News

9
Dec

What Will You Pay In Medicare Premiums In 2020?

2020 Calendar

Medicare premiums, deductibles, and coinsurance amounts change annually. Here’s a look at some of the costs that will apply in 2020 if you enrolled in Original Medicare Part A and Part B.

Medicare Part B premiums

According to the Centers for Medicare & Medicaid Services (CMS), most people with Medicare who receive Social Security benefits will pay the standard monthly Part B premium of $144.60 in 2020.

You may pay less than the standard Part B premium if you meet the following conditions:

– Medicare deducts premiums from your Social Security benefits

and

– The cost-of-living increase in your benefit payments for 2020 will not be enough to cover the Medicare Part B increase.

People with higher incomes may pay more than the standard premium. If your 2018 federal income tax return shows a modified adjusted gross income (MAGI) above a certain amount, a higher premium will apply. You’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium, as shown in the following table.

Medicare Premiums Table

Other Medicare costs

The following out-of-pocket costs for Original Medicare Part A and Part B apply in 2020:

 

  • Part A deductible for inpatient hospitalization: $1,408 per benefit period
  • Part A premium for those who need to buy coverage: up to $458 per month (most people don’t pay a premium for Medicare Part A)
  • Part A coinsurance: $352 per day for days 61 through 90, and $704 per “lifetime reserve day” after day 90 (up to a 60-day lifetime maximum)
  • Part B annual deductible: $198
  • Skilled nursing facility coinsurance: $176 for days 21 through 100 (for each benefit period)

For more information on costs and benefits related to Social Security and Medicare, visit ssa.gov and medicare.gov.

2
Dec

College Cost Data for 2019-2020 School Year

college costsEach year, the College Board releases its annual Trends in College Pricing report that highlights current college costs and trends. While costs can vary significantly depending on the region and college, the College Board publishes average cost figures, which are based on a survey of nearly 4,000 colleges across the country.

Following are cost highlights for the 2019-2020 academic year.1 Note that “total cost of attendance” figures include direct billed costs for tuition, fees, room, and board, plus a sum for indirect costs that includes books, transportation, and personal expenses, which will vary by student.

Public college costs (in-state students)

  • Tuition and fees increased 2.3% to $10,440
  • Room and board increased 2.9% to $11,510
  • Total cost of attendance: $26,590

Public college costs (out-of-state students)

  • Tuition and fees increased 2.4% to $26,820
  • Room and board increased 2.9% to $11,510 (same as in-state)
  • Total cost of attendance: $42,970

Private college costs

  • Tuition and fees increased 3.4% to $36,880
  • Room and board increased 3.0% to $12,990
  • Total cost of attendance: $53,980

Reminder on FAFSA timeline

Families were able to begin filing the 2020-2021 FAFSA (Free Application for Federal Student Aid) on October 1, 2019. The earlier timeline was instituted a few years ago to better align the financial aid process with the college admissions process and to give parents information about their child’s aid eligibility earlier in the process.

The 2020-2021 FAFSA relies on income information from your 2018 federal income tax return and current asset information. Your income is the biggest factor in determining financial aid eligibility. A detailed analysis of the federal aid formula is beyond the scope of this article, but generally here’s how it works:2

  • Parent income is counted up to 47% (income equals adjusted gross income, plus untaxed income/benefits minus certain deductions)
  • Student income is counted at 50% over a certain amount ($6,840 for the 2020-2021 academic year)
  • Parent assets are counted at 5.64% (home equity, retirement accounts, cash value life insurance, and annuities are excluded)
  • Student assets are counted at 20%

The result is a figure known as your expected family contribution, or EFC. Your EFC remains constant, no matter which college your child attends. Your EFC is not the same as your child’s financial need. To calculate financial need, subtract your EFC from the cost at a specific college. Because costs vary at each college, your child’s financial need will vary depending on the cost of a particular college.

One thing to keep in mind: Just because your child has financial need doesn’t automatically mean that colleges will meet 100% of that need. In fact, it’s not uncommon for colleges to meet only a portion of it. In this case, you’ll have to make up the gap, in addition to paying your EFC.

