July 3, 2025 • 24 mins
The Income-Related Monthly Adjustment Amount (IRMA) is a Medicare surcharge that can significantly increase your healthcare costs in retirement based on income from two years prior.
• IRMA affects both Medicare Part B and Part D premiums, potentially adding over $500 per month per person
• The surcharge is based on your Modified Adjusted Gross Income (MAGI) from two years prior
• Income thresholds begin at $106,000 for individuals and $212,000 for joint filers
• One-time income events like selling property or Roth conversions can trigger IRMA
• Higher premiums due to IRMA do not provide better coverage - everyone gets the same benefits
• You can appeal IRMA if you experience life-changing events like retirement or divorce using Form SSA-44
• Strategic planning between ages 59½ and 64 may be critical for minimizing IRMA in retirement
• Qualified Charitable Distributions (QCDs) and donating appreciated assets directly to charity can reduce MAGI
• Tax laws affecting IRMA change regularly, requiring ongoing review of your retirement strategy
Schedule your complimentary consultation at masterplanretire.com or call our office at 770-980-9262 to create a holistic retirement plan that addresses these hidden costs.
Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evan (00:06):
Who the heck is Irma and why is she so mean?
Hi folks, welcome back toRetirement Roadmap with Master
Plan Retirement Consultants.
My name is Evan.
With me, as always, retirementplanner Mark Fricks.
No, it's not your great auntvisiting from out of town.
During the show, we're going todiscuss Medicare's surcharge,
the income-related monthlyadjustment amount, otherwise
(00:29):
known as IRMAA, as well asMedicare changes that may be
coming in 2026.
IRMAA Mark is an income-basedMedicare surcharge that kicks in
if your income from two yearsago crosses a certain threshold.
2025 premiums, for example, arebased on 2023 income.
(00:50):
Why is this important?
Mark (00:51):
Well, a couple of things.
Number one is when you leave acompany.
I would bet two years ago youmade pretty good money and now
you're retired, but you're goingto pay a significant amount
more for your Medicare.
Evan (01:03):
Part B.
That's right.
We're going to get into a lotof details about IRMAA, what to
look out for things to consider,especially as you start to
think about your retirementplanning, Because we know
there's a lot of retirementstrategies that are going to
fluctuate your income in a yearand that can directly influence
how much you're paying in IRMAA.
And we'll look at the table alittle bit as well and see okay,
(01:23):
how much does it jump,depending on what your income
level is?
Mark (01:27):
And the sad thing is there's so few advisors out
there that say they're plannersand say they're retirement
planners, that don't evenrealize that exist, and all of a
sudden they trigger these bigpremiums for one, two, three
years and the clients are likewhy'd this happen?
And the advisor's like I don'tknow, and it just yeah.
That's why you've really got tomake sure you work with a
retirement planner thatunderstands all the aspects.
Evan (01:49):
That's right.
Even a one-time income spike,like selling a business or doing
a Roth conversion that cantrigger IRMAA, lead to
significantly higher monthlypremiums for both Part B and
Part D.
And, like you said, I meanwe've got to consider that we're
huge proponents.
We've talked about taxstrategies a lot on this show.
(02:10):
We're huge proponents of Rothconversions.
They're super important, buttiming and strategy is just as
important as getting that moneyto tax-free accounts, especially
when you don't realize theareas that you could be
affecting.
Like you like to say, what youdon't know is going to hurt you.
Mark (02:22):
Well, and that's why you can't put it on, set it and
forget it, right?
Right, because every year isdifferent, like you just
mentioned a minute ago, and soyou have to look at every year
in its own tax year, right, whatI've taken out, what I'm going
to need to take out, and that'swhy I prefer looking at the tax
strategies toward the end of theyear.
We kind of know what you'vespent, things like that, but
it's not a have to thing, but itcan certainly help.
Evan (02:43):
Well, it's better to look at the end of the year,
especially if you're lookingbackwards and being like, oh, I
shouldn't have done this earlier.
I need to cut back on the lastfew months of the year.
It's kind of like when you'vegot a lease on a car and you've
got X amount of miles and you'reon year three and you're like,
oh man, we're getting real closeto that limit.
Mark (02:59):
Here comes the bus.
Evan (03:00):
It's time for Uber for a little while.
So the surcharge I did mention,there are two separate ones.
You pay more for Part Bdirectly to Medicare and for
Part D, you still pay your basepremium to your insurer, but the
IRMAA surcharge is paidseparately to the government.
Another interestingconsideration is that IRMAA
(03:22):
thresholds used to adjust forinflation, but some were frozen
for years and the highest incometier won't adjust until at
least 2028, so making strategicincome planning even more
important than ever, because youknow, once 2028 comes, if
you're in those higher tiers,you are going to pay more
regardless.
So again, I want to review.
The 2025 IRMAA is based on yourmodified adjusted gross income
from 2023, always two yearsprior.
(03:43):
Medicare Part B 2025 standardmonthly premium is $185 per
month.
That's a 5.9% increase from theyear prior and, it's safe to
say, most years it goes up,although we did have a drop a
couple of years back, if yourecall.
Mark (04:01):
Yep, yep, due to.
Without getting into the weeds,they look at the overall cost
of the Medicare program,specifically Part B, and then
they kind of take some kind ofan average across everyone
that's on it, and there was somedrug that came off this really
expensive list dropped down toreally, really cheap, and so
many people were on it.
It actually caused cost to godown a little bit that year.
So nobody got an increase.
(04:21):
I don't think they got adecrease, though.
Does it ever go backwards?
I don't think so.
I don't think so, but at leastnot an increase.
But it's just another one ofthose hidden taxes that it seems
like we find a new one everyweek.
We teach a great tax class andit's getting longer every time
we teach it because we findsomething.
We call them stealth taxes.
(04:42):
This is one of those stealthtaxes that, unless it bites you,
you don't realize it and it'sprobably, I'd say I don't know
what the percentage is, but itwill bite a lot of folks,
especially that first year ortwo of retirement.
