In case you haven’t heard Medicare surcharges are on their way up
The Collins Dictionary defines “surcharge” as: A surcharge is an extra payment of money in addition to the usual payment for something. It is added for a specific reason.
Medicare ushered in a new income scale as the basis for Medicare high-income surcharges. that will have many of us will paying more for our Medicare Parts B and D in 2018.
In a recent article in Investment News, Katy Votava wrote an excellent article titled “How reverse mortgages can help stave off Medicare surcharges,” in which she describes the changes and surcharges affecting the future benefits provided by Medicare for seniors and how The New Reverse Mortgage may provide a perfect solution.
What are Medicare surcharges?
A recent law changed the scale that Social Security uses to determine Medicare surcharges. The surcharges, officially known as the income-related monthly adjustment amount (IRMAA), create higher Medicare out-of-pocket costs for beneficiaries without providing any additional health coverage benefits.
The new law lowers the top three modified adjusted gross income (MAGI) tier thresholds, which means more of us will be exposed to paying top levels sooner than is currently the case.
Keep in mind that Social Security uses the MAGI from the tax return two years prior for rate setting. That is why it is important to incorporate the new MAGI tier structure into your retirement planning as soon as possible.
People will spend more out of their own pockets if they are even $1 into the next higher MAGI bracket. Conversely, they can save money by being $1 down into the next lower MAGI.
Reverse Mortgage to the Rescue
A reverse mortgage is one tool that can help you lower your MAGI and avoid those increased Medicare surcharges. The loan proceeds are tax-free and therefore are not included in the calculation of Medicare IRMAA surcharges.
The basic strategy is to structure retirement income to maximize cash-flow sources that will not be included in Medicare’s MAGI calculation. The lower the MAGI bracket, the lower Medicare Parts B and D surcharges will be without reducing benefits. In fact, those costs can be eliminated in the lowest MAGI tier.
The New Reverse Mortgage offers a number of different options for homeowners who will feel the pinch from these new Medicare surcharges. Unlike other disbursements from your qualified investment accounts, funds received from a reverse mortgage are not considered income and therefore will not increase your MAGI.
The New Reverse Mortgage offers a number of options that can be customized to meet your individual needs to avoid the Medicare surcharges.
- The Retiree’s Equity Line of Credit or RELOC gives you the flexibility to draw on the funds as needed for the coverage gap (donut hole).
- You can also elect to have a fixed tax free monthly payment that will give you the peace of mind knowing the funds will be available as long as you live in your home.
- The term option gives you a fixed tax free monthly payment for a predetermined period of time.
The New Reverse Mortgage isn’t for everyone…but it could be!
If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.
Spoiler alert! I’m not a financial advisor, so you should consult with yours before taking the next step.
Some of this information first appeared in Investment News
From the desk of Greg Cook