To get an estimate ahead of time of what your out-of-pocket costs might be at various colleges, run the net price calculator on each college’s website. A net price calculator asks for income, asset, and general family information and provides an estimate of grant aid at that particular college. The cost of the school minus this grant aid equals your estimated net price, hence the name “net price calculator.”

Reduced asset protection allowance

Behind the scenes, a stealth change in the FAFSA has been quietly and negatively impacting families. The asset protection allowance, which lets parents shield a certain amount of their assets from consideration (in addition to the assets listed above that are already shielded), has been steadily declining for years, resulting in higher EFCs. Fifteen years ago, the asset protection allowance for a 48-year-old married parent with a child about to enter college was $40,500. For 2020-2021, that same allowance is $6,000, resulting in a $1,946 decrease in a student’s aid eligibility ($40,500 – $6,000 x 5.64%).3

Higher student debt

Student loan debt continues to grow and student debt is now the second-highest consumer debt category, ahead of both credit cards and auto loans and behind only mortgage debt.4 About 65% of U.S. college seniors who graduated in 2018 had student debt, owing an average of $29,200.5 And it’s not just students who are borrowing. Parents are borrowing, too. There are approximately 15 million student loan borrowers age 40 and older, and this demographic accounts for almost 40% of all student loan debt.6

1) College Board, 2019
2-3) U.S. Department of Education, The EFC Formula, 2020-2021, 2005-2006
4) Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, August 2018
5) Institute for College Access & Success, Student Debt and the Class of 2018, September 2019
6) Federal Reserve Bank of New York, Student Loan Data and Demographics, September 2018
18
Nov

IRA and Retirement Plan Limits for 2020

IRA contribution limits

new year aheadThe maximum amount you can contribute to a traditional IRA or a Roth IRA in 2020 is $6,000 (or 100% of your earned income, if less), unchanged from 2019. The maximum catch-up contribution for those age 50 or older remains at $1,000. You can contribute to both a traditional IRA and a Roth IRA in 2020, but your total contributions can’t exceed these annual limits.

Traditional IRA income limits

If you are not covered by an employer retirement plan, your contributions to a traditional IRA are generally fully tax deductible. For those who are covered by an employer plan, the income limits for determining the deductibility of traditional IRA contributions in 2020 have increased. If your filing status is single or head of household, you can fully deduct your IRA contribution up to $6,000 ($7,000 if you are age 50 or older) in 2020 if your modified adjusted gross income (MAGI) is $65,000 or less (up from $64,000 in 2019). If you’re married and filing a joint return, you can fully deduct up to $6,000 ($7,000 if you are age 50 or older) in 2020 if your MAGI is $104,000 or less (up from $103,000 in 2019).

Traditional IRA Limits

If you’re not covered by an employer plan but your spouse is, and you file a joint return, your deduction is limited if your MAGI is $196,000 to $206,000 (up from $193,000 to $203,000 in 2019), and eliminated if your MAGI exceeds $206,000 (up from $203,000 in 2019).

Roth IRA income limits

The income limits for determining how much you can contribute to a Roth IRA have also increased for 2020. If your filing status is single or head of household, you can contribute the full $6,000 ($7,000 if you are age 50 or older) to a Roth IRA if your MAGI is $124,000 or less (up from $122,000 in 2019). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $196,000 or less (up from $193,000 in 2019). (Again, contributions can’t exceed 100% of your earned income.)

Roth IRA Limits

Employer retirement plans

Most of the significant employer retirement plan limits for 2020 have also increased. The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan is $19,500 in 2020 (up from $19,000 in 2019). This limit also applies to 403(b) and 457(b) plans, as well as the Federal Thrift Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $6,500 to these plans in 2020 (up from $6,000 in 2019). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($19,500 in 2020 plus any applicable catch-up contributions). Deferrals to 401(k) plans, 403(b) plans, and SIMPLE plans are included in this aggregate limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan — a total of $39,000 in 2020 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) is $13,500 in 2020 (up from $13,000 in 2019), and the catch-up limit for those age 50 or older remains at $3,000.

Note: Contributions can’t exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2020 is $57,000 (up from $56,000 in 2019) plus age 50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2020 is $285,000 (up from $280,000 in 2019), and the dollar threshold for determining highly compensated employees (when 2020 is the look-back year) is $130,000 (up from $125,000 when 2019 is the look-back year).