So got to be aware of it.
There's not much you can doabout it, that first year or two
if you were making great incomeand now you're making less.
(05:05):
But it can get, as you'll say injust a minute, significantly
higher.
Evan (05:06):
Yeah, absolutely, We'll look at the table and some
specific bracket changes, butagain, the standard monthly
premium being $185 per month Perperson, per person, right.
So if you're a couple, considerthat the brackets can increase
Part B monthly premiums by asmuch as $443.90.
When you add in Part D, whichcan be a surcharge, up to an
(05:26):
additional $85, you're breaking$500 a month extra per person
within the couple Over $1,000 amonth.
Mark (05:34):
That is so ridiculous.
And hey, I understand ifsomebody's making Warren Buffett
money, or even $400,000 or$500,000.
But you've got folks that arenot making that much money but
yet they can trigger that againand, because it's a surprise, it
hurts for at least a year ortwo right and we're going to
discuss a little bit more tooabout income planning.
Evan (05:55):
But the majority of your tax bracket in retirement, the
majority of the growth or theheightened bracket of that, is
because most of us are gettingour income from tax deferred
accounts.
So we're building up that taxbracket just to make our ends
meet per month.
So we're seeing that IRMAAaffected there.
So Medicare recipients willface higher Part B and D monthly
(06:19):
premiums in 2025 due to IRMAAif they reported a 2023 income
of $106,000 on an individual taxreturn or joint $212,000.
Now, joint, that doesn't soundlike it does sound like a lot of
money, but it really doesn'ttake long to get there,
especially if you're looking atsome bigger movements, maybe in
(06:42):
that year, like I said, sellinga house rental property business
, something like that.
Mark (06:47):
And you got a couple working and they both retire at
the same time and they were bothexecutive level type of incomes
200,000 plus, not that much.
Then we had a couple of clientsthat got like a lump sum payout
bonus at retirement.
That was another $25,000,$50,000, whatever it may be.
And you say, yeah, I'd love tohave that.
Yeah, I would too.
(07:08):
But it also, you know, withevery action comes a what equal
and opposite reaction.
That's right.
Or maybe a better way to put itis with every action comes a
tax, right, right, so it's just.
It just piles on top ofeverything else and again, what
you don't know, like you saidearlier, can hurt you.
And that's why we try to coverevery aspect of every client we
(07:29):
work with.
We don't want surprises.
Now maybe we're willing toaccept it for a year or two, but
if we know it's coming, we canplan for it.
But all of a sudden you getthat Medicare Part B bill and
that Medicare Part D, which isthe drug coverage, and it's a
shock and a surprise.
You may have to take more moneyout of your IRA to plug some
gaps.
Now you've just thrown yourselfinto a deeper hole.
(07:50):
So it's just this compoundingeffect.
Evan (07:53):
So just a couple of numbers.
I did mention individual filers$106,000 or less, joint
$212,000 or less, and that isPart B at $185,000.
And then there's no Part Dsurcharge.
If you go above $106 or above$212, then your Part B jumps
from $185 to $259 per month, andthen you've got an extra $13.70
(08:18):
on that, part D that's bothper-person numbers, that's right
.
That's right Now.
If you're above $133K as asingle filer or above $266K as a
joint filer, then your Part Bhas jumped up to $370K already.
The next tier above $167Ksingle, above $334K joint,
(08:39):
you're up to $480K and $0.90.
And again, joint, let's goahead and double that Above
200,000 for single or 400,000for joint, that's $591 and 90
cents.
And the highest is 500K or morefor single filer and 750K or
more, that's 628 and 90 centsper person.
(09:00):
Now that you know, if you'vegot that much income, then maybe
that's not your biggest deal.
But again, some of these higherbrackets might seem
unattainable but they're reallynot when you look at certain
life events.
Mark (09:12):
Yeah, absolutely.
And you've got to remember too,again, it's going to continue.
Is it at least two years thatwe'll continue?
For that's right.
So that's two years, that'sgoing to continue.
And then if you decide, let'ssay you're in retirement, you
want to start doing some Rothconversions, that Roth
conversion counts right towardthat number.
So you got to be careful howmuch you convert, not just
because of your tax bracket butbecause of our friend Irma,
(09:34):
right?
And so it's just.
Again, it's just multi-prong.
We use the illustrationsometimes of this 500 piece
puzzle, all these pieces comingtogether and either you're
missing one or one doesn't fitright and it messes up the rest
of the puzzle.
It's just, it just compoundsupon each other.
So it's again very importantthat you understand, you know
(09:54):
what's happening.
And, by the way, we're notincluding cost of supplemental,
the supplemental policies whichyou know I don't I've not priced
those lately, but I'm sure theystart probably at maybe $75 to
$100 a person.
Evan (10:06):
Yeah, right To reiterate that surcharge on IRMAA for the
Part D is in addition to whatyou're already paying your
carriers.
Mark (10:14):
So just great information, and information that's so
timely to make sure folks areaware of what's going on.
And again, I know a lot ofpeople try to educate themselves
.
Say I'm prepared for retirement, I've read, I've Googled.
But if you don't know what toGoogle, you don't necessarily
know how to find what theproblem is in your situation.
Evan (10:35):
That's right.
So there are ways to avoidIRMAA.
You can request a waiver Ifyour income is dropped due to a
life-changing event likeretirement, divorce or death of
a spouse.
Just be sure to file formSSA-44 and provide documentation
.
Now that's huge.
A lot of retirees don'tconsider that and so, like you
(10:57):
said, if they're earning asalary and all of a sudden they
go into retirement two yearslater, their big salary toward
probably the highest they'veearned, or at least close to it,
in their life at the end oftheir career, their IRMAA is
going to be based on that incometwo years prior.
So you can request a waiver.
The surcharge, again, isn'tpermanent, as you mentioned.
