IRMAA 2022 MEDICARE TAX - YouTube

Today's Cardinal Lesson, we're talking  about the dreaded IRMAA. I-R-M-A-A.  

People, what in the world is that? Well for  starters, I'm just going to give you the  

classic definition. It's Income Related Monthly  Adjustment Amount. Probably didn't do you much  

good. What in the world is that? It's the Medicare  Tax for people, that Medicare calls a High Income,  

or for the wealthy, or for people that have  a substantial amount of income in retirement.  

They're going to make you pay more for your  Medicare. It's just that simple. And so what  

I'm going to do today is just inform you about the  whole program, and just to understand what it is,  

and then in the second part of the thing,  we're going to talk about what are some of the  

things you can do about it. So, IRMAA is just  another acronym that people throw around. And  

I'm sure that I've been the guy who informs people  of this for the first time, my whole career. It's  

been around a lot of years and you just don't  learn anything about it when you're signing  

up for Medicare. And then you get that letter  in the second or third month of the start of  

Medicare. And then you get a repeat of the letter,  every January, where it says, “Okay, so this year  

you're going to be paying X amount for Medicare  Part B and Medicare Part D for the Drug Plan.  

Because your income, two years ago, was this  amount.” So they don't even make it easy. Again,  

what I want to do today is inform you, not try to  make you like this, I just want you to understand  

it. And it's not going to sneak up on you in  retirement. So they've got another acronym in  

here, which is called MAGI, M-A-G-I. And I find  that kind of funny as well, I mean it's just,  

you throw all these acronyms: Modified Adjusted Gross Income. So you know in the beginning there  

was income, for calculating Tax. Then there was  Gross Income. So I guess that would be the money..  

your income before deductions, the Gross Income.  Then we had Adjusted Gross Income, which is  

some sort of an adjustment on your gross income.  That would be used to drive a lot of other taxes.  

And now for the Medicare people, we  have Modified Adjusted Gross Income:  

MAGI. Isn't that a blast. So we're not going to  get in on this video to what all the elements of  

MAGI are, but for most purposes it's just your  Adjusted Gross Income. It's how much money-  

as a single person- you earn or as a  married couple, and how you're filing  

and anybody that's below $91,000 of Modified  Adjusted Gross Income, is they're filing  

alone. They're gonna, they're not facing this, and  couples that are below $182,000 they're not facing  

it either. So you might be listening, and you say,  Well that doesn't apply to me. I can go on. Well  

if that's what you choose to do, but I've had many  people that you know describe themselves as low  

income or we really don't have enough to get  by on, describe themselves as that way. And yet  

they're going to lay down an IRMAA letter to  me, and let me tell you how that happens. This  

is many times, the only real Savings that  a lot of people that have lower income  

have is a Retirement Account. And so a lot of  them will go, and if they had a retirement plan,  

and their employer bought them out of it- I've got  several instances of this where I come in later,  

where the people went to the retirement  plan. They made them an offer  

for a cash buyout. They took it and they  said we got to make the check out to you,  

and so the people took it. And then all of  a sudden they've got $180,000 added to their  

normal income. You know if it's a single person,  it throws them in. And then two years later,  

or really three years later, they find out about  IRMAA on this mistake. As if they hadn't already  

suffered enough. So there's some things we  can do about mistakes in the IRMAA, or if you  

have a significant reduction in income, like you  retired. Which a lot of people do at 65 or later.  

Or if they, you know, if they don't retire at 65.  They keep their group insurance, delay Medicare,  

and then retire at 68. And then they're coming off  their group insurance, signing up for Medicare.  

And then all of a sudden they get this IRMAA  letter. So when they come into us for financial  

planning or to buy their Medicare Supplement,  um, and they're they're coming in and they're  

doing it. We show them all this, but we're  just us. I mean there's a lot of people,  

they're finding out from us for the very first  time. So, hopefully through this video and some  

education, I can get the word out about this more  and that there are things we can do about it. So  

it starts at $91,000 for single people. It starts  at $182,000 for married couples filing jointly.  

It's gonna use, like in 2022 these are new  numbers. So if you studied this a year or two ago,  

you can look at this. If this is now, 2022,  that you're watching it- these are the numbers  

that affect this year. And where they're getting  these income numbers is from your 2020 tax return.  

So you could have a situation, and I have many  like this, where somebody that retired: just  

right now or last year, or the end of the year,  they're turning 65, they're going on Medicare,  

and their post retirement income is maybe going  to be $60,000, $80,000, $90,000 a year. I mean  

we're planning that for them but yet their income  two years ago while they were working or both of  

them were working was up you know at a $250,000 or  $300,000 by the time they threw it all together.  

And so they're, you know, they're looking at  paying some pretty significant IRMAA and they  

think that, well we're gonna have to pay  that now for a couple, three years till we  

you know, retire out of this two years ago thing.  And I'm going to talk to you in a minute about  

what we can do about that. We can file an  appeal. Now so, and it's a graduated tax and  

it is based upon the threshold and it's a fixed  amount that you get hit for, for the whole year  

based upon going one dollar over the thing. So  it's the cliff approach of taxing. So you know if  

you made a $142,010 and you were single, you'd go  into this bracket. And it would make a difference  

of a hundred bucks a month in IRMAA, for the whole  year. So I mean not that you can do anything about  

your 2020 income, now in 2022, but that's how  the system works. Now another thing I want to  

point out, is in a lot of our financial planning,  people don't think- especially people that have  

significant money that they've accumulated.  And they're coming to us and we're  

helping them to retire and create income. They  don't think a lot about, one of them is going to  

be the surviving spouse, and a lot of times  they don't really want to talk about that.  

