Navigating Medicare IRMAA: Strategies to Minimize Your Medicare Premiums

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You turn 65 and begin Medicare insurance. Looking at the monthly cost and think that is not so bad. You can easily look up how much your payment is going to be for your Part B and Part D. You may need to minimize your Medicare premiums. Medicare may cost you a lot more than you imagined!

Minimize Your Medicare Premiums

Welcome an unfriendly additional premium called IRMAA or income-related monthly adjustment amount. Basically, the more you make, the more you pay. Medicare looks back at your income two years ago to determine the price you will pay for parts B and D.  So income in the year you were 63 determines how much more you will pay when you are 65. The calculation is based on your modified adjusted gross income or MAGI. So, what income counts for MAGI? Almost everything counts, including tax-free municipal bond income.

If you have MAGI that is as little as $1 over the threshold limit, then you must pay the full adjustment. There are actually five different levels of income with five different levels of additional premium. The levels differ with single or jointly filed tax returns. At the most punitive level of income, an additional $419.30 for Part B and $81 for Part D must be paid per month per individual!

How to Avoid Additional Premiums

Consider Roth Conversions, Qualified Charitable Distributions, and controlling your dividend and interest income to avoid IRMAA adjustments.

Qualified Roth withdrawals are tax-free and do not count toward MAGI for Medicare purposes. So consider Roth conversions now!

Qualified Charitable Distributions or QCDs allow each IRA owner to donate from their IRA straight to charities with a limit of $105,000 per year. The IRA owner must be at least 70.5 years of age at the time of the QCD. So, you might consider a QCD if a Required Minimum Distribution pushes you over the MAGI limit. You should consider making a QCD from your IRA if you are over age 70.5 and are giving to charities, including your church. This donation is probably not tax deductible if you claim the standard deduction on your tax return.

Control your dividend and interest income in after-tax accounts. Perhaps use asset location to put your more interest- and dividend-producing investments in your tax-deferred accounts, thereby limiting your taxable dividends and interest.

If you have any specific questions about limiting the impact of IRMAA penalties on your Medicare premiums, call or email us at 940-464-4104.

You also can download our free guide: Navigating Healthcare Taxes in 5 Easy Steps.

Financial Success Doesn’t Happen by Chance

 Contact lead advisor Chris Robinson, ChFC, at our office, 940-464-4104, to schedule a time to discuss your IRMAA and other IRA questions.

RFG Wealth Advisory in Argyle, Texas, is an independent, fee-only Registered Investment Advisor firm that always puts our client’s interests first. We have a transparent, simple fee structure that’s easy to understand. Call us today!

Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.


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