It's recalculated annually.
If your income comes back down,so can your premiums in future
(11:20):
years.
So here are three differentways to appeal to IRMA.
One, you can request a newinitial determination from
Social Security.
Two, you could submit formSSA-44.
And then, three, call theSocial Security Administration,
that is, if there's anyone leftto answer the phones directly.
Mark (11:41):
Leave a message.
Evan (11:42):
Yeah, and I actually have their number 800-772-1213.
We'll see if that line is stillin existence within a few
months.
I would recommend pursuing allthree.
If an IRMAA appeal is denied,don't panic.
Multiple levels of the appealprocess provide additional
opportunities to make your case.
But lastly, there are someimportant deadlines for
(12:04):
appealing to IRMA.
You're only given 60 days torequest an appeal.
The 60-day clock begins whenyou receive your Part D IRMAA
letter.
The Social SecurityAdministration assumes you will
receive your letter five daysafter it's time stamped.
How do you like that one?
Mark (12:26):
Let's take a look at Social Security and how they're
behind the post office and howthey're behind that's right.
Yeah, good luck with that.
Evan (12:33):
So you are on a time limit .
Do not wait.
Be proactive in this.
If you think that you can getan adjustment to your IRMAA or
have it dropped altogether.
Mark (12:40):
And that's the Part D letter?
Evan (12:45):
Yes, yes, part D, which makes sense because they've got
to go back and forth with theprovider, probably a little bit
as well, but I'm assuming that.
Oh, here's another interestingthing to consider Higher
premiums does not mean bettercoverage, because Irma is a
surcharge that helps fundMedicare, not a ticket to extra
benefits.
Everyone on the same plan getsthe same coverage.
(13:07):
Listen, a financial servicesprofessional can help you plan
ahead, manage incomestrategically and avoid
unnecessary unnecessarysurcharges, thus putting more
control and more money back inyour hands.
Speaking of financialprofessionals, we are retirement
planners.
Folks, go tomasterplanretirecom.
You can schedule yourcomplimentary consultation with
(13:28):
us.
In fact, there's a button youpush on the website that'll take
you directly to our calendar toschedule your complimentary
consultation with us.
We'll run a series of reports,get a 10,000-foot view of your
own retirement.
Where are your strengths, whereare your weaknesses?
Where do you need improvement?
How can we make your money lastyour entire lifetime and create
a holistic retirement plan?
Again, that'smasterplanretiredcom, or call us
(13:51):
at the office, 770-980-9262.
Mark (13:56):
And, by the way, if this IRma discussion has triggered
something in your mind sayingwhat else do I not know?
Right?
So you know this.
This, uh, complimentaryconsultation, uh, we're going to
look at all aspects of what'sgoing on now.
I'm not saying we're going tocreate a plan from day one, but
we will start with exploration.
Uh, talking about yourretirement, your, you know your
situation, things like that, andwe may bring up some items.
(14:17):
Well, this might be somethingwe're going to look at.
This might be something else wewant to look at in your
situation and things like that.
And we may bring up some items.
Well, this might be somethingwe want to look at.
This might be something else wewant to look at in your
situation.
And then we run the reports.
We may even run some extrareports to illustrate some of
these other situations.
Yeah, absolutely so.
It fits you, it fits whereyou're at, what your goals are,
what your worries are, yourconcerns.
So, take advantage of that.
We have many, many people thattake advantage of that every
(14:38):
week and we are delighted to beable to do that for you.
And, as Evan likes to say, evenif you just take those reports,
that knowledge you gain andwalk away.
We're glad we were able to helpyou.
We love new clients but at thesame time we love helping folks
as well.
Evan (14:51):
That's right, yeah, and we really are education first with
our clients in the entireplanning process, but especially
in our prospective clients.
We want them to understand howwe work, why we do the things
that we do, and, especially ifwe're going through a retirement
plan with you, we want you toknow why we're recommending
certain things and so that notonly do you trust us because you
(15:13):
understand it, but you havethat peace of mind for the rest
of your retirement as well.
Mark (15:17):
And that's kind of the purpose of these episodes.
Yeah, Is that education?
What are we looking at?
How does this work?
How does that work?
What are some of the different?
So many different.
Various tools are available foryou for retirement.
Evan (15:33):
All right.
So how do we avoid IRMAA?
So blanket statement loweringyour modified adjusted gross
income is the best way to avoidIRMAA, or at at least to reduce
it.
So there are some key ways todo that.
For example, donatingappreciated assets directly to
charity can avoid capital gainstaxes and, in turn, lower your
(15:54):
modified adjusted gross income.
So this is.
These are appreciated assetslike mutual funds, ETFs, stocks.
Cash does not count.
You can't sell them first,because then you've already
captured that capital gain.
It avoids the capital gainsthat the donor would otherwise
(16:14):
pay if they sold the asset.
Guess what?
?
Q?
s also count qualifiedcharitable distributions from
IRAs up to $100,000 a year.
Mark (16:26):
This may help reduce your current income yeah, I think the
rule is that 70 and a half, 70and a half, you can start, seven
and a half you can do a QCD.
This is basically from an IRAqualified account directly to a
501c charitable ministry,whatever you want to support,
and you can do any amount up toa hundred thousand and you don't
(16:48):
pay taxes on that money comingout.
So you've got some money out ofyour IRA but you've also given
to that charity you love to giveto.
I just had a discussion with aclient a few weeks ago that it
has turned 73, yeah, yeah, 73this year.
So she has to start takingmoney out.
So we talked about that andshe's like well, I give to my
church every month.
I said, well, let's givestraight out of your IRA.
You're not going to pay tax onthat money and it counts towards
(17:10):
your required minimumdistributions and so, just based
on the amount of money she'sgiven, they're probably going to
save $2,000 a year in taxes.
Is that a lot?
It is to me.
And it doesn't count toward, ofcourse, their Medicare Part B
increases and Medicare Part D orIRMA, as we're talking about.
