Managing one's income to stay below the IRMAA Cliff

[ShokWaveRider]

This post is for us Medicare Eligible middle class fully retired folks like us that have an average income or slightly above average. Income is defined of any and all income whether it is from SS, Annuities, Pensions, Interest, Selling of Stocks, withdrawals from a portfolio or ANY taxable income. These folks after a few years of successful retirement, and are managing their income accordingly to avoid the IRMMA cliff.

We are a couple and are allowed $218k this year before IRMAA kick in. It is OK for singles to comment on their methods also. Those who are rich(er) and cannot avoid IRMMA need not comment as they are not the intended audience of this thread/post.

We manage ours to keep our income just under this limit. Unfortunately this does eliminate us from the full $12k BBB Seniors deduction, we get just under half. I think this is OK, as the difference is not that life changing. IMHO Taxes are about as low as they can realistic be. I do expect this to change and increase in the future.

We basically manage our Taxable income so MAGI is within the IRMAA limits, any more that we need or want comes from our post tax accounts/bucket.

I use the Google Sheets CashFlow - 2025 - 2026 Exel Spreadsheet (Recommend by a member here) to estimate our taxes for a given year. I also update our Taxable income from ALL sources spreadsheet monthly, this is a simple spreadsheet I wrote that reflects all our household income sources.

I am curious how other folks here that are similar to us manage their income to avoid the cliff. I am sure some folks manage their Taxable income to benefit from the $12k Senior benefit, this would meaning keeping theirs below $150k.

I am sure some here have Roth accounts and other Tax free sources to call on for funds if needed. I envy them as we do not.

 

[Koolau]

Yeah, I screwed up in '24 and am paying the IRMAA price this year. I'd forgotten the exact basis of a MYGA that had been 1035'd from excess insurance cash value. When I cashed in the MYGA, it put me over the IRMAA limit. Dumb mistake. I'm watching closer last 2 years. RMDs might eventually get me but I keep taking more than I need to meet RMDs in hopes of lowering my future RMDs. Of course, every year, the factor grows larger and my 401(k) just keeps growing. I guess there are worse problems to have.

In '33, should I live so long, I've got a tax bomb looming with my I-bonds. I probably should be cashing some of those every year.

 

[Car-Guy]

The majority of my income is from RMD's these days. I knew IRMAA it was coming when I was in my early 60's so I planned ahead accordingly. Took some guessing/estimating but except for the first year, so far so good.

I hate IRMAA almost as much as I do higher tax brackets. So unfair. Particularly when I read about all the fraud/abuse in the system that goes unchecked "for the most part".

 

[COcheesehead]

I have a spreadsheet where I track all sources of income as they occur. So it gets updated once or twice a month. I then run Dinkytown 1040 2-3 times a year to understand where we are. It takes a little bit of time, but knowledge is power. I haven’t screwed myself yet.

 

[GrayHare]

I've moved some interest and dividend producing investments to ones that instead generate capital gains. That lets me decide when to take the income and gives me the ability to offset some gains with losses.

 

[JoeWras]

Let me add to this it is important 2 years before Medicare eligibility too. Pay attention in the year you turn 63.

We're not in danger of reaching this limit unless we do extra large Roth conversions. For those doing them, pay attention. MYGAs are another great example of a surprise that push you over.

 

[Dtail]

Not there yet but following.
BTW, for your 218k limit, you are obviously using the 2024 MAGI for the 2026 IRMAA limit.
If you trust the "Finance Buff" IRMAA future schedules which use the already set monthly points and estimate the future points using no inflation, you can ratchet up your limits to 224k using 2025 MAGI, or 228k using 2026 MAGI.

 

[Dash man]

We’re in the second highest tier of IRMAA for this year and next, as a result of significant Roth conversions over the past few years. This year we’re trying to cut back on IRMAA for 2028 and the future. We’ve used our taxable brokerage to pay taxes on our conversions, which have reduced the taxable income on that account. We’re living primarily on dividends from our Roth accounts and taxable account, social security (DW begins in August) and my small pension. We also take some capital gains as needed. This year we’re trying are on track to be in the first level of IRMAA that requires additional payments in 2028. Worst case is the second level for 2028 and 2029. When RMDs begin in 2029, we’ll be using QCDs to avoid withdrawing taxable distributions.
For our recent car purchase, we took out a loan from our credit union so we wouldn’t have to pay any additional capital gains tax this year.

 

[MichaelB]

IRMAA is definitely not a middle class income problem. It affects somewhere between the top 10%-20% of all senior households. This is high income territory. Average / middle class households don’t pay it.

We pay it most years. Not happy to pay but at least I understand it - Medicare is heavily subsidized (75%) and IRMAA is a reduction in subsidy. Even after IRMAA it’s still subsidized, just less so.

 

[TheWizard]

I'm single and will likely always be at some level of IRMAA under current law. Nonetheless, I try to manage things to avoid getting into the next higher IRMAA tier.

As mentioned earlier, I use The Finance Buff's blog to project what the IRMAA tiers will be two years from now. In late November upcoming, this will be 2028 projected IRMAA tiers based on 2026 MAGI.

Then at end of November I total up my estimated income for the year as it impacts my AGI. I hold only index funds in my taxable account, so I don't have to worry about Capital Gains Distributions, only dividends and it's easy to get good estimates for those.

