What is IRMAA?
Not everyone knows this, but if you have a high income you may be subject to a Medicare surcharge, which can be substantial, because Medicare imposes surcharges on higher-income beneficiaries.
Medicare premiums are assessed on a year to year basis, based upon your Modified AGI from 2 years prior. The AGI threshold changes annually with inflation and the threshold is actually a cliff, meaning one dollar over the limit can incur a surcharge for the entire year. There are 5 tiers of Medicare surcharges based on these income thresholds.
So, if you have a high income, you may be subject to this surcharge, which is officially called the Income Related Monthly Adjustment Amount, or IRMAA.
This chart illustrates the 2022 AGI thresholds that correspond to the 2024 Medicare Premiums and 5 Tiers of monthly surcharges.
How is IRMAA treated in PlannerPlus?
If you are subject to IRMAA, the Planner will include the cost of IRMAA.
The calculation for IRMAA uses AGI from two years prior. If a user is already 65+, the calculation uses current year AGI (2024) for 2024 and 2025 calculations when income includes work and pension income.
Savings drawdowns, one time events and transfers which create taxable income will not be included in the IRMAA AGI for 2024 and 2025. They will be included in the IRMAA calculation for 2026.
If a user is below 65, for 2026 the calculation should also be using the 2024 AGI amount.
We model a change to IRMAA upon the death of a spouse.
IRMAA brackets and charges increase at your general inflation rate.
You can see your IRMAA Report in the Insights Library.
How do I turn off IRMAA surcharges in my plan?
We don't currently have a feature to turn off IRMAA.
A workaround would be to select Employer sponsored coverage. Add an amount for Medicare Expenses until your longevity age. This will turn off the IRMAA until the final year of the simulation but add in Medicare for the final month.
How is the MAGI for IRMAA computed?
You might not know it, but there are a couple of Modified AGI calculations which are used in particular instances such as the determination of thresholds and credits. We refer to these as MAGIs. To calculate a MAGI you usually have to add an item normally excluded from AGI back in, such as tax exempt interest.
There’s a specific MAGI that’s used in the calculation of your Medicare Premium. To calculate the MAGI for IRMAA, you have to add back the following items:
Tax-exempt interest income received or accrued (usually from state and local municipal bonds).
Interest earned from U.S. savings bonds used to pay higher education tuition and fees.
The taxable portion of your social security is already in your AGI. Don’t include the non-taxable portion of social security for IRMAA.
Earned income earned of U.S. citizens living abroad that was excluded from gross income.
Income from sources within Guam, the Northern Mariana Islands, or Puerto Rico not otherwise included in AGI.