IRMAA – The Details
Medicare’s Income Related Monthly Adjustment Amount or IRMAA for short is a progressive tax on a retiree’s income through Medicare if they happen to be earning “too much income”.
How IRMAA works:
In 2025 for individuals earning over $106,000 or couples earning over $212,000 in Modified Adjusted Gross Income (MAGI) the Social Security Administration will assess surcharges on top of their current year’s Medicare Part B and Part D premiums.
The greater the MAGI the larger the surcharges may become.
What is included in MAGI for IRMAA:
The SSA defines income as everything on lines 2a and 11 of the IRS tax form 1040 which includes:
|
Taxable Social Security |
Rental Income |
Pension Income |
|
Wages |
Capital Gains |
All Dividends |
|
Traditional IRA |
Keough Accounts |
Traditional 403(b) |
|
Qualified Annuities |
Traditional 401(k)’s |
SEP Accounts |
What is not included in MAGI:
What does not count as income from is a much smaller list as it includes loans from Life Insurance your primary residency as well as distributions from Roth Accounts, HSA’s and 401(h) Plans.
How do you pay for IRMAA:
According to federal regulations the bulk of your Medicare premiums, including any IRMA surcharges are automatically deducted from Social Security benefit you may be receiving.
What is IRMAA’s impact in retirement:
The Trustees of Medicare are reporting that Medicare / IRMAA will increase by over 8.00% annually for at least the next years while Social Security’s cost-of-living-adjustments (COLA) will only increase by 2.40%.
Those that meet IRMAA ill see a significant reduction in Social Security benefits which will place more strain on their retirement savings.
Takeaway about IRMAA:
Only improper planning leads to IRMAA. This will cause higher health costs and increased taxation while experiencing less benefits throughout retirement.
By utilizing Life Insurance, Roth Accounts and 401(h) Plans people heading to an in in retirement will experience more Social Security benefits and control over their health costs.
