IRMAA Thresholds in 2020

[gobadgers]

Is it true that the IRMAA thresholds will be adjusted upward for inflation in 2020 -- maybe about 2%?

In planning my 2018 tax return (the income for which will determine the 2020 threshold used), I need to know how close I can get to the cliff without going over. I am close to one of the current IRMAA cliffs now, but a 2% increase in 2020 would help ease the fear of going over. Does anyone have any information or comments on this?

[mhalley]

Our health insurance is going up to over 2800 a month in Jan.. My wife and I turn 65 later next year, and will jump offf the Irma cliff with glee.

[munemaker]

Our health insurance is going up to over 2800 a month in Jan.. My wife and I turn 65 later next year, and will jump offf the Irma cliff with glee.

Just curious - $2,800 seems expensive for a couple. What kind of insurance do you have? No less expensive options available?

[HueyLD]

Is it true that the IRMAA thresholds will be adjusted upward for inflation in 2020 -- maybe about 2%?

In planning my 2018 tax return (the income for which will determine the 2020 threshold used), I need to know how close I can get to the cliff without going over. I am close to one of the current IRMAA cliffs now, but a 2% increase in 2020 would help ease the fear of going over. Does anyone have any information or comments on this?

The kff.org indicates that the adjustment for 2020 will be about 2% and I think the OP should incorporate 2.1% into his projection. Better safe than sorry.

[PriceOfFreedom]

Hi HueyLD. I browsed the kff.org website, but cant find the info. Could you please provide a link? Thanks.

[HueyLD]

“The income thresholds that determine the income-related premium payments are frozen through 2019, but will increase by about 2 percent in 2020 and will be indexed after that for general price inflation.”

https://www.kff.org/medicare/issue-brie ... d-changes/

[The Wizard]

“The income thresholds that determine the income-related premium payments are frozen through 2019, but will increase by about 2 percent in 2020 and will be indexed after that for general price inflation.”

https://www.kff.org/medicare/issue-brie ... d-changes/

That confuses the issue.
MAGI in year X determines IRMAA tier for year X+2.
Nonetheless, I read it to mean perhaps a 2% increase in IRMAA tiers in 2020 for MAGI earned this year...

[HueyLD]

Yes, that’t the way it works.

[PriceOfFreedom]

Sorry to be so thick about this, but as I'm doing some year-end income planning, I want to avoid "just" going over an IRMAA threshold.

So the first IRMAA threshold for married filing jointly is currently $170,000. To determine the IRMAA surcharge for Medicare premiums that DW and I will pay in 2020 (based on 2018 adjusted AGI), will the applied IRMAA threshold be:

(1) $170,000 (the 2018 limit with no inflation adjustment)
(2) $170,000 plus the CPI increase for 2018 (currently expected to be about 2%?)
or
(3) $170,000 plus whatever the CPI increase is in 2020 (could be positive or negative)?

[mhalley]

Wife and I are both 64. The insurance is an HSA compatable Bronze plan bought off the healthcare.gov exchange. No subsidy as I am doing roth conversions. There is one cheaper ($2777) but it is not HSA compliant.
Some more specifics of the plan:
Deductible
$5,200Individual Total
$10,400 Family Total
Out-of-pocket maximum
$6,650 Individual Total
$13,300Family Total
Copayments / Coinsurance
Emergency room care: 50% Coinsurance after deductible
Generic drugs: 50% Coinsurance after deductible
Primary doctor: 50% Coinsurance after deductible
Specialist doctor: 50% Coinsurance after deductible
See why I welcome IRMAA?

[PriceOfFreedom]

mhalley, I agree that you will be better off financially next year with Medicare/IRMAA than with your current plan.

However, do you have an answer to my question?

[FactualFran]

So the first IRMAA threshold for married filing jointly is currently $170,000. To determine the IRMAA surcharge for Medicare premiums that DW and I will pay in 2020 (based on 2018 adjusted AGI), will the applied IRMAA threshold be:

(1) $170,000 (the 2018 limit with no inflation adjustment)
(2) $170,000 plus the CPI increase for 2018 (currently expected to be about 2%?)
or
(3) $170,000 plus whatever the CPI increase is in 2020 (could be positive or negative)?

