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Senior man on the phone while reviewing retirement benefits and how it will affect his Medicare B premiums.

Accessing Retirement Benefits Without Increasing Medicare B Premiums

Medicare has been a great safety net for people of retirement age or older. It is a stroke of genius, considering how exorbitant medical bills and other related costs have become. As of 2019, the program has provided medical coverage for over 60 million Americans and is slated to cover more than 75 million come 2027. Those are impressive numbers. However, the program has to find ways to keep itself running in the future. 

One of those ways is by charging premiums for its services. While these medical benefits save you money, premiums vary and can significantly increase if you have a higher income. So, how does this happen? How can you access your retirement benefits and investments without raising your Medicare B Premiums?

Let’s find out The Medicare Family‘s perspective.

Enter the IRMAA

The acronym means Income Related Monthly Adjustment Amount, but that’s where its simplicity ends. Medicare charges an IRMAA premium to its beneficiaries who earn a modified adjusted gross income above a certain amount. As of 2023, if your annual income in 2021 equals or exceeds $97,000 as an individual or $194,000 as a couple, then the SSA determines that a surcharge will be added to what you pay for Medicare B Premiums.

2023 IRMAA Brackets

The Centers for Medicare and Medicaid require you to pay this amount in addition to your Part B or D premiums. The SSA determines this based on tax return information provided by the IRS over the preceding two years. The SSA will contact you to notify you about their intention to add you to this premium collection group. They will also provide information on this levy and how you can appeal the decision.

This surcharge will automatically be added to your monthly Part B premium. However, if you have fallen out of the IRMAA brackets due to income loss or other circumstances, you may make an appeal to the SSA. 

Let’s take a look at a few other ways that may be available to keep you out of the IRMAA annual deductible bracket and avoid these surcharges.

Strategies to Lower Your Medicare B Premiums

As mentioned, the SAA relies on your income history over the preceding two years. This history helps them determine whether you qualify for Medicare B premiums and which bracket to place you in. If you are right on the cusp of one bracket or another, there are a few strategies to keep you from paying the extra premium on your Medicare.

Planning Ahead

As you head into retirement, you generally know where your income will come from. It could be from social security, your pension, and other investments you may have made. The combined revenues from these sources contribute towards the information SAA uses to place you into the premium brackets or move you up. 

Remember, the determination is based on returns from two years earlier. If you experience a life-changing event that could result in a loss of income, you can use them to appeal the SSA’s decision. These events can be retirement, divorce, the death of a spouse, or more. 

Roth IRA to the Rescue

As your taxable income contributes to the IRMAA inclusion, it’s best to get ahead of it. Placing your nest eggs in retirement accounts whose disbursements will be taxed as ordinary income further adds to the matter. However, there’s a way around it. 

You can start by converting your taxable assets to a Roth IRA. Contributions to Roth IRAs are taxed upfront, meaning qualified withdrawals are free. If you start the process at least five years before retirement and your age is 59 and a half years and above, you are guaranteed tax-free income when you retire. 

The other thing about Roth IRAs that help with this issue is that they do not have Required Minimum Distributions during your lifetime. It may seem a bit excessive to pay tax upfront for the Roth IRA accounts. However, the benefits down the road are immense, especially when it comes to keeping you out of the IRMAA premium brackets. 

Capital Gains Aren’t Your Friend

Capital gains tax is shown on the business photo using the text

If you have brokerage accounts or are looking to sell your home, the income or profits you get from those ventures are subject to the capital gains tax. Those income amounts are a relatively straightforward calculation that you can take into consideration as you determine how close those transactions will bring you to an IRMAA bracket.

The problem comes in with mutual funds. The capital gains and dividends you receive from such funds can surprise you negatively. You don’t know how much you’ll earn from such a venture, and the mutual funds must pass the gains to you. If staying out of the brackets matters, think of using your brokerage account to hold exchange-traded funds in place of mutual funds. These tend to be more tax-efficient.

Need Help with Medicare?

Navigating the labyrinth of requirements and paperwork necessary to get your Medicare working for you can be quite the hassle. That’s the entire reason The Medicare Family is in existence. For three generations now, we have been helping retirees such as yourself deal with the Medicare system to your benefit, and we’d love to serve you. 
Would you like to see how we can work together? Schedule an appointment with us today!

Sylvia Gordon, aka Medicare Mama®, is an expert on all things Medicare and Social Security. She is the 2nd Generation here at The Medicare Family and has served on the advisory boards of major insurance companies like UnitedHealthcare®, Cigna, and Anthem. In her free time, she can be found taking care of her animals (dogs, goats, peacocks, chickens), and reading a good book. Learn More.
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