I just got IMRAA'd

[Car-Guy]

And it's collected from those who likely already paid multiples of the average in Medicare payroll taxes over their careers because they were high earners.

Yep. Paid it most of my working life. At least with SS taxes, I looked forward to hitting the limit each year. It was like getting a small raise in the ~April timeframe. Medicare taxes never stopped.

 

[kaneohe]

I had been whining to DW about these stupid things for years to no effect. Until one year, she phoned me in shock to tell me her statement was $70K distribution! Of course you don't actually get that $$ in your pocket.

why not in your pocket? If reinvested, problem just compounds?

 

[Car-Guy]

I try to keep in mind Medicare is heavily subsidized. IRMAA means the subsidy is lower, but it is still there.

I understand what you are saying but from my POV I'm paying some of that subsidize for others. I paid 5 to 6 times the average in Medicare taxes during my working years, and I'm now paying ~3 times the base rates for the same coverage as everybody else.

Of course the same can be said for income taxes in general. Higher earners "usually" pay a lot more than the average earner yet still get nothing more from it.

 

[MichaelB]

I understand what you are saying but from my POV I'm paying some of that subsidize for others. I paid 5 to 6 times the average in Medicare taxes during my working years, and I'm now paying ~3 times the base rates for the same coverage as everybody else.

Of course the same can be said for income taxes in general. Higher earners "usually" pay a lot more than the average earner yet still get nothing more from it.

The Medicare payroll taxes we all paid are for Medicare Part A, and we all receive that, at no cost, beginning age 65. We all pay part of Medicare B. Everyone gets a subsidy, the amount of the subsidy depends on income, and the calculation is reset annually.

 

[Car-Guy]

The Medicare payroll taxes we all paid are for Medicare Part A, and we all receive that, at no cost, beginning age 65. We all pay part of Medicare B. Everyone gets a subsidy, the amount of the subsidy depends on income, and the calculation is reset annually.

Trust me, I understand how it works.

Personally, I've never needed part A and hope I never will. Of course I could opt to self insure (part B and D) but the real value in having those is the government "negotiated/established rates"

 

[marko]

The way I look at it is this:

Before we became eligible for Medicare, DW and I were paying ~$25,000 a year for BCBS with a $3,000 deductible.

Anything less than that--and Medicare certainly is--is a bargain. I'll gladly pay the IRMAA. I'm ahead by $20 grand a year.

 

[audreyh1]

And it's collected from those who likely already paid multiples of the average in Medicare payroll taxes over their careers because they were high earners.

Yes, but then those wealthy enough to retire very early didn’t pay into Medicare for a long time (until 2013 when NIIT started on investment income for AGI exceeding $250K MFJ).

And those early retirees with low income getting heavily subsidized ACA premiums, our NIIT has been helping you!

 

[Car-Guy]

The way I look at it is this:

Before we became eligible for Medicare, DW and I were paying ~$25,000 a year for BCBS with a $3,000 deductible.

Anything less than that--and Medicare certainly is--is a bargain. I'll gladly pay the IRMAA. I'm ahead by $20 grand a year.

In my case my premiums were much less since the vast majority of the cost was included in my total compensation package and I had choice of coverage. So for me now with Medicare, I have less coverage, limited choice, and it's costing me more.

 

[RunningBum]

What really gripes me is that the 53K of SS benefits pushes me into IMRAA. and I already am paying tax on that money

You can say that about a lot of things. NIIT? I'm already paying tax on that investment income. Extra income pushing more QDivs into being taxed? I already paid tax on that income. And so on.

And yours isn't even a tax. It makes your medicare premiums (an expense) higher. They just happen to take it directly out of your SS benefit, from my understanding.

 

[audreyh1]

The way I look at it is this:

Before we became eligible for Medicare, DW and I were paying ~$25,000 a year for BCBS with a $3,000 deductible.

Anything less than that--and Medicare certainly is--is a bargain. I'll gladly pay the IRMAA. I'm ahead by $20 grand a year.

That’s the way we see it. Even with IRMAA and all the various Medicare parts, we should still be ahead of our current insurance premiums, with a super low deductible compared to what we have to meet currently.

Plus our HSAs will be covering part B, part D and the IRMAAs until we draw SS which means that most of the premium is no longer being pulled from our annual withdrawal, plus we will no longer be funding HSAs - so more funds are available for other things.

