You might think that you will no longer have an income once you stop working. However, your Medicare Part B premiums are based on your household income. There is a two-year look-back period, and what is included in this income calculation may shock you. However, you have options when dealing with the sticker shock of Medicare premiums in retirement.
The Basics Of IRMAA
Higher-income retirees may be surprised to find themselves getting hit with Medicare surcharges based on their income levels. The income-related monthly adjustment amount (IRMAA) is a surcharge that increases your Medicare premiums. The income levels are subject to IRMAA, which is luckily adjusted for inflation each year. Remember that the IRMAA surcharges are based on your income from two years ago. So, if you hit age 65 in 2024, your premiums this year will be based on your income from 2022. If you were fully employed in 2022, your income that year may be higher than in 2024.
When beginning Medicare, the Social Security Administration will send a notice called an initial determination if the SSA determines that the client owes an IRMAA. The notice will also contain information about requesting a new determination if the client has experienced a specific life-changing event, which could help reduce the sting of IRMAA surcharges.
The IRMAA surcharge amounts are added to your monthly Medicare Part B and Part D premiums. It is your responsibility to ensure that the surcharges are paid even if your employer covers your Part D costs.