2024 Income Planning & 2026 IRMAA brackets

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LilyFleur
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2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

I'm retired and looking at needing a significantly higher income next year than usual.
I'm trying to plan responsibly for my taxes, and I noticed that I am on the edge of an IRMAA cliff.
(This is a question for Bogleheads who are well-versed in IRMAA strategy.)
My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
The IRMAA tier that I'd like to stay in is the $129,000 to $161,000 tier (that is the tier for 2024).
Would anyone care to estimate what that tier might actually be in 2026?
Should I adjust my t-IRA withdrawal for 2024 downward by perhaps $5,000, just to be on the safe side?
Thanks for your help!
Last edited by LilyFleur on Mon Dec 04, 2023 1:00 pm, edited 1 time in total.
BarbK
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by BarbK »

The finance buff has estimated the 1.4 Irmaa bracket for singles to be 132K-$165K with zero% inflation for 2025; and he has estimated the 2025 bracket to be <167K for 3% inflation.

To me it looks like you are safely in that bracket.
prd1982
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by prd1982 »

Also remember that at least 15% of Social Security is not part og MAGI
CuriousGeorgeTx
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by CuriousGeorgeTx »

LilyFleur wrote: Mon Dec 04, 2023 12:28 pm I'm retired and looking at needing a significantly higher income next year than usual.
I'm trying to plan responsibly for my taxes, and I noticed that I am on the edge of an IRMAA cliff.
(This is a question for Bogleheads who are well-versed in IRMAA strategy.)
My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
The IRMAA tier that I'd like to stay in is the $129,000 to $161,000 tier (that is the tier for 2024).
Would anyone care to estimate what that tier might actually be in 2026?
Should I adjust my t-IRA withdrawal downward by perhaps $5,000, just to be on the safe side?
Thanks for your help!
I follow Harry Sit’s forecasts at https://thefinancebuff.com/medicare-irm ... a-brackets

He hasn’t started on 2026 because he only uses the actual monthly inflators in the formula. You can see from his early 2025 estimates that you have some more headroom. If you can defer the decision into 2024, the 2025 numbers will become more clear, giving you some insight into 2026.
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LilyFleur
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

BarbK wrote: Mon Dec 04, 2023 12:40 pm The finance buff has estimated the 1.4 Irmaa bracket for singles to be 132K-$165K with zero% inflation for 2025; and he has estimated the 2025 bracket to be <167K for 3% inflation.

To me it looks like you are safely in that bracket.
Thank you, BarbK.
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LilyFleur
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

prd1982 wrote: Mon Dec 04, 2023 12:44 pm Also remember that at least 15% of Social Security is not part og MAGI
Good to remember. Thank you!
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LilyFleur
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

CuriousGeorgeTx wrote: Mon Dec 04, 2023 12:48 pm
LilyFleur wrote: Mon Dec 04, 2023 12:28 pm I'm retired and looking at needing a significantly higher income next year than usual.
I'm trying to plan responsibly for my taxes, and I noticed that I am on the edge of an IRMAA cliff.
(This is a question for Bogleheads who are well-versed in IRMAA strategy.)
My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
The IRMAA tier that I'd like to stay in is the $129,000 to $161,000 tier (that is the tier for 2024).
Would anyone care to estimate what that tier might actually be in 2026?
Should I adjust my t-IRA withdrawal downward by perhaps $5,000, just to be on the safe side?
Thanks for your help!
I follow Harry Sit’s forecasts at https://thefinancebuff.com/medicare-irm ... a-brackets

He hasn’t started on 2026 because he only uses the actual monthly inflators in the formula. You can see from his early 2025 estimates that you have some more headroom. If you can defer the decision into 2024, the 2025 numbers will become more clear, giving you some insight into 2026.
I could wait until January, would that help?
My frugal self would be VERY upset at tipping myself into a more expensive IRMAA tier by a small amount of income!
Or, I guess I could take two withdrawals and double-check the finance buff's estimate before doing a second withdrawal in July.
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FiveK
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by FiveK »

LilyFleur wrote: Mon Dec 04, 2023 12:28 pm My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
Consider using the approach in Roth Conversion with Social Security and Medicare IRMAA. Appears the assumptions currently in the toolbox spreadsheet described there are the 3% numbers for 2023 income used for 2025 IRMAA, and the same increase from 2023 to 2024 as from 2022 to 2023. Those are assumptions....
FactualFran
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by FactualFran »

Here is a table of the Medicare MAGI thresholds for premiums during 2025 that corresponds to the $161,000 threshold for premiums during 2024 and what the difference in the average CPI-U from November 2023 through August 2024 will need to be relative to the CPI-U for October 2023 of 307.671.

