💡 IRMAA Explained: The Hidden Medicare Cost That Could Catch You Off Guard
When it comes to Medicare, most people focus on coverage… but not enough attention is paid to what you’ll actually pay. As Victoria with Vitality Investments explains to Erin Kennedy, if you’re considered a “high-income beneficiary” by the Social Security Administration, you could be hit with an extra charge called IRMAA (Income-Related Monthly Adjustment Amount)… and it can significantly increase your Medicare Part B premiums.
Here’s what you need to know 👇
✔️ How high is “high-income”? Even a modest increase in income can push you into a higher bracket.
✔️ It’s a cliff, not a slope Go just $1 over the threshold, and you could pay hundreds more per year in premiums.
✔️ One-time events can trigger it Selling a home, taking an RMD, Roth conversions, or realizing large capital gains can unexpectedly spike your income.
✔️ Planning is everything Strategies like Roth conversions, Health Savings Accounts (HSAs), and Qualified Charitable Distributions (QCDs) can help reduce or even avoid IRMAA.
The bottom line: Without careful planning, you could end up paying more for Medicare than necessary.
📞 Want to make sure IRMAA doesn’t catch you off guard? Call Victoria at 941-413-0331 or visit www.VitalityInvestments.org to put a plan together that could save you thousands in health insurance.
Transcript:
Erin Kennedy 0:00
Hi, Victoria. So, good to see you. We are getting back to basics today. What is Irma, and how does it affect what you will pay for Medicare Part B? If the Social Security Administration considers you a high-income beneficiary, you'll pay a surcharge known as the income-related monthly adjustment amount, and how high is high income?
Victoria Larson 0:24
Yeah, well, in reality it's not that high. So most people pay the base rate, and you can see here the base rate is $202.90 So then if, if for individuals, if they make north of 109k now they've entered into Irma territory, and for married couple it's over 218k Now they're going to be paying that extra surcharge. Looking at this chart here, you can see that that surcharge can bring your monthly premiums to $689 Yeah, and if for a husband and wife that's a lot of money,
Erin Kennedy 1:06
and per person, which I think is relieved,
Victoria Larson 1:07
exactly right
Erin Kennedy 1:09
And then something else that catches people off guard, Irma is a cliff, $1 too much, and you're paying a completely different premium,
Victoria Larson 1:17
yeah, and it is painful and brutal. So let's step back for a second. Let's say we're looking at your federal taxes, and you're in the 24% tax bracket, and you get that extra 1099 that pushes you $1 into that higher 32% tax bracket. Well, then you're paying 32 cents on that $1 you're not going to lose any sleep over that here, though. With Irma, if you're over by $1 you are up into that additional bracket, and for individuals that can be hundreds of dollars more in that year. For married couples, it could be 1000s of dollars, just by $1
Erin Kennedy 2:02
and then for our observant viewers, I'm sure that they've noticed here, for so this is your 2026 part B premium based on your 2024 income. This is known as that two year look back. So, without proper planning, you may have to pay Irma because of a one time financial event two years ago. Write me through some examples that you know surprisingly bump up people's income.
Victoria Larson 2:24
Yeah, interestingly, it's not usually their income, their pension, or social security. It's usually one-time event, so it could be selling a home or selling a business, selling appreciated stocks. Roth conversions can do this, and required minimum distributions. Money you don't even need could be forcing you into a higher bracket in retirement. And the interesting thing, because that's a two-year look back, you often forget about it, or you're not planning about two years in the future.
Erin Kennedy 2:57
I can't tell you what I had for breakfast. I can't imagine trying to keep track of all this, so yeah, let's walk through some strategies then to reduce your Irma, and it's interesting that you mentioned Roth conversions, because that's also a strategy to reduce Irma, but as you mentioned, without careful planning, this can also be a landmine,
Victoria Larson 3:15
right? Yeah, it's important when you're doing those Roth conversions to really understand the real cost of it, one is the federal taxes, and maybe state taxes, but you do need to take into consideration what's the impact going to be on your Medicare Part B and D premiums too. Now, once you do that conversion, then any distributions from that aren't a part of your adjusted gross income, so they're not going to hurt you in the future, so that's one strategy,
Erin Kennedy 3:46
and then the next one, health savings accounts, these are uniquely triple tax advantaged,
Victoria Larson 3:51
they certainly are, so when you're working and you have that opportunity to fund those HSA accounts, you should do that, because when you take money out of those accounts later in life for qualified medical expenses, you don't pay any tax on those, and they don't part - they're not part of the adjusted gross income.
Erin Kennedy 4:12
And again, you mentioned RMDs, those required minimum distributions, which can bump up people's income, and that's where this strategy comes in. Qualified charitable distributions. Can you explain how these work, please?
Victoria Larson 4:23
Yeah, it's, it's certainly a helpful tool, especially for individuals who are charitably inclined. You can start doing distributions at 70 and a half, so earlier than your RMD age. When you take distributions for charity, now this is the key: it has to go from your IRA and a check directly to the charity, then those distributions are not part of MAGI and therefore do not impact your IRMA or Medicare premiums.
Erin Kennedy 4:53
Irma is really, to me, complicated. It's so much about threading a needle, especially considering that two. Or look back, so Victoria, if somebody would like to sit down with you, you know, especially if they're 63 now is when you need to start planning. What's the best way to reach you with questions?
Victoria Larson 5:08
Yeah, they can email us at info at Vitality investments.org
Erin Kennedy 5:14
All right, perfect. Victoria, again, thank you so much for your time today. I really appreciate it.
Victoria Larson 5:18
Thank you. Bye, bye, bye.
