Toni:
For the past two years, my Medicare Part B premiums have gone up. I am over 70 and began taking my RMDs (required minimum distributions) from my 401K. Could this have had an impact on my Medicare Part B premium increase?
This year my Part B and Part D premiums increased up to $187.50 for Part B and an extra IRMAA premium of $13.30 for Part D.
I am married and my wife has taken a new job with a higher salary. Since we are filing jointly, could this have an increased my Medicare premiums.
Thank you,
James from Tampa, FL
James:
Yes!! Your situation could have raised your Medicare Part B and D premiums.
The average American does not realize that any increase in your MAGI (modified adjusted gross income) when you are filing jointly can increase your Medicare premiums. Medicare bases your premiums on both you and your spouse’s income whether one is Medicare age or under. Your taking your RMDs combined with your wife’s increased income has raised your Medicare premiums.
The new Part B premium of $187.50 and $13.30 for Part D tells me that your joint income in 2016 was from $170,001-$214,000.
There is not much you can do about your wife’s increase due to income, but there is an IRS ruling which began July 2, 2014 which allows deferred income annuities to be made available as “Qualified Longevity Annuity Contracts” (QLACs), which can be excluded from the RMD (required minimum distributions) calculations if certain conditions are met.
A QLAC annuity contract can exclude up to $125,000 from a qualified plan such as 401K, 403B, etc. for an individual or $250,000 as a couple, from the RMD calculator until 85 when the annuity matures. The annuity can begin at any age prior to age 83.
One thing to note is that Roth IRAs do not qualify for a QLAC plan.
QLAC annuity plans can add value to a person’s retirement planning.
In an article from the Motley Fool, it explains the mechanics of a QLAC as “QLAC is an insurance product you buy up front in exchange for a guaranteed stream of income that will begin at some point in the future and last for the rest of your life. These payouts are not affected by market conditions and are guaranteed by the insurance company. Another benefit is that they can help you project what your income will be in your retirement years.”
James, you may want to investigate how a QLAC annuity can reduce the amount your annual RMD calculations requires you to take as income. This is a new subject added to the Toni Says “Confused about Medicare” workshop.