Evan (17:28):
Now this is fine line with every part of this conversation
.
I mean, this is also assumingyou don't need those withdrawals
for income.
But, for example, you gave theexample of donating to a church
tithing.
If you're tithing from yourSocial Security check or your
pension check, consider tithingfrom your IRA instead.
(17:48):
That way you get the tax cut,the tax break there, and just be
a little bit more strategicwith how you're making those
withdrawals.
But if you need those RMDs oryou need those IRA withdrawals,
then you're in a little bit of atighter situation, which is why
planning ahead over time andcreating a strategy is so vital.
Mark (18:07):
Well, and also, as you mentioned earlier, stocks or
whatever that may have a highcapital gains.
We have several clients thathave stocks that they've had for
25, 30 years and their capitalgains maybe they paid $100,000,
they're worth like a million.
They almost can't sell themBecause taxes on a $900,000
profit is huge.
(18:27):
But what about?
Every year you donate some ofthat stock to that charity and
so you don't pay again.
You don't pay capital gainsbecause it's a gift to that
charity.
The charity doesn't pay gainson it when they sell it because
they're a charity.
So again, just so many peopleare not aware of this and when I
tell them they're like theirjaws kind of drop open why
haven't I been doing this?
I said, well, you didn't callus.
Evan (18:49):
Also another interesting consideration if you're still
working and you have earnedincome now, this is age 65 is
when you would start receivingMedicare.
If you're still working andhave earned income, making tax
deductible contributions to aretirement account will reduce
your modified adjusted grossincome, potentially reduce or
avoid IRMAA.
(19:09):
Now, if you're a 65 and you'retrying to reduce IRMA and also
put more money in tax-freeaccounts, but then you're
simultaneously putting into atax-deferred account, that's a
little bit of a balancing act.
Both of these aren't necessarilysaving you.
It's a very niche situation forit to really be a huge benefit,
(19:30):
but again you've got to discussthat with them.
Mark (19:32):
Yeah, I think what we look at in that situation is where
are you at in 10 years and 20years?
Where's the tax rate going tobe?
Where are you going to be?
You know, and so we just haveto be careful.
And are you expecting maybe abig inheritance in the future?
You know that may add to yourtaxes in the future.
If you inherit an IRA, you know, from a mom, a dad, an uncle or
(19:55):
whatever, then you're requiredto take money out of that over a
10-year period.
So if that's coming, maybe wewant more.
We're willing to give up sometax savings here to get more
money into Roths so we have lessof an issue there.
I mean, it's just thiscascading, you knowading type of
situation as we allude to a lot.
Maybe it's a great time to talkto your parents about getting
some of that money out of thatIRA into a Roth, or send your
(20:16):
parents to see us.
Evan (20:17):
We've got some other episodes.
We have not even gotten intothe conversation of why tax
diversity is so important today,but you need tax diversity.
As Mark likes to say, taxes arecurrently on sale, meaning they
are historically low.
Whether it feels like they areor not, our tax system is at a
historical low bracket, or allthe brackets are historically
low, excuse me.
(20:37):
Conversions are huge right nowand again.
We love them, but processingRoth conversions before Medicare
coverage begins and or duringgap years, which is between
retirement age and your RMD ageyou've got to have a tax
strategy on how to do thatappropriately.
If you can, the earlier youstart the better.
If it can be before age 65,then do it.
(20:58):
Even if you know you're hittingthat two-year window of when
Irma will hit at 65, it's stillworth it to start ahead of time,
strategically, incrementally,because we need that tax and
birth certificate.
Mark (21:10):
And again you can go back and file a waiver.
You know, try to get that.
But I think that's why it's socritical between ages of 59 and
a half and 64 of really beingaggressive in Roth conversions,
because you're still not onMedicare, but at 59 and a half
and 99% of the cases, you canroll over most or all of your
(21:31):
account at work, even if youhaven't left into an IRA, which
makes it convertible.
Now, typically, a 401k is notconvertible to a Roth.
You have to get into an IRAfirst.
So now we've got it in an IRA,we've got a multitude of
different investments to look atwhich your 401k does not.
But more importantly, or justas importantly, it gives us that
(21:53):
window of between I don't knowthree and a half to four and a
half years to be more aggressiveon the Roth conversion.
So and if you've retired by 59and a half, it's even better
because your income may be alittle bit lower, right, so you
could do maybe even be moreaggressive.
So again, it's all a timing,it's a strategic decision, it's
communication with our clientsto see where they're comfortable
from a tax standpoint.
Evan (22:14):
We talk about tax loss, harvesting a lot when you've got
an account that's down, maybesell it while it's down, so
you're minimizing your capitalgains taxes.
But another concept is theexact opposite of that tax gain
harvesting, realizing gains anddeliberately paying taxes now,
while the taxes are low.
Mark (22:31):
Yeah, and that's again.
That's something else to lookat.
Capital gains are certainly low.
They've talked about makingcapital gains rates equal to
whatever bracket you're in, sothat could greatly increase it.
It's also important this isreally another subject but if
you have something that has alot of gains in it, if you will
pass that on to beneficiariesthrough a will or a trust as
(22:52):
opposed to gifting it, then theyget a big tax break.
They don't pay capital gains onthat item.
So, again, estate planningcomes into it as well, that's
right, Absolutely so.
Evan (23:03):
Like your personal situation, folks, tax laws can
and do change, potentiallyleading to new ways to reduce
taxable income and avoid IRMAFor your situation.
Every situation is unique untoitself and please seek a
retirement planner to helpcreate a holistic plan for your
own retirement.
Mark (23:22):
Yeah, and I love just what you said.
It does change.
We talk about how tax laws arewritten in pencil, and so every
two years there's somebody newin Washington, right, there's a
presidential election every fouryears.
The House is every two, theSenate's every six.
New people in the power shiftsfrom one side of the House to
one side of the Congress to theother.
