IRMAA – a Medicare Surcharge That You Need to Know About

Surprise, the same thing that boosted your income two years ago may now increase your Medicare premiums. Income-related monthly adjustment amounts, or IRMAAs, are one of those unwelcome surprises that can confront you as retirement draws near.

The IRMAA is important for Medicare beneficiaries earning over $91,000 and enrolling in Medicare Part B and/or Medicare Part D. Essentially, it’s a surcharge on these premiums.

The process works like this. The base Medicare Part B premium in 2024 for a single filer is $170.10. However, your Medicare premiums will increase once your adjusted gross income (MAGI) exceeds $91,000.

Individuals with MAGIs between $91,000 and $114,000 pay $238.10 for Part B. In the $114,000 to $142,000 bracket, the premium is $340.20. Part D surcharges (the prescription drug benefit) are also added to the regular premium.

If you’re being assessed an IRMAA, the Social Security Administration will notify you. The most confusing part is that IRMAA was based on your income two years ago. Therefore, your 2020 income tax return is used to calculate your Medicare premiums for 2024, and it is recalculated every year.

Both single filers and married filers have five IRMAA-related MAGI brackets for Part B. If a couple’s MAGI is over $182,000 to $228,000, Part B premiums are $238.10; $340.20 for those filing jointly with a MAGI of over $228,001 to $284,001; etc., up to a maximum of $578.30 for those married filing jointly with a MAGI of over $750,000. Part B premiums for single filers with a MAGI over $500,000 are $578.30.

If you believe the IRMAA calculation was incorrect, you can appeal it. In the event that your income has decreased as a result of a life-changing event, you may use Form SSA-44 to request an IRMAA reduction.

Many retirees do not know about IRMAA until they receive a notice. You might encounter it for the following reasons:

An excessive number of Roth conversions in a single year

To reduce retirement taxes, Roth conversions are a good idea. Tax-free distributions are permitted from Roth IRAs and Roth 401(k)s when withdrawn after age 59.5. However, the conversion is taxable, driving up your taxable income and possibly putting you in a higher Medicare tier.

It is crucial to handle Roth conversions smartly, taking into account your IRMAA calculation and handling them over a period of years. By consulting a retirement planner, you can find out how much you can convert to a Roth without hitting a higher IRMAA level.

In the event that a spouse passes away

Assume the surviving spouse is entitled to the deceased’s full pension. This, coupled with Social Security and any ancillary income, could raise the survivor’s MAGI and increase their Medicare premiums.

RMDs (required minimum distributions)

Upon reaching age 72, you must withdraw a certain percentage of your tax-deferred retirement accounts. A required minimum distribution can push you into a higher tax bracket, putting you at risk of IRMAA. The significance of tax planning for retirement can’t be overstated, particularly Roth conversions, which should be done in a systematic, limited way.

Get educated about IRMAA before it affects your Medicare premiums if you want to limit or avoid it. Make sure you don’t receive an unwanted surprise in the form of a costly surcharge by asking your retirement professional to perform an analysis.