How do I include Medicare in a plan?

Income Lab divides Medicare Part B and D premiums into two parts:

1. Base premiums: Can be included or excluded as line-items in the plan. If included, can be treated as baseline or other/variable expenses.
2. Income-related monthly adjustment amount (IRMAA): Calculated automatically based on a two-year lookback on Medicare modified adjusted gross income (MAGI) whenever clients are covered by Medicare parts B and/or D. Medicare IRMAA amounts above and beyond base Medicare premiums are treated as a tax and included in tax tables and graphs. IRMAA is included regardless of whether base premiums are included as line-item expenses in the plan.

You can include or exclude Medicare from one or two clients in a plan. If included, Medicare IRMAA will be calculated automatically and included as a tax. If you would also like to include Medicare base premiums as line items in a plan, you can do that as well.

Including Medicare (IRMAA) in a Plan

To include Medicare IRMAA in a plan, be sure to mark the client(s) as "Covered by Medicare" Parts B and/or D in the Plan's Advanced Settings, in the Medicare section, as in the section outlined in green below. Clients are marked as Covered by both parts B and D by default in any new household plans. If a client is not covered by either of these parts, please uncheck the relevant box(es).

In the Medicare section of Advanced Plan Settings, you can also include an amount for Part D base premiums and make any necessary changes to when Medicare will begin for clients. Delays in starting Medicare after age 65 will be treated as allowed (as when clients are covered by health insurance that meets Medicare standards) and will not trigger automatic late-enrollment penalties in the plan. If you would like to include late enrollment penalties, please do so in the Other/Variable Expenses section of the plan.

If clients are marked in this section as covered by Medicare Parts B and/or D, their plan will automatically include estimated income-related monthly additional amount (IRMAA) payments in all areas where plan tax estimates are displayed. Please note that these IRMAA amounts exclude base premiums. Only the extra portion of Medicare premiums are shown as a tax.

You can also include the base premiums for parts B and/or D by checking the "Include base premiums as expense item" box for one or both clients and choosing how you would like to include these base premiums, as either baseline or other/variable expenses (this section is outlined in orange above). Baseline expenses are part of normal spending, not an extra spending item. So, choosing "Baseline Expense" will not affect the plan's Spending Capacity/Retirement Paycheck. Other/Variable expenses, on the other hand, are treated as separately funded expense items. So, choosing 'Other/Variable' will affect a plan's Spending Capacity.

Medicare (IRMAA) Default Settings

Income Lab calculates Medicare annual premiums at $2,950 per year in today’s dollars (real view) when using the default settings. This corresponds to a monthly Part B premium of $202.83 (today’s dollars) and a default Part D premium of $43, for a total monthly Medicare premium of $245.83 in today’s dollars.