But one of them has the chance of going maybe  in their 70s, or their early 80s. And then the  

other one lives on for another 10, or 15, 20  years, and you know it.. it what i've just  

kind of learned through doing this planning, is  that's something you need to plan for. And when I  

point this out to people, they generally become  very concerned, because they love their spouse  

and they want to make sure their spouse is well  taken care of. And then the other side of that,  

is it might be them, and what happens when you  were a couple filing taxes together and then you  

are widowed or a widower. You are now thrust  into the single tax branch, so IRMAA goes up,  

and then your taxes are going to go up based  upon the same income. They're going to go way  

up because you'll be a single filer. So that's  something we plan for in our financial planning.  

But now back to IRMAA. This thing becomes pretty  significant for people that are making $3-400,000  

a year. Whether it's as a couple or a single  person and you get, you know, you get up to where  

we've got these numbers two ways. Thats the the  black number $544.30 a month is how much you'll  

pay for your Medicare Part B, but everybody pays  $170.10, so the extra IRMAA portion is $374.20.  

And then the amount of the Medicare Part D is $71,  so you're paying an extra $440 a month. And that's  

on each of you if you're Husband and Wife on on  on Medicare. So it's, it's a pretty significant  

amount. Now sometimes, people get so carried away  this angers them so much. They start shifting  

all their thinking and their financial planning  trying to reduce this thing, and you know my  

answer to that is let's do some planning. And  let's be smart about this, but let's not let the  

IRMAA tail of the dog.. wag you know the whole  dog. So and I.. I gotta add one other joke is  

that we've done some cartoons where you know, it's  Uncle Sam, who is the tax man, and ‘We Want You.’  

And then this is the female version: it's Aunt  IRMAA. So take that for what it's worth. Now I  

want to talk about some planning things, and the  first thing I talked about earlier was the appeal,  

okay. So if you have a life event- which is  typically retirement- so you have a reason that  

your income went down significantly, but you could  also have a reduction in hours. So you didn't  

retire but you just are going to be making less,  because you are working less, or you could have  

taken another job. So you don't necessarily have  to retire if you have a significant loss in income  

and you've had one of these life events,  that's a justification for an appeal.  

And it's been my experience that  people that appeal this on their own,  

they go into way too much depth, and they they,  so I would suggest my help or somebody like me  

to help you with the thing. I mean you have  to do the appeal. We can't do it for you  

but we can certainly write it for you and let  you put it in your own words. And we've got a  

pretty good Batting Average, because we can tell  you whether they're going to work or not. And then  

we're pretty much, and then you know we're going  to give have you give them exactly what they need.  

We've got a good batting average on it, so the  one thing we got is the opportunity for an appeal.  

Then the other thing is you can't really appeal  a high income. This is if you've been successful  

enough and smart enough about your Savings  that you just have a high income in retirement.  

Now those are exactly the kind of people  that we can help doing all kinds of planning,  

not just IRMAA planning, to try to lower their  Tax Bill. And to try to be smart about it and do  

their Estate Taxes and all that type of planning.  Well IRMAA is just part of it. Now one area that  

drives up income are distributions from an IRA. I  mean it's a significant area, is a lot of people,  

even people with significant assets, a good  percentage of those are in pre-tax money.  

And that's one of the big problems that we  deal with when we're doing financial planning  

for people, and they're already aware of the  problem. Is they got this big hunk of money  

and now they got to live on it for an  uncertain number of years, for retirement,  

with a lot of uncertainties. And then the Big  Certainty in there is Taxes. Because and then  

there's a smart way to distribute that money.  And we find that so that we can level it out.  

It's usually in small chunks, okay, but  then you reach a point at age 72 where  

you have to do this thing called RMDs. There's  another acronym: Required Minimum Distributions  

and most people are aware of those. And if they're  going on Medicare, it's still seven years off,  

if they're 65. Or a few years off, but they come  up pretty quick, and they are going to add to  

the IRMAA problem. Because it's just like you've  got to take this amount out of your pre-tax IRA,  

every year the amount goes up a little bit.  Every year at least the percentage does,  

and that's going to add to your income and add to  your IRMAA problem. So one thing that we could do  

is we could start taking distributions before  72 to lessen the effect of RMDs. We can start  

doing Roth conversions, which many  folks are very interested in already,  

and.. but then the problem with Roth conversions,  

if we're doing them after Medicare starts  at like 65. We're actually increasing,  

because you do $100,000 Roth conversion in  2022 your MAGI, or your Modified Adjusted Gross 

Income is up by $100,000. So we're actually  creating IRMAA to have the money over in a Roth.  

So all these things- we got a lot of  plates spinning in the air when we're  

doing retirement planning- and IRMAA is just  one of them. And it's actually a smallish plate,  

but it's still a consideration. Again, what I like  about Roth conversions and Roth income is that  

it's Tax-Free. So it's not when you ultimately  start taking some money out of the Roth,  

you're not going to be increasing IRMAA. You're  not going to be paying extra tax on your Social  

Security or if you just leave it in the Roth  and Will it to your next generation, um you're  

not paying any taxes on it. And it's not driving  any income for me, and you don't have any RMDs so  

that's about all I got today. I'm Hans Scheil  and I thank you very much for listening.