Always changes, so you reallyhave to keep an eye on things
(23:44):
Again.
That's why our retirementroadmap is not static.
It is a living, breathingdocument, so to speak.
So we appreciate you being withus today.
I hope this is helpful.
I hope Irma triggered something.
Hey, I didn't know that.
I need more help If you do,masterplanretirecom, and until
we see each other again, planwell and prosper, take care.
Speaker 3 (24:05):
This was Retirement Roadmap Radio with Mark Fricks
of Master Plan RetirementConsultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
Thanks for listening andremember plan well and prosper.
Who the heck is Irma and why is she so mean?
Hi folks, welcome back toRetirement Roadmap with Master
Plan Retirement Consultants.
My name is Evan.
With me, as always, retirementplanner Mark Fricks.
No, it's not your great auntvisiting from out of town.
During the show, we're going todiscuss Medicare's surcharge,
the income-related monthlyadjustment amount, otherwise
(00:29):
known as IRMAA, as well asMedicare changes that may be
coming in 2026.
IRMAA Mark is an income-basedMedicare surcharge that kicks in
if your income from two yearsago crosses a certain threshold.
2025 premiums, for example, arebased on 2023 income.
(00:50):
Why is this important?
Mark (00:51):
Well, a couple of things.
Number one is when you leave acompany.
I would bet two years ago youmade pretty good money and now
you're retired, but you're goingto pay a significant amount
more for your Medicare.
Evan (01:03):
Part B.
That's right.
We're going to get into a lotof details about IRMAA, what to
look out for things to consider,especially as you start to
think about your retirementplanning, Because we know
there's a lot of retirementstrategies that are going to
fluctuate your income in a yearand that can directly influence
how much you're paying in IRMAA.
And we'll look at the table alittle bit as well and see okay,
(01:23):
how much does it jump,depending on what your income
level is?
Mark (01:27):
And the sad thing is there's so few advisors out
there that say they're plannersand say they're retirement
planners, that don't evenrealize that exist, and all of a
sudden they trigger these bigpremiums for one, two, three
years and the clients are likewhy'd this happen?
And the advisor's like I don'tknow, and it just yeah.
That's why you've really got tomake sure you work with a
retirement planner thatunderstands all the aspects.
Evan (01:49):
That's right.
Even a one-time income spike,like selling a business or doing
a Roth conversion that cantrigger IRMAA, lead to
significantly higher monthlypremiums for both Part B and
Part D.
And, like you said, I meanwe've got to consider that we're
huge proponents.
We've talked about taxstrategies a lot on this show.
(02:10):
We're huge proponents of Rothconversions.
They're super important, buttiming and strategy is just as
important as getting that moneyto tax-free accounts, especially
when you don't realize theareas that you could be
affecting.
Like you like to say, what youdon't know is going to hurt you.
Mark (02:22):
Well, and that's why you can't put it on, set it and
forget it, right?
Right, because every year isdifferent, like you just
mentioned a minute ago, and soyou have to look at every year
in its own tax year, right, whatI've taken out, what I'm going
to need to take out, and that'swhy I prefer looking at the tax
strategies toward the end of theyear.
We kind of know what you'vespent, things like that, but
it's not a have to thing, but itcan certainly help.
Evan (02:43):
Well, it's better to look at the end of the year,
especially if you're lookingbackwards and being like, oh, I
shouldn't have done this earlier.
I need to cut back on the lastfew months of the year.
It's kind of like when you'vegot a lease on a car and you've
got X amount of miles and you'reon year three and you're like,
oh man, we're getting real closeto that limit.
Mark (02:59):
Here comes the bus.
Evan (03:00):
It's time for Uber for a little while.
So the surcharge I did mention,there are two separate ones.
You pay more for Part Bdirectly to Medicare and for
Part D, you still pay your basepremium to your insurer, but the
IRMAA surcharge is paidseparately to the government.
Another interestingconsideration is that IRMAA
(03:22):
thresholds used to adjust forinflation, but some were frozen
for years and the highest incometier won't adjust until at
least 2028, so making strategicincome planning even more
important than ever, because youknow, once 2028 comes, if
you're in those higher tiers,you are going to pay more
regardless.
So again, I want to review.
The 2025 IRMAA is based on yourmodified adjusted gross income
from 2023, always two yearsprior.
(03:43):
Medicare Part B 2025 standardmonthly premium is $185 per
month.
That's a 5.9% increase from theyear prior and, it's safe to
say, most years it goes up,although we did have a drop a
couple of years back, if yourecall.
Mark (04:01):
Yep, yep, due to.
Without getting into the weeds,they look at the overall cost
of the Medicare program,specifically Part B, and then
they kind of take some kind ofan average across everyone
that's on it, and there was somedrug that came off this really
expensive list dropped down toreally, really cheap, and so
many people were on it.
It actually caused cost to godown a little bit that year.
So nobody got an increase.
(04:21):
I don't think they got adecrease, though.
Does it ever go backwards?
I don't think so.
I don't think so, but at leastnot an increase.
But it's just another one ofthose hidden taxes that it seems
like we find a new one everyweek.
We teach a great tax class andit's getting longer every time
we teach it because we findsomething.
We call them stealth taxes.
(04:42):
This is one of those stealthtaxes that, unless it bites you,
you don't realize it and it'sprobably, I'd say I don't know
what the percentage is, but itwill bite a lot of folks,
especially that first year ortwo of retirement.
So got to be aware of it.
There's not much you can doabout it, that first year or two
if you were making great incomeand now you're making less.
(05:05):
But it can get, as you'll say injust a minute, significantly
higher.
Evan (05:06):
Yeah, absolutely, We'll look at the table and some
specific bracket changes, butagain, the standard monthly
premium being $185 per month Perperson, per person, right.
So if you're a couple, considerthat the brackets can increase
Part B monthly premiums by asmuch as $443.90.
