What is IRMAA??
Here’s a question you need to ask your financial planner, “Tell me about IRMAA.” If he or she looks at your quizzically, and asks “How should I know about the girl you’re dating,” you can be certain that they need some education.
Better to start with your Medicare insurance advisor. He/she will tell you the IRMAA is an acronym that stands for Income Related Monthly Adjustment Amount, and affects the premiums you pay for Parts B and D of Medicare, based on the income reported on your taxes from two years prior. IRMAA is a surcharge, or effectively a tax, on higher incomes.
Because the taxable income and distributions you receive in retirement (ie. IRAs, 401ks etc etc) will be taken into account on your filed taxes, you and your advisor/planner will need to begin to plan your retirement income to position you advantageously with respect to IRMAA — and that planning needs to start well before you retire, or even apply for Medicare to avoid extra costs due to IRMAA assessments.
Interestingly, IRMAA derives from an older concept called “means testing” which is at the core of multiple government programs. In the US, means testing dates back to the years of the Great Depression in the 1930s and was a test for determining if one was in poverty (read “limited means”) and might be eligible for a “dole,” or monetary assistance in today’s parlance.
IRMAA is at exactly the opposite end of the spectrum of the old means tests. With IRMAA, the income that one reports on their filed income taxes two years previously determines the premiums that person will pay be the Medicare Part B premium and the add-on to the Medicare Part D premium.
The table below shows the IRMAA values, by tax status, for 2025::
As will happen when people retire and lose their employers regular income, their personal income will decrease. In such cases, the SSA Form 44 may be used to request a re-assessment of the effective IRMAA for an individual based on current actual income.
As always, give us a call or write a note if you have questions or need help with this.