How is the irmaa , which many clients don ’ t even know about , even calculated ?

“ some retirees are aware of it , but certainly not all ,” says Bruce Primeau , a cPa and president of summit wealth advocates in Prior lake , minn . “ Their reaction , quite frankly , is that many are shocked by paying more than three times as much as others

IrMMA for Medicare Part B ( for 2022 ) for the same level of coverage .” medicare beneficiaries who earn more than $ 91,000 a year ( the projected threshold this year ) and who are in medicare Part B or medicare Part d , or both , face irmaa surcharges . These surcharges are based on income earned two years before the coverage year ; a client enrolling for one of these segments of medicare would pay an irmaa surcharge based on their 2020 tax return .

“ There are three types of clients with respect to irmaa ,” says lawrence Pon , a cPa in redwood city , calif . “ Those who will never be affected by it , those who might be affected

“there are three types of clients with respect to IrMAA . those who will never be affected by it , those who might be affected and those who will always be affected — it ’ s just a question of by how much .”

— Lawrence Pon

$ 91,001 to $ 114,000 $ 182,001 to $ 228,000 n / a $ 238.10 $ 114,001 to $ 142,000 $ 228,001 to $ 284,000 n / a $ 340.20 $ 142,001 to $ 170,000 $ 284,001 to $ 340,000 n / a $ 442.30 $ 170,001 to $ 499,999 $ 340,001 to $ 749,999 $ 91,001 to $ 409,000 $ 544.30 $ 500,000 or above $ 750,000 or above $ 409,000 or above $ 578.30

IrMMA for Medicare Part D ( for 2022 )

$ 91,001 to $ 114,000 $ 182,001 to $ 228,000 n / a $ 12.40 + Premium $ 114,001 to $ 142,000 $ 228,001 to $ 284,000 n / a $ 32.10 + Premium $ 142,001 to $ 170,000 $ 284,001 to $ 340,000 n / a $ 51.70 + Premium $ 170,001 to $ 499,999 $ 340,001 to $ 749,999 $ 91,001 to $ 409,000 $ 71.30 + Premium $ 500,000 or above $ 750,000 or above $ 409,000 or above $ 77.90 + Premium and those who will always be affected — it ’ s just a question of by how much .”

The surcharge , which was frozen until recently , depends on a special modified adjusted gross income ( magi ) different from that used to calculate income tax and other purposes . in general , surcharges on monthly premiums increase pro rata for recipients earning $ 91,000 to $ 500,000 annually ( for those who file taxes as single ) or $ 182,000 to $ 750,000 annually ( for couples filing jointly ). The maximum surcharges apply to all those who earn more than the maximum annual thresholds . many types of income bumps can trigger these surcharges , including the last few years ’ covid-related withdrawals from retirement accounts .

“ for those not affected , we need to warn them of events which can cause them to be subject to irmaa ,” Pon says . “ The most common event is the sale of their home . most of our clients have taxable gains when they sell their homes . i warn them their medicare premium will go up for a year and then it will drop .”

There are mitigation strategies . “ it may make sense to stop roth conversions at least a couple of years before claiming medicare since roth conversion income is part of magi ,” Pon says . “ when clients ask about when to sell their home , this may also be a consideration . sell at age 63 so it won ’ t affect irmma .” other reduction tactics include reducing required minimum distributions from retirement accounts , including by using qualified charitable distributions .

“ You can draw funds either from a taxable account , with an anticipated lower tax cost , or draw funds from such tax-free accounts as roth iras , health savings accounts and so on so your agi isn ’ t impacted at all ,” Primeau adds . “ we haven ’ t had any clients draw cash value from life insurance policies ,

12 | financial advisor magazine | maY 2022 www . fa-mag . com