When I was helping my dad make his decision, I was shocked will all the rules. Different rules impact different things, but there was one particular rule that made him pay more for Medicare.
This rule deals with IRMAA. IRMAA stands for income-related monthly adjustment amount. The rule states that you are required by law to pay more for your Medicare Part B and Medicare prescription drug plans if you have a higher income.
The standard monthly rate for Medicare Part B is $135.50, but the additional penalty can cost you from $54.10 to $325 extra a month. The more you make, the more you pay.
These additional fees can quickly add up, so there are two things to be aware of:
Specific income levels that are penalized.
It’s essential to be aware of what income level requires you to pay more for your Medicare and how that number is generated.
Medicare uses your most recent federal tax return from the IRS to determine your modified adjusted gross income (MAGI).
You will pay more for Medicare Part B and prescription drug coverage if you file your taxes as:
- Married, filing jointly and your MAGI is greater than $170,000, you’ll pay higher.
- If you file using a different tax status, and your MAGI is greater than $85,000.
Please note, MAGI is not the same as your income but is based on your income.
The many numbers that go into calculating your MAGI include:
- Income from an employer.
- Income from investments (this includes rental property).
- Money that is taken out of retirement accounts.
Another thing to note on MAGI, Medicare uses the most recent number that the IRS has, but sometimes this number can be two years old.
IRMAA rules will likely apply to you if your income was at or over these levels over the past two years.
You can appeal the penalty if you qualify.
It’s important to understand that Medicare can waive these fees, but they won’t do it proactively.
If your income goes down and you are below the IRMAA income levels, you may be able to get the additional fees waived.
We help our clients to get these additional fees waived for many situations. The most common case people get these additional fees waived is if you or your spouse have stopped working. This change saves people thousands of dollars each year.
To know if you are going to hit IRMAA levels, check your tax returns to get an idea of what your income was.
As a takeaway, please make sure you understand what you are expected to pay for Medicare before you join. Knowing the cost in advance can help you plan for the payments, and it’s also a critical factor when deciding if you should stay on your employer plan or join Medicare.
To easily make the right Medicare decision you can CLICK HERE to sign up for our Medicare Enrollment Concierge.