As far as I can tell, it will be

(4) $170,000 modified by the percent change between 1) the average CPI-U for the 12-month period ending August 2019, and 2) the average CPI-U for the 12-month period ending August 2018, and rounded to the nearest $1,000.

[PriceOfFreedom]

Thanks FactualFran, this makes sense.

My option (3) was a nonsensical attempt to capture future inflation rather than this year's (already known) inflation. However, since the IRMAA limits for 2020 need to be determined in late 2019, your timeline makes far more sense.

[JackoC]

Our health insurance is going up to over 2800 a month in Jan.. My wife and I turn 65 later next year, and will jump offf the Irma cliff with glee.

Further idle curiosity, which state? Our plan is similar to yours in broad brush. We're a little younger but if I take the published rates and age factors in our state, NJ, and made us both 64 our Bronze HSA plan with similar (they might not be exactly the same) thresholds would be $1671 per month for 2019. Horizon, which is not the cheapest but the cheaper ones aren't widely accepted and previous experience going that way convinced us it's not worth it. Pre ACA, NJ had about the most eye watering private health insurance rates in the country. We were considering moving to a neighboring state in part because HI was around 1/3 to 1/4 as much in PA and DE (though no guaranteed issue pre ACA, NJ did have gteed issue pre ACA). NJ rates now are higher in absolute $'s than then, but I guess we've 'fallen behind' relatively.
https://www.state.nj.us/dobi/division_i ... s_2019.pdf

I'll still be welcoming IRMAA too, if not quite as gleefully.

[deltaneutral83]

mhalley, I agree that you will be better off financially next year with Medicare/IRMAA than with your current plan.

However, do you have an answer to my question?

He and his wife are 64, this is what insurance with no subsidies with ACA costs for an HDHP (not PPO which is more expensive; $2,800/month for individual/combined deduc at $5,200/$10,400 and OOP max for indiv/combined at $6,650/$13,300). What other explanation are you seeking? This is the cost of insurance, and when you look at the deduc's and OOP max's you can determine for yourself the quality/value.

If the poster were seeking a PPO plan with lower deducs and copays, well....you get it.

[OnTrack]

mhalley, I agree that you will be better off financially next year with Medicare/IRMAA than with your current plan.

However, do you have an answer to my question?

He and his wife are 64, this is what insurance with no subsidies with ACA costs for an HDHP (not PPO which is more expensive; $2,800/month for individual/combined deduc at $5,200/$10,400 and OOP max for indiv/combined at $6,650/$13,300). What other explanation are you seeking? This is the cost of insurance, and when you look at the deduc's and OOP max's you can determine for yourself the quality/value.

If the poster were seeking a PPO plan with lower deducs and copays, well....you get it.

PriceOfFreedom's question was about how to determine the IRMAA threshold. It was not about the cost of the current insurance.

[deltaneutral83]

PriceOfFreedom's question was about how to determine the IRMAA threshold. It was not about the cost of the current insurance.

My mistake, another had concerns that the premiums were indeed matching the policy.

[One Ping]

Bogleheads has an amazing wealth of information in old threads. I was looking for exactly this and found it!

So the first IRMAA threshold for married filing jointly is currently $170,000. To determine the IRMAA surcharge for Medicare premiums that DW and I will pay in 2020 (based on 2018 adjusted AGI), will the applied IRMAA threshold be:

(1) $170,000 (the 2018 limit with no inflation adjustment)
(2) $170,000 plus the CPI increase for 2018 (currently expected to be about 2%?)
or
(3) $170,000 plus whatever the CPI increase is in 2020 (could be positive or negative)?

As far as I can tell, it will be

(4) $170,000 modified by the percent change between 1) the average CPI-U for the 12-month period ending August 2019, and 2) the average CPI-U for the 12-month period ending August 2018, and rounded to the nearest $1,000.

After reading it I realized I still had a question about the calculation of the CPI adjustment in FactualFran's answer (4) above. Is there language (e.g., a Federal Register reference) somewhere that actually states that the referenced logic for applying the inflation adjustment is what FactualFran stated in (4) above (i.e., the difference between the average Sept through Aug CPI-U values for the years 2018 and 2019)?

The logic, not to mention the CPI, seems similar but slightly different that that used for determining the Social Security COLA (https://www.ssa.gov/oact/cola/latestCOLA.html):

A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective.

