The Income-Related Monthly Adjustment Amount (IRMAA) can significantly impact Medicare costs for higher-income beneficiaries. For that reason, it’s crucial to understand how this adjustment works, as it directly influences Medicare Part B and Part D premiums. By familiarizing yourself with the mechanisms behind IRMAA and its income brackets, you can effectively manage your healthcare expenses. It may sound daunting, but implementing a strategic plan can help minimize the impact of IRMAA and prevent unexpected increases in your Medicare premiums.
What is IRMAA?
Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge on top of the standard Medicare Part B and Part D premiums for individuals with higher modified adjusted gross incomes (MAGI). This adjustment is mandated by sections 1839(i) and 1860D-13(i) of the Social Security Act, so it’s unfortunately unavoidable. The premiums are based on a sliding scale that adjusts according to your income bracket and tax filing status.
IRMAA and Tax Filing Status
The IRMAA tables categorize beneficiaries based on three filing statuses:
- Single, head-of-household, or qualifying surviving spouse with a dependent child.
- Married filing jointly.
- Married filing separately.
Each category has specific income brackets that determine the premium adjustments. For example, in 2024, singles with incomes up to $103,000 pay a standard monthly premium of $174.70 for Part B, while married couples filing jointly with incomes up to $206,000 enjoy the same rate.
Here’s a breakdown of the tax brackets for 2024 based on filing status:
Single Taxpayers:
- 10% for incomes of $11,600 or less
- 12% for incomes over $11,600 up to $47,150
- 22% for incomes over $47,150 up to $100,525
- 24% for incomes over $100,525 up to $191,950
- 32% for incomes over $191,950 up to $243,725
- 35% for incomes over $243,725 up to $609,350
- 37% for incomes over $609,350
Married Filing Jointly:
- 10% for incomes of $23,200 or less
- 12% for incomes over $23,200 up to $94,300
- 22% for incomes over $94,300 up to $201,050
- 24% for incomes over $201,050 up to $383,900
- 32% for incomes over $383,900 up to $487,450
- 35% for incomes over $487,450 up to $731,200
- 37% for incomes over $731,200
IRMAA for Medicare Part B and Part D in 2024
In 2024, IRMAA for Medicare Part B and Part D premiums are determined based on 2022 federal tax returns. The standard Medicare Part B premium for 2024 is $174.70 for beneficiaries with income below $103,000 (singles) or $206,000 (married filing jointly). The IRMAA adjustment applies to roughly 8% of Part B and Part D beneficiaries and can increase monthly premiums significantly based on income brackets. Part B premiums can range up to $559 for married couples with incomes over $386,000. IRMAA for Part D also follows a similar income-based adjustment, with premiums ranging from $12.90 to $81.00 extra per month for high-income beneficiaries.
Strategies to Manage IRMAA
The key to managing IRMAA lies in understanding the income brackets and implementing effective tax strategies. Here are three actionable strategies to help manage potential increased Medicare costs:
- Roth Conversions: Roth conversions involve moving pre-tax funds from a traditional IRA or a qualified retirement plan into a post-tax retirement account. This triggers an immediate tax bill, which is treated as income for the year. While this can lead to future tax-free withdrawals, it may also increase taxable income, affecting future Medicare premiums. It’s important to weigh the benefits against potential IRMAA increases.
- Tax Loss Harvesting: Tax loss harvesting involves selling investments at a loss to offset capital gains. This strategy helps reduce adjusted gross income and can potentially lower future Medicare premiums. It’s an effective year-end strategy to consider if you have capital gains to offset.
- Qualified Charitable Distributions (QCDs): Retirees can make charitable donations directly from their retirement accounts through qualified charitable distributions (QCDs). This strategy allows donations to be excluded from taxable income, thereby preventing increases in taxable income and future Medicare premiums. QCDs are available for retirees aged 70½ or older, even though required minimum distributions now start at age 73.
Avoiding the Medicare “Hurricane”
Even a minor increase in income can push beneficiaries into a higher IRMAA tier, raising their Medicare premiums significantly. The potential for unexpected increases makes it vital to be mindful of how income changes might affect Medicare costs. This is particularly relevant for those utilizing strategies like Roth conversions, which can increase taxable income and trigger higher premiums. Planning ahead and being aware of income thresholds can help beneficiaries avoid these sudden cost hikes, which financial advisors often refer to as the “hurricane” of unexpected healthcare expenses in retirement.
Appealing Medicare Premiums
If you experience a significant life change, such as divorce, death of a spouse, loss of a pension, or retirement, you may appeal your Medicare Part B premium. This appeal must be filed upon receiving the benefit notice for 2024. Appealing based on a “life-changing event” is crucial for managing unexpected premium increases, especially since IRMAA is based on income from two years prior. Circumstances like job loss or changes in marital status can substantially lower income, making an appeal a vital tool for preventing undue financial strain from inflated Medicare premiums.
Walking the IRMAA Tightrope
Managing IRMAA and Medicare costs requires careful planning and awareness of how income changes impact premiums. By utilizing strategies like Roth conversions, tax loss harvesting, and qualified charitable distributions, you can potentially minimize IRMAA impacts and avoid unexpected Medicare cost hikes. Ultimately, staying informed and proactive is the best way to successfully navigate these challenges.
If you have any questions, give us a call or read Chapter 6 of “Wealth on Purpose” by Bryan Ballentine.
Have a great weekend!
Sources: Located at the bottom of the article.
Golf Tip of the Week
Players and caddies agree: This is the key number you should care about
Have you ever looked at a professional golfer before they hit a shot? Especially before an important shot?
