Act now to save on Medicare later

Once you turn 65, Medicare will likely become important to you – so it’s a good idea to learn as much about it as you can. And if you have a high income, one element you'll want to look into is the Medicare premium surcharge known as the income-related monthly adjustment amount, or IRMAA.
To get a sense of whether you might be subject to IRMAA and, if so, how much you might pay, take a look at the chart below:
MAGI from 20212 | Part B Enrollees Surcharge for 2023 (in addition to the Part B premium)3 | Part B and D Enrollees Surcharge for 2023 (in addition to the Part B & D premiums) | |||
---|---|---|---|---|---|
Individual4 | Married Filing Jointly5 | Monthly | Annual | Monthly | Annual |
$97,000 or less | $194,000 or less | n/a | n/a | n/a | n/a |
$97,001–$123,000 | $194,001–$246,000 | $65.90 | $790.80 | $78.10 | $937.20 |
$123,001–$153,000 | $246,001–$306,000 | $164.80 | $1,977.60 | $196.30 | $2,355.60 |
$153,001–$183,000 | $306,001–$366,000 | $263.70 | $3,164.40 | $314.40 | $3,772.80 |
$183,001–$499,999 | $366,001–$749,999 | $362.60 | $4,351.20 | $432.60 | $5,191.20 |
$500,000+ | $750,000+ | $395.60 | $4,747.20 | $472.00 | $5,664.00 |
1 Source: ssa.gov.
2 Or 2020 if 2021 isn’t available.
3 For 2023, the base premium for Part B is $164.90 per month.
4 Single, Head of Household or Qualifying Widow(er) with dependent child.
5 For Married Filing Separately: Those with MAGI from 2021 of $97,001–402,999 are subject to a surcharge of $362.60/month for Part B premiums and $432.60/month for Part B and D premiums. Those with MAGI from 2020 of $403,000 and above are subject to a surcharge of $395.60/month for Part B premiums and $472.00/month for Part B and D premiums.
IRMAA is based on your modified adjusted gross income (MAGI), backdated two years. Your MAGI consists of several elements, including:
As the chart above shows, the Medicare surcharge can be significant – and if it’s unexpected, it can be an unpleasant surprise. So, if you’ve still got a few years until you enroll in Medicare, you may want to take steps to control your MAGI and potentially limit IRMAA during your retirement. In fact, the earlier you start planning, the more flexibility you’ll have in managing your MAGI and IRMAA.
Here are a few moves to consider:
And if a conversion from a traditional IRA to a Roth IRA is appropriate for your needs, you might want to act on it three or more tax years before you enroll in Medicare. If you convert a large amount from a traditional IRA to a Roth IRA after that, you could increase your MAGI bracket and bump up your IRMAA two years later. If you’ve missed that window, a Roth conversion may still be advantageous, but you want to be aware of the potential to trigger or increase IRMAA so you’re not caught off guard.
To determine if these or other taxable income-reducing strategies are right for your situation, you’ll want to consult with your financial and tax professionals.
One last strategy to keep in mind is an appeal. One of the more common reasons this comes up is when someone retires and enrolls in Medicare at age 65, but their IRMAA is assessed from MAGI when they were still working (and their income was higher). For this and other life events, you can appeal the IRMAA determination, provide documentation that your income is lower and potentially reduce or eliminate your premium surcharge.
While IRMAA isn’t as well-known as other aspects of Medicare, having an awareness of its impacts, and thinking in advance of ways to address it, may help you when you’re retired. And by working with your financial advisor, you may be able to develop strategies that can help keep IRMAA from spelling trouble for you in the years ahead.
Meagan Dow leads the Analyst team within Edward Jones Client Needs Research. This team focuses on creating advice and guidance helping investors prepare for retirement, enjoy their retirement, save for education, plan their estates and protect their financial goals.
Meagan is a Chartered Financial Analyst and a Certified Financial PlannerTM.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. This content should not be depended upon for other than broadly informational purposes. Specific questions should be referred to a qualified tax professional.