Ask Bob: Switching From Employer Coverage to Medicare

Robert Powell

Question: I will be 69 years old this month. I hope to and intend to work until at least age 70 at my company. My wife does not work and is 56. I'm signed up for Medicare Plan A but use only my employee medical plan. My concern is how much I'll be paying for Medicare Plan B and D when I actually retire. My income now is in the high six figures. I don't know how the government calculates the amount of premium I'll pay. All I know is I'll go from high six figures to about $60,000 from Social Security and my RMD (required minimum distribution). How does it work and how much can I expect to pay?

Answer: Since your income will decrease significantly after you quit working, you can request a new initial determination, says Carolyn McClanahan, director of Financial Planning at Life Planning Partners.

There are, she says, a list of life-changing events that will allow this. The U.S. Department of Health and Human Services provides a list of these and other details

"Income is more than just Social Security and RMDs," notes McClanahan. Medicare premiums are based on modified adjusted gross income -- your adjusted gross income (including dividends, interest, capital gains, etc.) plus any untaxed Social Security and any tax-free income.

"You need to go immediately from your employer plan to sign up for part B and your Medigap plan," says McClanahan. "You should not go on COBRA."

If you do, she warns, "You will pay additional penalties for delaying your enrollment as COBRA coverage does not count toward this."

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