K-K-K-Katy was a WWI song about a special gal that regained popularity in WWII and was sung by barbershop quartets and even Mel Blanc as Porky the Pig. It was supposed to be a stuttering lovesick soldier singing on his way to war.
I only mention Katy because I could not find a song about Irma, or IRMAA! It stands for Income Related Monthly Adjustment Amount and it will not make you sing.
This is not about September’s deadly Hurricane Irma. This IRMAA “adjusts” the amount of money you pay for Medicare Parts B and D. For those of you already on Medicare, you may have suffered the blow already. For those of you headed for Medicare, here is your somewhat gentler and less windy introduction.
Leave it to the Social Security Administration (S.S.A.) to find a way to “adjust” your benefits based on your earnings. This is not the only way Social Security (S.S.) is means tested.
Means testing is a favorite arrow in the quiver of S.S. system reformers and I quiver every time I hear it. S.S. is already partially means tested. The higher your salary during your working years the less as a percentage S.S. replaces. I do not have the inclination or the space to review the incredibly arcane S.S. benefit calculation but here is one example.
Using the S.S. calculator at https://www.ssa.gov, I ran the following scenario.
Person A makes $50,000/year. At full retirement age, S.S. pays $16,224 per year or 32% replacement.
Person B makes $150,000/year. At full retirement age, S.S. pays $34,332 per year or 23% replacement.
Do not get hung up on the specific amounts. The more you earn, the higher the disparity, but that is not IRMAA. Nooo, IRMAA blows in after you start Medicare.
I can see you now . . . lying in a hammock under the old oak tree sipping a cold drink, the smell of freshly cut grass courtesy of your lawn service wafting on the breeze. Suddenly a scream erupts from the house.
Unbeknownst to you, your spouse has been digging in the pile of unopened mail that has collected on the kitchen table. Who needs to open mail? We are retired!
You struggle upright from the hammock, hoping it is not serious. You open the kitchen door and there, ashen faced, is your spouse shaking a piece of official looking letterhead like a palm frond in a gale. You retrieve the paper and stare at a bill. It says your Medicare Part B premium is $1,607.40 for the next three months. That is twice what you expected. Part B premiums are $134/month or $804 per quarter for you and your spouse, right? IRMAA has delivered a blow to your budget!
Your premium adjusted, because you made enough money to trigger the increase. Not in this, the first year of your retirement, but two years prior. In addition, to make it worse, IRMAA does not go up gently. It jumps your premiums up around $80 per month, per person, when you earn $1 more than the threshold. Oh, and do not neglect the IRMAA for the drug coverage, Part D. It is in addition to your Part D premiums. Please see the chart below.
Married filing jointly
Married filing separately
Monthly IRMAA Part B
Monthly IRMAA Part D
$85,000 or less
$170,000 or less
$85,000 to $107,000
$170,001 to $214,000
$107,001 to $160,000
$214,001 to $320,000
$160,001 to $214,000
$320,001 to $428,000
$85,000 to $129,000
If notified that you crossed over an IRMAA threshold based on your income, and you disagree, you can file an appeal using https://www.ssa.gov/forms/ssa-44.pdf. It can be a difficult process but it is better than whistling in the wind. You can also use this form if you experience a life-changing event or your income drops.
To be sure, you have a nice retirement if you meet the IRMAA thresholds but it is irksome that the initial determination is on your earnings two years prior to your acceptance into Medicare. Most of us do not retire before Medicare age. This same two-year lookback may continue throughout retirement. You can rage against the storm but it is better to appeal if you have a case.
Are there ways to lessen or even avoid IRMAA’s impact?
Give us a c-c-c-call and we will discuss it with you