Ep. 222 – 2023 IRMAA Update – Will You Have a Surcharge for Medicare Part B and D?

In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the 2023 Medicare Part B and D IRMAA surcharges. They explain the modified adjusted gross income and the 2023 surcharges if you earn more than $97k single or $194k married filing jointly.

Listen in to learn about the income-dropping circumstances the IRS considers when exempting anyone from the Medicare IRMAA surcharges. You will also learn you should be aware of your numbers when implementing any type of strategy.

In this episode, find out:

• The modified adjusted gross income – the baseline that allows you not to have Medicare surcharges.
• Income-dropping circumstances the IRS considers when exempting anyone from the Medicare IRMMA surcharges.
• Always ask if you qualify for a Medicare IRMAA surcharges exception and file form SSA44.

As an EXAMPLE:

• The surcharges for 2023 if you earn more than $97k single or $194k married filing jointly.
• The unfortunate scenarios where the SSA44 doesn’t work.
• Why you should be aware of your numbers when implementing any type of strategy.

Tweetable Quotes:

• “The IRS does recognize that there are some nuances and special circumstances “life-changing events” that significantly reduce your income.”– Murs Tariq
• “If you did have something that occurred and you did a large Roth conversion that put you in a higher bracket for Medicare Premium, it’s one year, so don’t think you’ve put yourself in this position for the rest of your life.”– Radon Stancil

Resources:

