Medicare Part B will see a 15% cost increase in 2022. This is one of the largest in the history of the program. Not only will premiums rise significantly, but the income-related surcharge known as IRMAA will increase in 2022 as well.
Why Will Part B Premiums Increase?
According to the Centers for Medicare and Medicaid Services (CMS), COVID-related price hikes and a higher rate of medical care usage have pushed up Part B premiums.
Another reason is related to potential administration of a new Alzheimer’s medication called Aduhelm. It has a price tag of $56,000 per year and if it were covered by Medicare, could significantly increase program spending.
What about IRMAA?
High-income beneficiaries, a status determined by 2020 federal tax filings, will also have to pay higher surcharges for Part B.
Modified adjusted gross income in 2020 of $91,000 or higher (for single filers) or $182,000 or higher (for married filers) will result in a Part B surcharge between $68 to $408 per month in addition to the regular Part B premium (see below chart).
Part D (prescription drug coverage) also penalizes high-income beneficiaries. The IRMAA surcharge on Part D can range from about $12 to more than $75 per month in addition to the standard Part D premium.
Strategies to Avoid IRMA
- If you’re planning on doing a Roth IRA conversion, plan it carefully, as it will increase your taxable income.
- If you invest in municipal bonds (which can be a great source of tax-exempt income), be aware that that interest can affect your Medicare premiums
- If you are a higher-income retiree and have had a life-changing event, make sure to notify Social Security by filing an IRMAA appeal.
- If you plan to sell any appreciated assets (including real estate), know what your options are to minimize your taxable income.
- Consider opening a Medicare Savings Account (MSA) if you meet eligibility requirements.
- Understand how taking annual required minimum distributions (RMDs) from your retirement accounts might affect your taxable income.
- Consider making a qualified charitable donation (QCD) to reduce your tax liability.
Looking for more ideas to avoid paying IRMAA? Click here to schedule a free, no-obligation consultation and review of your financial plan using our Results In Advance Planning method with one of our advisors.
_______________________________
Alli Thomas
Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k)administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.
