Evade the concealed tax from Medicare with these financial advice tips from an expert, designed to bypass IRMAA.
The Income-Related Monthly Adjustment Amount (IRMAA) surcharge can significantly increase Medicare Part B (medical) and Part D (prescription drug) premiums for retirees whose modified adjusted gross income (MAGI) exceeds certain thresholds from two years prior.
The IRMAA surcharge is calculated based on MAGI from two years earlier. For instance, the 2025 IRMAA is based on 2023 income, and the 2026 IRMAA on 2024 income. The income thresholds change annually with inflation, and in 2025, a single filer with MAGI over $106,000 or a married couple filing jointly over $212,000 will face surcharges.
Retirees may find themselves paying a sudden surcharge, known as falling off the "Medicare cliff," where even $1 over the limit triggers much higher premiums. Factors contributing to an income spike can include Roth IRA conversions, required minimum distributions (RMDs), part-time income, or other taxable income sources.
However, the SSA allows Medicare beneficiaries to appeal the IRMAA surcharge if their income has dropped due to a life-altering event. To file an appeal, you'll need to complete Form SSA-44, which can be found on the administration's website or at a local SSA office.
Retirees who experience a significant life-changing event causing a drop in income, such as job loss, marriage/divorce, or death of a spouse, can appeal their IRMAA surcharge using SSA Form 44 to request a reconsideration for a reduced surcharge based on current income rather than two-year-old tax returns.
Planning strategies include managing income sources to stay below IRMAA thresholds, such as timing Roth conversions or controlling taxable income temporarily to avoid triggering the surcharge. Monitoring the IRS and SSA guidelines for income counting methods and timely filing appeals after qualifying events help reduce IRMAA costs.
In summary, IRMAA causes higher Medicare premiums for retirees with income above set thresholds based on past tax returns, but it can be managed by financial planning and sometimes appealed after qualifying life events. Common qualifying events include loss of income due to retirement or other job changes, the death of a spouse, divorce or annulment, marriage, loss of pension income, or receiving an employer-settlement payment.
If you believe you're being charged IRMAA incorrectly, you can request a correction of the tax information being used and provide the IRS with updated documentation showing your current income. Utilizing financial instruments such as full or partial Roth conversions, life insurance policies that have a cash value, health savings accounts, annuities, reverse mortgages, or home equity lines of credit can help avoid the IRMAA surcharge.
- With careful personal-finance management, retirees can take measures to manage income sources, such as timing Roth conversions or controlling taxable income, to stay below the IRMAA thresholds, thus avoiding the increased Medicare premiums.
- In case of a significant life-changing event causing a drop in income, Retirees have the option to appeal the IRMAA surcharge using SSA Form 44, requesting a reconsideration for a reduced surcharge based on their current income.
- While the SSA allows Medicare beneficiaries to appeal the IRMAA surcharge, income sources such as life insurance policies with cash value, health savings accounts, annuities, reverse mortgages, or home equity lines of credit might help avoid the surcharge altogether, serving as a crucial aspect of health-and-wellness and finance planning.