One Ping

[HueyLD]

One Ping asked:

"After reading it I realized I still had a question about the calculation of the CPI adjustment in FactualFran's answer (4) above. Is there language (e.g., a Federal Register reference) somewhere that actually states that the referenced logic for applying the inflation adjustment is what FactualFran stated in (4) above (i.e., the difference between the average Sept through Aug CPI-U values for the years 2018 and 2019)?"

https://www.ssa.gov/OP_Home/ssact/title18/1839.htm

"(5) Inflation adjustment.—

(A) In general.—In the case of any calendar year beginning after 2007 (other than 2018 and 2019), each dollar amount in paragraph (2) or (3) shall be increased by an amount equal to[177]—

(i) such dollar amount, multiplied by

(ii) the percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period ending with August 2006 (or, in the case of a calendar year beginning with 2020, August 2018).[178]

(B) Rounding.—If any dollar amount after being increased under subparagraph (A) is not a multiple of $1,000, such dollar amount shall be rounded to the nearest multiple of $1,000."

[One Ping]

Well, I'll be darned! Thanks, HueyLD This place is amazing!

Apologies to FactualFran for doubting her.

One Ping asked:

"After reading it I realized I still had a question about the calculation of the CPI adjustment in FactualFran's answer (4) above. Is there language (e.g., a Federal Register reference) somewhere that actually states that the referenced logic for applying the inflation adjustment is what FactualFran stated in (4) above (i.e., the difference between the average Sept through Aug CPI-U values for the years 2018 and 2019)?"

https://www.ssa.gov/OP_Home/ssact/title18/1839.htm

"(5) Inflation adjustment.—

(A) In general.—In the case of any calendar year beginning after 2007 (other than 2018 and 2019), each dollar amount in paragraph (2) or (3) shall be increased by an amount equal to[177]—

(i) such dollar amount, multiplied by

(ii) the percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period ending with August 2006 (or, in the case of a calendar year beginning with 2020, August 2018).[178]

(B) Rounding.—If any dollar amount after being increased under subparagraph (A) is not a multiple of $1,000, such dollar amount shall be rounded to the nearest multiple of $1,000."

[Alan S.]

Since we are nearly halfway through the Sept 2018 to August, 2019 period and inflation is quite low due to declining oil prices, I would not expect much of an inflation adjust to the 2020 IRMAA tiers.

Anyone know if the "average" is that of that final 3 months of the period as in the case of SS COLA, or includes more than the last 3 months. Also, is chained CPI U used or just basic CPI U? Chained would cut roughly .2% off the result.

So you might look for maybe 171,000 - 174,000) to replace the 170,000 figure. If you exceeded 170,000 for 2018 MAGI by a small amount you are probably pulling for a burst of inflation this summer.

[Oicuryy]

If I keyed them right these are the CPI numbers so far.

Code: Select all

   month     CPI-U
        2017-2018  2018-2019
       9   246.819    252.439
      10   246.663    252.885
      11   246.669    252.038
      12   246.524    251.233
       1   247.867
       2   248.991
       3   249.554
       4   250.546
       5   251.588
       6   251.989
       7   252.006
       8   252.146

average   249.2802   252.1488
                        1.15%

And my estimates of the thresholds assuming 1.15% inflation.

Code: Select all

thresholds single
    2019      2020
   85000     86000
  107000    108000
  133500    135000
  160000    162000
  500000    506000

thresholds married
    2019      2020
  170000    172000
  214000    216000
  267000    270000
  320000    324000
  750000    759000

Ron

[One Ping]

Anyone know if the "average" is that of that final 3 months of the period as in the case of SS COLA, or includes more than the last 3 months. Also, is chained CPI U used or just basic CPI U? Chained would cut roughly .2% off the result.

So you might look for maybe 171,000 - 174,000) to replace the 170,000 figure. If you exceeded 170,000 for 2018 MAGI by a small amount you are probably pulling for a burst of inflation this summer.

Alan S. – The way I read the reference provided by HueyLD above, the change in CPI is calculated from the AVERAGE of the LAST 12 MONTHS CPI values, divided by the AVERAGE of the PREVIOUS 12 MONTHS CPI values.

