Medicare income caps/costs

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togb
Posts: 320
Joined: Mon Oct 23, 2017 8:36 pm

Medicare income caps/costs

Post by togb »

I will turn 65 early in 2023, which means it will be the 2021 tax return they'll use to determine my cost. I still work and also have rental and investment income. I'm going to have trouble staying under the income threshold this year to avoid paying extra for IRMA (?). And honestly, I probably won't make it next year. So I have a few questions.

I read that you can appeal the cost by sending a form that explains you retired, thus income changed. That sounds very reasonable-- are they always approved? So just plan on appealing?

Do they check this every year, or once it's "set" that's your cost? Once I retire, I might still incur the first tier ($49 extra per month) but I should be able to avoid the $149 per month. I realize that's less than $2000K a year, but still..... I'd rather not pay it if I don't have to.

TIA for info on how to handle this, or maybe I'm overthinking things.
jebmke
Posts: 25475
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Medicare income caps/costs

Post by jebmke »

I don't think the fact that you retired is sufficient to qualify for a waiver. Someone else might chime in but I think it takes something more unusual.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
notBobToo
Posts: 213
Joined: Wed Jan 02, 2019 9:07 pm

Re: Medicare income caps/costs

Post by notBobToo »

IRMMA is for one calendar year. So in your example, your 2021 income dictates the surcharge for 2023; 2022 for 2024; and so forth.

And don't forget, the surcharge also applies to Part D.
BogleTaxPro
Posts: 650
Joined: Sat Apr 04, 2020 6:08 pm

Re: Medicare income caps/costs

Post by BogleTaxPro »

I think it's a little early to worry too much about this, since you don't know how much you'll have in income this year (or next year? not clear from your post).

But if you do want to start planning ahead, take a look at the appeal form (https://www.ssa.gov/forms/ssa-44-ext.pdf). It has pretty good instructions/explanations (although the explanation as to whether to use the previous or next year's MAGI does kinda confuse me but it's early in the morning here).

The IRMAA is re-calculated every year based on the tax return from 2 years previous. You could fall in or out each year. So if you can manipulate your income stream to odd/even years you could benefit. You'll see other discussions in Bogleheads where people are doing this to maximize deductions and/or ACA subsidies if you want to research this further.
Big Dog
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Joined: Mon Sep 07, 2015 4:12 pm

Re: Medicare income caps/costs

Post by Big Dog »

I read that you can appeal the cost by sending a form that explains you retired, thus income changed. That sounds very reasonable-- are they always approved? So just plan on appealing?
If you meet one situation for the check boxes, and retiring/work reduction is one, then yes, it should be approved. Sometimes you might have to appeal an incorrect first determination, but you should win in the end.
water2357
Posts: 654
Joined: Sat Sep 12, 2020 9:24 am

Re: Medicare income caps/costs

Post by water2357 »

When are you actually retiring? You need to have a "life changing" event as defined for the SSA-44 waiver of IRMAA. Along with that "life changing" event which you must provide documentation for, your income must also decrease after that event such that the decrease in income will cause you to move to a lower IRMAA bracket than you would otherwise have based on your income 2 years prior.

So, if you are retiring in 2023 and applying for Medicare in 2023 and can document that you have retired and can document that your income in 2023 will have decreased such that using 2023 income instead of 2021 income will put you in a lower IRMAA bracket, then file for the SSA-44 waiver. In the waiver, request that they use your 2023 income to determine IRMAA for 2023.

If your 2022 income is also high (since you were not yet retired), you will need to file SSA-44 again (for whatever reason the Social Security Administration can only handle one year's income on each SSA-44, even though they ask for two years). Thus in 2024 file SSA-44 again, provide all your documentation about retiring and income being lower, only this time ask them to use your 2024 income instead of your 2022 income to determine IRMAA.

In 2025, you will now have been retired with lower 2023 income and Social Security Admin will use your 2023 income to determine IRMAA for 2025.

If you retire late in 2023 and your 2023 income is still high, then bump all of these dates ahead a year. Or if you retire in 2022, then adjust them appropriately back a year depending on when your income actually decreases (in this case you may only have to file SSA-44 one year if your 2022 income already has decreased).

Also, you can't file an SSA-44 until Social Security Admin has gotten your application for Medicare and it is in their system. They can't process a waiver form before they know that you will actually be getting Medicare in a particular month. So, as you get close to actually being covered by Medicare, call them to see if your information has been recorded and ask if you can now send in SSA-44, do it as soon as possible, so you don't get charged for IRMAA and than have to wait to get it refunded.
Topic Author
togb
Posts: 320
Joined: Mon Oct 23, 2017 8:36 pm

Re: Medicare income caps/costs

Post by togb »

thanks everyone for the great information. I did some more work on it, and realized it would require unnatural acts to get my AGI low enough to avoid the second bracket. Really the only major lever I have is before tax 401K contributions, with a minor lever of removing dividend/tax free interest income from my brokerage account. But, I'm trying to build my Roth, not before tax accounts so it seems a bit silly to go there. I will just pay a higher cost for medicare for a couple years, because my other goals are more important to me at this time. Once I retire, I can appeal and get it lowered. Again, thanks. I appreciate the great information.
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