How You Can Avoid a Costly Medicare Premium Mistake

If you have a higher income and are approaching age 65, there could be a surprise waiting for you when you sign up for Medicare. Known as the income-related monthly adjustment amount, or IRMAA, this surcharge is added to Medicare premiums for individuals and married couples with an income above a certain threshold. And the higher your income, the higher the IRMAA will be. Many people who are approaching Medicare age are not aware of the IRMAA, and it could significantly affect your retirement plans, especially if you are at the lower end of the income spectrum at which it is required. Read on to find out more about Medicare premiums with IRMAA, and how you may be able to avoid or lessen this additional charge.

Income Limits for Medicare’s IRMAA

Any single filer who is receiving Medicare benefits and has a Modified Adjusted Gross Income (MAGI) above $97,000 in 2023 will be required to pay the IRMAA in addition to their normal premiums for Medicare Parts B and D. If you reach this income threshold, instead of paying the usual $164.90 monthly premium for Medicare Part B, you will pay $230.80. You will also have to pay $12.20 in addition to your usual Medicare Part D premium. This amount will vary depending on your tax filing status and it increases proportionally with your income:

  • $97,000-$123,000: $230.80 for Part B and $12.20 + Plan Premium for Part D
  • $123,000.01-$153,000: $329.70 for Part B and $31.50 + Plan Premium for Part D
  • $153,000.01-$183,000: $428.60 for Part B and $50.70 + Plan Premium for Part D
  • $183,000.01-$500,000: $527.50 for Part B and $70.00 + Plan Premium for Part D
  • $500,000.01 and above: $560.50 for Part B and $76.40 + Plan Premium for Part D

The Social Security Administration has compiled different tables for various tax filing statuses on their website, located here.

As you can see, going over the limit by even a single penny can push you up into the higher premium bracket, so planning your income carefully after age 65 is essential. At the lower end of the income spectrum, you may only have to pay hundreds more than your usual premiums; at the higher end, it could be thousands more per year. For a retiree on a fixed income, this could be disastrous.

Individual Retirement Account Planning to Avoid IRMAA

While you may know exactly how much income you will have at this point in your life, that will all change once you reach age 73 and are required to take Required Minimum Distributions (RMDs) from your traditional IRA accounts. That’s why it is important to start planning to avoid IRMAA as early as possible. With proper planning, you can convert your traditional IRAs into Roth IRAs that do not require an RMD, making it much simpler to know how much income you will have in any given year. It’s also important to remember that your income in the year you turn 63 will determine your Medicare premium at age 65.

Estate Planning Attorney in the Philadelphia Area

If you want to avoid crossing the threshold for an IRMAA when you start receiving Medicare benefits, it is crucial that you speak to a financial advisor who specializes in retirement planning. An elder law attorney in Philadelphia and surrounding areas may also be able to advise you on clever ways to avoid your assets being counted towards your MAGI. If you live in Philadelphia or any surrounding counties, Slutsky Elder Law can help you learn more about Medicare IRMAAs and a range of other concerns related to your estate and end-of-life planning. Call us at (610) 940-0650 or fill out the online form on our contact page to request a consultation with an experienced Pennsylvania elder law attorney today!

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