Many factors go into preparing for Medicare. You need to sign up at the correct time and find the right plans for your needs, and you also have to prepare for the expenses. Knowing how much you will pay for the different parts and plans can be puzzling, especially when you get into the details.

If you’re like others, you’re likely wondering what part your investments play. So, will investments affect your Medicare costs? The short answer is, yes, it can, but there are a few factors to keep in mind.

General Medicare Costs

It’s good to learn more on medicare insurance fort myers fl before understanding the role investments play. The foundation of your Medicare consists of two different parts. The first part is Medicare Part A, which helps cover inpatient care. The second part is Medicare Part B, coverage for your outpatient needs.

Most people pay no monthly premium for Part A from having at least 40 working quarters in the U.S. and paying Medicare taxes. Without enough work credits, you will pay either $274 or $499 each month, depending on how many work quarters you have.

Now, unlike Part A, everyone must pay for Part B. Many people pay the standard premium each month, which is $170.10 in 2022. Additionally, Part B pays only 80% of Medicare-approved medical services. This means you are responsible for the remaining 20%. Fortunately, Medicare Supplement plans help cover this 20%.

Additionally, there is Medicare Part C and Part D. Part C is the Advantage plan program, while Part D is for prescription drug coverage. Each Part D plan’s monthly premium varies depending on different factors, including your zip code.

Income-Related Monthly Adjustment Amount

You may have to pay an additional charge on top of your Part B and Part D premiums. This is commonly referred to as an income-related monthly adjustment amount (IRMAA) charge delegated by Social Security (SS). But, how do you know if you qualify for an IRMAA charge?

To determine if you are subject to an IRMAA charge, SS looks at your IRS tax return from two years ago to calculate your modified adjusted gross income (MAGI). They are looking to see if your income amount is above a certain level. If it is, SS will charge you more for your Part B and Part D premiums.

For example, if you start Medicare in 2022, SS will refer to your 2020 IRS tax return to look at your income level at that time. In this example, you filed as an individual in 2020 with a MAGI above $91,000 but no greater than $114,000. In this case, you would qualify for an IRMAA charge, paying $238.10 for your Part B premium instead of the standard $170.10 in 2022.

How Investments Affect Modified Adjusted Gross Income

Well, what exactly counts towards your MAGI? Your MAGI consists of different items, including interest, wages, capital gains, SS benefits, tax-deferred pensions, and investments.

More specifically, this can include interest and dividends earned on investments, including tax-exempt interest. So, these items can increase the level of your MAGI, meaning you can pay more for your Part B and Part D premiums.

There are some resources available online if you’re unsure of how to calculate your MAGI. You will likely need to combine your adjusted gross income (AGI), excluded foreign income, and more.

IRMAA Appeal

Fortunately, there is a way to appeal this IRMAA charge if your income level has decreased since two years ago. To do so, you will need to qualify for what is called a “life-changing event.” You can do this by filling out and submitting the SSA-44 form.

The form has more detailed instructions on what qualifies as a life-changing event. For example, retiring from a job is considered a life-changing event, which most people use when filling out the SSA-44 form.

If your appeal is approved, they will typically lower your Part B premium to the standard base premium. This means you’ll have more money in your pocket to help cover the cost of additional plans such as Medigap Plan F. If you qualify for a life-changing event, it never hurts to submit the form and see if you can get your costs reduced.

Final Thoughts

Investments can affect your Medicare costs, specifically your Medicare Part B and Part D premiums. If you’re unsure whether your previous income was high enough to qualify for an IRMAA charge, you can find the different threshold amounts for 2022 online.