Unintended Consequences - IRMAA

[ncbill]

Doing pretty well if you're paying IRMAA in retirement.

On another forum a poster in their 70s with $350k in household income complained that it was costing him several thousand extra annually.

My reply was that doesn't seem like much of an issue when one's household income is that high.

 

[statsman]

Just got my January Medicare bill yesterday and it dropped to $148..we had been paying a $388 penalty since March when I signed up for Medicare due to 2018 income.

That's what I hope happens for my DW. Her Medicare bill for Parts B and D maxed out this year due to a one-time income spike in 2018 (capital gains on the sale of a house after $500k exemption). Our income prior to that and since would put her well outside of IRMAA.

We haven't seen any notification of what her monthly bill will be for 2021, and we won't know for sure until her first SS payment in January 2021 as Medicare is deducted from that.

 

[audreyh1]

That's what I hope happens for my DW. Her Medicare bill for Parts B and D maxed out this year due to a one-time income spike in 2018 (capital gains on the sale of a house after $500k exemption). Our income prior to that and since would put her well outside of IRMAA.

We haven't seen any notification of what her monthly bill will be for 2021, and we won't know for sure until her first SS payment in January 2021 as Medicare is deducted from that.

If you log into Medicare.gov, you can see your Jan Medicare bill. It’s due Dec 25, and they usually post it by Nov 27. So your next bill is viewable online now.

 

[Livefree]

That's what I hope happens for my DW. Her Medicare bill for Parts B and D maxed out this year due to a one-time income spike in 2018 (capital gains on the sale of a house after $500k exemption). Our income prior to that and since would put her well outside of IRMAA.

We haven't seen any notification of what her monthly bill will be for 2021, and we won't know for sure until her first SS payment in January 2021 as Medicare is deducted from that.

This is what we experienced too. We sold an investment property in 2018 that caused the one year spike in premiums.

 

[statsman]

If you log into Medicare.gov, you can see your Jan Medicare bill. It’s due Dec 25, and they usually post it by Nov 27. So your next bill is viewable online now.

Didn't work. Since DW has her Medicare Part B premium deducted from her monthly SS payment, it is not listed as an upcoming bill on her Medicare.gov account, or at least we can't find it. All that shows up is her December 2020 bill (and history going backward from there).

 

[audreyh1]

Oh, I thought that info would still show there. What about ssa.gov?

 

[statsman]

What about ssa.gov?

It is listed there. Her SSA.gov account shows what DW's base SS payment will be for 2021 and what the Medicare deduction(s) are. In her case, Plan B is listed as $148.50.

 

[braumeister]

Didn't work. Since DW has her Medicare Part B premium deducted from her monthly SS payment, it is not listed as an upcoming bill on her Medicare.gov account, or at least we can't find it. All that shows up is her December 2020 bill (and history going backward from there).

Look up near the top of the page for "Messages" and you should be able to see a recent message with all the info. That's how it is for me.

 

[audreyh1]

It is listed there. Her SSA.gov account shows what DW's base SS payment will be for 2021 and what the Medicare deduction(s) are. In her case, Plan B is listed as $148.50.

OK good!

 

[pdxgal]

My ex-DH learned the IRMAA lesson the hard way. I'd asked him early in the year if he'd consider taking a bit less in IRA distributions and/or consult with our CPA to find a way to keep our joint income under the limit that would allow me to contribute to a Roth. He replied no, he wanted to keep all his money coming in, and that I had enough money anyway. That was the final straw for me, so I started divorce proceedings. Two months later my mom died and capital gains from liquidating her stocks pushed our joint income 3K above the IRMAA threshold. The next year my ex was ticked off when he got the increased Medicare premium notice. He blamed me and my inheritance, which to add insult to injury had not benefited him! I reminded him that had we done tax planning he could've easily avoided the premium penalty, but he'd wanted to have all his money. Unintended consequences indeed ;-)

Lesson here is that inheritances can really throw things off, so best to do tax planning if you're lucky enough to receive one.

 

[audreyh1]

My ex-DH learned the IRMAA lesson the hard way. I'd asked him early in the year if he'd consider taking a bit less in IRA distributions and/or consult with our CPA to find a way to keep our joint income under the limit that would allow me to contribute to a Roth. He replied no, he wanted to keep all his money coming in, and that I had enough money anyway. That was the final straw for me, so I started divorce proceedings. Two months later my mom died and capital gains from liquidating her stocks pushed our joint income 3K above the IRMAA threshold. The next year my ex was ticked off when he got the increased Medicare premium notice. He blamed me and my inheritance, which to add insult to injury had not benefited him! I reminded him that had we done tax planning he could've easily avoided the premium penalty, but he'd wanted to have all his money. Unintended consequences indeed ;-)

Lesson here is that inheritances can really throw things off, so best to do tax planning if you're lucky enough to receive one.

