Unintended Consequences - IRMAA

[lem1955]

Some mistakes I can share on any social media site so friends can learn from mine. This one results in sharing too much about my own income so I won't share on Facebook. But perhaps you can learn from mine.

In 2019 I needed to take about $95,000 from my Trad IRA to pay expenses in addition to other taxable income I had from other sources. I also converted $33,900 to ROTH. And at the last moment I withdrew another $31,500 to pay off my HELOC because the market had done so well. In total my MAGI came to $197,400 for the year. I didn't need to do the ROTH conversion or the HELOC payoff. But by doing so I triggered Income-Related Monthly Adjustment Amount of $59.40 on Medicare Part B and $12.30/month on Part D, for a total increase over my base Medicare cost of $860.40 for 2021. It feels good to be debt free, but 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.

 

[SecondCor521]

Measure three times, cut once.

 

[harley]

Then throw that board in the scrap pile and get a new one.

 

[powerplay]

I share your pain! I have been carefully trying to manage income and stay below the IRMAA limit. What I didn't plan for and couldn't plan for was my stock club deciding to disband in 2019. That distribution put me over so I'm in the higher tier for 2021.

 

[audreyh1]

In 2019 I needed to take about $95,000 from my Trad IRA to pay expenses in addition to other taxable income I had from other sources. I also converted $33,900 to ROTH. And at the last moment I withdrew another $31,500 to pay off my HELOC because the market had done so well. In total my MAGI came to $197,400 for the year. I didn't need to do the ROTH conversion or the HELOC payoff. But by doing so I triggered Income-Related Monthly Adjustment Amount of $59.40 on Medicare Part B and $12.30/month on Part D, for a total increase over my base Medicare cost of $860.40 for 2021. It feels good to be debt free, but it will feel much better when I can go back to below the IRMAA threshold income.

First world problem? We’re pretty much stuck with higher tier IRMAAs now that they narrowed the thresholds. DH paid 3.7x the standard rate this year including the part D IRMAA. We’re draining his HSA fast. Oh, well.

 

[Travelfreek]

Yes! I can relate as well. We pulled a bunch out of IRAs in 2018 to pay our house off. I started Medicare in 2020 and learned then about the cost of Part B and D IRMAA payments. Luckily, that was for
the 4 mos only and now my IRMAA premium bill came for 2021 and it’s just another $59 a month more instead of $315. Part D is $12 instead of $70. Whew!

 

[ivinsfan]

Much like ACA, Part B and D are income based. Even without a surcharge I'm surprised at how much the two of us pay for complete coverage under Medicare. I know way back when I started figuring retirements expenses, I really underestimated what the true cost of Medicare is.

 

[JARON46]

We are in the same boat with IRMAA. Wife inherited IRA from her Mother. so we will be paying more for Medicare in 2021. I think it will drop off in 2022 because we will be below the IRMAA amount this year.

 

[braumeister]

Believe me, the IRMAA surcharge catches lots of people by surprise (well, once anyway). After you become aware of it, you tend to watch those thresholds pretty closely.

The good thing is that once you drop back below a threshold amount, the surcharge goes away automatically -- you don't have to do anything special to drop it, just like you didn't have to do anything special for it to be imposed.

 

[Car-Guy]

Believe me, the IRMAA surcharge catches lots of people by surprise

No joke!


I wish I could "vent" about it here.....

 

[jazz4cash]

It is my understanding that you can file a request to have your premium calculation re-evaluated if your income has dropped from two years prior and you can substantiate. It may just require a tax return from one year prior instead of the 2 yrs prior that is used for the initial determination. I am barely familiar with this and trying to get up to speed. I expect one of the forum "experts" will be along shortly, but in the meantime here is something on the topic:

https://www.marketwatch.com/story/should-you-appeal-your-medicare-irmaa-charges-2020-10-05

 

[Car-Guy]

^^^^^^^

I think you need to file form SSA-44 for any reconsideration.. I know I'm thinking about it for next year.

 

[CRLLS]

What gets me is that IRMAA can be triggered by Roth conversions. This is for money earned many years ago. I know it wasn't taxed back then, but it was income then AND reported. I almost went over the trigger this years because my spreadsheet erroneously linked to my "taxable" income rather than my AGI/MAGI. I caught it about 2 hours before I pulled the trigger on the conversion while doing a final check.

 

[RobbieB]

I celebrate my IRMAA surcharge! Proof that we're living large -

 

[statsman]

First world problem?

Pretty much for us. DW got nailed with IRMAA this year because of the capital gains on our house sale in 2018. The amount above the $500k capital gains exemption for a house sale was still quite sizable.

 

[davebarnes]

I celebrate my IRMAA surcharge! Proof that we're living large)

Yup
Only people with a lot of money whine about Medicare premium surcharges.

 

[RobbieB]

Yeah, big wow eh? Compared to paying the premium all by myself it's a gift.

 

[Sunset]

I'm trying hard to avoid this issue, but when many balls are in the air, it's a little difficult to avoid the extra charge.
I thought the reason was to pay for the extra's that rich folks get when on Medicare, like caviar and champagne when hospitalized.

 

[ivinsfan]

I hope all you posters with "one more year" syndrome are reading this...

 

[audreyh1]

I hope all you posters with "one more year" syndrome are reading this...

Yeah, more work years, bigger nest egg, more taxes and other gotchas!

 

[Car-Guy]

Yup
Only people with a lot of money whine about Medicare premium surcharges.

Except maybe one... ME!


IMO, I don't have a lot of money.... But, I guess that is relative.... Whining about it, is the only thing I'm getting for my IRMAA premiums.

 

[audreyh1]

Except maybe one... ME!


IMO, I don't have a lot of money.... But, I guess that is relative.... Whining about it, is the only thing I'm getting for my IRMAA premiums.

Ha ha ha.

 

[pb4uski]

It is my understanding that you can file a request to have your premium calculation re-evaluated if your income has dropped from two years prior and you can substantiate. It may just require a tax return from one year prior instead of the 2 yrs prior that is used for the initial determination. I am barely familiar with this and trying to get up to speed. I expect one of the forum "experts" will be along shortly, but in the meantime here is something on the topic:

https://www.marketwatch.com/story/should-you-appeal-your-medicare-irmaa-charges-2020-10-05

I'm not sure if it woul be successful, but it might be worth a shot to apply and claim that you were over only because you did a withdrawal from retirement accounts to pay off your HELOC and that income will not recur in future years. Only cost would be to fil out the form and send it in. Who knows, you might get a sympathetic examiner.

 

[Ready-4-ER-at-14]

I'm taking a chance and paying for a whole lot of movement into roth this year.
Yes it is costing a lot and will elevate medicare costs at least one year, but...

If we survive one year when there is a 40% return.. we're golden.

 

[pb4uski]

... If we survive one year when there is a 40% return.. we're golden.

A one-year 40% return as never happened that I can find... at least for calendar years.