Given the data from the BLS:

I calculate the current (end of December 2018) delta-CPI-U value as:

(avg CPI-U value for Jan 2018 through Dec 2018) / (avg CPI-U value for Jan 2017 through Dec 2017), or
(251.107) / (245.120) = 1.024, for a current delta-CPI-U value of 2.4%.

I looked at the history of the CPI-U from 2010 to the present and calculated the delta-CPI-U history using the above approach and created the following plot. It’s pretty busy, but I think it demonstrates that the average delta-CPI-U changes relatively slowly, making it possible to estimate the 2020 planning value with a reasonable probability. Since the current value is hovering around the dividing line between, $173K and $174K, for planning purposes I expect the 2020 Tier 1 IRMAA MAGI will likely be either $173,000 or $174,000.

Since the current value is hovering around the dividing line between, $173K and $174K, for planning purposes I expect the 2020 Tier 1 IRMAA MAGI will likely be either $173,000 or $174,000. I plan on using $173K unless things change over the next 4 to 6 months that would drive it more into the $174K range.

One Ping

ETA: It's obvously too late to do any income planning for the 2020 IRMAA MAGI limit, however looking at a 2% bump for 2021 might not seem too unreasonable. On top of the $173K for 2020, that would put 2021 IRMAA Tier I MAGI (2019 MAGI limit) at $176K.

[Rob54keep]

It looks like the base income threshold for MFJ for IRMMA for 2020 (thus 2018 MAGI) is $174k or less per Medicare website.
https://www.medicare.gov/your-medicare- ... t-a-glance

[Big Dog]

just for clarification of this rook:

MAGI for IRMAA purposes is Line 11 of the new tax form 1040 + the add-backs (such as tax-exempt interest). In other words, MAGI+exempt interest is net of the new standard or itemized deductions, correct?

(Only asking since 'MAGI' does not appear to be a tax form line item anymore.)

[FactualFran]

just for clarification of this rook:

MAGI for IRMAA purposes is Line 11 of the new tax form 1040 + the add-backs (such as tax-exempt interest). In other words, MAGI+exempt interest is net of the new standard or itemized deductions, correct?

(Only asking since 'MAGI' does not appear to be a tax form line item anymore.)

Standard or itemized are subtracted from the AGI as part of calculating the taxable income. According to the Medicare Premiums: Rules For Higher-Income Beneficiaries booklet: "Your MAGI is your total adjusted gross income and tax-exempt interest income." The taxable income, not the MAGI, is net of standard deductions or itemized deductions (and the Qualified Business Income deduction).

As far as I know, the Medicare MAGI has never been a line on an income tax return.

[Big Dog]

just for clarification of this rook:

MAGI for IRMAA purposes is Line 11 of the new tax form 1040 + the add-backs (such as tax-exempt interest). In other words, MAGI+exempt interest is net of the new standard or itemized deductions, correct?

(Only asking since 'MAGI' does not appear to be a tax form line item anymore.)

Standard or itemized are subtracted from the AGI as part of calculating the taxable income. According to the Medicare Premiums: Rules For Higher-Income Beneficiaries booklet: "Your MAGI is your total adjusted gross income and tax-exempt interest income." The taxable income, not the MAGI, is net of standard deductions or itemized deductions (and the Qualified Business Income deduction).

As far as I know, the Medicare MAGI has never been a line on an income tax return.

Thanks. I was just checking to make sure I'm not missing anything. (Had severance payments that put me close to IRMAA...)

btw: Yes, 'Medicare MAGI' was never part of a tax return, but Adjusted Gross Income (AGI) was; for example, line 37 on 2016 1040. (The bottom of 1040 page 1 was Total Income, line 22). Thus, to get to Modified Adjusted Gross Income, just add the tax-exempt stuff to AGI.

The new 1040 eliminated the AGI, so kinda hard to 'modify' something that no longer exists.

[PriceOfFreedom]

Doesn't line 7 of the 2018 1040 return show the AGI?

[pahkcah]

As has been discussed in other threads related to the Income-Related Monthly Adjustment Amount (IRMAA), if you had one major life changing event during 2018, you can request a reduction in your 2020 IRMAA. This is done by submitting Social Security Form SSA-44. If you had more than one life changing event during 2018, SS asks that you call 1-800-772-1213 (TTY 1-800-325-0778). Life changing events include:

Marriage
Divorce/Annulment
Death of Your Spouse
Work Stoppage
Work Reduction
Loss of Income-Producing Property
Loss of Pension Income
Employer Settlement Payment

The form contains fields that ask for: (1) The amount of your adjusted gross income (AGI, as used on line 37 of IRS form 1040), and (2) Tax-exempt income (as used on line 8b of IRS form 1040.

