More About IRMAA:  For audiences age 61 to 64

In the last 12 months, I received too many callers, “surprised (or shocked) by IRMAA,” which inspired a previous, introductory (Part 1) article on the topic.  Today’s article, “More About IRMAA,” is Part 2, and goes into greater detail, providing resources for further research.  We hope it is helpful.

Short Background

Whereas Medicare Part A is free for most people, Part B is not.  Part B enrollees pay a monthly premium representing about 25% of the Part B estimated program costs.  For 2022,  this so-called, “Standard” premium is $170.10 per month.  The government subsidizes the rest, but…

The Cost is Greater Than You Think

Your cost to participate in Medicare Part B and Part D is higher if your income exceeds certain thresholds. For 2022, the first IRMAA threshold is triggered when a person files as Single and has income over $91,000 ($182,000 for Married, filing Jointly).

“Your cost to participate in Medicare Part B and Part D is higher if your income exceeds certain thresholds”

More About IRMAA

IRMAA is the Acronym for Income-Related Monthly Adjustment Amount; there are two versions associated with Medicare:

1. IRMAA-B for Medicare Part B
2. IRMAA-D for Medicare Part D

How bad can this get?  In 2022, the max out (worst case) IRMAA is $578.30 monthly for Part B, and $77.90 for the Part D IRMAA.  Consider that this cost “doubles” when a couple enrolls in Medicare A and B, meaning the annual IRMAA cost could be as high as $15,748.  For the planners in my audience, the monthly budget breaks down like this:

Monthly Costs for Spouse 1:

• Part B Standard premium: $170.10
• Part B IRMAA: $578.30
• Part D IRMAA: $77.90
• Medicare Supplement Plan G: $127.52 (65 year-old in Santa Clara County)
• Part D Prescription Drug Plan: $33.37 (national average)

Monthly Costs for Spouse 2:

• Same as above, (less a Household discount for the Medicare Supplement policy)

IRMAA Seems Worse in The South Bay

IRMAA impacts 4% of Medicare beneficiaries, according to the Social Security Administration.  In practice, we have observed it closer to 40% to 50%:  Many individuals residing in the San Jose

metro area pay more because the threshold is low i.e. $182,000 (Married, filing Jointly) or $91,000 for all other filers.

Compounding the problem, “income” is taken from two (sometimes three) years prior to Medicare, which is often the pinnacle of your career.  During this period “income spikes” may occur, due to cashing in of stock options, taking capital gains etc.  These show up in your MAGI (line 11), but with foreknowledge (and a little financial engineering), I believe many can reduce the size of IRMAA.

Know and Prepare for IRMAA

In the years leading up to your Medicare application, Individuals should consider contacting a local independent agent experienced in Medicare and bring your CPA/ tax advisor into the conversation.  There are a few solid agents willing to discuss your options now, in exchange for an opportunity to represent your supplemental insurance in the future.

Do Not Pay Too Much

Recently, a delightful couple called me from I received a call from Saratoga:  the younger spouse is turning 65 in two months, but the older spouse is a senior engineer, and at age 72, not yet ready to retire.  The younger spouse was concerned of Medicare penalties if they did not enroll in Part A and Part B.  While every situation is unique, her phone call saved the family thousands of dollars by learning how she could delay Medicare, without penalty.  Do not pay too much:  just to be sure, request a consult at 408-252-7300.

In The Good-To-Know Corner

“Income” is based on MAGI (line 11 of your 1040 Federal Income tax return), plus adjustments for tax-free interest.  Fortunately, the IRMAA is not permanent, and SSA recalculates it every  year.  You may file an appeal in limited circumstances.

“The potential for an IRMAA should factor into the timing of receiving capital gains and the scheduling of your retirement date.”

The potential for an IRMAA should factor into the timing of receiving capital gains and your retirement date, and ultimately your application for Medicare.  Key Point:  You have greater control of these factors during the three or four years prior to retirement, so talk to your tax advisor and find a local, independent agent early in the process..

Local Is Good – Independent is Better

A local, independent agent can discuss mitigation strategies and options, such as the fine balance of working a few months longer than scheduled, while carefully avoiding late enrollment penalties (Part B and Part D).  Due to baby boomer demographics, good agents are much sought after, so start a conversation early, and build that business relationship before you need it.

408-252-7300

Would you like me to be your independent agent?  Call me and let’s have a discussion, to make sure we are a good fit.  Request a phone meeting with Marc, at 408-252-7300.

Editor’s Note:  Marc Derendinger is an independent agent serving Santa Clara County residents for more than 30 years.  He helped the City of San Jose establish its first-ever group voluntary long-term care plan in 2001, served as an advisor to the State of California DHCS California Partnership for Long-term Care, and currently serves as insurance broker for the San Jose Police Officers’ Association.  Marc gives back to the community by offering free assistance to new Medicare beneficiaries, residing in California:  Call (408) 252-7300.

Resources

• For greater clarity on “income” and how MAGI is used, see HI 01101.020: https://secure.ssa.gov/poms.nsf/lnx/0601101010#b

• Going deeper:  Medicare Sliding Scale Income Tables: https://secure.ssa.gov/poms.nsf/lnx/0601101020

• Appealing your IRMAA due to a life-changing event: https://www.ssa.gov/OP_Home/handbook/handbook.25/handbook-2507.html