{"id":733,"date":"2021-09-10T08:03:22","date_gmt":"2021-09-10T14:03:22","guid":{"rendered":"http:\/\/gpswp.com\/ursadvisory\/?p=733"},"modified":"2021-09-10T08:06:17","modified_gmt":"2021-09-10T14:06:17","slug":"how-to-steer-clear-of-medicares-irmaa-tax-cliff-and-save-thousands-in-retirement","status":"publish","type":"post","link":"https:\/\/gpswp.com\/ursadvisory\/how-to-steer-clear-of-medicares-irmaa-tax-cliff-and-save-thousands-in-retirement\/","title":{"rendered":"How to Steer Clear of Medicare\u2019s IRMAA Tax Cliff and Save Thousands in Retirement"},"content":{"rendered":"\n
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Chances are you haven\u2019t looked very closely at your Medicare premium notice from last year, but if it included an IRMAA adjustment and you experienced a life-changing event, you might want to look at it again. Why? To avoid the IRMAA tax cliff and save thousands of dollars in Medicare premiums. But, truly, the time to start planning to avoid the tax should begin a few years before you become Medicare-eligible at age 65.<\/p>\n\n\n\n

Beware of the IRMAA Bump!<\/strong><\/p>\n\n\n\n

Typically, the subject of Medicare doesn\u2019t appear on anyone\u2019s radar until they enter the age 65 orbit. But, since the Income Related Monthly Adjustment Amount, known as IRMAA<\/a>, was instituted in 2007, it is crucial you begin thinking about it before you turn 63. That\u2019s because Medicare premiums that start at age 65 are based on your Modified Adjusted Gross Income<\/a> (MAGI)[i]<\/a> from two years prior<\/em><\/strong>. If you land in one of the higher tax brackets during that time, you could pay extra Medicare Part B[ii]<\/a> premiums to the tune of more than $4,000. <\/p>\n\n\n\n

If, at age 63, your adjusted gross income (AGI) is $88,000 or less for a single filer or $176,000 as a joint filer, you will pay the baseline Medicare Part B premium of $148.50 per person per month. But, if your income sneaks above those levels by just one dollar<\/em><\/strong>, your premiums will increase significantly. As the table below illustrates, the premium increases can be very steep. Note, the table does not include the Medicare Part D (prescriptions) IRMAA, added in 2010 as part of the Affordable Care Act.[iii]<\/a><\/p>\n\n\n\n

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Source: Centers for Medicare & Medicaid Services (CMS)<\/a><\/p>\n\n\n\n

Keeping in mind that the IRMAA assessment is based on a two-year lookback, at some point your income may fall within the lower brackets, triggering a premium reduction. In the meantime, the IRMAA tax could cost you thousands of dollars. However, with proper planning done well before you become Medicare eligible, it can be mitigated or even avoided entirely. <\/p>\n\n\n\n

Planning for IRMAA<\/strong><\/p>\n\n\n\n

If you have more than two years to plan for your initial IRMAA assessment\u2014which is issued when you first sign up for Medicare and then reissued every November\u2014there are a number of strategies to consider with regard to shifting or reducing your MAGI (which includes taxable Social Security<\/a> benefits and tax-exempt income), including:<\/p>\n\n\n\n