Updated IRMAA estimates for 2025

[Chuckanut]

IRMAA is tough for several reason. One is that the step increases are huge. Over by $1 is as costly as being over by $26,000. And one has to look two years into the future. It’s tough enough looking at two months into the future as those who misjudged the current fall in interest rates have found out.

 

[audreyh1]

I believe the IRMAAA levels for the following year are announced in late September.

 

[braumeister]

I believe the IRMAAA levels for the following year are announced in late September.

It was October 12th this year.

 

[audreyh1]

Was it? In 2022 it was Sept 27. Interesting.

 

[RetMD21]

IRMAA is tough for several reason. One is that the step increases are huge. Over by $1 is as costly as being over by $26,000. And one has to look two years into the future. It’s tough enough looking at two months into the future as those who misjudged the current fall in interest rates have found out.

I have done a lot of misjudging

I believe the IRMAAA levels for the following year are announced in late September.

The trick is that they announced the 2024 levels in October 2023 but that doesn't help much since the last day to take effective action was in December 2022. Harry Sit (from the original post) and others know the methodology and can give good estimates well in advance of the end of the year for 2 years in the future.

 

[audreyh1]

My point is that from there you can look at projections from a site like FinanceBuff and get a pretty good range estimate for IRMAA levels another year out that correspond to current year taxable income. You are having to look out a little over a year ahead.

 

[MichaelB]

WADR, I think the concern over making a mistake projecting IRMAA is exaggerated. The amount of additional premium one pays can be $2k for a couple, but it kicks in with income over $200k. This is not like the ACA where lost subsidy is much greater and income levels lower.

My point is that from there you can look at projections from a site like FinanceBuff and get a pretty good range estimate for IRMAA levels another year out that correspond to current year taxable income. You are having to look out a little over a year ahead.

+1

 

[RetMD21]

WADR, I think the concern over making a mistake projecting IRMAA is exaggerated. The amount of additional premium one pays can be $2k for a couple, but it kicks in with income over $200k. This is not like the ACA where lost subsidy is much greater and income levels lower.



+1

It would just be annoying to pay the $2,000 for being a few dollars over. A first world problem.

 

[Gumby]

Yes it would, which is why I give myself a wide margin.

 

[rayvt]

This year we were (are?) thinking of keeping below the IRMAA line, it's tight. This morning weirdly I thought maybe we should just jump into IRMAA at the 1st level as this would allow a larger Roth Conversion.

If you are approaching the IRMAA limit now, then you will most likely go over it in upcoming years.

 

[audreyh1]

The IRMAA limits are tracking pretty well with inflation these days. So unless your taxable income is outpacing inflation you might be OK.

 

[MichaelB]

It would just be annoying to pay the $2,000 for being a few dollars over. A first world problem.

It’s happened to me, more than once. Not the result of a poor projection, but instead getting more distributions than planned / expected. So now, like others, I allow myself a large margin, and then just focus my attention on other aspects of my portfolio and budget.

 

[RetMD21]

It’s happened to me, more than once. Not the result of a poor projection, but instead getting more distributions than planned / expected. So now, like others, I allow myself a large margin, and then just focus my attention on other aspects of my portfolio and budget.

That's probably the wiser approach. Anyway 2023 is effectively over so no more 2025 IRMAA planning

 

[Chuckanut]

It’s happened to me, more than once. Not the result of a poor projection, but instead getting more distributions than planned / expected. So now, like others, I allow myself a large margin, and then just focus my attention on other aspects of my portfolio and budget.

I have to wonder how many people (not among this enlightened group, of course!) will be surprised by IRMAA in 2025 and even 2026, thanks to the big jump in MM, CDs and bond interest rates we have seen this year and it’s continuation into next year for the time being. I suspect a lot of Medicare age Joes and Jane will get an IRMAA surprise in a year or two.

 

[audreyh1]

Interest income has certainly jumped and that may have surprises for people in a year.

This year our ordinary income was considerably higher. Our normal top tax rate is 15% due to mostly capital gains/qualified dividends income. This year a bit crept into the 22% bracket.

C’est la vie. If I thought that this would continue much longer I’d move my highest interest yielding assets into tax deferred accounts.

 

[Sunset]

That's probably the wiser approach. Anyway 2023 is effectively over so no more 2025 IRMAA planning

So now I'm getting worried

I can only deal with current year limits. So for tax year 2023, isn't the current IRMAA limit ~$194K
Meaning if my income in 2023 is $195K I pay IRMAA "penalty" in 2 years

 

[audreyh1]

So now I'm getting worried

I can only deal with current year limits. So for tax year 2023, isn't the current IRMAA limit ~$194K
Meaning if my income in 2023 is $195K I pay IRMAA "penalty" in 2 years

Not exactly. The IRMAA MFJ first limit for 2025 will probably be over $206K. The 2024 limit is already $206K. So $195K is under.

 

[Brett_Cameron]

Regarding the two-year look back: if your income drops below IRMMA levels due to loss of income, it is possible ask for your part premiums to be adjusted. You do that by taking proof of income change to SS office e. This way you do not have to pay the higher IRMMA premiums for 2 years until the auto look back process changes the premiums.

 

[pacergal]

So now I'm getting worried

I can only deal with current year limits. So for tax year 2023, isn't the current IRMAA limit ~$194K
Meaning if my income in 2023 is $195K I pay IRMAA "penalty" in 2 years

You may be confusing the income limit from 2021, which I believe was 194k, for paying IRMAA in 2023. Two year look back, if I understand IRMAA correctly.
This years income would define your IRMAA for 2025

 

[RetMD21]

Regarding the two-year look back: if your income drops below IRMMA levels due to loss of income, it is possible ask for your part premiums to be adjusted. You do that by taking proof of income change to SS office e. This way you do not have to pay the higher IRMMA premiums for 2 years until the auto look back process changes the premiums.

Here's the form. You are supposed to have a qualifying event corresponding to one of the boxes. Sadly varying investment returns or converting too much to a Roth don't qualify. https://www.ssa.gov/forms/ssa-44.pdf

You may be confusing the income limit from 2021, which I believe was 194k, for paying IRMAA in 2023. Two year look back, if I understand IRMAA correctly.
This years income would define your IRMAA for 2025

Exactly

 

[joesxm3]

The Boglehead video today mentioned on IRMAA factor that I had not considered.

One guy said that the market spiked at the end of the year causing his RMD to increase enough to tip him over the IMRAA limit.

 

[Joylush]

So how does the IRMMA two year look back work. If you are turning 65 in 2026 are the looking at your taxes from 2024 and 2025?

 

[Gumby]

Just the second year back. So, if you are paying Medicare Part B in 2026, your income in 2024 determines whether you trigger IRMAA. Those limits actually will be determined in late 2025.

 

[braumeister]

So how does the IRMMA two year look back work. If you are turning 65 in 2026 are the looking at your taxes from 2024 and 2025?

It's a shame that this topic is so confusing to so many.

In a nutshell, your MAGI on your 2023 taxes (that you'll be filing in the coming months) determines your IRMAA level (or lack of it) for your Social Security cost in 2025. That's the two-year factor.

Similarly, your MAGI in 2024 determines your IRMAA level in 2026. Etc., etc.

 

[braumeister]

The Boglehead video today mentioned on IRMAA factor that I had not considered.

One guy said that the market spiked at the end of the year causing his RMD to increase enough to tip him over the IMRAA limit.

That's simple to fix if you're 70 ½ or older -- just make a QCD for part of your RMD instead of taking the distribution yourself. That will bring your MAGI down to where you need it.