The company I worked for was sold in 2017, which resulted in a significant payout to all of the employees. As a result, I filed a reduction request for 2019 (which was approved). Today, my DW and I visited the local SS office and submitted SSA-44 forms to request IRMAA reductions for 2020. These requests were based on the fact that I retired in 2018.

packcah

[Big Dog]

Doesn't line 7 of the 2018 1040 return show the AGI?

uh, sorry my bad, I was looking at an electronic copy of my 18 return but it really was a work sheet, and not the printed copy.....

[mslaw]

It looks like the base income threshold for MFJ for IRMMA for 2020 (thus 2018 MAGI) is $174k or less per Medicare website.
https://www.medicare.gov/your-medicare- ... t-a-glance

Excellent information in this thread.
Is there a “safe” estimation of Medicare MAGI to use for 2020, that would keep a MFJ below the IRMMA first cliff in 2022?
I’m defining safe as absolutely not over the IRMMA level, except for legislative or administrative changes to the method of calculation.

[capran]

I was looking at that same question yesterday and found this. https://www.fool.com/retirement/2019/11 ... re-pa.aspx

If I am reading it right, for 2020 based on 2018 income the max MAGI is $174,000. But then I spent time trying to find that same info on an Gov site and all I found was a note about the 2020 indexing for inflation, but no specific numbers. Anybody found anything else? I've done the math in our situation and unless the tax rate went up more than 5% it doesn't seem worthwhile to convert more. (by the time you pay the part B and plan d IRMAA it would add $840 per person for B and D surcharges.) But if we keep our income at 173,000 (for a thousand dollar cushion), no IRMAA.

Sure would be nice if they would clearly post such changes before the year of to help people be able to plan.

[capran]

just for clarification of this rook:

MAGI for IRMAA purposes is Line 11 of the new tax form 1040 + the add-backs (such as tax-exempt interest). In other words, MAGI+exempt interest is net of the new standard or itemized deductions, correct?

(Only asking since 'MAGI' does not appear to be a tax form line item anymore.)

Standard or itemized are subtracted from the AGI as part of calculating the taxable income. According to the Medicare Premiums: Rules For Higher-Income Beneficiaries booklet: "Your MAGI is your total adjusted gross income and tax-exempt interest income." The taxable income, not the MAGI, is net of standard deductions or itemized deductions (and the Qualified Business Income deduction).

As far as I know, the Medicare MAGI has never been a line on an income tax return.

I also thought MAGI included the non taxable portion of your Social Security. Is that not so? If it is, then I could have converted another 3000+ into my Roth, as when I did my MAGI I added the full SS amount as well as tax free income.

[FactualFran]

I also thought MAGI included the non taxable portion of your Social Security. Is that not so? If it is, then I could have converted another 3000+ into my Roth, as when I did my MAGI I added the full SS amount as well as tax free income.

As far as I know, the Medicare MAGI for IRMAA purposes includes taxable portion of Social Security and excludes the non-taxable portion. Only the taxable portion is in the AGI. If someone has a link to a government document that indicates that the non-taxable portion is included, please post a link.

As to the question in another post: "Is there a “safe” estimation of Medicare MAGI to use for 2020, that would keep a MFJ below the IRMMA first cliff in 2022?", unless the law is changed, the absolutely safe Medicare MAGI for the first MFJ IRMAA threshold is $170,000.

A very likely safe Medicare MAGI is $174,000 (the first MFJ IRMAA threshold for 2020). For the threshold to be the next step down at $172,000, the average of the CPI-U for September 2020 to August 2021 would have be more than about 0.13% less that the average for September 2018 to August 2019. The average from September 2019 to April 2020 (the latest available when this was posted) was 1.34% more than the average for September 2018 to August 2019.

