WIIFY – Quickly learn about getting from gross to net on Social Security so you don’t have an ‘income below expectations’ surprise.
We got a question from a reader on Medicare premiums being subtracted from Social Security. Medicare Part A has no premiums, but Medicare Part B does. (Trust me, you most likely need Part B, so you’ll be paying premiums.)
Social Security gross to net (or, ‘What’s my take home?’)
From the Medicare website:
“If you get Social Security or Railroad Retirement Board (RRB) benefits, your Medicare Part B (Medical Insurance) premium will get deducted from your benefit payment.”
So the arithmetic looks like:
Social Security gross monthly payment
-Less Medicare Part B premium (see below!)
-(Maybe) Less Medicare Part D premium (can pay directly to provider or have it deducted from Social Security
-Less any Federal tax withholding (see below, again!)
Social Security net monthly payment to you
Medicare Part B monthly premium ranges from $134 (most of us) to $428.60 (very few of us), depending on MAGI income (taxable income plus tax-exempt interest income). The premium is per person. To learn more specifics, see the Medicare Part B costs website.
Federal income tax on Social Security
Social Security can be taxable, depending on your ‘combined income’. 0-85% of your Social Security may be subject to tax. Sample scenario – you have $10,000 of Social Security gross income, and because of other income (pension, IRA withdrawals, interest) you have 85% of the Social Security gross included in income. That 85% is $8,500 and is taxed at your marginal rate (10%-39.6% depending on taxable income).
Up next – Look for the next update on Friday, July 21 at 12:30 PM.
Actions you can take:
-Read up on Medicare and Social Security on the links above or the books in Resources below.
Resources from your library or Amazon.com
Phil Moeller’s Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs (The Get What’s Yours Series)
Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.