Discover strategies to optimize your Social Security and minimize Medicare expenses.
Friday, August 16, 2024
By Jeff Velastegui and Robert Sturges, LUTCF, CLTC
As individuals plan for retirement, understanding the complexities of Medicare becomes increasingly important. One such aspect is the Income Related Monthly Adjustment Amount (IRMAA), which affects the premiums individuals pay for Medicare Part B and Part D. This article aims to delve into what IRMAA is, how it’s calculated, and its implications for retirees.
What is IRMAA?
IRMAA stands for Income Related Monthly Adjustment Amount. It’s an additional amount that some people have to pay on top of their Medicare Part B and Part D premiums. The purpose of IRMAA is to ensure that higher-income beneficiaries contribute more towards their Medicare coverage.
How is IRMAA Calculated?
IRMAA is calculated based on an individual’s modified adjusted gross income (MAGI) from two years prior. For instance, if you’re calculating IRMAA for 2024, your 2022 tax return will be used. The IRS provides this information directly to the Social Security Administration (SSA) for Medicare enrollees.
IRMAA Tiers
IRMAA has different income brackets, or “tiers,” which determine the amount individuals have to pay. These tiers are based on filing status and income levels. For both Medicare Part B and Part D, there are five IRMAA tiers:
Implications of IRMAA
Higher Premiums
The most immediate impact of IRMAA is higher premiums for Medicare Part B and Part D. The additional amount varies depending on which tier an individual falls into.
Tax Planning Considerations
Since IRMAA is based on MAGI, individuals approaching retirement need to consider how their income sources may affect their Medicare premiums. Strategies such as Roth conversions or managing investment distributions can help mitigate IRMAA.
Retirement Planning
Understanding IRMAA is crucial for retirement planning, as it adds another layer of complexity to estimating healthcare costs during retirement. Proper planning can help retirees budget for potential increases in Medicare premiums.
Appeals Process
If individuals believe that their IRMAA determination is incorrect due to certain life-changing events or income adjustments, they can appeal the decision through the SSA. Life-changing events include marriage, divorce, death of a spouse, or reduction of work-related income.
Key IRMAA Takeaways
RMAA is a significant consideration for individuals planning for retirement and managing their healthcare expenses. By understanding how IRMAA is calculated, its implications, and potential strategies to mitigate its impact, individuals can make informed decisions to optimize their retirement finances. If you have any questions about your planning or would like a second opinion, let the Legacy Group help you navigate and explore your options, email us at info@legacygroupny.com
Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. The Legacy Group is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. [6800 Jericho Turnpike. Suite 202 W Syosset, NY 11791
(516) 364-4203. CRN202708-6965794
