Underestimated IRMAA

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single2019
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Underestimated IRMAA

Post by single2019 »

After retirement, your income declined for a few years but you then began to take the Required Minimum Distributions. Therefore you knew your income will increase before. The RMDs will not be visible to the SSA for IRMAA calculations for up to two cycles. Are you required to notify SSA proactively to avoid risk of a penalty? (Is there a form for this?) Or is SSA content to catch up with you at a later year via their standard IRS IRMAA calculation process?

Is there a penalty associated with this situation?
prd1982
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Re: Underestimated IRRMA

Post by prd1982 »

No need to contact them. IRMAA is based on your tax return from 2 years ago. So it will be 2 years behind in charging you IRMAA. Also, if your income drops because of reduced passive income, IRMAA will continue for 2 years. If your income drops because you lose your job (and other reasons), you can inform the IRS and ask to have then drop IRMAA.
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single2019
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Re: Underestimated IRRMA

Post by single2019 »

prd1982 wrote: Fri Jun 04, 2021 2:28 pm No need to contact them. IRMAA is based on your tax return from 2 years ago. So it will be 2 years behind in charging you IRMAA. Also, if your income drops because of reduced passive income, IRMAA will continue for 2 years. If your income drops because you lose your job (and other reasons), you can inform the IRS and ask to have then drop IRMAA.
My question is related to increasing income
123
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Re: Underestimated IRRMA

Post by 123 »

Because of the 2 years delay in using income to calculate IRMMA SSA is able to calculate IRMMA liability in a timely manner and adjust Medicare premiums. Though potentially someone could file an amended return that might change things. I think that SSA would then just do an adjustment.
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Re: Underestimated IRRMA

Post by Hyperchicken »

IRRMA, IRMMA, IRMAA - 3 twin sisters.
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single2019
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Re: Underestimated IRRMA

Post by single2019 »

Hyperchicken wrote: Fri Jun 04, 2021 3:26 pm IRRMA, IRMMA, IRMAA - 3 twin sisters.
IRRMA and RMD are twins. First world problems
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Re: Underestimated IRRMA

Post by Stinky »

single2019 wrote: Fri Jun 04, 2021 2:37 pm
prd1982 wrote: Fri Jun 04, 2021 2:28 pm No need to contact them. IRMAA is based on your tax return from 2 years ago. So it will be 2 years behind in charging you IRMAA. Also, if your income drops because of reduced passive income, IRMAA will continue for 2 years. If your income drops because you lose your job (and other reasons), you can inform the IRS and ask to have then drop IRMAA.
My question is related to increasing income
Increasing income, decreasing income, flat income - it doesn’t make any difference.

IRMAA will adjust with a two year lag.
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HeelaMonster
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Re: Underestimated IRRMA

Post by HeelaMonster »

single2019 wrote: Fri Jun 04, 2021 2:21 pm After retirement, your income declined for a few years but you then began to take the Required Minimum Distributions. Therefore you knew your income will increase before. The RMDs will not be visible to the SSA for IRMAA calculations for up to two cycles. Are you required to notify SSA proactively to avoid risk of a penalty? (Is there a form for this?) Or is SSA content to catch up with you at a later year via their standard IRS IRMAA calculation process?

Is there a penalty associated with this situation?
To my understanding, the IRMAA surcharge *IS* the "penalty." You appear to be asking if there is an additional penalty on top of this penalty, if you knew in advance your income might be increasing (not only increasing, but exceeding a threshold)... but failed to give them a heads up? As others have noted, there is no mechanism or need for you to be notifying them. They will catch up with you, with a two year lag. Plus, your proactive notification may or may not come true; what counts is what actually happened.

BUT there may be opportunity for you to take advantage of that advance knowledge yourself, if there are things you could do to reduce the income and thereby reduce the IRMAA penalty (e.g., Roth conversions to reduce RMDs).
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Re: Underestimated IRRMA

Post by Eagle33 »

Your 1040 tax return is how you let SSA know indirectly through the IRS. That is why there is the 2-year delay. SSA checks your MAGI from 2 years prior and informs you at end of the year what next year's Medicare premiums are and if you owe payback of any portion the 75% Medicare subsidy that is reflected in the standard Medicare premium for next year. So 2021 premiums were based on income back in 2019 and 2022 premiums will based on your 2020 income.
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Re: Underestimated IRRMA

Post by TheDDC »

Good tax advice would help you here for sure. I don’t pay for an investment professional but I do with with a tax pro. Don’t pay IRMAA - it’s the stupid tax. Appeal it if possible. If not, its at least not the worst price of admission you have had most likely.

This happened to my loved one during one year when I was managed her money and slipped. Never again after I managed it better. Like I say it’s a stupid tax hopefully only one time oaks.