[capran]

It looks like the base income threshold for MFJ for IRMMA for 2020 (thus 2018 MAGI) is $174k or less per Medicare website.
https://www.medicare.gov/your-medicare- ... t-a-glance

That seems pretty clear from your link on the Medicare site that the threshold on 2018 income for the 2020 IRMAA is $174k, and it seems the consensus is that the computation for the IRMAA is your Adjusted Gross Income plus any tax exempt interest/tax exempt dividends, and that it does NOT include the non taxed portion of your Social Security. Shame on me for not checking this before I did my year end Roth conversion. I just figured (wrongly it seems) that since the tax exempt int/div is in the same column as the full amount of your social security, it was the that amount that would determine IRMAA. A $3,471 "mistake, which was the non taxable amount of SS I could have additionally converted to my Roth. Live and learn.

I sure appreciate the wisdom and experience of those who linger here.

[Alan S.]

Yes, but also note that if the deflationary trend in the CPI U that started in April continues through August, it is possible that the 2021 IRMAA threshold could drop to 172k, or even back to 170k if the deflation accelerates. Food inflation moderates the deflation trend right now, but if that reverses as well, there is a small chance of the 4k reduction.

Good thing that the measurement period is a 12 month average and not simply a 3 month average as used for CC COLAs. In any event, you might be happy that you did not make that ~3400 conversion.

[sawdust60]

-- consider the CARES act when working on your 2020 AGI:
Depending on your income level and whether you received the full stimulus payment, the 22% marginal tax rate may be 5% higher for some income above 150k MFJ.

I will do less Roth conversions in 2020, to capture the full tax credit by limiting 2020 AGI to 150k MFJ.(see prior post)

[capran]

-- consider the CARES act when working on your 2020 AGI:
Depending on your income level and whether you received the full stimulus payment, the 22% marginal tax rate may be 5% higher for some income above 150k MFJ.

I will do less Roth conversions in 2020, to capture the full tax credit by limiting 2020 AGI to 150k MFJ.(see prior post)

Sawdust, I'm still not totally up on the cares act. We did just receive our stimulus check Thursday. 2398.45 because our taxable income was 150,031 in 2018. We had been holding off filing our 2019 because our taxable income was up a little- 159,275. I was going to convert a little more IRA to Roth, just enough to keep my MAGI under 172k/173k ish . I'm not sure of the logistics of how it all plays out under the CARES act. I remember reading that we won't have to pay back in 2020 filing what we received this year, even if we are over the 150 in 2020, so please describe your thinking as to the advantages of keeping your 2020 income under 150k? Would very much appreciate your thinking on that.

[sawdust60]

-- consider the CARES act when working on your 2020 AGI:
Depending on your income level and whether you received the full stimulus payment, the 22% marginal tax rate may be 5% higher for some income above 150k MFJ.

I will do less Roth conversions in 2020, to capture the full tax credit by limiting 2020 AGI to 150k MFJ.(see prior post)

Sawdust, I'm still not totally up on the cares act. We did just receive our stimulus check Thursday. 2398.45 because our taxable income was 150,031 in 2018. We had been holding off filing our 2019 because our taxable income was up a little- 159,275. I was going to convert a little more IRA to Roth, just enough to keep my MAGI under 172k/173k ish . I'm not sure of the logistics of how it all plays out under the CARES act. I remember reading that we won't have to pay back in 2020 filing what we received this year, even if we are over the 150 in 2020, so please describe your thinking as to the advantages of keeping your 2020 income under 150k? Would very much appreciate your thinking on that.

In your case, it looks like the difference is $1.55. Since you appear to have received close to the full stimulus amount, you need not be concerned.

Note that the 150k is AGI. And you keep your advance stimulus payment.

I did a larger Roth conversion in 2018, so my advance payment was less. My 2020 marginal tax rate for AGI above $150k is 27%, until 2020 AGI exceeds 2018 AGI. At that point, it would be 22% until IRMAA.

[capran]

Sawdust, As I read your original response and follow up, I am still curious about the interaction between 2018 income and 2020. Are you suggesting that since you had a higher income in 2018, if you keep your 2020 income below the 150k threshold, you will get some additional tax credit/stimulus? But that since I got nearly the full stimulus from having just over 150k, my 2020 income if higher would not require me to pay back or otherwise pay more taxes in 2020?

[sawdust60]

Sawdust, As I read your original response and follow up, I am still curious about the interaction between 2018 income and 2020. Are you suggesting that since you had a higher income in 2018, if you keep your 2020 income below the 150k threshold, you will get some additional tax credit/stimulus? But that since I got nearly the full stimulus from having just over 150k, my 2020 income if higher would not require me to pay back or otherwise pay more taxes in 2020?