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 Secure Your Retirement Podcast. We, today, have a topic that I think is something you have to think about and plan for ahead of time. It’s a two-year increment, and we’re going to walk you through that. But it’s really talking about can I avoid, will I avoid what are called IRMAA surcharges? IRMAA, which is I-R-M-A-A, is connected to a calculation that is going to determine whether or not I’m going to have a surcharge on my Part B and my Part D of my Medicare insurance. We’ve had quite a few clients that didn’t plan for this and/or maybe know some of the things that they needed to know. Therefore, they got caught unaware.
Radon Stancil:	What we’re going to do is, we’re going to basically set up the baseline and the baseline then is going to say, okay, if I fall into this category, I know my premium. I know what I’m going to pay. And then if I make more money than this, I’m going to have surcharges. There’s a couple of caveats here that we’ll handle as we go through. Let’s just take us through and understand what this all involves.
Radon Stancil:	First of all, basically what the idea is is that if I make more than a certain amount of money, I’m going to need to pay more or contribute more toward my insurance on Medicare Part B and Part D. So, what is the baseline? Well, what we have to look at is what is called the modified adjusted gross income. And when we do that, what it’s going to do is, it’s going to say we’ve got a baseline. If I make, as a single person, $97,000 a year of modified adjusted gross income or less, or 194,000 married filing jointly or less, then I do not have a surcharge. I’m going to have a Part B premium of this year, $164.90.
Radon Stancil:	As long as I am in that category, so if you do that, you don’t have to worry about surcharges. But if maybe you’re still working and you’re going to retire in the next couple of years, which is where the gotcha comes in, we have to start planning ahead of time to avoid those surcharges. Think about it. Everything we’re going to go through right now is 2023. We did one of these before for 2022, but this is 2023 numbers. Where they’re getting the numbers from is from what you earned in 2021. They look back two years. So pretend you were working in 2021 and you retired and about to go on Medicare. Now, you are having to look at that income.
Radon Stancil:	All right. The first thing that we’re going to ask is, if let’s just say that you know that you’re going to retire in two years from now. You know you’re working and you go, “Whoa, we might be over that.” Well, what do we do? I’m going to now transition and say, okay, Murs, let’s say that a person’s looking up their 2023 and they go, “Wait a minute. In 2021, I was making more than that.” What’s the first thing that they should consider?
Murs Tariq:	Yeah. If you answered yes to that question of I was making more than the numbers that we just listed off, 97,000 single, 194 married filing joint, then luckily, the IRS does recognize that there are some nuances and some special circumstances, what they would call life-changing events. Have you or your spouse, if married, experienced a life-changing event that has significantly reduced your income? Think about that for a second. If you are about to retire or you have just anything that could have changed your income significantly and drastically for the future going forward, the IRS is going to recognize that.
Murs Tariq:	How do they that? Well, there’s a whole list of things that they will consider. Per the Social Security Administration, a life-changing event includes marriage, divorce, widowing, retirement, a layoff, loss of pension or income-producing property. Those items there are pretty common items that we will see, the most common being, “I retired. I retired at Medicare age or somewhere in that area, and the two-year lookback shows me having great income. But now, I’m retired. I don’t have this type of income.” SSA is going to give you the chance to explain. Why did you have a drop of income?
Murs Tariq:	Unfortunately, we see it through divorce and widowing as well. Layoffs has been a common reason to try to get this exception. If you go back to pandemic times, and even after that, layoffs were a topic of conversation. Just realize that there are exceptions to this Medicare IRMAA surcharge that you would definitely want to look into. But the list is very specific, and what I’ve heard is that they’re very strict on these rules, too. But part of this is just understanding and having the knowledge of, well, there may be some things to work around Medicare IRMAA versus just saying, “Oh, well, I guess I’m just going to have to pay the extra.”
Murs Tariq:	I’ll always be asking the question of, well, do I qualify for an exception? If we believe we do under that list of items, well, then you can try requesting an exception by filing form SSA-44. I’ve seen the form. It’s relatively simple. It’s a form that allows you to basically state your case. Why is your income dropping, why was it a significant change, and does it fall within one of the guidelines that they have said qualifies for an exception?
Murs Tariq:	If you fill that form, SSA-44, and then you submit it, then they’ll put it into the review process and let you know as to whether or not you get the exception, which could make a huge difference when it comes to your Medicare premiums, Part B and Part D. And we’ll help you understand here in a second, because we’re going to walk you through how these numbers change, if we don’t qualify for the exception and what those numbers go up to.
Radon Stancil:	Okay. Now, we’re going to work through all of these scenarios and tell you what the surcharges are for 2023. What I want to make sure that you’re clear of is that you don’t have to, all of a sudden, frantically start writing notes. We have a blog article that is written on this very topic. You can go to the website and you can read the article. All of these numbers will be there, so don’t stress out right now.
Radon Stancil:	All right. Here we are. We’ve got our baseline, and now what we’re going to say is, okay, what are the surcharges for 2023 if I earn more than $97,000 single, 194,000 married filing jointly? We’re going to walk you through each of these, and it’s like there’s little blocks in all essence of money, like they do with the tax code. Here’s our first one.
Radon Stancil:	If in 2021, remember, we’re looking back two years, I, as a single person, earned anywhere from $97,001 to 123,000, or married filing jointly, $194,001 to $246,000 married filing jointly, then I’m going to have a surcharge. Remember, this surcharge is in addition to my base premium of $164.90. My surcharge, my extra premium, is going to be $65.90 a month for Part B and $12.20 for Part D. Those are my increases.
Radon Stancil:	Remember, this is per person. If I’ve got two, a married couple, and they’re both going on the Medicare, then each of them are going to have that surcharge on their part. This is not for the couple, this is per person. All right. Let’s take us to the next block.
Murs Tariq:	All right. The next tier for single taxpayer is $123,001, all the way up to 153,000. And then for married filing jointly, $246,001, all the way up to 306,000. If you fall into this tier, whether single or jointly, now your Part B surcharge, so this is, again, on top of the base rate, the Part B surcharge goes to $164.80 per month per person, and Part D surcharge now goes to $31.50 per month per person. And then we’ve got a couple more tiers.
Radon Stancil:	All right. Now, we’re just picking up here. From 150, $153,001 is a single person, all the way to 183,000. For married filing jointly, $306,001, all the way to 366,000. My surcharge now is $263.70 for Part B and $50.70 for Part D.
Murs Tariq:	And then our next tier for single, $183,001, all the way to $499,999 as a single. And then for married filing jointly, $366,001, all the way up to $749,999. The Part B surcharge goes to $362.60 per month per person. Part D goes to $70 per month per person.
Radon Stancil:	All right. This is our last tier. Now, it’s just the last time you have to think about I., more than $500,000 as a single, more than 750,000 as a married filing jointly. My surcharge now is $395.60 for Part B and $76.40 for Part D. Some of this may or may not apply. It’s just good to know though, especially if I’m still working. Or I have some events that are going to come up that I might have, that would add a lot to my income. Maybe something I’m going to sell, maybe something that I’m going to have that I know I want to do. Let’s say I’m planning forward, I might say, “I want to go ahead and do this transaction three years prior so I don’t have to worry about it.”
Radon Stancil:	Because, by the way, this exception for that forum that Murs told you about earlier, this SSA-44, that’s really almost a one-time deal. There are some scenarios where you might be able to get a second one on there, but that’s really a one-time event. We’ve had some folks try to apply and you might get a nice Medicare representative that helps you out on that, but this is something we can plan for. Is there anything else, Murs, that you’ve seen as far as planning?
Murs Tariq:	Yeah. I would say, unfortunately, that form SSA-44, the list of exceptions, it does not work in the case of you have higher than normal investment gains. Or you can’t plead your case just saying, “Hey, I was trying to do a specific strategy for my retirement plan.” Right now, we’re in the midst of our tax strategy meetings with our clients and let’s just say, for example, someone has a desire to do significant Roth conversions.
Murs Tariq:	Well, one of the things we want to look at is, well, yeah, where is the tax bracket going to go if we’re doing these Roth conversions? Which is, it’s the act of taking money from pre-tax, paying the tax, and putting it into a tax-free bucket. Obviously, that’s going to bring up more taxes as we are paying the tax on those dollars, and it could potentially take us into another bracket. But the conversation doesn’t stop there. It’s also, well, let’s take a look at the IRMAA. Let’s see. Are we going to now infringe on these IRMAA different numbers that we just gave you? That’s part of the strategy.
Murs Tariq:	I know several clients that have made a Roth conversion and thinking that all they had to worry about was the tax brackets, and then they came in with a surprise when they found out that they got the letter from Social Security that says, “Hey, your Medicare is going up because of your income.” And they tried to fight it and it did not work. There’s planning that you can do when it comes to transitions like this that the exception will work, but then you want to be very, very aware of what your numbers are when we’re trying to implement any types of strategies. And that’s a major thing that we’re looking at.
Radon Stancil:	Yeah. Just also, so it doesn’t overly depress you if that were to happen one year, it is one year. It’s not like all of a sudden now, you’ve bumped yourself into a premium that’s going to be for the rest of your life. It gets reevaluated each year, looking back two. If you did have something that occurred and you did do a large Roth conversion and you said, “No, I understand it’s going to put me in a higher bracket for Medicare premium,” it’s one year. Don’t think that you’ve just put yourself into this position for the rest of your life.
Radon Stancil:	All right, everybody, we hope this has been at least some help for you to think this through. Again, I want to remind you, go to the blog and the blog article there walks you through all these numbers. If you ever have any questions, we always invite you to go to our website, top right-hand corner, click on schedule call. You can hop on a call with Murs or myself, either one, and we’re glad to spend 15 minutes with you, trying to help you get a little bit of guidance. Everybody, we hope you have a great week. We’ll talk to you again next Monday.