Code: Select all

$161,000  -3.11%
$162,000  -2.39%
$163,000  -1.66%
$164,000  -0.93%
$165,000  -0.20%
$166,000   0.53%
$167,000   1.26%
$168,000   1.98%
$169,000   2.71%
If the difference turns out to be at least 1.26% but less than 1.98%, the threshold will be $167,000.
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Chip Munk
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by Chip Munk »

BarbK wrote: Mon Dec 04, 2023 12:40 pm The finance buff has estimated the 1.4 Irmaa bracket for singles to be 132K-$165K with zero% inflation for 2025; and he has estimated the 2025 bracket to be <167K for 3% inflation.

To me it looks like you are safely in that bracket.
Isn't that the 2.0x Standard row of TFB's table?

The row labeled "1.4x Standard" shows the MAGI limit for a single filer as <= $132,000.
The row labeled "2.0x Standard" lists the MAGI limit for a single filer as <= $165,000.
Tracker968
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by Tracker968 »

A little bit of topic but, if this is my last year of working it doesn't matter if I go slightly above an IRMAA cliff because I can tell SSA that I quit working and my current income is lower. Is that right? Or will they still base my 2025 IRMAA on my 2023 tax return?
capran
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by capran »

LilyFleur wrote: Mon Dec 04, 2023 1:02 pm
prd1982 wrote: Mon Dec 04, 2023 12:44 pm Also remember that at least 15% of Social Security is not part og MAGI
Good to remember. Thank you!
But remember that tax free interest/dividends IS included in MAGI when one is looking at IRMAA. But it is difficult to make a decision one year without knowing the exact limits for IRMAA. We do one big conversion in January and then wait until we have some updated numbers from the Financial Buff website. For example, they recently updated and said based on data already in the books, the minimum IRMAA threshold for us will be 210,000 for 2023 income) and if inflation comes in at 3% it would be 212,000. We did our second conversion the end of November knowing what our actual income and dividends were for the year, to stay just under the 210,000.
tibbitts
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by tibbitts »

LilyFleur wrote: Mon Dec 04, 2023 12:28 pm I'm retired and looking at needing a significantly higher income next year than usual.
I'm trying to plan responsibly for my taxes, and I noticed that I am on the edge of an IRMAA cliff.
(This is a question for Bogleheads who are well-versed in IRMAA strategy.)
My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
The IRMAA tier that I'd like to stay in is the $129,000 to $161,000 tier (that is the tier for 2024).
Would anyone care to estimate what that tier might actually be in 2026?
Should I adjust my t-IRA withdrawal for 2024 downward by perhaps $5,000, just to be on the safe side?
Thanks for your help!
Unlike everybody else who determines IRMAA limits down to the dollar I just go with the current limit and back off by a few thousand dollars. However it seems like one way to be exact is to take the last few thousand dollars of your estimate plus a few more as a tIRA withdrawal near the end of the year, then tweak it by either replacing some of the funds in a tIRA or converting them early in the following year. So you defer calculating the exact amount until you actually have all the data to prepare your taxes. Of course the 60-day rollover rule won't fit if you're still receiving tax forms from partnerships etc. after that expires in late February, but if you have the typical income you'll have your tax documents (okay, maybe not with corrections) by the end of January or so.
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

Tracker968 wrote: Mon Dec 04, 2023 9:20 pm A little bit of topic but, if this is my last year of working it doesn't matter if I go slightly above an IRMAA cliff because I can tell SSA that I quit working and my current income is lower. Is that right? Or will they still base my 2025 IRMAA on my 2023 tax return?
Here's a link. Scroll down to the heading, IRMAA Appeal, and there will be some information for you:
https://thefinancebuff.com/medicare-irm ... a-brackets
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LilyFleur
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by LilyFleur »

