Ep. 177 – Will I Avoid IRMAA Surcharges on Medicare?

Are you going to be able to avoid IRMAA surcharges on Medicare parts B and D? IRMAA stands for Income-Related Monthly Adjusted Amount, and there are charges on both parts B and D based on where your income lands.

If you’re thinking about retiring any time soon, there are ways to manage your income to stay at a lower amount to avoid surcharges on your Medicare premiums.

In this episode of the Secure Your Retirement podcast, we take you through the IRMAA surcharges on Medicare part B and D over a glass of La Crema Chardonnay. Listen in to learn about the 3-layer IRMAA surcharge difference and which category you fall in. 

In this episode, find out:

●     Understanding what Income-Related Monthly Adjusted Amount represents in Medicare.

●     The meaning of Modified Adjusted Gross Income and why you need to know yours.

●     The IRMAA surcharge to pay if your income didn’t exceed 91k single or 182k married filed jointly.

●     When to file for a form SSA-44 and explain how a life-changing event affected your income.

●     The 3-layer IRMAA surcharges to pay if your income exceeds 91k single or 182k married filed jointly two years prior.

Tweetable Quotes:

●     “There’s a potential where you can have additional charges on your part B or D if you fit certain criteria when it comes to income.”– Murs Tariq

●     “With a little bit of planning, we can be able to think IRMAA through and what’s going to be beneficial to you.”– Radon Stancil


