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Understanding the Income-Related Monthly Adjustment Amount for Medicare Part B Premiums

Retirement Planning

Lately, I've heard from several clients bewildered by the complexities of the Income-Related Monthly Adjustment Amount (IRMAA) for Medicare Part B premiums. This confusion is understandable given the intricacies involved in how income affects premiums. With Medicare being a crucial component of healthcare for many, it's important to clarify how IRMAA works and what steps can be taken to manage it effectively. In this blog, I'll break down the essentials of IRMAA, how it may impact your premiums, and what to do if your income fluctuates yearly.

What is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an additional charge that some Medicare beneficiaries pay on top of the standard Part B premium based on their income. Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and other items and services. The standard premium for Part B does not apply to everyone; those with higher incomes will pay more.

How IRMAA is Calculated

The amount of IRMAA you pay is determined by your Modified Adjusted Gross Income (MAGI) from two years prior. For instance, your 2022 income will affect your IRMAA for 2024. The Social Security Administration (SSA) sets income brackets annually, and those with higher incomes pay more.

For 2024, the income brackets and corresponding IRMAA adjustments are as follows:

Individual Filers:
  • $103,000 or less: No IRMAA
  • $103,001 to $129,000: $65.90 additional premium
  • $129,001 to $160,000: $165.90 additional premium
  • $160,001 to $500,000: $274.70 additional premium
  • Above $500,000: $407.70 additional premium
Joint Filers:
  • $206,000 or less: No IRMAA
  • $206,001 to $258,000: $65.90 additional premium
  • $258,001 to $320,000: $165.90 additional premium
  • $320,001 to $750,000: $274.70 additional premium
  • Above $750,000: $407.70 additional premium

These amounts are added to the base Part B premium of $174.70 for 2024.

What to Do If Your Income Changes

Managing IRMAA can be particularly tricky if your income fluctuates from year to year. If your income spikes in one year and drops significantly the next due to a life-changing event, you need to address the impact on your premiums. Common examples of life-changing events are retirement, divorce, or a death of a spouse. Below are tips for managing IRMAA:

  1. Track Your Income
    Keep accurate records of your income and any significant changes. This documentation is crucial for filing any necessary adjustments.

  2. File Form SSA-44 for Income Reduction
    If your income decreases after a year of higher earnings, use Form SSA-44 to request an adjustment to your IRMAA. This form allows you to explain your current financial situation and provide evidence of the change in income.

  3. Monitor the Adjustment Process
    After submitting Form SSA-44, review any communications from the SSA regarding your request. Adjustments to your IRMAA may take some time to process, so try to file immediately following the life-changing event.

  4. Prepare for Future Income Spikes
    If you expect a temporary increase in income, plan your budget to accommodate potentially higher premiums. This foresight can help manage any financial strain during those periods.

  5. Appeal if Needed
    If your request for an IRMAA adjustment is denied, you can appeal the decision. The SSA provides guidance on how to appeal. Consult a Medicare specialist if you need additional support.

  6. Regular Review
    Regularly review your income and the potential impact on your IRMAA to ensure you're prepared for any necessary adjustments. During our regular reviews with clients, we evaluate income needs and review their current tax situation, to ensure there are no surprises. There may be years where income is higher, whether due to funds needed for travel, home repair, Roth conversions, or many other reasons. During those years, we evaluate the potential impact on your Medicare Part B premiums. 

Navigating the complexities of IRMAA and Medicare Part B premiums can be daunting, especially with fluctuating income. By staying informed about how IRMAA is calculated and taking proactive steps to manage your premiums, you can better regulate your healthcare costs and avoid unexpected financial strain. If you find yourself facing changes in income or need assistance with Form SSA-44, please don’t hesitate to reach out. Together, we can review your financial situation and plan for any necessary adjustments. We are here to help you navigate these complexities and work together on strategies to manage your situation.

 ~ Diana Sailler

The information provided in this blog is for informational and educational purposes only and should not be construed as specific financial, legal, or tax advice. Individual financial situations vary, and you should consult with a financial advisor or Medicare specialist to determine what strategies may be appropriate for your situation. While we strive to keep the information current, Medicare guidelines and income brackets may change, and we encourage you to consult up-to-date sources or professionals for the most current information. Past performance is not indicative of future results.