When you add in Part D, whichcan be a surcharge, up to an
(05:26):
additional $85, you're breaking$500 a month extra per person
within the couple Over $1,000 amonth.
Mark (05:34):
That is so ridiculous.
And hey, I understand ifsomebody's making Warren Buffett
money, or even $400,000 or$500,000.
But you've got folks that arenot making that much money but
yet they can trigger that againand, because it's a surprise, it
hurts for at least a year ortwo right and we're going to
discuss a little bit more tooabout income planning.
Evan (05:55):
But the majority of your tax bracket in retirement, the
majority of the growth or theheightened bracket of that, is
because most of us are gettingour income from tax deferred
accounts.
So we're building up that taxbracket just to make our ends
meet per month.
So we're seeing that IRMAAaffected there.
So Medicare recipients willface higher Part B and D monthly
(06:19):
premiums in 2025 due to IRMAAif they reported a 2023 income
of $106,000 on an individual taxreturn or joint $212,000.
Now, joint, that doesn't soundlike it does sound like a lot of
money, but it really doesn'ttake long to get there,
especially if you're looking atsome bigger movements, maybe in
(06:42):
that year, like I said, sellinga house rental property business
, something like that.
Mark (06:47):
And you got a couple working and they both retire at
the same time and they were bothexecutive level type of incomes
200,000 plus, not that much.
Then we had a couple of clientsthat got like a lump sum payout
bonus at retirement.
That was another $25,000,$50,000, whatever it may be.
And you say, yeah, I'd love tohave that.
Yeah, I would too.
(07:08):
But it also, you know, withevery action comes a what equal
and opposite reaction.
That's right.
Or maybe a better way to put itis with every action comes a
tax, right, right, so it's just.
It just piles on top ofeverything else and again, what
you don't know, like you saidearlier, can hurt you.
And that's why we try to coverevery aspect of every client we
(07:29):
work with.
We don't want surprises.
Now maybe we're willing toaccept it for a year or two, but
if we know it's coming, we canplan for it.
But all of a sudden you getthat Medicare Part B bill and
that Medicare Part D, which isthe drug coverage, and it's a
shock and a surprise.
You may have to take more moneyout of your IRA to plug some
gaps.
Now you've just thrown yourselfinto a deeper hole.
(07:50):
So it's just this compoundingeffect.
Evan (07:53):
So just a couple of numbers.
I did mention individual filers$106,000 or less, joint
$212,000 or less, and that isPart B at $185,000.
And then there's no Part Dsurcharge.
If you go above $106 or above$212, then your Part B jumps
from $185 to $259 per month, andthen you've got an extra $13.70
(08:18):
on that, part D that's bothper-person numbers, that's right
.
That's right Now.
If you're above $133K as asingle filer or above $266K as a
joint filer, then your Part Bhas jumped up to $370K already.
The next tier above $167Ksingle, above $334K joint,
(08:39):
you're up to $480K and $0.90.
And again, joint, let's goahead and double that Above
200,000 for single or 400,000for joint, that's $591 and 90
cents.
And the highest is 500K or morefor single filer and 750K or
more, that's 628 and 90 centsper person.
(09:00):
Now that you know, if you'vegot that much income, then maybe
that's not your biggest deal.
But again, some of these higherbrackets might seem
unattainable but they're reallynot when you look at certain
life events.
Mark (09:12):
Yeah, absolutely.
And you've got to remember too,again, it's going to continue.
Is it at least two years thatwe'll continue?
For that's right.
So that's two years, that'sgoing to continue.
And then if you decide, let'ssay you're in retirement, you
want to start doing some Rothconversions, that Roth
conversion counts right towardthat number.
So you got to be careful howmuch you convert, not just
because of your tax bracket butbecause of our friend Irma,
(09:34):
right?
And so it's just.
Again, it's just multi-prong.
We use the illustrationsometimes of this 500 piece
puzzle, all these pieces comingtogether and either you're
missing one or one doesn't fitright and it messes up the rest
of the puzzle.
It's just, it just compoundsupon each other.
So it's again very importantthat you understand, you know
(09:54):
what's happening.
And, by the way, we're notincluding cost of supplemental,
the supplemental policies whichyou know I don't I've not priced
those lately, but I'm sure theystart probably at maybe $75 to
$100 a person.
Evan (10:06):
Yeah, right To reiterate that surcharge on IRMAA for the
Part D is in addition to whatyou're already paying your
carriers.
Mark (10:14):
So just great information, and information that's so
timely to make sure folks areaware of what's going on.
And again, I know a lot ofpeople try to educate themselves
.
Say I'm prepared for retirement, I've read, I've Googled.
But if you don't know what toGoogle, you don't necessarily
know how to find what theproblem is in your situation.
Evan (10:35):
That's right.
So there are ways to avoidIRMAA.
You can request a waiver Ifyour income is dropped due to a
life-changing event likeretirement, divorce or death of
a spouse.
Just be sure to file formSSA-44 and provide documentation
.
Now that's huge.
A lot of retirees don'tconsider that and so, like you
(10:57):
said, if they're earning asalary and all of a sudden they
go into retirement two yearslater, their big salary toward
probably the highest they'veearned, or at least close to it,
in their life at the end oftheir career, their IRMAA is
going to be based on that incometwo years prior.
So you can request a waiver.
The surcharge, again, isn'tpermanent, as you mentioned.
It's recalculated annually.
If your income comes back down,so can your premiums in future
(11:20):
years.
So here are three differentways to appeal to IRMA.
One, you can request a newinitial determination from
Social Security.
Two, you could submit formSSA-44.
And then, three, call theSocial Security Administration,
that is, if there's anyone leftto answer the phones directly.
Mark (11:41):
Leave a message.
Evan (11:42):
Yeah, and I actually have their number 800-772-1213.
We'll see if that line is stillin existence within a few
months.
I would recommend pursuing allthree.
If an IRMAA appeal is denied,don't panic.