-TheDDC
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Re: Underestimated IRRMA

Post by celia »

single2019 wrote: Fri Jun 04, 2021 2:21 pm After retirement, your income declined for a few years but you then began to take the Required Minimum Distributions. Therefore you knew your income will increase before. The RMDs will not be visible to the SSA for IRMAA calculations for up to two cycles. Are you required to notify SSA proactively to avoid risk of a penalty? (Is there a form for this?) Or is SSA content to catch up with you at a later year via their standard IRS IRMAA calculation process?

Is there a penalty associated with this situation?
IRMAA **is** the “penalty” for having too much income. :o You don’t have to contact SS about this as the IRS and SS share the information they have for you and automatically adjust the amount of IRMAA withholding from your SS income 2 years later.

The reason there is a 2-year gap is the tax return for a given year is not due until October 15 of the following year (although the tax dollars are due in April). So just after October 15, the IRS will notify SS as to what your MAGI was. SS will then send a letter to the appropriate people who are subject to IRMAA charges the following year as to what the charges will be, then they are withheld from your SS for the following year.
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Re: Underestimated IRRMA

Post by calwatch »

I do wonder if they used the "deemed" return if you are late on your taxes. In case you didn't know, if you are really late on your taxes, after you get a couple of "we haven't received a return" letters, the IRS will tally up your 1099's and W-2's (with zero basis), apply the standard deduction and exemptions, and send you a nastier letter telling you to file or else this will be your return, with the accompanying bill. This is supposed to get you off your butt to file (and did in my case). Based on personal experience this usually happens around 18 months after the due date, so right before IRMAA is calculated.
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22twain
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Re: Underestimated IRRMA

Post by 22twain »

single2019 wrote: Fri Jun 04, 2021 3:31 pm
Hyperchicken wrote: Fri Jun 04, 2021 3:26 pm IRRMA, IRMMA, IRMAA - 3 twin sisters.
IRRMA and RMD are twins. First world problems
He's trying to remind you to check the proper spelling. IRMAA (two A's) = Income-Related Monthly Adjustment Amount.
It's "Roth", not "ROTH". Senator William Roth was a person, not an acronym.
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Re: Underestimated IRRMA

Post by Prokofiev »

TheDDC wrote: Fri Jun 04, 2021 10:55 pm Good tax advice would help you here for sure. I don’t pay for an investment professional but I do with with a tax pro. Don’t pay IRMAA - it’s the stupid tax. Appeal it if possible. If not, its at least not the worst price of admission you have had most likely.

This happened to my loved one during one year when I was managed her money and slipped. Never again after I managed it better. Like I say it’s a stupid tax hopefully only one time oaks.
Can you give me the name of the tax pro that can avoid IRMAA? I didn't think I was THAT stupid.
Would love to avoid it as it would save us a lot of money
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Re: Underestimated IRRMA

Post by LadyGeek »

22twain wrote: Sat Jun 05, 2021 5:28 am
single2019 wrote: Fri Jun 04, 2021 3:31 pm
Hyperchicken wrote: Fri Jun 04, 2021 3:26 pm IRRMA, IRMMA, IRMAA - 3 twin sisters.
IRRMA and RMD are twins. First world problems
He's trying to remind you to check the proper spelling. IRMAA (two A's) = Income-Related Monthly Adjustment Amount.
I fixed the spelling in the thread title.

IRMAA = Income Related Monthly Adjustment Amount, see: Part B costs | Medicare

(Thanks to the member who reported the post and explained what's wrong.
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Re: Underestimated IRRMA

Post by Stinky »

TheDDC wrote: Fri Jun 04, 2021 10:55 pm Don’t pay IRMAA - it’s the stupid tax.

[snip]

Like I say it’s a stupid tax hopefully only one time oaks.

-TheDDC
Not true.

IRMAA is a part of our "progressive" tax system. In most instances, taxes based on income have higher marginal tax rates for higher incomes. That's the way the IRMAA works.

Even if you are paying IRMAA surcharges, you're getting a good "actuarial" deal. At the highest IRMAA tier, your Part B premiums and IRMAA surcharge are funding only 85% of the Part B cost. And, for lower IRMAA tiers, the actuarial deal is better.

Yes, manage your affairs (if possible) to minimize IRMAA surcharges. Managing income to minimize taxes is entirely legal and appropriate. But IRMAA is not a "stupid tax".
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Re: Underestimated IRMAA

Post by OhioGozaimas »

It may help to remember “IRMAA” from: MY FRIEND IRMA(a)

https://en.wikipedia.org/wiki/My_Friend_Irma_(film)

(Marie Wilson played Irma.)
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Re: Underestimated IRRMA

Post by tibbitts »

Prokofiev wrote: Sat Jun 05, 2021 7:33 am
TheDDC wrote: Fri Jun 04, 2021 10:55 pm Good tax advice would help you here for sure. I don’t pay for an investment professional but I do with with a tax pro. Don’t pay IRMAA - it’s the stupid tax. Appeal it if possible. If not, its at least not the worst price of admission you have had most likely.

