Medicare IRMAA Could Cost You Money — How to Prepare

close up shot of medicare card.
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Medicare recipients who reach a certain income level must pay a surcharge in the form of an Income Related Monthly Adjustment Amount, or IRMAA. This charge is in addition to your Medicare Part B and Part D premiums — and if you don’t pay attention to the rules governing it, you might find yourself stuck with a bill you didn’t expect.

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If you have Medicare Part B and/or Part D and the Social Security Administration determines that the IRMAA applies to you, you should get a notice from the SSA, according to Medicare.gov. The notice can come at any time and includes information about Social Security’s determination and your appeal rights.

The SSA determines who pays an IRMAA based on the income reported two years earlier, according to a blog by Humana. For 2023, for example, the SSA looks at your 2021 tax returns to see if you must pay an IRMAA.

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In 2022, IRMAAs apply to single filers with annual modified adjusted gross incomes (AGI) of more than $91,000 and married couples with AGIs above $182,000, Barron’s reported.

The income thresholds for 2023 rise to $97,000 for single filers and $194,000 for married couples filing jointly, according to Humana. The amount of your IRMAA then increases incrementally depending on how much more you earn above the threshold. For example, single filers with AGIs between $97,000 and $123,000 pay an IRMAA of $12.20 a month plus their plan premiums. That rises to $31.50 a month plus plan premiums for incomes of $123,000 to $153,000.

Because IRMAA charges are reset every year based on the income from two years earlier, even retirees who never faced an IRMAA might be blindsided by one after an unusually high-income year, Barron’s noted.

The first thing you should do is review your income from the relevant year and see how it stacks up against the new IRMAA thresholds. To prepare for 2023, check your income from 2021 and compare the new thresholds.

Beyond that, there are steps you can take now to avoid IRMAA charges in the future. If you’ve had high income in 2022, for example, you can make adjustments to lower it before year-end, such as selling losing investments to offset capital gains.

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You should also be careful about spiking your income too high by pulling large chunks of money out of retirement accounts for major purchases. Robert Klein, a CPA in Newport Beach, California, told Barron’s that you should start strategizing at age 60 and certainly no later than 63. That’s the age when the income you earn will determine your Medicare premium at 65 — the year many retirees begin Medicare.

Avoiding IRMAA once you hit age 72 becomes harder because of the required minimum distributions from IRAs. This is one reason financial planners urge clients to whittle down their IRA balances well before turning 72, such as through Roth conversions. This can help lessen the likelihood that your RMD will push you above the IRMAA threshold.

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If you do have a Medicare Part B or Part D IRMAA, there are four ways you can pay it:

All payments must be made directly to Medicare. If you disagree with an IRMAA notice, you have 60 days from receiving it to file an appeal. To get started, contact the SSA at 800-772-1213 (TTY: 800-325-0778).

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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