Dear Liz: We’re pondering of retiring to Paris. What can be the repercussions if we stop paying Medicare premiums? We’re concerned about the potential of returning to the U.S. at some future date and the prices of reinstating it. Will we just pay back the overdue payments plus a penalty?
Answer: You wouldn’t make up the missed payments, but you’d owe a penalty that will permanently increase your premiums for Medicare Part B, which covers doctor’s visits, and Part D, which covers prescriptions. The penalty for Part B is 10% for each 12 months you were eligible but not enrolled. The penalty for Part D is set by multiplying 1% of the “national base beneficiary premium” ($33.37 in 2022) by the variety of months that you simply were eligible but didn’t enroll.
Many retirees who plan to eventually move back to the U.S. or make frequent visits opt to maintain up their Medicare coverage. Consider discussing your options with a fee-only financial advisor — preferably one who has experience advising would-be expatriates. Another choice when you have got Medicare questions is to contact your State Health Insurance Assistance Program, which may provide free counseling.
Dear Liz: I’m selling my house. After subtracting all selling costs, stepping up the premise for capital improvements over time, and using the $500,000 capital gains exclusion from the IRS, I’ll still have a big capital gains tax due. Does this tax have to be paid via the quarterly estimated tax within the quarter the home closes, or can I wait and pay the capital gains tax with the yearly tax filing?
Answer: In the event you are the only owner of the house, then you definately can exclude as much as $250,000 of capital gains from a house sale. In the event you’re married then the exclusion amount is doubled to $500,000.
Ours is a “pay as you go” tax system, which suggests you’re speculated to withhold the suitable taxes as you earn or receive income. In the event you don’t withhold enough, you’ll be able to owe penalties. Individuals who don’t have regular paychecks or who experience windfalls, comparable to your house sale, could have to make quarterly estimated payments to make sure they’ve paid enough to avoid the penalties.
One solution to avoid penalties is to be certain your 2022 withholding a minimum of equals your 2021 tax bill, in case your adjusted gross income is $150,000 or less. In case your adjusted gross income is greater than $150,000, your withholding must equal 110% of your 2021 tax bill. One other is to pay 90% of your 2022 tax bill. It’s tough to know what your tax bill goes to be before the 12 months ends, though, so most individuals decide to withhold based on their 2021 tax bill. In case your 2022 bill will significantly exceed your withholding, nonetheless, you’ll need to be certain you stash the suitable money in a protected, FDIC-insured savings account so it’s available when you have got to pay Uncle Sam next 12 months.
Dear Liz: I understand your suggestion about waiting until you’re 70 to use for Social Security since you’ll get a bigger amount. Nonetheless, I applied at 62 and irrespective of how way more I’d have received at 70, I’d never recoup an amount equal to what I received. My husband selected to attend and died before he reached 70.
Answer: In case your husband’s profit was larger than your personal, then his decision to delay was an actual gift to you.
When one member of a pair dies, the survivor gets only the larger of the 2 Social Security advantages the couple used to receive. Losing one profit could cause a pointy drop within the survivor’s income. That’s among the many the explanation why financial planners urge the upper earner to attend so long as possible: to maximise the profit the survivor may have to continue to exist for years and even many years.
In case your husband had remained alive, then your early start might have been a mistake. Most individuals live past the “break even” point where the larger checks you can get from delaying greater than outweighed the smaller checks you passed up within the meantime.
Liz Weston, Certified Financial Planner, is a private finance columnist for NerdWallet. Questions could also be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by utilizing the “Contact” form at asklizweston.com.