This happened to my loved one during one year when I was managed her money and slipped. Never again after I managed it better. Like I say it’s a stupid tax hopefully only one time oaks.
Can you give me the name of the tax pro that can avoid IRMAA? I didn't think I was THAT stupid.
Would love to avoid it as it would save us a lot of money
I don't think it's a question of avoiding IRMAA, but maybe where the "stupid" part comes in is due to IRMAA having cliffs, and often it's possible that if you aren't careful, you can fall off an IRMAA cliff by $1 and pay a much larger amount. Sometimes that extra $1 will be entirely discretionary and your fault - maybe doing $1 less in Roth conversions might save you, for example.

It's not like with income tax, where you can venture into a higher bracket by $1 and only pay the higher marginal rate on that $1.
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Re: Underestimated IRRMA

Post by TheDDC »

tibbitts wrote: Sat Jun 05, 2021 2:23 pm
Prokofiev wrote: Sat Jun 05, 2021 7:33 am
TheDDC wrote: Fri Jun 04, 2021 10:55 pm Good tax advice would help you here for sure. I don’t pay for an investment professional but I do with with a tax pro. Don’t pay IRMAA - it’s the stupid tax. Appeal it if possible. If not, its at least not the worst price of admission you have had most likely.

This happened to my loved one during one year when I was managed her money and slipped. Never again after I managed it better. Like I say it’s a stupid tax hopefully only one time oaks.
Can you give me the name of the tax pro that can avoid IRMAA? I didn't think I was THAT stupid.
Would love to avoid it as it would save us a lot of money
I don't think it's a question of avoiding IRMAA, but maybe where the "stupid" part comes in is due to IRMAA having cliffs, and often it's possible that if you aren't careful, you can fall off an IRMAA cliff by $1 and pay a much larger amount. Sometimes that extra $1 will be entirely discretionary and your fault - maybe doing $1 less in Roth conversions might save you, for example.

It's not like with income tax, where you can venture into a higher bracket by $1 and only pay the higher marginal rate on that $1.
Yes, what you said. Also, IRMAA refers to payment for Medicare services and not taxes, and I always like to pay as little for services (if at all), so I would seek to avoid IRMAA at all costs. Someone else may be different and enjoy paying more. When I say "stupid tax" it's something punitive that once paid would teach me to get myself into a situation where I would not pay it again, especially since it involves handing wealth over to the government health care-industrial complex.

As for OP's request for a tax pro, I would say you need to interview several individuals and explain your situation and look into their expertise to manage income in retirement. You really don't need to be spitting out the income from investments to trigger IRMAA. The "cliff" is quite large, and many/most get by without hitting the cliff at all.

-TheDDC
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Re: Underestimated IRRMA

Post by Wricha »

Stinky wrote: Sat Jun 05, 2021 10:14 am
TheDDC wrote: Fri Jun 04, 2021 10:55 pm Don’t pay IRMAA - it’s the stupid tax.

[snip]

Like I say it’s a stupid tax hopefully only one time oaks.

-TheDDC
Not true.

IRMAA is a part of our "progressive" tax system. In most instances, taxes based on income have higher marginal tax rates for higher incomes. That's the way the IRMAA works.

Even if you are paying IRMAA surcharges, you're getting a good "actuarial" deal. At the highest IRMAA tier, your Part B premiums and IRMAA surcharge are funding only 85% of the Part B cost. And, for lower IRMAA tiers, the actuarial deal is better.

Yes, manage your affairs (if possible) to minimize IRMAA surcharges. Managing income to minimize taxes is entirely legal and appropriate. But IRMAA is not a "stupid tax".
You are assuming that people with higher income use healthcare at the same rate as the average Medicare person. I believe the data supports people who have higher incomes use less healthcare dollars.
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Underestimated IRMAA

Post by celia »

TheDDC wrote: Sat Jun 05, 2021 5:00 pm As for OP's request for a tax pro, I would say you need to interview several individuals and explain your situation and look into their expertise to manage income in retirement. You really don't need to be spitting out the income from investments to trigger IRMAA. The "cliff" is quite large, and many/most get by without hitting the cliff at all.
Tax pros don’t have a secret “form” or way of avoiding IRMAA fees other than telling you to keep your MAGI under $88K for Single filers or $176K for MFJ. If your annual income is a million dollars a year, it’s likely not worth even trying to lower your MAGI, unless you itemize with lots of deductions. But if you are in the process of doing large Roth conversions to minimize RMDs at age 72, these are the numbers to aim for on your future tax returns.

IRMAA info
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Re: Underestimated IRRMA

Post by tibbitts »

TheDDC wrote: Sat Jun 05, 2021 5:00 pm
tibbitts wrote: Sat Jun 05, 2021 2:23 pm
Prokofiev wrote: Sat Jun 05, 2021 7:33 am
TheDDC wrote: Fri Jun 04, 2021 10:55 pm Good tax advice would help you here for sure. I don’t pay for an investment professional but I do with with a tax pro. Don’t pay IRMAA - it’s the stupid tax. Appeal it if possible. If not, its at least not the worst price of admission you have had most likely.

