How To Avoid Higher Medicare Costs, According to Suze Orman
Written by
Nicole Spector
Edited by
Jenna Klaverweiden
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By the year 2030, every boomer in the U.S. will be aged 65 or older. This year will see a particularly heavy wave of people reaching this milestone age — an average of 11,000 Americans a day are expected to celebrate their 65th birthday from the beginning of 2024 through December. This isn’t just any old birthday; it’s the first day you can apply for Medicare. It’s likely that the healthcare program will see a historic rush of enrollees.
Recognizing this monumental occasion for so many people, financial guru Suze Orman took to her blog to share a key way you can avoid higher Medicare costs. Let’s dig in.
Rethink Selling Your Home
It’s normal and sometimes very smart for retirees to consider downsizing. But if that involves selling your current home, you may want to rethink things to lessen a spike in Medicare premiums.
“Selling your home may … cause your Medicare Part B premium to rise, if only for one year,” Orman wrote. “When you sell a home at a profit, a big chunk of your capital gain is tax-free. If you are single the first $250,000 in capital gain from a home sale ($500,000 for married couples filing a joint tax return) is tax-free. But if your gain is above those limits, the amount of the excess gain is considered ‘income’ for the year. (That said, you won’t owe income tax on that money, but rather a capital gains tax which is typically lower than income tax rates.)”
Orman went deeper. “If you have a big capital gain on your current home, and you sell it at age 63 or later, there’s a good chance it might cause your Medicare Part B premium to be higher when that year’s tax return is used to determine your Part B premium cost.”
The bottom line here is that selling your home for profit will present an income boost that could drive up your Medicare costs. Not even careful strategy can soften this blow.
“As a general rule, a one-time spike in your income caused by a decision you made — to convert an IRA or take a big IRA/401(k) distribution — won’t get your Part B premium reduced,” Orman wrote.
How To Avoid an Excess Premium
If you’ve had a life-altering event in the following two years after selling that has impacted your income, “such as you retired, or were laid off, or a spouse died or you were divorced, you may be able to avoid the excess premium payment for the year under consideration,” Orman wrote.
But this reduction will not come without some diligent work on your end.
“You will need to submit the Medicare Income-Related Monthly Adjustment Amount Life Changing Event form to ask for your Part B premium to be reduced,” Orman wrote.
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