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 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.