Will You Pay More for Medicare Benefits?... Learn About IRMAA and How to Avoid It

What is IRMAA?

If you are asking this question, consider yourself either lucky (that you don’t already know) or (if you received the IRMAA letter) prepare to be disappointed… IRMAA stands for Income-Related Monthly Adjustment Amount. In short, if your income is high enough you will be subject to elevated premiums for Medicare. That’s right, you will pay more for the same coverage.

What income is IRMAA based on?

Premium adjustments for Medicare are based on your MAGI (Modified Adjusted Gross Income). You can calculate your MAGI by taking your Adjusted Gross Income (AGI) figure from line #11 on form 1040 and adding in any tax-exempt interest you received during the same year. Some common sources of income included in the AGI are social security, wages, pensions, rental income, capital gains, dividends, interest, retirement plan distributions (including Roth conversions), and other sources of income.

What are the impacts to Medicare premiums?

Your MAGI from two years ago will dictate the Medicare Part B (doctor coverage) & Part D (prescription coverage) premiums that are applicable to you for the current year. See the chart below for a summary on the impact to premiums for 2024:

What can I do to potentially avoid or reduce IRMAA?

Many people do not have control over when they receive income, but below we list some potential planning considerations for IRMAA:

If you are already on Medicare, be careful when doing Roth IRA conversions
Account withdrawal strategies - Plan how to strategically withdraw from your taxable, tax deferred and tax-free accounts to “manage” your taxable income
If you are NOT on Medicare yet, you (or your advisor) should do some analysis to see if you should consider DOING some Roth IRA conversions before your Required Minimum Distributions start
Avoid recognizing capital gains AND/OR take capital losses, where possible
If you are self-employed, consider shifting income into years that will have lower taxable income

What are some other important considerations?

If you had one of the following life-changing events during the last two years, which has resulted in either your income going down or a threshold increase, you should consider filing the appeal form - www.ssa.gov/forms/ssa-44.pdf

Life-changing events:

Marriage
Divorce
Death of spouse
Work reduction or stoppage
Loss of income property or pension
Employer settlement payment

In summary, if you are approaching the age of 65 or are already receiving Medicare insurance, it makes sense to review the impact of income changes on your Medicare premiums and consider any potential planning items that may be beneficial for your specific situation.

As always, please feel free to reach out to us here at NCM to review any questions.

All the best,

NCM Capital Management

*Medicare premium chart source – www.irmaacertifiedplanner.com

Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services. For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.