If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:Welcome everyone to our September wine down. We are going to talk about a topic today that is extremely important. It is Medicare and then the surcharges that could be related to that. If you know the term, it’s called IRMAA. Don’t worry about that means yet. Murs is going to explain what IRMAA means. But before we get into all this Medicare, surcharges, premiums, all that kind of stuff, it’s time to have a glass of wine.  
Morgan:And today we are drinking chardonnay. It’s a La Crema from the Sonoma coast. Not a lot of research on it, it’s just kind of what we had in the fridge, but it’s a good, yummy, buttery chardonnay.  
Radon Stancil:Well, fantastic. So here’s the question that we’re going to pose throughout this podcast today, and that is will I or am I going to be able to avoid IRMAA surcharges on Medicare Part B and Part D? Now before we get into this, we got a couple things we’re going to talk about, but Medicare obviously is something that kicks in when we’re 65. We get on this insurance and there’s different sections of it. There’s Part B and Part D. We’re not going into what those cover, but there are premiums that we have to pay when it comes to Medicare, but there are surcharges and they are related to what we call IRMAA. So before we go any further, Murs, can you tell us what IRMAA stands for?  
Murs Tariq:So IRMAA stands for Income-Related Monthly Adjustment Amount. So like Radon was saying, there are charges on Part B and Part D and based off of where your income is going to land, and we’re going to walk you through how you can understand will you be affected or not, but there is a potential where you could have an additional charge on your Part B and Part D if you fit certain criteria when it comes to income. So we’re going to walk through what are they looking at and all the different steps that would put you into qualifying for this IRMAA surcharge. But just know that you do pay something for Part B and Part D, and potentially based off of income, IRMAA says that we could charge you a little bit more if you make a certain amount of income.  
Radon Stancil:All right, one more thing I want to say, just so you don’t get stressed out as we’re going through this, we do have a blog written on this and it will have all of the numbers that we’re about to go through. In addition to that, we have developed a flow chart and that flow chart kind of takes us through what we’re going to talk about today. If you would like the flow chart, you can get it, we’ll give it to you at absolutely no cost. The easiest thing for you to do is to call the office at (919) 787-8866. Ask for Laura or Morgan and they’ll get you the flow chart. Okay?  
 So we’re going to just give that to you. It’s at no cost to you. I think it’s a really good guide. We’ll be able to shoot it over in an email. So here’s how it’s going to flow. We got these questions and we’re taking us down a lot of different paths. So we hope this as you’re listening to this, if you’re on a walk or you’re on a drive, this will all flow and make sense. And Morgan’s going to be our guide.  
Morgan:I sure will. So the first question is, did your modified adjusted gross income exceed $91,000 single or $182,000 if married and filing jointly based on the prior year? So if my answer to that is a no, Radon?  
Radon Stancil:Well, can we just do this real quick first, just because I am real big about these terms. Murs, can you tell us what modified adjusted gross income means?  
Murs Tariq:Yeah, so you got to love our tax system and there’s a bunch of different terms. And without getting too confusing, let’s break it down into the high level, which is you’ve got gross income coming in the door. That’s either your wages, pension, all the income sources that you have coming in, that’s your gross income. And then we take down our deductions, our standard deductions, anything that reduces our income. Now we’re at our adjusted gross income. And then there’s a certain category of things that we need to add back. Things like student loan interest or retirement account contributions, those get added back to create your modified adjusted gross income. So it is a level on the tax line that you do need to know, especially if you’re trying to figure out am I going to be in a situation of an IRMAA surcharge or not? So that’s the modified adjusted gross income.  
Radon Stancil:All right, very good. Now Morgan’s question was what if we exceed $91,000 single or $182,000 married filing jointly? And she said prior year. But to be real clear, the way Medicare looks at this when they’re doing these surcharges is they actually look back two years. So we’re sitting in 2022, they’re going to say, what was your 2020 modified adjusted gross income? So again, if we’re looking at this in 23, it’s going to be your 21. So just keep that in mind. So if it is a no, I did not exceed $91,000 as a single person or $182,000 married filing jointly, then I know my premium, my premium for my Part B is going to be $170.10 A month. That’s where I’m going to be. And so that’s my baseline. So I can just answer that if I didn’t exceed it, $170.10. But now we got to go down the other path. So take us down the other side.  
Morgan:Okay, so then yes it did. Then we’re going to ask, have you or your spouse have married, experienced a life changing event that has significantly reduced your income? And let’s say we don’t know the answer to that, Murs.  
Murs Tariq:So if we don’t know the answer because the IRS kind of terms that as a life changing event, and you may have one definition of what a life changing event is, someone else has a different one, the IRS has a very specific one. Basically per the Social Security Administration, a life changing event includes marriage, divorce, widowing, retirement, which is very common, layoff, loss of a pension or income producing type of property is what the government is going to qualify as a life changing event. So if those are one of the things that you have gone through here in the last two years, when we’re looking at your IRMAA qualifications, because it’s a two year lookback, that would change or point you down one of the paths of this little checklist that we’re going through here. One of those life changing events.  
Morgan:All right, so Radon, what if I have for sure experienced one of these life changing events?  
Radon Stancil:So now what we can do is we can basically go to the Medicare office or submit a form saying, hey, what I made in 2020 is not real. Meaning I retired in 2021 and what I made there in my last year of working, that income is really high. Or I had one of these scenarios that occurred that’s going to really change my income perspective. Then I can go and I can file a form SSA-44. A form SSA-44 and basically explain the situation.  
 And we have had quite a few of our clients who have filed this and they got the exception because what it did is that in that form you’re saying, well what is your income after this life changing event? You explain it and then they give you credit for it, because if we don’t do this, Medicare is just going to look at your 2020. And so if we don’t explain it, they’re going to look at it. They don’t know that you’re retired, they don’t know that you got a divorce, they don’t know that you did any of these deals. So make sure that you file the form, explain it and you might get an exception, which puts you back at that baseline premium if you’re under that $91,000 as a single or $182,000 married filing jointly.  
Morgan:So then back to it, what if we have not experienced one of these life changing incomes, but our income exceeded the 91 single or 182 filing jointly?  
Murs Tariq:So if we determine that we have not experienced a life changing event, then unfortunately we are now in an IRMAA surcharge type of situation. So what we know is that the baseline for Part B is $170.10 per month. So you know that you’re already going to pay that. Now that we have exceeded the income for this IRMAA surcharge, we know that we’re going to be paying potentially more now. And so now we have to go back and understand we’re looking two years prior. So we’re looking at the 2020 tax return and saying, what was our 2020 modified adjusted gross income? Kind of like looking at, if you look at tax brackets and you say, here’s here’s where my income is and that’s where I fall as far as a tax bracket goes, there’s a system to it, very similar with how they’re going to rate how much your surcharge is going to be is you fall into an income category and that’s going to give you an additional charge on your Medicare Part B.  
 So to walk you through the first layer, is if you filing as a single, if you made between $91,000 and $114,000 or married filing jointly $182,000 to $228,000, then your surcharge for Part B is going to be an additional $68 a month. So $170 is the standard plus $68 per month is what your Medicare Part B is going to be if you’re in those income thresholds. And then on top of that, Part D is going to go up a little bit by $12.40 a month. So kind of going back to that tax rate system, that’s level one. Radon, you want to take level two?  
Radon Stancil:All right, so now we’re just picking it up and we’re just, this will go pretty quick now, we just want to walk you through these numbers so you know what it looks like. So now if I’m single and I’m falling between $114,000 to $142,000 or married filing jointly, $228,000 to $284,000, my Part B surcharge is $170.10. So that’s up and above my $170.10 on the other, so I’ve basically doubled my premium now and I’ve got a $32.10 Surcharge on my Part D. Part three, Murs.  
Murs Tariq:And now, so level three now is filing single $142,000 to $170,000, or married filing jointly, $284,000 to $340,000, Part B surcharge is now $272.20 per month. Part D surcharge is now $51.70 per month.  
Radon Stancil:All right, now we’re taking it to the top level. This is where we just kind of go $500,000 and more as a single, $750,000 or more as a married filing jointly, your surcharge is $408.20 on Part B, $77.90 on Part D. So this by the way, is per person. So if I’ve got two people in the house, I’m paying this for each person. So what we did is we just kind of to walk you through this, because this IRMAA deal can, obviously, you can see how those numbers, they go up pretty quickly. And so there a little bit of planning, we can be able to think this through. And really what’s going to be beneficial to you is if you are thinking about retiring in 2021, for example, I’m sorry, 2022 or 2023. 2021’s gone, 2022, 2023, you might start thinking, what can I do to maybe make sure my income is maybe at that lower amount?  
 And then I’ve got to manage that because if I have any of these events take me above those thresholds throughout retirement, it could change my Medicare premiums. So we got to think it through, spend a little bit of time. I just want to reiterate a couple of things. We went through the numbers, go to the website pomwealth.net, go to the blog page, we’ll have all of that information there for you with all of the numbers. If you would like to have this flow chart, we’re glad to send it to you. Just call the office. We’ll send it out to you. And we hope this has been beneficial and that it’s not been stressful because we’re talking about surcharges. We just got to make sure we think it through. Thank you so much for listening to our wine down. We hope that it has given you some insight. Thank you Morgan, for being such a good commentator.