DQOTD: IRMAA x 2 for Couples?

[Midpack]

I went on Medicare in 2019, and got hit with IRMAA rates in 2020 due to Roth conversions (which we’ll be doing until 2026 or thereabouts). DW goes on Medicare in 2021, and I was wondering if we both pay the IRMAA Part B and D penalties- versus one per household?

I’m afraid I know the answer, but I didn’t find it doing a search here or online (not that it’s not there somewhere).

And related, in the ultimate tail wagging the dog story - if I convert to the top of the 22% bracket as planned, it puts us about $20K over the 140% IRMAA MFJ threshold. It’s penny wise pound foolish to restrict our conversions by $20K (about 11% less) to avoid the next IRMAA threshold - but I can’t help thinking about it...

 

[audreyh1]

Unfortunately, the answer is yes!

Personally I would probably reduce the conversion a bit to avoid an IRMAA threshold that affects two of us. 2x the penalty.

If you think you’ll be above the same IRMAA threshold regardless when both taking RMDs in the future, does it really help to pay the higher IRMAA now?

 

[youbet]

Yes, you both pay. But, the thresholds are higher for a couple than a single. Roth conversions followed by RMD's keep us securely entrenched paying IRMAA. Enjoy!

 

[Car-Guy]

I've been paying the the IRMAA "success penalty" for several years now. My DW joins the Medicare ranks next year and I saw this "double success penalty" coming, so I made some adjustments. I think I'll be just under the high water mark for next year... If they don't change the rules again.

 

[SecondCor521]

The IRMAA brackets are now indexed to inflation, and there is a two year offset. So depending on the numbers, there might be some wisdom in evaluating taking a bit less income in 2021 and hope that inflation increases that IRMAA bracket cutoff number you're looking at so you just squeak under that mini-cliff in 2023. Since it impacts both you and your spouse and Medicare Parts B and D for the whole year if you're $1 over the limit, it's worth looking at I think.

 

[Niuatoputapu]

We each need to do our own calculations and decisions. We decided to stop conversions just before the first IRMAA threshold (as you note, about $20K before the 22% max). Your decision to convert that last $20K results in about $1700 more in Medicare premiums (for two people over 64) or 8.5% additional "tax". If I wanted larger conversions, I would reach for just shy of the next IRMAA threshold and convert about $40K extra (instead of just $20K). Yes, you will pay 24% income tax on the additional $20K but 0% extra Medicare premium.

If 30.5% on the first $20K over the first IRMAA threshold was good for you, only 24% on the second $20K should be better.

 

[audreyh1]

We each need to do our own calculations and decisions. We decided to stop conversions just before the first IRMAA threshold (as you note, about $20K before the 22% max). Your decision to convert that last $20K results in about $1700 more in Medicare premiums (for two people over 64) or 8.5% additional "tax". If I wanted larger conversions, I would reach for just shy of the next IRMAA threshold and convert about $40K extra (instead of just $20K). Yes, you will pay 24% income tax on the additional $20K but 0% extra Medicare premium.

If 30.5% on the first $20K over the first IRMAA threshold was good for you, only 24% on the second $20K should be better.

Good point. You could do extra every other year, and thus avoid the higher IRMAA every other year.

Or, if you are going to pay higher IRMAA in RMD years anyway, save it for then.

 

[Midpack]

We each need to do our own calculations and decisions. We decided to stop conversions just before the first IRMAA threshold (as you note, about $20K before the 22% max). Your decision to convert that last $20K results in about $1700 more in Medicare premiums (for two people over 64) or 8.5% additional "tax". If I wanted larger conversions, I would reach for just shy of the next IRMAA threshold and convert about $40K extra (instead of just $20K). Yes, you will pay 24% income tax on the additional $20K but 0% extra Medicare premium.

If 30.5% on the first $20K over the first IRMAA threshold was good for you, only 24% on the second $20K should be better.

Interesting. I’m looking at a $2546 premium over the next bracket down, a $4226 premium over no IRMAA penalty. We’re going to have the $1680 premium regardless. But alternating a $4226 and $1680 premium every other year beats $4226 every year while we’re doing conversions and achieving the same total conversions. But off the top of my head paying 24% on (marginal) $20K is $4800 every other year to save $2546 every other year? I’ll look closer.