Details on Medicare Enrollment + The American Families Plan, Ep #58

In this special two-part episode of Retirement Made Easy, I answer a listener’s question about Medicare enrollment. I also talk about the tax proposals that legislators snuck into The American Families Plan and how they could impact you. If you’re nearing retirement this is a can’t-miss episode full of important details.

You will want to hear this episode if you are interested in…

• [1:54] Send me questions at RetirementMadeEasyPodcast.com
• [5:18] The basics of enrolling in Medicare
• [10:40] What is a Medicare Advantage Plan?
• [13:55] Proposed tax changes in The American Families Plan

The basics of enrolling in Medicare

When is the deadline to enroll in Medicare? The initial enrollment period is three months before you turn 65 or three months after you turn 65. If you decide to work past 65, you can stay on your health insurance through work. When you retire, you become eligible for a special enrollment period. The special enrollment period is an eight-month window that starts once you officially retire. You can then purchase a supplement or an advantage plan.

Did you know that the cost of Medicare Part B and Part D are based on your taxable income? Medicare will automatically look at your income two years before your retirement date. If your household income is more than $176,000 you will pay what’s called an IRMAA tax in addition to what you pay for Medicare Part B and Part D.

Is there a way to get around that? If your income is lower the year you retire, you have to submit a life-changing event form called an SSA-44 form. It lets Medicare know that they can’t look at your income based on 2019 and to price based on current income. NOTE: If your annual household income is below $176,000, it won’t impact you either way.

What is a Medicare Advantage Plan?

Medicare Advantage plans—also called Part C coverage—have low to no premiums but a higher deductible. How is it different from a supplement? You’re limited to a network of physicians. If you like to travel, you will likely need care outside of this network. If that’s the case, this plan won’t make sense for you. I’d lean toward a Medicare supplement plan instead. One thing that’s nice about these plans is that you won’t need to get Medicare Part D, it’s included in the Advantage plan. I recommend meeting with an independent health insurance specialist to help walk you through your different options.

Proposed tax changes in The American Families Plan

What does The American Families Plan actually mean for the American family? One of the proposals is raising the top tax bracket from 37% to 39.6% like it was before the 2017 Tax Cuts and Jobs Act. It’s probably going to happen.

One of the next items on the plan addresses capital gains and dividends and taxing anyone that makes more than $1 million a year. Capital gains and dividends would be taxed as ordinary income for those individuals. I think this has a good chance of passing. Capital gains have always gotten preferential tax treatment. If someone is currently paying 20% and will suddenly pay 39.6%? That seems excessive.

They also want to repeal the step-up of cost-basis at death for gains exceeding $1 million. If my grandfather bought AT&T stock for $50,000, what he paid is the cost basis. When he passes away 60 years later, he leaves his kids this stock—now worth $2 million. In the past, the kids would inherit the $2 million and could sell the stock without paying taxes. If this plan passes, the kids would have to pay the capital gains taxes on the $2 million they inherited.

There are a couple of other proposed changes in this bill that you should know about. Listen to the whole episode to learn more!

Resources & People Mentioned

• SSA-44 Form
• The American Families Plan