What is the income-related monthly adjusted amount (IRMAA)?
For high-income Medicare beneficiaries, Part B and Part D premiums include an additional charge based on your modified adjusted gross income.
Key takeaways
Beneficiaries who earn over $88,000 a year – and who are enrolled in Medicare Part B and/or Part D
IRMAA is determined by income from your income tax returns two year prior
How IRMAA affects Part B premiums depends on your household income.
IRMAA surcharges are added to you Part D premiums.
The SECURE Act of 2019 could further affect your premiums.
What is IRMAA?
The Medicare Income-Related Monthly Adjustment Amount (IRMAA) is an amount you may pay in addition to your Part B or Part D premium if your income is above a certain level. Since 2007, high-income Medicare enrollees have been required to pay the IRMAA surcharge for Part B coverage. An IRMAA surcharge for Part D premiums took effect in 2011.
For Medicare beneficiaries who earn over $88,000 a year – and who are enrolled in Medicare Part B and/or Medicare Part D – it’s important to understand the income-related monthly adjusted amount (IRMAA), which is a surcharge added to the Part B and Part D premiums.
How is my income used in my IRMAA determination?
IRMAA is determined by income from your income tax returns two years prior. This means that for your 2021 Medicare premiums, your 2019 income tax return is used. This amount is recalculated annually. The IRMAA surcharge will be added to your 2021 premiums if your 2019 income was over $88,000 (or $176,000 if you’re married.
You will receive notice from the Social Security Administration to inform you if you are being assessed IRMAA.
The income used to determine IRMAA is a form of Modified Adjusted Gross Income (MAGI), but it’s specific to Medicare. The Modified Adjusted Gross Income is different from your Adjusted Gross Income, because some people have additional income sources that have to be added to their AGI in order to determine their IRMAA-specific MAGI.
It’s important to understand that MAGI for calculating IRMAA isn’t the same as the normal MAGI that you might be accustomed to for non-healthcare purposes.
How much are Part B IRMAA premiums?
If an individual makes $88,000 or more – or a jointly filing household makes $176,000 or more – then the IRMAA assessment increases the 2021 Part B premium to the amounts shown below:
This level has risen from 2019, when the income requirements were $85,000 and $170,000 respectively. 2020 was the first year that these MAGI income requirements were adjusted for inflation. Going forward, the Modified Adjusted Income requirements will continue to be adjusted by inflation (CPI).
Here are the 2022 premiums
How much are Part D IRMAA surcharges?
For Part D, the IRMAA amounts are added to the regular premium for the enrollee’s plan (Part D plans have varying prices, so the full amount, after the IRMAA surcharge, will depend on the plan).
The following income levels (based on 2019 tax returns) trigger the associated IRMAA surcharges in 2021 (note that the income amounts have increased since 2020, but the Part D IRMAA surcharges are slightly lower than they were in 2020).
The SECURE Act and IRMAA
Further complications have been introduced as a result of the SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019), which was enacted in late 2019. The SECURE Act has a number of different features – such as allowing IRA contributions after age 70½ if you’re still earning an income – and it extends the minimum age that one must receive RMDs (Required Minimum Distributions) from 70½ to 72. Note that those who are already at least 70½ must continue to receive RMDs.
The reason this may be important is that it is possible that delaying receiving RMDs may also reduce IRMAA if your Modified Adjusted Gross Income is close to the limits stated in tables above.
Financial planning and health insurance go hand in hand
If your income exceeded $88,000 in 2019, your 2021 Medicare Part D and Part B premiums depend on your income. And as you can see in the tables above, the additional premiums can be substantial.
Understanding how this works – including what counts as income as far as Medicare is concerned – is a key part of your financial planning. And since the government will base your premiums on your income from two years ago, you’ll also want to have a good understanding of how to appeal an IRMAA determination, in case you experience a life change that reduces your income.
Smarter Planning. Smarter Portfolios. Smarter Fees.