There are times when it looks less like they’re playing a game, more like they’re cramming for an important test.
They have papers and books. Levels (before they got banned) and compasses (before they banned those too). You may even ask yourself what are those guys looking at.
Well, they’re looking at lots of different things. But above all else they’re looking at a number. One really important number, which makes every other number make sense.
It’s a number that helps make the bad shots look better, and the good shots look great. It masks their mistakes. The pros, they trust it above all else. And it’s a number that you should use too because it’s one of the easiest and quickest ways to strategize your way to better golf.
It’s called a Cover Number.
You can learn all about it in our most recent Game Plan, which you can watch right here:
How to use cover numbers
A cover number, quite simply, is the number it takes to clear an obstacle short of the green.
That could mean a bunker, water, or some other obstacle you’re forced to carry. Often, theze hazards are slightly off-center, or off to the side of a green, so the number to the front of the green isn’t always the same as a cover number.
To understand how to use cover numbers like the pros, imagine you’re approaching a pin that’s 173 yards away, with a bunker short right.
The number to clear the bunker is 168 yards.
That means you need to pick a club that, on a pretty bad mis-hit, you know will carry 168 yards.
As you can see below, golf statistician Lou Stagner finds that five handicaps miss about 13 yards short or long of their intended target from this distance.
What’s 168 (the cover number) plus 13 (your usual short-miss buffer you need to account for)?
It’s 181 yards, which means you need to hit your 181 yard club to this 173-yard pin. Do that, and it will leave your short misses clear of that bunker, your average shots with a birdie putt, and your long misses with a non short-sided putt or chip.
It’s a simple example, but one which poses a good question:
Are you hitting your 180 club from there? Probably not, which is why you keep coming up short and making bogeys or doubles.
There are lots of variations of this, but the more you understand cover numbers—and how to use it—the better golfer you’ll become.
Tip adapted from golfdigest.comi
Recipe of the Week
Bourbon Peach Iced Tea
8 Servings
Ingredients
Peach Simple Syrup
- 1 1/2 lb. fresh peaches (about 3), peeled, sliced
- 2 c. (400 g.) granulated sugar
Tea
- 6 black tea bags
- 1/2 c. (or more) bourbon
- Ice
- 1 fresh peach, sliced
Instructions
Peach Simple Syrup
- In a medium pot over medium heat, bring peaches, sugar, and 2 cups water to a boil. Cook, stirring occasionally, until peaches have completely softened, 10 to 15 minutes. Let cool.
- Strain syrup through a fine-mesh sieve, pressing on peaches with a spoon to release more juice. Store in an airtight container and refrigerate until ready to use.
- Make Ahead: Syrup can be made 1 month ahead. Keep refrigerated.
Tea
- In a medium pot or kettle, bring 4 cups water to a boil. Remove from heat and add tea bags. Let steep 5 to 8 minutes. Discard tea bags.
- Pour tea into a heatproof pitcher. Add 1 cup peach simple syrup and 4 cups water and stir to combine. Let cool.
- When ready to serve, add bourbon. Taste and add more bourbon or simple syrup, if needed.
- Serve over ice with peach slices.
Recipe adapted from Delish.comii
Travel Tip of the Week
This Stunning Caribbean Beach Has the Clearest Waters in North America
Sure, every vacation experience is special, but there is just something particularly enticing about jetting off to a place with waters so clear you can see all the way to the bottom. If that’s your idea of a good time, we’re here to tell you that it’s time for you to head to the Bahamas.
In late 2023, FloridaPanhandle.com released its list of beaches with the clearest waters in the world. It came to its conclusion after creating a seed list of 50 beaches that were ranked as the highest on publicly available traveler reviews, analyzing more than 2.4 million reviews in total. The team then calculated which beaches had the highest percentage of reviews mentioning “clear water.”
After doing all the math, the team named Half Moon Beach on Little San Salvador Island in the Bahamas as North America’s best beach for clear waters, with more than one-third of all reviews mentioning the water. It’s important to note that the beach is a private island owned by the Carnival Cruise brand, so to get there, you have to hop aboard either a Carnival or Holland America ship. But once you’re there, you’ll be treated to those gin-clear waters lapping bright white sandy beaches, and sun loungers waiting for you to relax.
“Located on a private island owned by the Carnival cruise brand, the only downside of such clear shores can be a lack of fish to spot when snorkeling,” FloridaPanhandle.com noted. “As one reviewer writes: ‘There are snorkel excursions available, where I’m sure you see a lot [of sealife], just don’t expect to see a bunch from snorkeling at the beach.'”
Tip adapted from travelandleisure.comiii
Copyright (C) 2021. Ballentine Capital Advisors. All rights reserved.
Our mailing address is:
Ballentine Capital Advisors
15 Halton Green Way
Greenville, SC 29607
Sources:
Retirees will pay more for Medicare Part B premiums in 2024. What to know about managing those costs
2024 Medicare Parts A & B Premiums and Deductibles
IRS provides tax inflation adjustments for tax year 2024
Disclosure:
Ballentine Capital Advisors is a registered investment adviser. The advisory services of Ballentine Capital Advisors are not made available in any jurisdiction in which Ballentine Capital Advisors is not registered or is otherwise exempt from registration.
Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.
This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.
No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.
Advisory services through Ballentine Capital Advisors, Inc.
i https://www.golfdigest.com/story/golf-digest-game-plan-strategy-cover-numbers-explained
ii https://www.delish.com/cooking/recipe-ideas/a60569601/bourbon-peach-iced-tea-recipe/
iii https://www.travelandleisure.com/half-moon-beach-little-san-salvador-island-clearest-water-north-america-8645265