tibbitts wrote: Tue Dec 05, 2023 9:07 am
LilyFleur wrote: Mon Dec 04, 2023 12:28 pm I'm retired and looking at needing a significantly higher income next year than usual.
I'm trying to plan responsibly for my taxes, and I noticed that I am on the edge of an IRMAA cliff.
(This is a question for Bogleheads who are well-versed in IRMAA strategy.)
My estimate for my 2024 income is $161,239. (Included in that estimate is a COLA adjustment of 2% mid-year for my modest pension, as well as the updated Social Security monthly amount for 2024, and a large withdrawal from my t-IRA).
The IRMAA tier that I'd like to stay in is the $129,000 to $161,000 tier (that is the tier for 2024).
Would anyone care to estimate what that tier might actually be in 2026?
Should I adjust my t-IRA withdrawal for 2024 downward by perhaps $5,000, just to be on the safe side?
Thanks for your help!
Unlike everybody else who determines IRMAA limits down to the dollar I just go with the current limit and back off by a few thousand dollars. However it seems like one way to be exact is to take the last few thousand dollars of your estimate plus a few more as a tIRA withdrawal near the end of the year, then tweak it by either replacing some of the funds in a tIRA or converting them early in the following year. So you defer calculating the exact amount until you actually have all the data to prepare your taxes. Of course the 60-day rollover rule won't fit if you're still receiving tax forms from partnerships etc. after that expires in late February, but if you have the typical income you'll have your tax documents (okay, maybe not with corrections) by the end of January or so.
I kind of like the first option. (I'm a caregiver for an ill family member, and I'm not sure I have the wherewithal to deal with remembering to do something in 60 days.) My income estimate is fairly accurate, especially by mid-year (no partnerships, etc.), so I do like the idea of taking an initial withdrawal early in the year for cash flow purposes, and then another one later in the year, after my estimates are firmed up. (The COLA in my pension is adjusted in May.)
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by Dregob »

prd1982 wrote: Mon Dec 04, 2023 12:44 pm Also remember that at least 15% of Social Security is not part og MAGI
Please explain. Does this mean adding the 15% if SS is taxed at 85% needs to be added back to AGI to calculate MAGI? Thank you.
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FiveK
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by FiveK »

Dregob wrote: Sat Feb 10, 2024 11:37 pm
prd1982 wrote: Mon Dec 04, 2023 12:44 pm Also remember that at least 15% of Social Security is not part of MAGI
Please explain. Does this mean adding the 15% if SS is taxed at 85% needs to be added back to AGI to calculate MAGI? Thank you.
No, it means that at least 15% of SS is not part of MAGI, because no more than 85% of SS is added for AGI and none of the non-taxable 15% is added for this particular MAGI.

See MAGI for Medicare premiums (IRMAA tiers).
OhioGozaimas
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by OhioGozaimas »

Note that SS is never “taxed at 85%”. Depending upon what other income on the return, 0% up to 85% of gross SS benefits may be taxed (at the marginal rate).

Gross SS benefits go on the 1040’s Line 6a; the Taxable amount on Line 6b can never be more than 85% of the gross benefits. So, as Five K notes, at least 15% of SS dollars are non-taxable.

Woo-hoo!
Map out your future – but do it in pencil. – Jon Bon Jovi
capran
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by capran »

OhioGozaimas wrote: Sun Feb 11, 2024 1:59 am Note that SS is never “taxed at 85%”. Depending upon what other income on the return, 0% up to 85% of gross SS benefits may be taxed (at the marginal rate).

Gross SS benefits go on the 1040’s Line 6a; the Taxable amount on Line 6b can never be more than 85% of the gross benefits. So, as Five K notes, at least 15% of SS dollars are non-taxable.

Woo-hoo!
I have never played with it to see what the lower threshold that makes 85% of SS taxable might be, but seems pretty low. We created a social security taxable worksheet in excel, and for our modest 2 pensions of about 48k and 10k div, the worksheet says that our one SS of 27.4 results in 85% of it being taxable. I guess the only advantage is you don't need to do the convoluted worksheet every year to find out that 85% of SS is taxable.
capran
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by capran »

Dregob wrote: Sat Feb 10, 2024 11:37 pm
prd1982 wrote: Mon Dec 04, 2023 12:44 pm Also remember that at least 15% of Social Security is not part og MAGI
Please explain. Does this mean adding the 15% if SS is taxed at 85% needs to be added back to AGI to calculate MAGI? Thank you.
In simple terms, it means that IRMAAs MAGI includes the taxable portion of your SS, whatever that may be, which is found by doing the worksheet and entering that number on line 6b "Taxable portion of SS.
Dregob
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by Dregob »

OhioGozaimas wrote: Sun Feb 11, 2024 1:59 am Note that SS is never “taxed at 85%”. Depending upon what other income on the return, 0% up to 85% of gross SS benefits may be taxed (at the marginal rate).

