Medicare enrollees with high incomes pay extra for Medicare Part B (which covers doctors’ bills) and Part D (prescription drugs). You’ll be affected with income (including tax-exempt income from municipal bonds) over $85,000, or over $170,000 on a joint tax return.
As income tops $107,000, $160,000, and $214,000, fees keep increasing. All of those income numbers are doubled for joint returns. If both spouses are on Medicare and their joint income is over those thresholds, both spouses will pay more for Medicare Parts B and D.
Savvy planning can keep costs in check. Suppose a hypothetical John and Mary Young have income of $130,000 in 2011. They are both enrolled in Medicare but their income keeps them from owing income-based premiums.
Say that John has a $100,000 traditional IRA he would like to convert to a Roth IRA. If he converts the entire amount this year, the Youngs’ joint income will be $230,000 and their cost for Medicare Parts B and D in 2013 would increase by about $3,500.
Instead, John could keep his Roth IRA conversions to around $33,000 a year for the next three years. That would keep their joint income at about $163,000 a year and avoid any income-based increases for Parts B and D.
