EDITOR'S NOTE: This article was originally published in the March 2009 issue of Kiplinger's Retirement Report. To subscribe, click here.
For the third year in a row, higher-income Medicare beneficiaries received notice that they'll pay more in Part B premiums than other seniors. But this year, there's a catch: The size of the premium is based on returns for tax year 2007, before the economic downturn slashed the nest eggs of many retirees.
The premium is calculated on a sliding scale based on a taxpayer's adjusted gross income plus any tax-exempt income. According to the Social Security Administration, 2 million beneficiaries (4.9% of all beneficiaries) paid a higher premium in 2008, compared with 1.7 million (4.2%) in 2007.
The standard Part B premium is $96.40. Individuals with a modified AGI from $85,000 to $107,000 in 2007 will pay a $134.90 premium (married couples pay twice that on joint income from $170,000 to $214,000). Individuals from $107,000 to $160,000 (married, $214,000 to $320,000) pay $192.70. Individuals from $160,000 to $213,000 (married, $320,000 to $426,000) pay $250.50. And individuals above $213,000 (married, above $426,000) pay $308.30.
You can contest the higher premium if your income has dropped because of a "life-changing event." A life-changing event is marriage, divorce, job loss, reduced work hours, loss of income from income-producing property or cuts in pension benefits.
What is not considered a life-changing event is a drop in income because of investment declines. For example, if you had a significant amount of income in 2007 from selling shares, you're liable for the higher premium this year even if your income is much lower.
If you do fit one of the categories, fill out Form "Medicare Part B Income-Related Premium-Life Changing Event," which you can find at www.ssa.gov/online/ssa-44.pdf. If Social Security rejects your request, you have 60 days to file an appeal.
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