The good news is you are rich. The bad news is you will pay much more for Medicare Part B than the average American. Medicare Part B will cost $170.10 per month, starting in January 2022 for most people. What you pay is based on your modified adjusted gross income from 2 years prior. If you are getting ready to retire pull out your 2020 tax returns to find out what you’ll pay in 2022.
Medicare does not have an asset test. It doesn’t matter how much you have in the stock market or the value of your real estate. How much did you earn in 2020?
As a single person, if it was between $91,000 – $114,000 you triggered the Rich Penalty and will pay $68 more per month for Part B. But wait—there’s more. You will also pay more for Medicare Part D, the drug coverage. While I won’t go into all those brackets here, you can easily find them on the internet.
There are five brackets for high earners. The highest being for a single filer who earned over $500,000 in 2020. That lucky person will pay an extra $408.20 per month for Medicare Part B. Why doesn’t Medicare go up even higher? How about making Warren Buffet pay commensurate with his income? The government has been moving in that direction, expanding the brackets, but still barely scratching at the top 1%.
If you are married filing jointly, the first tier of Rich Penalty starts at incomes between $182,000 – $228,000. If you are thinking about retiring in 2 years, you can do a little planning that could possibly save you some money. If you are going to take a withdrawal from your 401K that puts you over the limit by $1—don’t do it. A bit too much income could cause both spouses to pay the extra amount each month for a year. These numbers are adjusted for inflation each year. What you pay will always be a reflection of what you earned 2 years prior.
“But I only made $40,000 in 2020, I should have to pay this because my spouse made $200,000. We are separated and this isn’t fair.” I’ve encountered this many times. People assume they can beat the system by filing married but filing separately. As long as you resided with your spouse—even one day—in that past 12 months, you’ll still hit this Rich Penalty, even if you don’t file jointly.
You can file an appeal with Social Security if you had a “Life Changing Event” such as the death of a spouse, marriage, divorce, you stopped working or reduced your hours; you lost incoming-producing property due to a natural disaster, fraud or other circumstances or loss of pension. Just call your local Social Security office and they can help you file the appeal.