This happened to my loved one during one year when I was managed her money and slipped. Never again after I managed it better. Like I say it’s a stupid tax hopefully only one time oaks.
Can you give me the name of the tax pro that can avoid IRMAA? I didn't think I was THAT stupid.
Would love to avoid it as it would save us a lot of money
I don't think it's a question of avoiding IRMAA, but maybe where the "stupid" part comes in is due to IRMAA having cliffs, and often it's possible that if you aren't careful, you can fall off an IRMAA cliff by $1 and pay a much larger amount. Sometimes that extra $1 will be entirely discretionary and your fault - maybe doing $1 less in Roth conversions might save you, for example.

It's not like with income tax, where you can venture into a higher bracket by $1 and only pay the higher marginal rate on that $1.
Yes, what you said. Also, IRMAA refers to payment for Medicare services and not taxes, and I always like to pay as little for services (if at all), so I would seek to avoid IRMAA at all costs. Someone else may be different and enjoy paying more. When I say "stupid tax" it's something punitive that once paid would teach me to get myself into a situation where I would not pay it again, especially since it involves handing wealth over to the government health care-industrial complex.

As for OP's request for a tax pro, I would say you need to interview several individuals and explain your situation and look into their expertise to manage income in retirement. You really don't need to be spitting out the income from investments to trigger IRMAA. The "cliff" is quite large, and many/most get by without hitting the cliff at all.

-TheDDC
This year will be my first with IRMAA in the picture (to be paid in two years), but I'm intentionally triggering a higher IRMAA because:

1. it should only affect me for a few months (after my birthday);
2. by doing more Roth conversions in this one year vs. spreading them out, it should help me avoid again triggering IRMAA in the future.

Of course there are income tax bracket implications that need to be managed as well, but as with some other fees/taxes, sometimes it pays to lump triggering factors into a single year (especially if it's not a full calendar year, but even otherwise.) So given the cliff, it can be better to fall off the cliff for one year (or less) than to fall off (even to possibly a lesser extent) year after year.
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single2019
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Re: Underestimated IRRMA

Post by single2019 »

22twain wrote: Sat Jun 05, 2021 5:28 am
single2019 wrote: Fri Jun 04, 2021 3:31 pm
Hyperchicken wrote: Fri Jun 04, 2021 3:26 pm IRRMA, IRMMA, IRMAA - 3 twin sisters.
IRRMA and RMD are twins. First world problems
He's trying to remind you to check the proper spelling. IRMAA (two A's) = Income-Related Monthly Adjustment Amount.
So embarrassed. New contributor. Appreciate you all
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Re: Underestimated IRRMA

Post by TheDDC »

Wricha wrote: Sat Jun 05, 2021 8:54 pm You are assuming that people with higher income use healthcare at the same rate as the average Medicare person. I believe the data supports people who have higher incomes use less healthcare dollars.
The only thing I was assuming was that most would rather not pay more for funding medical insurance (which Medicare falls under). Hence why it makes sense to keep income under the IRMAA limits.
celia wrote: Sat Jun 05, 2021 9:32 pm Tax pros don’t have a secret “form” or way of avoiding IRMAA fees other than telling you to keep your MAGI under $88K for Single filers or $176K for MFJ. If your annual income is a million dollars a year, it’s likely not worth even trying to lower your MAGI, unless you itemize with lots of deductions. But if you are in the process of doing large Roth conversions to minimize RMDs at age 72, these are the numbers to aim for on your future tax returns.

IRMAA info
Yes, but I was not sure if OP was doing his own taxes or was moving in the direction of looking at getting tax advice to look at better ways of taking retirement income. Keeping it under 176K for a married couple isn't rocket science of course.

-TheDDC
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Re: Underestimated IRRMA

Post by Stinky »

TheDDC wrote: Sat Jun 05, 2021 10:56 pm I was not sure if OP was doing his own taxes or was moving in the direction of looking at getting tax advice to look at better ways of taking retirement income. Keeping it under 176K for a married couple isn't rocket science of course.

-TheDDC
Yes, there are folks who can manage their retirement income to be below $176k so that they will not pay IRMAA. For them, proper planning of IRA conversions to stay below the $176k threshold can be useful.

There are other folks who have pension and Social Security income, significant taxable accounts that generate interest and dividend income, large RMDs, and/or deferred income payments from their prior employers. The combined effect of these income items can be to push them over the $176k income threshold in many or all years of retirement. Those folks will pay IRMAA, sometimes for many years. The challenge for them is to minimize the IRMAA hit as much as possible, balanced against other financial imperatives.

I'm sure that there are folks who blunder into paying IRMAA that was unnecessary. But I wouldn't say that all folks who pay IRMAA aren't doing proper planning. Nor would I say that IRMAA is a "stupid tax".
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Re: Underestimated IRMAA

Post by andypanda »

"When I say "stupid tax""

You're either being rude or glib or something or you never had much money and just don't know how it works.

