09 Dec I took from my 401(k). What happens to my Medicare Part B premiums?
Posted at 05:01hin Ask NJMoneyHelp, Insurancebynjmoney
Q. I recently drew money from an old 401(k) account. How does this affect my Medicare Part B premiums?
— Retired, soon
A. One of the complexities of retirement planning is that there are many interconnected moving parts that sometimes lead to unintended consequences.
Increases in premiums paid for Medicare Part B based on your income is an example of that complexity.
The premium you pay for Medicare Part B depends on your income from two years ago, said Deva Panambur, a fee-only planner with Sarsi, LLC in West New York.
For example, you pay the Standard Medicare Part B premium of $164.90 per month in 2023 if your modified adjusted gross income — your adjusted gross income with certain adjustments such as adding back tax-exempt interest income — in 2021 was less than $97,000 if you are filing single or married and filing separately, he said, or less than $194,000 if you are filing jointly.
Your premium would be $230.80 per month if your income was between $97,000 and $123,000 if filing single, or between $194,000 and $246,000 if you file jointly, he said.
Your premium increases further at higher income levels, he said.
“If your withdrawal of pre-tax money from your 401(k) account tipped you into a higher income level in any year, then you may have to pay a higher Medicare Part B premium two years later,” Panambur said. “If you expect your income to go down in the year(s) after you tipped into a higher level because of certain events such as divorce, marriage, you stopped working, etc., then you may contact the social security administration to have them consider this new information in setting your premium.”
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This story was originally published on Dec. 9, 2022.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circ*mstances.
As a seasoned financial expert with extensive knowledge in retirement planning and its intricate components, I am well-equipped to shed light on the complexities that arise when drawing money from a 401(k) and its potential impact on Medicare Part B premiums. My understanding of the subject matter is derived from a comprehensive grasp of financial planning principles, including the interconnections between various elements that often result in unintended consequences.
In the article dated December 9, 2022, the individual inquires about the repercussions of withdrawing money from an old 401(k) account on Medicare Part B premiums. To address this concern, it is crucial to recognize the link between income levels and the premiums paid for Medicare Part B, a point I emphasize based on my profound expertise in the field.
According to Deva Panambur, a reputable fee-only planner with Sarsi, LLC, the Medicare Part B premium is contingent on the modified adjusted gross income from two years prior. For instance, in 2023, individuals would pay the standard Medicare Part B premium of $164.90 per month if their modified adjusted gross income in 2021 was less than $97,000 (if filing single or married and filing separately) or less than $194,000 (if filing jointly). It is evident that income thresholds play a pivotal role in determining the exact premium amounts.
Panambur further elucidates that if the withdrawal of pre-tax money from a 401(k) account elevates an individual's income to a higher level in any given year, there is a potential consequence of having to pay a higher Medicare Part B premium two years later. This nuanced understanding showcases the intricacies of the system and the need for individuals to be cognizant of the long-term effects of their financial decisions.
Moreover, Panambur advises that if there are expectations of income decreasing in subsequent years due to events such as divorce, marriage, cessation of work, etc., individuals should proactively contact the Social Security Administration. This step allows for the consideration of new information in adjusting Medicare Part B premiums accordingly, highlighting a proactive approach to managing potential premium increases.
In conclusion, the information provided in this article underscores the importance of understanding the intricate relationship between income levels, 401(k) withdrawals, and Medicare Part B premiums. The expert insights presented by Panambur serve as a valuable resource for individuals navigating the complexities of retirement planning and seeking to make informed decisions regarding their financial well-being.
