Some cheered when it was announced that Social Security checks would be going up 5.9% in 2022. For many of Social Security age, this is very comforting, given the rising cost of living. Unfortunately, healthcare costs are rising faster than the cost of other goods and services you may be using. For instance, the increase in Medicare Part B premiums will be 14% to 16%.
In 2021, the lowest premium for Medicare Part B was $149 per month. In 2022, it has increased 14% to $170 per month. Increases are detailed in the table below, ranging from 14-16%.
What are the reasons for such high increases in one year?
- Lawmakers declined to raise the premiums in 2021 during the height of COVID.
- The (expensive) Alzheimer drug Aduhelm has been approved and a reserve is being created.
- General health care costs have been increasing.
Premiums are based on the adjusted gross income (AGI) shown on tax returns from 2 years ago. Higher-income taxpayers pay more for their Medicare Part B premiums. This is the Income-Related Monthly Adjusted Amount, or more popularly, IRMAA. High income events – such as the sale of a business, a Roth IRA conversion, the start of RMDs, etc. – may bring higher Medicare Part B premiums, even temporarily. Even one dollar into the next bracket will mean paying the higher premium, so it is worth paying attention to.
Here is the table showing the new premiums and the new brackets for 2022 as compared to 2021:
When planning for long retirements, it’s important to think about how inflation on the good and services you use in retirement will intersect with the cost-of-living adjustments for the income you will be receiving as well as the investment portfolio and any other resources you will be turning to.
Talk to your tax advisor in advance if you anticipate a higher than usual income year, or for other tax-sensitive strategies.
This is for educational purposes only. To learn more about the topics mentioned and if they are suitable for you, consult an appropriate professional. Tax laws can change at any time.
Any information provided in this presentation has been prepared from sources believed to be reliable but is not guaranteed and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for information purposes only and does not constitute a recommendation.
Arthur Stein and Arthur Stein Financial, LLC are not authorized to give legal or tax advice. For information on your specific situation, please consult your tax advisor regarding any tax implications and your attorney for legal implications. As required by the US Treasury Regulations, you should be aware that this presentation is not intended to be used and it cannot be used for the purposes of avoiding penalties under federal tax laws.
Keep in mind that:
- Past performance is no guarantee of future performance;
- None of the information provided is necessarily relevant to anyone’s personal situation. Circumstances differ among individuals, and you should not assume that these generalizations or information apply to you.