Meanwhile, my experience has been that SSA will catch up with your income when it changes, even if you get married and appeal the IRMAA and get it wrong. :)
When I got married a few months before the end of 2018 I appealed my IRMAA and had to estimate our income so they could use the married table to calculate my IRMAA. I got a nice reduction, and the refunds deposited in two weeks, in IRMAA even with her income, my pension, SSA, CDs, taxable portfolio, etc. Call it two steps down.
A year or so later SSA heard from the IRS that, due to an extra $90k or so of LT capital gains I hadn't been able to predict during the appeal, our income had been way up. The result was that they sent me a notice of what I owed for underpayment and then took what I owed out of my SSA retirement deposit one month. It was a large chunk of it, but that's the way it goes. Call that one step up for a partial year.

No penalties or interest or nasty letters or anything.
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Re: Underestimated IRMAA

Post by Leesbro63 »

I'm only 61, but wondering how IRMAA works for high income folks at age 65. Will you be subjected to IRMAA from the get-go (based on age 63 income), or will it take until age 67 for Medicare to realize that you are subject to IRMAA, based on age 65 income?
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Re: Underestimated IRMAA

Post by dodecahedron »

celia wrote: Sat Jun 05, 2021 9:32 pm If your annual income is a million dollars a year, it’s likely not worth even trying to lower your MAGI, unless you itemize with lots of deductions.
Itemizing deductions has zero effect on AGI or MAGI or IRMAA. Itemizing deductions can reduce taxable income but does nothing at all to change your AGI, MAGI, or IRMAA.
celia wrote: Sat Jun 05, 2021 9:32 pmBut if you are in the process of doing large Roth conversions to minimize RMDs at age 72, these are the numbers to aim for on your future tax returns.
I would say that the three biggest levers for managing MAGI for IRMAA (and other purposes) are Roth conversions as mentioned by Celia above, the timing of realizing capital gains in your taxable assets, and the use of Qualified Charitable Donations (QCDs). Note that QCDs are only available once you are at least 70.5.
Last edited by dodecahedron on Sun Jun 06, 2021 7:17 am, edited 1 time in total.
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Re: Underestimated IRMAA

Post by dodecahedron »

Leesbro63 wrote: Sun Jun 06, 2021 6:54 am I'm only 61, but wondering how IRMAA works for high income folks at age 65. Will you be subjected to IRMAA from the get-go (based on age 63 income), or will it take until age 67 for Medicare to realize that you are subject to IRMAA, based on age 65 income?
As soon as you go on Medicare (at any age, for any reason--which could even be prior to age 65, if you qualify based on disability or kidney disease, or could be after age 65 if you remain covered by an employer policy after that age), your premiums for Medicare Parts B and D will be calculated based on your MAGI from two years earlier.

You can apply for an IRMAA reconsideration if certain life changes (e.g., subsequent retirement, widowhood, etc.) have happened to make that two-year-earlier income unrepresentative of your current circumstances.
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Re: Underestimated IRMAA

Post by andypanda »

I was initially surprised when I realized that I was being billed for the IRMAA charge for Part D even though I don't buy Part D from Medicare. Oh well.
I have a Medicare-coordinating Anthem plan that includes prescriptions, dental, etc with premiums deducted from my monthly pension check.
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Re: Underestimated IRRMA

Post by TheDDC »

Stinky wrote: Sun Jun 06, 2021 5:57 am I'm sure that there are folks who blunder into paying IRMAA that was unnecessary. But I wouldn't say that all folks who pay IRMAA aren't doing proper planning. Nor would I say that IRMAA is a "stupid tax".
Well, there is the sudden realization that they "should have" probably invested more in Roth options or done some conversions before being at that that point in life. Too late. However, we did traditional 403(b)/IRAs for a few years before I got Boglew0ke, and my loved one had a "financial advisor/salesman" who never even brought up the need to do Roth conversions before taking RMDs! Hopefully I can do enough conversions and keep income under $150k (another "stupid tax" inflection point of sorts if you have dependents with the new child tax credit changes) in my younger years.

No reason to push income past the IRMAA cliff in retirement, really. It is definitely a "stupid tax". And by "stupid" I don't mean to say that someone is stupid if it happens to them. It's just one of those "head smack" moments like a kid touching a stove. It generally won't happen again. Once done, lesson learned. Don't pay more.

-TheDDC
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Re: Underestimated IRMAA

Post by Kompass »

I have a question, my mother had very high income in 2019 and 2020, she is currently in hospice and is unlikely to be around long enough to pay all of the IRMAA fees. What happens if a person dies before completing the payment and is no longer using medicare? I am unclear if this is a fee or a tax, will it be treated as a tax to be billed to her estate?
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Re: Underestimated IRMAA

Post by Stinky »

Kompass wrote: Sun Jun 06, 2021 8:15 pm I have a question, my mother had very high income in 2019 and 2020, she is currently in hospice and is unlikely to be around long enough to pay all of the IRMAA fees. What happens if a person dies before completing the payment and is no longer using medicare? I am unclear if this is a fee or a tax, will it be treated as a tax to be billed to her estate?
IRMAA is an adjustment to the monthly Medicare premium.

