $142.90 a month. Finally, at the top end for MAG over $400,000 expect $161.40 in premiums.
This is another loud and clear wakeup call to seniors to be pro-active when planning their taxable income year to year instead of being reactive to tax changes. Just a $5 dollars extra of taxable income could cost you higher premiums. How can you be a pro-active tax planner? A little time spent with your tax professional projecting your tax liabilities with current income strategies implementing a few deliberate income planning changes could reap large tax reduction and lower Medicare Part B premium rewards for you for your small time investment.
For example, if you are a Single person who takes only an extra $100 withdrawal from you IRA on 12/27 instead of waiting until after 1/1 of the following tax year when you already had MAG of $79,950, you have just increased your Part B premiums by $12.30 a month for the following year because you failed to look ahead. You lost more than the $100 you withdrew.
One thing to remember about these premiums is that if you are still working at a company with a cafeteria or section 125 plan, you can have these premiums included in your pre-tax payroll deductions and reimbursed back to you through the plan. So, you could be paying them pre-tax in some situations if you just spent a few minutes once a year filling out the forms.
These premiums are also included in all your other medical expenses when you are trying to reach the 7.5% threshold before you are able to itemize expenses on schedule A if you are not a cafeteria plan participant.
For more information on how this change may affect you, call the Social Security office at 800-772-1213.
> Return to Tax Planning |
Authored by the
founder of the
PaladinRegistry