 

[audreyh1]

Of course the same can be said for income taxes in general. Higher earners "usually" pay a lot more than the average earner yet still get nothing more from it.

Yes, story of my adult life, yet for some reason I don’t get particularly bummed about it.........

 

[pacergal]

Due to our pensions, we probably will pay IRMAA right from the get-go at 65.
I feel very blessed to have been in a job for 35+ years that is affording me the luxury of earlier retirement at a very decent income.
I would much rather be in this situation than poverty.
You make the money, you pay the taxes to support the services for this country.
There are many ways people can decrease your taxes, but at some point, ya gotta pay.
I don't have a problem with it.

 

[Car-Guy]

Yes, story of my adult life, yet for some reason I don’t get particularly bummed about it.........

I don't get too bummed about it since I would much rather be complaining about having to pay high taxes because of my income rather than the alternative.


I guess it really a relative thing or I might really get bummed out.

 

[audreyh1]

I don't get too bummed about it since I would much rather be complaining about having to pay high taxes because of my income rather than the alternative.

Exactly!

 

[Marc]

I am glad that IRMAA is finally indexed; however, it is kind of hard to work too close to the cliff when IRMAA depends on income two years prior and you don't know exactly where the cliff will be.

I have decided to max 22% bracket for 20 and 21 knowing I will likely go over first IRMAA cliff for 22 (two months of medicare for me) and 23 (full year for me and half year for my wife). After that I will try to work income so that we pay IRMAA only every other year. We are drawing money out of IRA in the years prior to 70 so RMD should not affect us; i.e., we would be drawing out that much anyway.

I have found that planning out three or four years in advance is all I can do; who knows what future tax laws will look like.

Marc

 

[marko]

In my case my premiums were much less since the vast majority of the cost was included in my total compensation package and I had choice of coverage. So for me now with Medicare, I have less coverage, limited choice, and it's costing me more.

Well, of course; when I was working my HC cost me next to nothing.

But my post was in the context of those of us who've RE'd maybe 10 or 15 years before Medicare.

 

[audreyh1]

In more detail I figured out today that our 2019 income definitely pushes us a bit over into a higher IRMAA threshold for 2021, guessing at what the inflation adjusted level might be. So I’m going ahead and taking tax hits on other things this year, like rebalancing before the end of the year and other investment clean up.

 

[ronin]

I have been IRMAAed for the last 2 yrs but should get back to the base rate in 2020. I am still awaiting the letter from the SSA to notify me. I agree it can be tough to plan for when you are close to the line. I have my estimates of dividend and cap gains distributions but won't know the actual amounts for a couple more weeks. There may be room for a small Roth conversion or not. And again, we don't know the income level 2 yrs down the road with the inflation adjustments now to be added on.

 

[MichaelB]

In more detail I figured out today that our 2019 income definitely pushes us a bit over into a higher IRMAA threshold for 2021, guessing at what the inflation adjusted level might be. So I’m going ahead and taking tax hits on other things this year, like rebalancing before the end of the year and other investment clean up.

I cut my calculation too close twice now, both times due to bigger / unexpected distributions. Just over the threashold for an IRMAA clip level is, for me, a missed opportunity to rebalance.

 

[Gumby]

Of course the same can be said for income taxes in general. Higher earners "usually" pay a lot more than the average earner yet still get nothing more from it.

Yes, story of my adult life, yet for some reason I don’t get particularly bummed about it.........

Me too. I know others don't particularly share my religious beliefs, but I consider Luke 12:48(b) to be quite apropos in my circumstances: "From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded."

 

[Chuckanut]

Perhaps everybody should convert to Roths, ASAP?

 

[audreyh1]

Perhaps everybody should convert to Roths, ASAP?

Well, you could do it all in one fell swoop and then not deal with IRMAAs thereafter.

Not sure that would help much in our case as we have tons of taxable.........

 

[RunningBum]

Perhaps everybody should convert to Roths, ASAP?

I assume that was tongue in cheek. Just one of the many moving parts in this puzzle.

 

[Koolau]

Got caught once myself due to sale of a property which had significant depreciation recapture. While I was a bit bummed, I knew if was only for a year. Now, if the problem were that I had TOO much coming in EVERY year, THAT's a problem I wouldn't mind (too much.) YMMV

 

[kgtest]

Better to have a tax problem, than an income problem.