Medicare premiums cease at death. I strongly suspect that the IRMAA surcharge would also. (But I couldn’t find absolute confirmation through a quick google search.)
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HueyLD
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Re: Underestimated IRMAA

Post by HueyLD »

Stinky wrote: Sun Jun 06, 2021 8:40 pm
Kompass wrote: Sun Jun 06, 2021 8:15 pm I have a question, my mother had very high income in 2019 and 2020, she is currently in hospice and is unlikely to be around long enough to pay all of the IRMAA fees. What happens if a person dies before completing the payment and is no longer using medicare? I am unclear if this is a fee or a tax, will it be treated as a tax to be billed to her estate?
IRMAA is an adjustment to the monthly Medicare premium.

Medicare premiums cease at death. I strongly suspect that the IRMAA surcharge would also. (But I couldn’t find absolute confirmation through a quick google search.)
Yes, it is expected that the premium paid in advance can be refunded after death and it should be pro rated. And no more Medicare premium is due after death.

See this official link https://secure.ssa.gov/apps10/poms.nsf/lnx/0601001325
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Re: Underestimated IRRMA

Post by LilyFleur »

TheDDC wrote: Sun Jun 06, 2021 3:35 pm
Stinky wrote: Sun Jun 06, 2021 5:57 am I'm sure that there are folks who blunder into paying IRMAA that was unnecessary. But I wouldn't say that all folks who pay IRMAA aren't doing proper planning. Nor would I say that IRMAA is a "stupid tax".
Well, there is the sudden realization that they "should have" probably invested more in Roth options or done some conversions before being at that that point in life. Too late. However, we did traditional 403(b)/IRAs for a few years before I got Boglew0ke, and my loved one had a "financial advisor/salesman" who never even brought up the need to do Roth conversions before taking RMDs! Hopefully I can do enough conversions and keep income under $150k (another "stupid tax" inflection point of sorts if you have dependents with the new child tax credit changes) in my younger years.

No reason to push income past the IRMAA cliff in retirement, really. It is definitely a "stupid tax". And by "stupid" I don't mean to say that someone is stupid if it happens to them. It's just one of those "head smack" moments like a kid touching a stove. It generally won't happen again. Once done, lesson learned. Don't pay more.

-TheDDC
Would you put yourself into the highest tax bracket doing Roth conversions in your early 60s in order to prevent IRMAA? Or are some folks "stupid" for having large 401ks (possibly increasing in value because of market growth during their highest income-earning years) along with early pensions and good-sized brokerage accounts, or any combo of those things? Hard to imagine, but some people are single and have stupidly high single tax brackets. And most folks end up single at some point, whether by divorce or being widowed (unless they are married and are the one who dies first, and presumably they care about their loved one's tax burden and have planned ahead for it).
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Re: Underestimated IRRMA

Post by Stinky »

TheDDC wrote: Sun Jun 06, 2021 3:35 pm
No reason to push income past the IRMAA cliff in retirement, really. It is definitely a "stupid tax". And by "stupid" I don't mean to say that someone is stupid if it happens to them. It's just one of those "head smack" moments like a kid touching a stove. It generally won't happen again. Once done, lesson learned. Don't pay more.

-TheDDC
I know a person who will likely be paying IRMAA for the rest of her life, now that RMDs have begun.

She was a lifetime high-earner, and accumulated a very nice nest egg in her traditional 401(k) by investing in her employer's stock that did fantastically well. She directed new contributions to her 401(k) to the Roth option the moment one was made available to her. But the traditional 401(k), now converted to an IRA, is large enough that she will hit the IRMAA threshold, every year for the rest of her life, from RMDs alone.

Should she have paid 40+% in income taxes on the very large Roth conversions she would need to have made to avoid paying IRMAA during her RMD years?

In her case, paying 40+% in income taxes would truly be a "stupid tax". She will pay much less in total tax by accepting the IRMAA penalty during her RMD years.

You continue to assert that paying IRMAA is a "stupid tax". I disagree; for some folks, the total tax/premium burden is less if some IRMAA is paid. Individual circumstances trump your blanket statements.

As they say on this Forum, YMMV. This is definitely one of those cases.

It appears that we need to agree to disagree.

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Re: Underestimated IRMAA

Post by HueyLD »

Stinky commented: “ You continue to assert that paying IRMAA is a "stupid tax". I disagree; for some folks, the total tax/premium burden is less if some IRMAA is paid. Individual circumstances trump your blanket statements.”

