Future of IRMAA

No matter what you’ve been told, Medicare’s Income-Related Monthly Adjusted Amount (IRMAA) is more than just a minor surcharge for retirees.

IRMAA happens to represent a progressive tax on income that will significantly impact your retirement budget and bottom line later in life

Granted, many in the financial industry, like your financial advisor and CPA, currently view IRMAA as a sign of financial success, it is far from it.

IRMAA is a time-bomb waiting to blow-up precisely in 8 years and without proper planning, it will quickly become the unexpected burden that you won’t be able to get out of.

What is IRMAA?

IRMAA, or Medicare’s Income-Related Monthly Adjusted Amount, is a surcharge applied to Medicare Part B and D premiums for individuals with income exceeding specific thresholds.

In simple IRMAA is yet another tax on your income, but this time it is through Medicare.

What makes IRMAA a unique tax?

Unlike most taxes, IRMAA is completely avoidable and there is no reason at all as to why you or anyone you know should ever be in it.

IRMAA is also progressive as the tax increases with the more income you have

What counts as income towards IRMAA?

The Social Security Administration (SSA) defines income for IRMAA as:

Your adjusted gross income plus any tax-exempt interest you have or everything on lines 2a and 11 of your IRS form 1040.

Some examples of income for IRMAA are:

Wages, taxable Social Security Benefits, Capital gains, Dividends, Interest and any distribution from your Traditional 401(k) or Traditional IRA.

What doesn’t count as income is only Life Insurance, Roth distributions, 401(h) Plans, Home Equity and Health Savings Accounts (HSA’s).

Yes, you will most likely reach IRMAA if you have a Traditional 401(k):

The steps on how you will reach IRMAA:

1. When you reach age 75 you will have to make a required minimum distribution (RMD) from your Traditional 401(k)/IRA.
2. This distribution will count as income and will lead to the taxation of your Social Security benefits.
3. Your taxable Social Security benefit will be added to your RMD which will count as income for IRMAA.
4. Each year after age 75 you will have to make larger RMD distributions while Social Security benefit will also cost-of-living adjustments (COLA).

This will eventually place you into IRMAA at some point in retirement if you live long enough.

But is IRMAA really that big of deal right now?

Currently, many in the financial industry will gladly state that IRMAA is okay to have as, again, it is a sign of financial success, and they may be correct right now.

In 2025 the IRMAA Surcharges are only:

2025	No IRMAA	1st IRMAA	2nd IRMAA	3rd IRMAA	4th IRMAA	5th IRMAA
Part B	$185.00	$259.00	$481.00	$592.00	$670.60	$629.00
Part D	$102.5	$116.2	$137.8	$159.5	$181.1	$188.3
Monthly	$287.48	$375.18	$618.78	$751.48	$851.68	$817.28
Annually	$3,450	$4,502	$7,425	$9,018	$10,220	$9,807

Ultimately, right now, if you reach the 1^st Threshold of IRMAA you will “only” pay an extra $87.70 a month or $1,052.40 for the year per person.

If you reach the 3^rd Threshold the amount you will pay inflates to $5,568 or $11,136.00 per couple and this is just for your spouse’s and your Medicare Part B and Part D premiums.

To some people these extra surcharges may be a marginal amount to pay in taxes that provide no other added benefits.

Others, however, may realize that when the government can increase a tax the government will do it every time, and this makes the future of IRMAA very dangerous.

What is the Future of IRMAA?

Before delving into the Future of IRMAA consider this:

• The government is broke and needs money, especially to sustain Medicare.
• The only way any government can produce more money is by taxing people more.

Because of Medicare and the government going broke the reality is that IRMAA will have to become bigger and bigger burden on anyone who reaches it and the is simply due to the fact that the government needs your money.

And by the way the government is not hiding any of this.

According to the Medicare Board of Trustees the 2033 the Surcharges for IRMAA will be:

2033	No IRMAA	1st IRMAA	2nd IRMAA	3rd IRMAA	4th IRMAA	5th IRMAA
Part B	$299.80	$454.40	$671.20	$888.10	$1,104.80	$1,177.20
Part D	$163.3	$198.0	$235.0	$272.0	$308.9	$321.3
Monthly	$463.14	$652.44	$906.24	$1,160.14	$1,413.74	$1,498.54
Annually	$5,558	$7,829	$10,875	$13,922	$16,965	$17,982

The Trustees of Medicare are stating that the IRMAA Surcharges will inflate annually over the next 8 years by over 9.00%.

• Medicare Part B: 6.25%
• Medicare Part D IRMAA Surcharges: 10.51%

HERE IS YOUR WAKE-UP CALL:

Medicare Premiums and IRMAA Surcharges are projected to inflate by over 9.00% up until the Peak Baby Boomers turn 75 in 2033.

The significance of this is the FACT that in 2033 the largest segment of our population will have to start taking their RMD’s.

The government has perfectly timed the increase of IRMAA surcharges to the exact year that the largest amount of retirees will have to withdraw assets from their savings.

To make matters worse, the financial industry is doing its best to ensure that you don’t address it right now.

GET IT?

IRMAA is a TIME-BOMB that is precisely set to go off at the worst possible time for retirees but the perfect time for the government.

All that the government needs to have happen is for the financial industry to continue telling its clients that they should be proud to pay IRMAA over the next 8 years and presto there is plenty of tax revenue.

Doubt it?

Well, here is a chart from the Congressional Budget Office showing how Medicare, Social Security and the U.S. Budget will react over the next 50 years:

But will the Future of IRMAA eventually get better right?

We already know that IRMAA must inflate by more than 9.00% a year for the next 8 years for Medicare to remain functional.

Because of this sharp increase in the expense of IRMAA right before the Peak Baby Boomers turn age 75 even if the IRMAA surcharges and the Medicare Premiums inflate by just 4.00% from that point forward by 2043 the costs of IRMAA PER PERSON will be:

2043	No IRMAA	1st IRMAA	2nd IRMAA	3rd IRMAA	4th IRMAA	5th IRMAA
Part B	$443.78	$672.62	$993.54	$1,314.60	$1,635.37	$1,742.54
Part D	$241.78	$293.15	$347.92	$402.69	$457.31	$475.66
Monthly	$685.56	$965.77	$1,341.46	$1,717.29	$2,092.68	$2,218.21
Annually	$8,226.72	$11,589.25	$16,097.48	$20,607.49	$25,112.17	$26,618.46

 The path to financial destruction for retirees is already set.

It all comes down to how you feel about paying an extra $3,000 to $17,000 per person each year while in retirement.

Things you can do today to avoid IRMAA in the future:

The income for IRMAA and the income that will lead to the taxation of your Social Security benefits is directly from your Traditional 401(k)/IRA.

You are being told to avoid taxes today when you are young and can afford to pay them so you can pay them later when you are older and need the money.

All you have to do is stop using tax-deferred investment vehicles and instead invest into Rot Accounts and/or purchase Life Insurance if you qualify.

The Future of IRMAA Conclusion

IRMAA is something that you can easily avoid, but once you are in it there may not be a lot that can be done to get out of it.

The government needs your money, and it is not hiding its intentions. This is why the costs of IRMAA will increase by over 9.00% until the Peak Boomers reach age 75.

The easiest way to get yourself out of this mess is to pay taxes today.

If you need any information to stay ahead of rising IRMAA costs please contact us today to schedule a consultation and explore tax-efficient strategies tailored to your retirement goals.

Email: [email protected]

Phone: 617-894-8043