I've been doing QCDs from my tIRA to satisfy "most" of my RMD from the tIRA.
I also have RMD income from my 403(b) which goes into my checking account as Ordinary Income; can't do QCDs from a 403(b).
I also have been doing partial rollovers from 403(b) ----> tIRA to allow me to do larger QCDs if I want to in future years.

Anyhow, once I have a good estimate of my AGI for the year, I then use TFB's projections to determine how big of a Roth conversion I can do to get my AGI up to within $1500 or so of the next higher IRMAA tier.
This process has worked fine for the past few years.

Note: I don't try to estimate my income tax for the year. FreeTaxUSA does that just fine when February rolls around...

 

[GenXguy]

Haven't there been various thread on addressing this already? I am years from Medicare, but my long term spreadsheet already has this IRMAA factor figured in, along with keeping my tax bracket from creeping up.

I am curious how other folks here that are similar to us manage their income to avoid the cliff. I am sure some folks manage their Taxable income to benefit from the $12k Senior benefit, this would meaning keeping theirs below $150k.

The senior benefit is actually only $6000 per senior. $12,000 would be for two people. Anyway, it is scheduled to be gone before I'm old enough, and I would only get part of it due to the income phaseout, if were to be extended.

 

[Ronstar]

Not into IIRMA range yet, but projections show we will be in 2-3 years when RMDs start. I’ll do more than usual Roth conversions for a couple of years to minimize the damage, and study the subject more to figure out what else we can do.

 

[SecondCor521]

For anyone managing IRMAA, it seems like one would want to try to manage against all of the various triggers/thresholds, like the ones listed annually in reference threads here.

I think the main ones are just the tax brackets and IRMAA, but there may be others that may also be worth looking at, e.g. NIIT and maybe others.

 

[ShokWaveRider]

Note: I don't try to estimate my income tax for the year. FreeTaxUSA does that just fine when February rolls arouaround.

February would be too late, estimated taxed need to be paid by December 31st in order to avoid penalties.

 

[ShokWaveRider]

The senior benefit is actually only $6000 per senior. $12,000 would be for two people. Anyway, it is scheduled to be gone before I'm old enough, and I would only get part of it due to the income phaseout, if were to be exextended.

Yes, as mentioned in the OP there are 2 of us.

 

[TheWizard]

February would be too late, estimated taxed need to be paid by December 31st in order to avoid penalties.

For purely estimated tax payments, correct.
But I do mostly withholding from my steady income streams, supplemented by a Q4 estimated to cover my modest Roth conversion...

 

[GenXguy]

February would be too late, estimated taxed need to be paid by December 31st in order to avoid penalties.

Jan 15th, but Feb would still be too late.

 

[TheWizard]

Jan 15th, but Feb would still be too late.

All I meant in #10 about income taxes is that mine are on inflation adjusted cruise control due to withholding certain percentages.
So it's not something I need to worry much during the tax year, especially since my Roth conversion amounts are small now compared to in my 60s...

 

[SecondCor521]

February would be too late, estimated taxed need to be paid by December 31st in order to avoid penalties.

I thought 4th quarter ES payment was due January 15th?

 

[GenXguy]

I thought 4th quarter ES payment was due January 15th?

It is. See above: Managing one's income to stay below the IRMAA Cliff

 

[old medic]

I am curious how other folks here that are similar to us manage their income to avoid the cliff. I am sure some folks manage their Taxable income to benefit from the $12k Senior benefit, this would meaning keeping theirs below $150k.
I am sure some here have Roth accounts and other Tax free sources to call on for funds if needed. I envy them as we do not.

Without our Roth conversions we dont even hit the single IRMAA limit. Guess it pays to be poor....

 

[jimbee]

IRMAA is definitely not a middle class income problem. It affects somewhere between the top 10%-20% of all senior households. This is high income territory. Average / middle class households don’t pay it.

We pay it most years. Not happy to pay but at least I understand it - Medicare is heavily subsidized (75%) and IRMAA is a reduction in subsidy. Even after IRMAA it’s still subsidized, just less so.

That was the first thing I thought of when I read the premise. How in the **** is the income associated with IRMAA considered to be "middle class"?

 

[NW-Bound]

In a few years when we face RMD, we will be permanently in IRMAA land. So, I suck it up and have been doing Roth conversion to the same income level we will have with RMD, while delaying SS. Completely missed out on the $12K senior deduction. Oh well.

The only way to have less RMD is for the market to crash, and crash hard. I don't want that!

 

[Gumby]

For anyone managing IRMAA, it seems like one would want to try to manage against all of the various triggers/thresholds, like the ones listed annually in reference threads here.

I think the main ones are just the tax brackets and IRMAA, but there may be others that may also be worth looking at, e.g. NIIT and maybe others.

Here's a link that may be helpful for that.

Some important "trigger" levels for 2026

CORRECTED TO POST #18 Here is a list of important “trigger” income levels for 2026. Numbers are actual AGI/MAGI (i.e. - before standard or itemized deductions) unless indicated as Taxable Income by an asterisk * which means you can add $32,200 MFJ/$16,100 single if you use the standard...

www.early-retirement.org

 

[TheWizard]

In a few years when we face RMD, we will be permanently in IRMAA land. So, I suck it up and have been doing Roth conversion to the same income level we will have with RMD, while delaying SS. Completely missed out on the $12K senior deduction. Oh well.

The only way to have less RMD is for the market to crash, and crash hard. I don't want that!

This sounds exactly like what I did in previous years, being 76 now.
It worked out fine and I have excess income to invest most months which pleases me...