Yes. I thought that I was penalized when 2018 was used. Then I learned that it was an advance payment of a 2020 tax credit, so I will get the balance of the credit by keeping 2020 AGI at 150k or less.

There's also a provision that says you get to keep what you already received, should your credit be lower when calculated on 2020 AGI.

[capran]

Thanks for the confirmation. Makes sense on my end to go ahead and continue to convert as much as possible now, both to reduce future RMD's when they start which might trigger unwanted IRMAA as well as my belief that taxes will go up, so take advantage of the lower tax rates while I can.

[jhawktx]

Yes, but also note that if the deflationary trend in the CPI U that started in April continues through August, it is possible that the 2021 IRMAA threshold could drop to 172k, or even back to 170k if the deflation accelerates. Food inflation moderates the deflation trend right now, but if that reverses as well, there is a small chance of the 4k reduction.

Good thing that the measurement period is a 12 month average and not simply a 3 month average as used for CC COLAs. In any event, you might be happy that you did not make that ~3400 conversion.

With 8 out of 12 months already on the books, it will take significant deflation to reduce the threshold below the threshold of last year. By my calculation, the index would need to average more than 5% deflation over the next 4 monthly reporting periods compared to the current most recent reporting period. Though possible, I would consider the chances very unlikely.

[diy60]

Yes, but also note that if the deflationary trend in the CPI U that started in April continues through August, it is possible that the 2021 IRMAA threshold could drop to 172k, or even back to 170k if the deflation accelerates. Food inflation moderates the deflation trend right now, but if that reverses as well, there is a small chance of the 4k reduction.

Good thing that the measurement period is a 12 month average and not simply a 3 month average as used for CC COLAs. In any event, you might be happy that you did not make that ~3400 conversion.

With 8 out of 12 months already on the books, it will take significant deflation to reduce the threshold below the threshold of last year. By my calculation, the index would need to average more than 5% deflation over the next 4 monthly reporting periods compared to the current most recent reporting period. Though possible, I would consider the chances very unlikely.

Agree, the 6/10/2020 CPI-U number was 256.394. We now have 9 months of data with a 9 month average of 257.315. Comparing to the base index of 249.280 and using a quick hack of solver shows the remaining 3 months average can be at 242.772 or higher to maintain 87K/174K, and can be at 254.503 or higher to increase to 88K/176K.

[PriceOfFreedom]

With the release of the August CPI, I believe we can now compute the 2021 IRMAA income limits (as they will apply to 2019 income).

Recall last year's increase was 1.90%. This year's computation for an increase is:

(Average of Sep 2019-Aug 2020 CPI) / (Average of Sep 2018 CPI-Aug 2019 CPI) -1,

or 257.721 / 254.016 -1 = 1.46%.

Code: Select all

Base	2018	2019	2019 IRMAA	
	1.90%	1.46%	Single	MFJ
500,000	500,000	500,000	500,000	750,000
160,000	163,040	165,418	165,000	330,000
133,500	136,037	138,020	138,000	276,000
107,000	109,033	110,623	111,000	222,000
85,000	86,615	87,878	88,000	176,000

Does anyone disagree?

[diy60]

Does anyone disagree?

My monthly table and calcs match your results.

[capran]

With the release of the August CPI, I believe we can now compute the 2021 IRMAA income limits (as they will apply to 2019 income).

Recall last year's increase was 1.90%. This year's computation for an increase is:

(Average of Sep 2019-Aug 2020 CPI) / (Average of Sep 2018 CPI-Aug 2019 CPI) -1,

or 257.721 / 254.016 -1 = 1.46%.

Code: Select all

Base	2018	2019	2019 IRMAA	
	1.90%	1.46%	Single	MFJ
500,000	500,000	500,000	500,000	750,000
160,000	163,040	165,418	165,000	330,000
133,500	136,037	138,020	138,000	276,000
107,000	109,033	110,623	111,000	222,000
85,000	86,615	87,878	88,000	176,000

Does anyone disagree?