Multiple levels of the appealprocess provide additional
opportunities to make your case.
But lastly, there are someimportant deadlines for
(12:04):
appealing to IRMA.
You're only given 60 days torequest an appeal.
The 60-day clock begins whenyou receive your Part D IRMAA
letter.
The Social SecurityAdministration assumes you will
receive your letter five daysafter it's time stamped.
How do you like that one?
Mark (12:26):
Let's take a look at Social Security and how they're
behind the post office and howthey're behind that's right.
Yeah, good luck with that.
Evan (12:33):
So you are on a time limit .
Do not wait.
Be proactive in this.
If you think that you can getan adjustment to your IRMAA or
have it dropped altogether.
Mark (12:40):
And that's the Part D letter?
Evan (12:45):
Yes, yes, part D, which makes sense because they've got
to go back and forth with theprovider, probably a little bit
as well, but I'm assuming that.
Oh, here's another interestingthing to consider Higher
premiums does not mean bettercoverage, because Irma is a
surcharge that helps fundMedicare, not a ticket to extra
benefits.
Everyone on the same plan getsthe same coverage.
(13:07):
Listen, a financial servicesprofessional can help you plan
ahead, manage incomestrategically and avoid
unnecessary unnecessarysurcharges, thus putting more
control and more money back inyour hands.
Speaking of financialprofessionals, we are retirement
planners.
Folks, go tomasterplanretirecom.
You can schedule yourcomplimentary consultation with
(13:28):
us.
In fact, there's a button youpush on the website that'll take
you directly to our calendar toschedule your complimentary
consultation with us.
We'll run a series of reports,get a 10,000-foot view of your
own retirement.
Where are your strengths, whereare your weaknesses?
Where do you need improvement?
How can we make your money lastyour entire lifetime and create
a holistic retirement plan?
Again, that'smasterplanretiredcom, or call us
(13:51):
at the office, 770-980-9262.
Mark (13:56):
And, by the way, if this IRma discussion has triggered
something in your mind sayingwhat else do I not know?
Right?
So you know this.
This, uh, complimentaryconsultation, uh, we're going to
look at all aspects of what'sgoing on now.
I'm not saying we're going tocreate a plan from day one, but
we will start with exploration.
Uh, talking about yourretirement, your, you know your
situation, things like that, andwe may bring up some items.
(14:17):
Well, this might be somethingwe're going to look at.
This might be something else wewant to look at in your
situation and things like that.
And we may bring up some items.
Well, this might be somethingwe want to look at.
This might be something else wewant to look at in your
situation.
And then we run the reports.
We may even run some extrareports to illustrate some of
these other situations.
Yeah, absolutely so.
It fits you, it fits whereyou're at, what your goals are,
what your worries are, yourconcerns.
So, take advantage of that.
We have many, many people thattake advantage of that every
(14:38):
week and we are delighted to beable to do that for you.
And, as Evan likes to say, evenif you just take those reports,
that knowledge you gain andwalk away.
We're glad we were able to helpyou.
We love new clients but at thesame time we love helping folks
as well.
Evan (14:51):
That's right, yeah, and we really are education first with
our clients in the entireplanning process, but especially
in our prospective clients.
We want them to understand howwe work, why we do the things
that we do, and, especially ifwe're going through a retirement
plan with you, we want you toknow why we're recommending
certain things and so that notonly do you trust us because you
(15:13):
understand it, but you havethat peace of mind for the rest
of your retirement as well.
Mark (15:17):
And that's kind of the purpose of these episodes.
Yeah, Is that education?
What are we looking at?
How does this work?
How does that work?
What are some of the different?
So many different.
Various tools are available foryou for retirement.
Evan (15:33):
All right.
So how do we avoid IRMAA?
So blanket statement loweringyour modified adjusted gross
income is the best way to avoidIRMAA, or at at least to reduce
it.
So there are some key ways todo that.
For example, donatingappreciated assets directly to
charity can avoid capital gainstaxes and, in turn, lower your
(15:54):
modified adjusted gross income.
So this is.
These are appreciated assetslike mutual funds, ETFs, stocks.
Cash does not count.
You can't sell them first,because then you've already
captured that capital gain.
It avoids the capital gainsthat the donor would otherwise
(16:14):
pay if they sold the asset.
Guess what?
?
Q?
s also count qualifiedcharitable distributions from
IRAs up to $100,000 a year.
Mark (16:26):
This may help reduce your current income yeah, I think the
rule is that 70 and a half, 70and a half, you can start, seven
and a half you can do a QCD.
This is basically from an IRAqualified account directly to a
501c charitable ministry,whatever you want to support,
and you can do any amount up toa hundred thousand and you don't
(16:48):
pay taxes on that money comingout.
So you've got some money out ofyour IRA but you've also given
to that charity you love to giveto.
I just had a discussion with aclient a few weeks ago that it
has turned 73, yeah, yeah, 73this year.
So she has to start takingmoney out.
So we talked about that andshe's like well, I give to my
church every month.
I said, well, let's givestraight out of your IRA.
You're not going to pay tax onthat money and it counts towards
(17:10):
your required minimumdistributions and so, just based
on the amount of money she'sgiven, they're probably going to
save $2,000 a year in taxes.
Is that a lot?
It is to me.
And it doesn't count toward, ofcourse, their Medicare Part B
increases and Medicare Part D orIRMA, as we're talking about.
Evan (17:28):
Now this is fine line with every part of this conversation
.
I mean, this is also assumingyou don't need those withdrawals
for income.
But, for example, you gave theexample of donating to a church
tithing.
If you're tithing from yourSocial Security check or your
pension check, consider tithingfrom your IRA instead.
(17:48):
That way you get the tax cut,the tax break there, and just be
a little bit more strategicwith how you're making those
withdrawals.
But if you need those RMDs oryou need those IRA withdrawals,
then you're in a little bit of atighter situation, which is why
planning ahead over time andcreating a strategy is so vital.
