What’s The Deal With IRMAA?

Bottom Line Up Front

• IRMAA (Medicare Income-Related Monthly Adjustment Amount) imposes additional premiums for Medicare Part B and Part D based on income.
• Individuals with Modified Adjusted Gross Income (MAGI) exceeding $103,000 for single filers or $206,000 for joint filers are subject to IRMAA premiums, which can be appealed in case of life changing events.
• Strategies to manage and mitigate IRMAA premiums include timing income events to minimize spikes in MAGI, employing tax-efficient investment strategies, leveraging health savings accounts (HSAs), making qualified charitable distributions (QCDs) from IRAs, and seeking advice from financial professionals and tax advisors.

If you’re approaching retirement and looking at Medicare, you may want to be aware of the Medicare Income-Related Monthly Adjustment Amount (“IRMAA”). The short answer is that the Social Security Administration (“SSA”) sets an additional income based premium for both Medicare Part B (provider coverage) and Medicare Part D (prescription drug coverage).

What Are The Key Things I Need to Know?

• Income based premiums – Unlike health insurance at your employer or in the private market, your premiums are based on your income. For 2024, the “standard” Medicare Part B premium s $174.70 per month (indexed each year). For higher income individuals, you are subject to an additional IRMAA premium which is based on your tax filing status and Modified Adjusted Gross Income (“MAGI”) from two years earlier (e.g., 2022 MAGI for 2024 Medicare premium rates).
• Appeals process for lower IRMAA assessment – If you’ve had a life changing event (e.g., marriage, divorce, reduced income, etc.), you can appeal for a reduction in your IRMAA premium.
• Income levels subject to IRMAA – If your 2022 MAGI was more than $103,000 for a single filer or $206,000 for a joint filer, you are subject to the IRMAA premiums for your Medicare Part B and Medicare Part D coverages.
• Tax filing status – Note that the IRMAA premiums based on filing status are for each individual’s Medicare coverage.
• Notification – The SSA will end with a notice each year to beneficiaries that details the determined rate.

What Are The 2024 IRMAA monthly Premiums?

What If I’m In Medicare Advantage (Medicare Part C)?

Medicare Advantage plans usually offer prescription drug coverage (e.g., roll in Part D coverage). As such, you’re subject to Medicare Part D IRMAA surcharge even if you’re in Medicare Advantage plan.

What Are The Ways To Avoid Or Mitigate IRMAA Premiums?

Given that these premiums are based on your modified adjusted gross income from two (2) years prior, it’s important to manage your MAGI to the extent possible.

• Income Timing – Consider timing large income events, such as selling property or taking large retirement account distributions, to minimize spikes in MAGI.
• Tax Planning – Use tax efficient investment strategies to lower your MAGI. This could involve investing in Roth IRAs (for which withdrawals are tax-free) or managing capital gains and losses.
• Life-Changing Events – If you experience a life-changing event that reduces your income (such as retirement, divorce, or death of a spouse), you can appeal the IRMAA decision with the SSA. This is formally known as a “new initial determination.”
• Health Savings Account (HSAs) – Contributions to HSAs can reduce your MAGI, potentially lowering or eliminating IRMAA charges.
• Charitable Contributions – If you’re over 70½, consider making Qualified Charitable Distributions (QCDs) from your IRA. These distributions can satisfy required minimum distributions (RMDs) without increasing your MAGI.

Given that this is just one element of your retirement expenses, it’s important to consult with your financial professionals and tax advisors to ensure that any decisions fit your overall objectives.

If you have questions, we’d be happy to help. You can reach me or another Odyssey consultant by dropping us a message here.

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