AARP Hearing Center
Key takeaways
- Understand premium costs by reviewing how Tricia Sandiego explains income-based calculations for Medicare.
- Reduce your Medicare Part B premium by submitting proof of retirement or income changes, per Sandiego’s advice.
- Explore Medicare Savings Programs, as Sandiego recommends, to help cover premiums if your income is limited.
Summary
Medicare premiums are determined in part by your income, and understanding how this works can help you better plan your retirement budget. As Medicare adviser Tricia Sandiego explains, your modified adjusted gross income (MAGI), reported on your federal tax return from two years prior, directly impacts what you’ll pay — particularly for Medicare Part B premiums. While most people pay no premium for Medicare Part A, nearly everyone pays for Part B, and higher income can trigger higher premium rates.
If your income drops because of retirement, divorce or the loss of a spouse, you can submit new documentation to possibly lower your Medicare premium. There are also Medicare Savings Programs available if you have limited income, offering crucial help in covering premium costs. Understanding how your income affects your Medicare premiums now means fewer surprises and greater control over your retirement finances.
The key takeaways and summary were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
Full Transcript:
[00:00:00] If you’re nearing retirement age, you’re probably looking at what you retirement budget will be. You might be surprised to learn that your Medicare premiums can change based on a
[00:00:09] number of factors including your income. Hi, I’m Tricia Sandiego. In my work with AARP,
[00:00:15] I help people understand Medicare’s costs. Here’s a question that comes up a lot. How does my income affect my Medicare premium?
[00:00:26] Let’s take a look. Premiums are the amount you pay for health insurance coverage. Most people don’t pay a premium for Medicare Part A, which covers hospital
[00:00:35] stays, rehab, some home health services and end-of-life hospice care. If you have not paid into Medicare taxes for at least 10 years, you will have to
[00:00:45] pay a premium for Part A. But most do pay a premium for Part B, the part of Medicare
[00:00:50] that covers doctor visits, outpatient and lab services, and things like a wheelchair or oxygen equipment if you need it.
[00:00:57] The basic Medicare premium is set by law each year and is based on Medicare costs,
[00:01:02] but there are different premium levels. You’ll pay more if your income is above a certain level.
[00:01:08] Here’s how it works. They use your federal tax return from the year before last to determine how
[00:01:14] much you pay. But let’s say your income drops after you file that tax return. Maybe you had a life-changing event such as retirement,
[00:01:22] divorce or the death of a spouse, and now your income is substantially lower. You’ll
[00:01:27] need to provide a more recent tax return. If you’re not able to do that, you will need other evidence of your new income.
[00:01:34] This may include a death certificate, a letter from your employer about retirement, or something similar.
[00:01:39] You’ll also need to fill out a form called SSA-44 found at ssa.gov.
[00:01:45] The bottom line is that your income does play a big role in how much your Medicare premium will be each year.
[00:01:51] If you have limited income, you might be eligible for a Medicare Savings Program to help pay your premiums.
[00:01:58] I hope this video gives you a better idea about what kinds of expenses you’ll need to consider as you plan for retirement.
[00:02:05] For more helpful information, visit aarp.org/medicare.