Gross SS benefits go on the 1040’s Line 6a; the Taxable amount on Line 6b can never be more than 85% of the gross benefits. So, as Five K notes, at least 15% of SS dollars are non-taxable.

Woo-hoo!
Thanks. True sloppy wording on my part. 85% will be taxed at my tax rate/bracket.
Dregob
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by Dregob »

capran wrote: Sun Feb 11, 2024 9:01 am
OhioGozaimas wrote: Sun Feb 11, 2024 1:59 am Note that SS is never “taxed at 85%”. Depending upon what other income on the return, 0% up to 85% of gross SS benefits may be taxed (at the marginal rate).

Gross SS benefits go on the 1040’s Line 6a; the Taxable amount on Line 6b can never be more than 85% of the gross benefits. So, as Five K notes, at least 15% of SS dollars are non-taxable.

Woo-hoo!
I have never played with it to see what the lower threshold that makes 85% of SS taxable might be, but seems pretty low. We created a social security taxable worksheet in excel, and for our modest 2 pensions of about 48k and 10k div, the worksheet says that our one SS of 27.4 results in 85% of it being taxable. I guess the only advantage is you don't need to do the convoluted worksheet every year to find out that 85% of SS is taxable.
Same here. No need for the worksheet for us. I wonder how many Bogleheads have SS taxed at 0% or even 50%?
capran
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by capran »

Dregob wrote: Sun Feb 11, 2024 11:35 am
capran wrote: Sun Feb 11, 2024 9:01 am
OhioGozaimas wrote: Sun Feb 11, 2024 1:59 am Note that SS is never “taxed at 85%”. Depending upon what other income on the return, 0% up to 85% of gross SS benefits may be taxed (at the marginal rate).

Gross SS benefits go on the 1040’s Line 6a; the Taxable amount on Line 6b can never be more than 85% of the gross benefits. So, as Five K notes, at least 15% of SS dollars are non-taxable.

Woo-hoo!
I have never played with it to see what the lower threshold that makes 85% of SS taxable might be, but seems pretty low. We created a social security taxable worksheet in excel, and for our modest 2 pensions of about 48k and 10k div, the worksheet says that our one SS of 27.4 results in 85% of it being taxable. I guess the only advantage is you don't need to do the convoluted worksheet every year to find out that 85% of SS is taxable.
Same here. No need for the worksheet for us. I wonder how many Bogleheads have SS taxed at 0% or even 50%?
I don't know, but it seems like quite a few keep their income super low to take advantage of ACA insurance, and seek to delay paying income tax as long as possible. We're in the opposite camp, believing that the tax cuts will expire in 2026, so down the road will pay 3% more in tax, so convert as much as possible now. Last year our combined Roths earned over 42k. Yes, we had to pay income tax on all the conversions we've done over the years, but it's still less tax than in current law expiration.
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FiveK
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Re: 2024 Income Planning & 2026 IRMAA brackets

Post by FiveK »

capran wrote: Sun Feb 11, 2024 9:01 am I have never played with it to see what the lower threshold that makes 85% of SS taxable might be, but seems pretty low.
If I understand the cryptic notes and formulas around cell Calculations!H52 in the personal finance toolbox spreadsheet, for MFJ
- if the SS amount is >=$12000, X = 36941.18 + SS/2
- if the SS amount is =<$12000, X = 44000 - 0.15/1.7 * SS

for single,
- if the SS amount is >=$9000, X = 28705.88 + SS/2
- if the SS amount is =<$9000, X = 34000 - 0.15/1.7 * SS

where X = the lower threshold of non-SS income that makes 85% of SS taxable.

The "SS amount is >=" formulas look the same (after some algebra and substitution) as those in when the maximum of 85% of Social Security benefits becomes taxable. Don't know offhand why there would be a formula difference for the "<=" SS amounts, but some tests with the Social Security Benefits Worksheet corroborate the formulas given.
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