Who Invited Aunt IRMAA? What IRMAA Means for Your Retirement.
Updated: Sep 21
On the uninvited guest who wants to crash your retirement party.
Aunt IRMAA is coming to town. And just like Uncle Steve, who no one remembers inviting to Thanksgiving but who keeps showing up and stealing all the dark meat anyway, Aunt IRMAA will be there whether you invite her or not. And, just like Steve, IRMAA is likely to get more obnoxious as the years pass as the cost of healthcare continues to rise.
So who is IRMAA anyway, and how does it impact your retirement?
IRMAA is an acronym for the the Income-Related Monthly Adjustment Amount, a surcharge to your Medicare premiums. When you turn 65 and enroll in Medicare, your premiums are based on your income from two years ago. If your Modified Adjusted Gross Income (MAGI) exceeds $109,000 (individuals) or $218,000 (couples), you pay IRMAA surcharges, currently ranging from $1,000 to $6,000 per person per year.
The Cliff Effect: Where $1 Costs You $1,000+
You thought Steve grabbing the last piece of pie was annoying? Here’s why IRMAA is even more obnoxious than that. Unlike tax brackets which impact portions of your income, the surcharge operates on a cliff system—if your income crosses into the next bracket by even $1, your Medicare premiums can jump by over $1,000 per year. So for instance, a single filer with MAGI of $137,000 owes about $975 in annual Part B IRMAA. But if her income is $137,001—one dollar more—she owes about $2,435. That’s $1,460 more for one dollar of income. Double it if you’re married.
The table below shows how these cliffs work.
“But Medicare Is Decades Away—Why Care Now?”
If you’re in your 30s, 40s, or 50s, you probably haven’t thought much about Medicare in your own life. Medicare feels abstract, distant, someone else’s problem.
But the financial decisions you’re making right now about where to save your money are setting you up for a Medicare surcharge problem if you don’t pay attention. And the issue is only going to get worse: IRMAA surcharges are projected to increase 30% by 2030 and will keep rising. Healthcare costs outpace inflation. More retirees are crossing the income thresholds. The government is increasingly relying on IRMAA to fund Medicare’s shortfall. The younger you are, the worse this problem will be by the time you reach Medicare age.
But the good news: You have something incredibly valuable that people already on Medicare don’t have. Time.
We can’t stop Steve from stealing the pie, but with proper planning we can prevent IRMAA from taking your savings. In my next newsletter, I’ll outline tools for building IRMAA-proof wealth and, finally, discuss how to manage IRMAA if you’re already Medicare age. So stay tuned!
Ms. Money is written by Marisa Rothstein, JD, CFP(t), AEP, and Lead Financial Advisor at Siena Private Wealth, A Member of Advisory Services Network, LLC.
Nothing contained in this article should be construed as investment, legal or tax advice. Consult your tax or legal advisor regarding your situation. To learn more about Siena Private Wealth, visit: www.sienaprivate.com. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.
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