Am I understanding you correctly if my take away is that the IRMAA threshhold should not go below the 174000 mark since inflation was 1.46%? I thought I saw a figure of a 1.3% social security increase for 2021. getting ready to do my IRA conversion and want to avoid the IRMAA surcharge. with that in mind am thinking of keeping my MAGI at 171k. Is that a safe bet? chart seems to suggest could go to 176k for MFJ

[PriceOfFreedom]

Am I understanding you correctly if my take away is that the IRMAA threshhold should not go below the 174000 mark since inflation was 1.46%? I thought I saw a figure of a 1.3% social security increase for 2021. getting ready to do my IRA conversion and want to avoid the IRMAA surcharge. with that in mind am thinking of keeping my MAGI at 171k. Is that a safe bet? chart seems to suggest could go to 176k for MFJ

I assume you are talking about a 2020 tax year IRA conversion (that is, sometime prior to Dec. 31, 2020). The IRMAA thresholds for 2020 income will not be known before September, 2021, but since they are already $176,000 for 2019 MAGI, we would need to have considerable deflation for them to drop below $174,000 for 2020 MAGI, and even more drastic deflation for them to drop below $172,000 ( note they cannot be $171,000 since the MFJ threshold is twice the single rate, which itself is rounded to the nearest thousand dollars).

For the 2020 MAGI threshold threshold to drop below $174,000, we would require that the average CPI for Sep 2020 to Aug 2021 be -1.57% relative to the average for Sep 2019 to Aug 2020.

For the threshold to drop below $172,000, we would require the average CPI be -2.71% relative to the average for Sep 2019 to Aug 2020.

I suppose anything is possible if, say, COVID spins out of control and deflation really kicks in, so you will have to use your own comfort limit to set your 2020 MAGI,

[capran]

Am I understanding you correctly if my take away is that the IRMAA threshhold should not go below the 174000 mark since inflation was 1.46%? I thought I saw a figure of a 1.3% social security increase for 2021. getting ready to do my IRA conversion and want to avoid the IRMAA surcharge. with that in mind am thinking of keeping my MAGI at 171k. Is that a safe bet? chart seems to suggest could go to 176k for MFJ

I assume you are talking about a 2020 tax year IRA conversion (that is, sometime prior to Dec. 31, 2020). The IRMAA thresholds for 2020 income will not be known before September, 2021, but since they are already $176,000 for 2019 MAGI, we would need to have considerable deflation for them to drop below $174,000 for 2020 MAGI, and even more drastic deflation for them to drop below $172,000 ( note they cannot be $171,000 since the MFJ threshold is twice the single rate, which itself is rounded to the nearest thousand dollars).

For the 2020 MAGI threshold threshold to drop below $174,000, we would require that the average CPI for Sep 2020 to Aug 2021 be -1.57% relative to the average for Sep 2019 to Aug 2020.

For the threshold to drop below $172,000, we would require the average CPI be -2.71% relative to the average for Sep 2019 to Aug 2020.

I suppose anything is possible if, say, COVID spins out of control and deflation really kicks in, so you will have to use your own comfort limit to set your 2020 MAGI,

Thank you for that detailed reply. I may go ahead and knock it down to 170k just to be ultra conservative. a -2.71% given COVID issues doesn't seem outside the realm of possibility, and paying 2 peoples IRMAA surchrarges would be alot more than that!

[diy60]

For the 2020 MAGI threshold threshold to drop below $174,000, we would require that the average CPI for Sep 2020 to Aug 2021 be -1.57% relative to the average for Sep 2019 to Aug 2020.

For the threshold to drop below $172,000, we would require the average CPI be -2.71% relative to the average for Sep 2019 to Aug 2020.

I agree with your numbers, but given 3 months of data is already in the drop would need to be greater than you indicated relative to the remaining months of Dec '20 to Aug '21. Here is what I get.

Code: Select all

Known:					
Dec 2019 thru Aug 2020				258.49532	
Sept 2020			260.280		
Oct 2020			260.388		
Nov 2020			260.229		
Sept to Nov average				260.299	
					
Remaining unknown:					
Dec thru Aug, 2020 to 2021 average
			170000	243.652	-5.7%
			172000	247.562	-4.2%
			174000	251.473	-2.7%
			176000	255.383	-1.2%
			178000	259.293	0.3%

I may actually take some risk and shoot for $178K income this year, minus a little bit for any EOY dividend or cap gain surprises.