What a wise statement. I think there may be an envy factor involved because being subject to IRMAA means that someone has enough income to be considered wealthy. It is a first world problem. FWIW, paying Medicare premiums (IRMAA or not) is “optional” and those who object to paying IRMAA can always voluntarily disenroll from Medicare and pay out of pocket. Well, maybe not because one serious illness can land such unfortunate souls into total financial ruins.
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Re: Underestimated IRMAA

Post by Eagle33 »

Isn't paying IRMAA analogous to receiving less subsidy on ACA if income gets too high?
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Re: Underestimated IRMAA

Post by HueyLD »

Eagle33 wrote: Mon Jun 07, 2021 10:18 am Isn't paying IRMAA analogous to receiving less subsidy on ACA if income gets too high?
Yes.
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Re: Underestimated IRRMA

Post by BigJohn »

TheDDC wrote: Sun Jun 06, 2021 3:35 pm
Stinky wrote: Sun Jun 06, 2021 5:57 am I'm sure that there are folks who blunder into paying IRMAA that was unnecessary. But I wouldn't say that all folks who pay IRMAA aren't doing proper planning. Nor would I say that IRMAA is a "stupid tax".
Well, there is the sudden realization that they "should have" probably invested more in Roth options or done some conversions before being at that that point in life. Too late. However, we did traditional 403(b)/IRAs for a few years before I got Boglew0ke, and my loved one had a "financial advisor/salesman" who never even brought up the need to do Roth conversions before taking RMDs! Hopefully I can do enough conversions and keep income under $150k (another "stupid tax" inflection point of sorts if you have dependents with the new child tax credit changes) in my younger years.

No reason to push income past the IRMAA cliff in retirement, really. It is definitely a "stupid tax". And by "stupid" I don't mean to say that someone is stupid if it happens to them. It's just one of those "head smack" moments like a kid touching a stove. It generally won't happen again. Once done, lesson learned. Don't pay more.

-TheDDC
This is a very broad generalization that is totally wrong in some cases. When I did my Roth conversion planning I fully understood IRMAA. I looked at doing very small conversion and paying no IRMAA vs larger conversions that triggered IRMAA. The results were very clear that paying some IRMAA premium now before RMDs start is a net lower cost than the alternative.
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Re: Underestimated IRMAA

Post by celia »

Eagle33 wrote: Mon Jun 07, 2021 10:18 am Isn't paying IRMAA analogous to receiving less subsidy on ACA if income gets too high?
It's not similar to me since if you weren't using the ACA (eg., had employer insurance), you would be paying the higher tax anyway.

I would say it's more like paying higher car registration fees because you bought a more expensive car. You apparently have the money for the expensive car, so you get to pay more to maintain the same roads everyone uses.
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When does paying IRMAA make sense?

Post by celia »

I'm changing the focus a little by thinking while I type about when paying IRMAA makes sense and you know about it far in advance. Here are some cases:

1. You have HUGE income coming in every year, such from a wealthy family trust.

2. You plan to give all your tax-deferred accounts to charity, so why do any Roth conversions and pay taxes that you don't need to pay (other than on RMDs that are more than the maximum QCD). (compliments of Boglehead named marcopolo, for a special case that I still need to confirm)

3. You are a well-organized, plan-ahead Boglehead who converted all her tax-deferred accounts before age 62 but ended up inheriting $10M in tax-deferred at age 63. You're too young for QCDs and even when you become eligible, you can only QCD $100,000 a year.

4. You have always been in a very low tax bracket and couldn't afford to save in retirement accounts, but you later married someone who was subject to high RMDs. Even though you don't have RMDs, your joint income is high.

5. You're a politician who needs to release your yearly tax return and "prove" you are willing to pay more taxes. (But then, you might not file for SS and Medicare either, since those are using "government benefits" that also make you look old.)
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Re: Underestimated IRRMA

Post by RetiredAL »

BigJohn wrote: Mon Jun 07, 2021 6:06 pm
TheDDC wrote: Sun Jun 06, 2021 3:35 pm
Stinky wrote: Sun Jun 06, 2021 5:57 am I'm sure that there are folks who blunder into paying IRMAA that was unnecessary. But I wouldn't say that all folks who pay IRMAA aren't doing proper planning. Nor would I say that IRMAA is a "stupid tax".
Well, there is the sudden realization that they "should have" probably invested more in Roth options or done some conversions before being at that that point in life. Too late. However, we did traditional 403(b)/IRAs for a few years before I got Boglew0ke, and my loved one had a "financial advisor/salesman" who never even brought up the need to do Roth conversions before taking RMDs! Hopefully I can do enough conversions and keep income under $150k (another "stupid tax" inflection point of sorts if you have dependents with the new child tax credit changes) in my younger years.

No reason to push income past the IRMAA cliff in retirement, really. It is definitely a "stupid tax". And by "stupid" I don't mean to say that someone is stupid if it happens to them. It's just one of those "head smack" moments like a kid touching a stove. It generally won't happen again. Once done, lesson learned. Don't pay more.