Some of this is not making sense.

1. Why did you have capital gains from liquidating your mother’s stocks? You should have had a stepped up basis, and essentially no capital gains if you sold them shortly after she died.

2. An inheritance is not income, and would not be declared on a tax return as income, and therefore would not cause an increase in IRMAA.

 

[statsman]

1. Why did you have capital gains from liquidating your mother’s stocks? You should have had a stepped up basis, and essentially no capital gains if you sold them shortly after she died.

The only time I've seen this is with an inheritance under an "A-B" trust, and the asset(s) in question were assigned to the individual who died first. The basis of those assets would be adjusted at the time of that individual's death. If the second individual lived for many years after that, there could be significant capital gains on assets assigned to the individual who passed first.

 

[JARON46]

The only time I've seen this is with an inheritance under an "A-B" trust, and the asset(s) in question were assigned to the individual who died first. The basis of those assets would be adjusted at the time of that individual's death. If the second individual lived for many years after that, there could be significant capital gains on assets assigned to the individual who passed first.

If you inherit an IRA you have to pay income tax on the proceeds.

 

[audreyh1]

If you inherit an IRA you have to pay income tax on the proceeds.

Of course, but the poster did not say she had inherited an IRA. Different rules there. It sounded like she had inherited some stocks from mom that she cashed out, but for some reason had significant capital gains that they paid taxes on?

 

[JoeWras]

Inherited annuities can also present a nice tax bill to the beneficiaries. Generally, there is some flexibility in a 5 year window. But let's say you wait until year 5, and then the ex-DH decides to cash in the IRA. Well, hello IRMAA.

The capital gain thing is perplexing though. Maybe the gains came even after the step up, and liquidating them was required as part of the divorce agreement? Otherwise, I'd let the gains ride.

 

[audreyh1]

I think the main warning was that an inheritance could mess up your IRMAA, and in most cases due to stepped up basis and inheritances not treated as income, it wouldn’t. Sure, there are cases like forced withdrawals over years from inherited IRAs, and more convoluted cases like inherited annuities or trusts that might increase taxable income.

 

[ivinsfan]

I think the main warning was that an inheritance could mess up your IRMAA, and in most cases due to step up basis and inheritances not treated as income, it wouldn’t. Sure, there are cases like forced withdrawals over years from inherited IRAs, and more convoluted cases like inherited annuities or trusts that might increase taxable income.

That post was mainly a vent about the ex..not really about some inheritance money

 

[ZachTB]

Some mistakes I can share...it will feel much better when I can go back to below the IRMAA threshold income.

You can be sure I won't make THAT mistake again.

Never heard of this! Thanks for sharing!

 

[Perryinva]

@livefree: are you working or retired?

 

[pdxgal]

The only time I've seen this is with an inheritance under an "A-B" trust, and the asset(s) in question were assigned to the individual who died first. The basis of those assets would be adjusted at the time of that individual's death. If the second individual lived for many years after that, there could be significant capital gains on assets assigned to the individual who passed first.

Yes, that's exactly what happened!

 

[friar1610]

I was working on my 2020 taxes earlier today. I did a Roth conversion in late 2020 and tried to figure out the highest amount I could convert without triggering IRMAA, realizing that at the time I did it I didn’t have my final actual 2020 income numbers. Based on what I computed today, it looks like I’ll squeak by less than $1K in MAGI. A bit too close for comfort.

 

[audreyh1]

Oooh - yeah, that’s close!!!

 

[Car-Guy]

Well I finally did it.... Late last year I watched my bottom line (income) really close and I adjusted my tIRA withdrawal at the last minute in December to keep me just under the first tier IRMMA (lower) limit. My 2020 tax return has been filed, processed and refund received. No amendments/adjustments required.
Now if "they" just don't lower the IRMMA limits and/or raise the annual RMD's, I think I can stay away from from paying the higher rates ever again.... Never thought I'd be happy about looking forward to lower income levels.

 

[Golden sunsets]

Well I finally did it.... Late last year I watched by bottom line (income) really close and I adjusted my tIRA withdrawal at the last minute in December to keep me just under the first tier IRMMA (lower) limit. My 2020 tax return has been filed, processed and refund received. No amendments/adjustments required.
Now if "they" just don't lower the IRMMA limits and/or raise the annual RMD's, I think I can stay away from from paying the higher rates ever again.... Never thought I'd be happy about looking forward to lower income levels.

Lucky you. Our 2020 income was lower as we took no RMD's in 2020, so our IRMAA will disappear for one year, starting in 2022, but be back in full force in 2023.

 

[audreyh1]

Not so for us ha ha, but we did drop down a tier for 2022.