What is IRMAA?

With the beginning of new year millions of retirees who are on Medicare may have received a letter from Social Security informing them that they are in IRMAA

The question that is usually comes up at this point is simply “What is IRMAA?”

IRMAA short for Medicare’s Income Related Monthly Adjustment Amount is just a tax on income.

As you enroll into Medicare or are even on it currently, the IRS informs the Centers for Medicare Services (CMS) of your income from the previous 2 years.

If your income happens to be too much, then CMS places a surcharge on top of your Part B and Part D premiums for the current year. By the way, your Social Security benefit automatically pays this amount monthly.

What is IRMAA income considered to be?

CMS and the IRS defines income as modified adjusted gross income (MAGI). This includes your adjustable gross income plus any tax-exempt income you generate or everything on line 2a and 8b of the 2021 IRS tax form 1040.

Some examples of income for IRMAA are:

Social Security benefits. Wages. Interest. Capital Gains. Dividends. Pension and Rental Income. Distributions from Traditional 401(k)’s, IRA’s. SEP’s and 403(b)’s.

How much is too much income for IRMAA?

Income for IRMAA is broken into 6 different brackets which in 2022 are:

But what really is the impact of the Income Related Monthly Adjustment Amount?

The impact comes down to 3 things

1. The costs today.
2. The costs in the future.
3. The amount that comes from Social Security benefit.

In 2022 the current premiums for Medicare Part B and Part are:

• Part B: $2,041.20 a year.
• Part D: $938.76 a year. This premium includes the deductible and is based on the national average all available plans.
• Total for Part B and D: $2,979.96 for the year.

The total costs in 2022 per IRMAA Bracket per person are:

When comparing health plans on the open market for those not on Medicare the premiums even in the highest bracket don’t look as bad, but Medicare is also inflating in terms of costs too.

According to the Medicare Board of Trustees (MBT) Medicare premiums are projected to inflate by over 6.30% for Part D and over 5.10% for Part D.

The other factor is that according to federal regulation these IRMAA Brackets are not to adjust for inflation until 2028. Any adjustment to the these brackets prior to 2028 is at the full discretion of the current Administration.

In 2028 the IRMAA Brackets, according to the MBT are:

In 2028 the MBT projects that the Medicare premiums will be:

• Part B premium: $2,715.60 annually.
• Part D premium: $1,282.56 annually.
• Total cost per individual for Part B and D: $3,998.16.

The total costs in 2028 per IRMAA Bracket per person are projected to be:

If inflation rates remain constant, even with Covid-19 wreaking havoc within the healthcare system of the United States, when today’s 65-year-old Medicare beneficiaries reach age 80 in 2037 the costs could be astronomical.

In 2037, if inflation just remains constant Medicare premiums could be:

• Part B: $5,125.00 annually.
• Part D: $2,049.00 annually.
• Total cost per individual for Part B and D: $7,174.00 annually.

The total costs in 2032 per IRMAA Bracket per person could be:

Medicare is a fantastic form of health coverage for those who have the proper coverage and who use it prudently. Keep in mind though that it is not free or even cheap…especially if you have income.

IRMAA, for those who are planning to retire, will become a major problem as the costs are much higher than anyone is projecting.

The bigger issue that you must also consider is that these costs come directly out of your Social Security check monthly. To compound the issue, anyone who enters IRMAA is NOT protected by the Hold Harmless Act.

For a free report to see how your savings will impact IRMAA and your Social Security benefit please contact us at [email protected] or call us at (208) 231-7080.

Your greatest asset is your health…the time to plan for it is today!