-TheDDC
This is a very broad generalization that is totally wrong in some cases. When I did my Roth conversion planning I fully understood IRMAA. I looked at doing very small conversion and paying no IRMAA vs larger conversions that triggered IRMAA. The results were very clear that paying some IRMAA premium now before RMDs start is a net lower cost than the alternative.
BigJohn - What you did was being smart. Being IRMAA stupid is being $5K into the next IRMAA bracket forever when a onetime (one year) conversion to the top of that IRMAA bracket gets you out of that higher IRMAA bracket forever.

Many people get caught in the IRMAA squeeze when their spouse dies. My Dad is one of them. His retirement + SS + dividends puts him above IRMAA-2 ($111K), so the removing his RMD $ becomes immaterial. He get to pay a significant stealth tax.
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Re: Underestimated IRRMA

Post by BigJohn »

RetiredAL wrote: Mon Jun 07, 2021 7:53 pm BigJohn - What you did was being smart. Being IRMAA stupid is being $5K into the next IRMAA bracket forever when a onetime (one year) conversion to the top of that IRMAA bracket gets you out of that higher IRMAA bracket forever.

Many people get caught in the IRMAA squeeze when their spouse dies. My Dad is one of them. His retirement + SS + dividends puts him above IRMAA-2 ($111K), so the removing his RMD $ becomes immaterial. He get to pay a significant stealth tax.
Thanks, I agree that example would be poor planning. And yes, filing single makes it even more difficult to avoid IRMAA. I became a widow about 4 years ago just after I retired. However, I saw it coming due to terminal illness so all my Roth conversion calculations were done with single status. Not sure I could have economically avoided IRMAA altogether even with MFJ status but it would have been a lot closer call.

It certainly is a stealth tax but since I turn 65 in August I've been doing my due diligence on Medicare choices. Here's some additional personal perspective on the impact of paying IRMAA. Initially the IRMAA premium was really making me upset when compared with the premiums I was paying in my mega-corp retiree plan. Part of my due diligence was to look at total cost in both my current good health state as well as with some future higher cost medical condition. When healthy, the IRMAA premium is all incremental additional cost. However, due to higher deductibles and co-pays, as you age and consume more medical services, that gap closes fairly substantially. When I looked at getting near the max out-of-pocket limit on my current plan, about 75 - 80% of that increment disappears.

Now, that doesn't mean I enjoy paying IRMAA and I certainly don't want to consume more medical services any time soon. However, it did make me feel a lot more accepting of this not being a terrible deal even with the IRMAA payments. Plus, it's the only game in town :beer
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Re: Underestimated IRMAA

Post by 2pedals »

Sometimes life happens in a good way and in such a way you are required to pay more in taxes and fees :shock:. It can be smart to estimate your MAGI before the tax year is over to see if you are going over the next income cliff. Maybe you can use QCDs to help you lower your income before you reach the cliff. If you can't, no problem, just pay the premiums and enjoy your fine retirement 🏝️
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Re: Underestimated IRMAA

Post by Leesbro63 »

I've asked this question before but am wondering about an update: What is the TOTAL monthly cost for very high income (max IRMAA) Medicare recipients for the best health coverage? Meaning traditional Medicare (NOT Medicare advantage) with a good supplement and Part D. I think the last time I asked this a few years ago the answer was about $800 per month per recipient. I'm guessing that it's $1000/month now. ??
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Re: Underestimated IRMAA

Post by SuzBanyan »

The cost of Medicare Supplement policies is aged based; expect higher premiums as you age.

For my husband, age 71, his F plan (non deductible) and Part D prescription coverage, plus a theoretical maximum IRMAA would be under $800/ month. In contrast, my ACA HDHP would be about $950/month, and would come with a $7000 deductible.
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Re: Underestimated IRMAA

Post by Leesbro63 »

SuzBanyan wrote: Thu Jun 10, 2021 8:11 am The cost of Medicare Supplement policies is aged based; expect higher premiums as you age.

For my husband, age 71, his F plan (non deductible) and Part D prescription coverage, plus a theoretical maximum IRMAA would be under $800/ month. In contrast, my ACA HDHP would be about $950/month, and would come with a $7000 deductible.
This is useful information. Thank you, SuzBanyan.
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Re: Underestimated IRMAA

Post by FactualFran »

The price of a Medigap policies is not necessarily age based. According to the Costs of Medigap policies web page at medicare.gov, the three ways that Medigap policies can be priced are Community rated (also called no age rated), Issue age rated (also called entry age rated), and Attained age rated. What type of pricing that is used depends on the insurance company and state regulations.
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Re: Underestimated IRMAA

Post by andypanda »

"I know a person who will likely be paying IRMAA for the rest of her life, now that RMDs have begun."

I've been paying IRMAA for 4 years and I haven't even started my three RMDs. My wife will start hers 5 years after I do.

If I'd known about IRMAA I wouldn't have started buying stocks in a taxable account in the late '60s . :oops: Poor planning. I should have spent it. :mrgreen:
I wish I'd been more successful and was now in the highest IRMAA bracket. :moneybag :moneybag :moneybag
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