Key Takeaways
- A 71-year-old father who retires next month will have his 2027 Medicare Part B premium set by his and his wife’s joint 2025 income, which includes the paycheck he’s about to give up.
- If that 2025 income were an assumed $280,000, his surcharge would be $202.90 a month at this year’s rates, or $2,434.80 a year.
- Stopping work is one of eight life-changing events that let him use form SSA-44 to ask Social Security to set the surcharge from the couple’s newer, lower income.
- If the couple’s income without his paycheck were an assumed $150,000, at this year’s rates he’d owe no surcharge at all.
Retiring usually means a smaller income. But Medicare sets its surcharge on higher earners from the tax return two years back. That means the first premium after a paycheck stops can still be priced off that paycheck. Fortunately, one form can fix that.
The paycheck stops next month
Earlier this month, an adult child posting in Reddit’s r/personalfinance forum asked for help building a retirement plan for their parents. The father is 71, already on Medicare and retires next month. The 62-year-old mother may need to stop working early next year. The poster puts the couple’s net worth at about $2.5 million, including a paid-off home and $2.16 million in invested assets.
The poster didn’t say what the parents earn, though. So let’s say the couple’s 2025 joint return shows $280,000 of modified adjusted gross income, counting his pay, her pay and their investment income.
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Medicare goes by the return from two years back
Medicare charges higher earners a monthly surcharge on Part B, and on Part D too, based on income bands. It uses the modified adjusted gross income on the tax return from two years before, or from three years before if that return isn’t available. So the father’s 2027 premium will be set by the couple’s joint 2025 return, which includes the paycheck he’s about to give up. The 2027 bands aren’t out yet. At this year’s rates, a couple filing jointly with more than $218,000 pays a surcharge of $81.20 a month, and the surcharge rises with income to $487.00 at $750,000 or more.
What an assumed $280,000 would cost him
At the assumed $280,000, the couple would fall in the band above $274,000 and up to $342,000. At this year’s rates, the surcharge in that band is $202.90 a month. That doubles his Part B premium to $405.80 a month. Over a year, the surcharge comes to $2,434.80.
Ouch. And he’d be paying it because of a paycheck that stops next month.
Stopping work is one of eight ways to ask again
Social Security sets the surcharge. If your income drops after one of eight life-changing events, you can ask it for a new decision based on your newer, lower income. Stopping work is one of the eight. The others are:
- a spouse’s death
- marriage
- divorce or annulment
- working less
- losing income-producing property
- losing an employer pension
- an employer settlement payment
You make the request on form SSA-44, which Social Security has online.
Now let’s say the couple’s income without his paycheck is an assumed $150,000 a year. Part of that income doesn’t depend on his job. The poster says a high-income ETF in his brokerage account pays about $20,000 a year, and the mother’s pay still counts for as long as she keeps working. At this year’s rates, $150,000 is well under the joint line where the surcharge starts. Social Security would set his premium from the lower figure, and the surcharge would go away.
The notice should arrive right on cue
Social Security sends its surcharge notices along with its yearly cost-of-living letters, which go out in November and December. So the father’s notice for 2027 should arrive right around his last day of work. That’s when he’d file the SSA-44, with stopping work as his life-changing event. Frankly, at the assumed $280,000, that’s a lot of money to pay on a paycheck that’s gone, and I’d have the form filled out before the letter even shows up.
CMS is due to publish 2027’s Part B premium and surcharge bands soon (last year, it put out this year’s on Nov. 14). Those figures will set the real numbers on his notice. And if the couple’s actual 2025 income comes in under 2027’s joint line, there won’t be a surcharge to drop at all.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
