Understanding IRMAA: Income-Related Monthly Adjusted Amount

Retirement planning should always account for healthcare costs, including premiums for health insurance.

For instance, most seniors in the U.S. rely on Medicare Part B and Medicare Part D for health and prescription insurance. The government charges a standard premium for Medicare Part B. Private insurers charge premiums for Medicare Part D.

In addition, beneficiaries with high incomes may pay more for Part B and Part D premiums than most Medicare recipients. The government adds a surcharge, called the Income-Related Monthly Adjusted amount, or IRMAA. Take a few minutes to understand IRMAA and how it can impact retirement planning.

IRMAA Basics 

This list explains the basics of IRMAA: 

  • The government added a surcharge to Medicare Part B for high-income Medicare beneficiaries in 2007, and they added IRMAA to Part D in 2011. 
  • This additional charge affects individuals with annual incomes over $91,000 and married couples with incomes over $182,000. 

How Much More Will High-Income Beneficiaries Pay?

Medicare recipients with high incomes should know they need to account for higher Part B and D premiums. For instance, most beneficiaries pay $170 for their monthly Part B premium, but people who earn from $91,001 to $114,000 will pay $238.10. The top bracket begins at $500,000 for individuals with a monthly Part B premium of $578.30. 

The base premiums for Part D plans vary. The government will add a surcharge to that premium based on income. Beginning at $90,0001 to $114,000, beneficiaries will pay an extra $12.10. At the highest level, the extra charge amounts to $77.90. 

When to Consider an IRMAA Appeal 

The government uses Modified Adjusted Gross Income to apply the surcharge, and this figure may differ from Adjusted Gross Income. Also important, the government uses income tax returns from two years in the past to determine income. If financial or life circumstances have changed or the government figured the IRMAA incorrectly, beneficiaries can file an appeal to have their premiums reduced. 

Why is IRMAA Important for Retirement Planning?

Retired folks may have some control over their income, and in turn, reducing income can help reduce the impact of premium surcharges. 

For instance: 

  • Retirees don’t need to take the required minimum distribution, or RMD, from tax-advantaged accounts until they turn 72. For example, withdrawals from a traditional IRA, 401(k), or 403(b) will count as taxable income, and some beneficiaries may benefit by delaying withdrawals.
  • In addition, the government allows tax-deductible contributions up to age 70 1/2. Taxpayers could continue to make contributions to enjoy deductions from their income and reduce tax bills and surcharges. 

How to Enjoy the Best Value From Medicare Benefits

Most people who earn high incomes understand how to maximize value. In turn, understanding how the government figures income to apply surcharges can give retirees a chance to manage their finances to reduce surcharges, understand when they should file an appeal, and even minimize tax burdens.

Most of all, high-income Medicare beneficiaries should consider possible surcharges when comparing Medicare insurance, so they’re not surprised when they pay more than the standard rate. 

Speak With Experienced Medicare Agents

Get in touch with our experienced Medicare insurance agents at any time to discuss available plans in your area and how you can enjoy good value. 

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