Mark (18:07):
Well, and also, as you mentioned earlier, stocks or
whatever that may have a highcapital gains.
We have several clients thathave stocks that they've had for
25, 30 years and their capitalgains maybe they paid $100,000,
they're worth like a million.
They almost can't sell themBecause taxes on a $900,000
profit is huge.
(18:27):
But what about?
Every year you donate some ofthat stock to that charity and
so you don't pay again.
You don't pay capital gainsbecause it's a gift to that
charity.
The charity doesn't pay gainson it when they sell it because
they're a charity.
So again, just so many peopleare not aware of this and when I
tell them they're like theirjaws kind of drop open why
haven't I been doing this?
I said, well, you didn't callus.
Evan (18:49):
Also another interesting consideration if you're still
working and you have earnedincome now, this is age 65 is
when you would start receivingMedicare.
If you're still working andhave earned income, making tax
deductible contributions to aretirement account will reduce
your modified adjusted grossincome, potentially reduce or
avoid IRMAA.
(19:09):
Now, if you're a 65 and you'retrying to reduce IRMA and also
put more money in tax-freeaccounts, but then you're
simultaneously putting into atax-deferred account, that's a
little bit of a balancing act.
Both of these aren't necessarilysaving you.
It's a very niche situation forit to really be a huge benefit,
(19:30):
but again you've got to discussthat with them.
Mark (19:32):
Yeah, I think what we look at in that situation is where
are you at in 10 years and 20years?
Where's the tax rate going tobe?
Where are you going to be?
You know, and so we just haveto be careful.
And are you expecting maybe abig inheritance in the future?
You know that may add to yourtaxes in the future.
If you inherit an IRA, you know, from a mom, a dad, an uncle or
(19:55):
whatever, then you're requiredto take money out of that over a
10-year period.
So if that's coming, maybe wewant more.
We're willing to give up sometax savings here to get more
money into Roths so we have lessof an issue there.
I mean, it's just thiscascading, you knowading type of
situation as we allude to a lot.
Maybe it's a great time to talkto your parents about getting
some of that money out of thatIRA into a Roth, or send your
(20:16):
parents to see us.
Evan (20:17):
We've got some other episodes.
We have not even gotten intothe conversation of why tax
diversity is so important today,but you need tax diversity.
As Mark likes to say, taxes arecurrently on sale, meaning they
are historically low.
Whether it feels like they areor not, our tax system is at a
historical low bracket, or allthe brackets are historically
low, excuse me.
(20:37):
Conversions are huge right nowand again.
We love them, but processingRoth conversions before Medicare
coverage begins and or duringgap years, which is between
retirement age and your RMD ageyou've got to have a tax
strategy on how to do thatappropriately.
If you can, the earlier youstart the better.
If it can be before age 65,then do it.
(20:58):
Even if you know you're hittingthat two-year window of when
Irma will hit at 65, it's stillworth it to start ahead of time,
strategically, incrementally,because we need that tax and
birth certificate.
Mark (21:10):
And again you can go back and file a waiver.
You know, try to get that.
But I think that's why it's socritical between ages of 59 and
a half and 64 of really beingaggressive in Roth conversions,
because you're still not onMedicare, but at 59 and a half
and 99% of the cases, you canroll over most or all of your
(21:31):
account at work, even if youhaven't left into an IRA, which
makes it convertible.
Now, typically, a 401k is notconvertible to a Roth.
You have to get into an IRAfirst.
So now we've got it in an IRA,we've got a multitude of
different investments to look atwhich your 401k does not.
But more importantly, or justas importantly, it gives us that
(21:53):
window of between I don't knowthree and a half to four and a
half years to be more aggressiveon the Roth conversion.
So and if you've retired by 59and a half, it's even better
because your income may be alittle bit lower, right, so you
could do maybe even be moreaggressive.
So again, it's all a timing,it's a strategic decision, it's
communication with our clientsto see where they're comfortable
from a tax standpoint.
Evan (22:14):
We talk about tax loss, harvesting a lot when you've got
an account that's down, maybesell it while it's down, so
you're minimizing your capitalgains taxes.
But another concept is theexact opposite of that tax gain
harvesting, realizing gains anddeliberately paying taxes now,
while the taxes are low.
Mark (22:31):
Yeah, and that's again.
That's something else to lookat.
Capital gains are certainly low.
They've talked about makingcapital gains rates equal to
whatever bracket you're in, sothat could greatly increase it.
It's also important this isreally another subject but if
you have something that has alot of gains in it, if you will
pass that on to beneficiariesthrough a will or a trust as
(22:52):
opposed to gifting it, then theyget a big tax break.
They don't pay capital gains onthat item.
So, again, estate planningcomes into it as well, that's
right, Absolutely so.
Evan (23:03):
Like your personal situation, folks, tax laws can
and do change, potentiallyleading to new ways to reduce
taxable income and avoid IRMAFor your situation.
Every situation is unique untoitself and please seek a
retirement planner to helpcreate a holistic plan for your
own retirement.
Mark (23:22):
Yeah, and I love just what you said.
It does change.
We talk about how tax laws arewritten in pencil, and so every
two years there's somebody newin Washington, right, there's a
presidential election every fouryears.
The House is every two, theSenate's every six.
New people in the power shiftsfrom one side of the House to
one side of the Congress to theother.
Always changes, so you reallyhave to keep an eye on things
(23:44):
Again.
That's why our retirementroadmap is not static.
It is a living, breathingdocument, so to speak.
So we appreciate you being withus today.
I hope this is helpful.
I hope Irma triggered something.
Hey, I didn't know that.
I need more help If you do,masterplanretirecom, and until
we see each other again, planwell and prosper, take care.
Speaker 3 (24:05):
This was Retirement Roadmap Radio with Mark Fricks
of Master Plan RetirementConsultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
Thanks for listening andremember plan well and prosper.
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