Dear Rusty: Please explain the Medicare premium increase based on income reported to Social Security? For those of us that waited to draw Social Security until age 70, and who are still working – drawing a salary, and planning to retire at age 75 after RMDs kick in at age 73 – how do we make sure that Social Security reports our earnings accurately, so we don’t wind up with increased Medicare premiums? Why not charge increased Medicare premiums when we are younger, instead of waiting to sneak up on us when we are older? Signed: Confused about Medicare Premiums
Dear Confused: I believe you are referring to Medicare’s “Income-Related Monthly Adjustment Amount,” or “IRMAA.” IRMAA increases the Medicare Part B (and Part D) premium amounts for those whose combined income from all sources exceeds specified levels for their IRS tax filing status. Social Security (and Medicare) get your earnings information from the IRS and use your reported IRS income (on your income tax return) to calculate your Medicare premium each year. But there is a twist – they use your reported combined income (also known as your “MAGI” or “Modified Adjusted Gross Income”) from 2 years ago to determine your current year’s Medicare premium. For example, they will use your 2023 MAGI to determine your 2025 Medicare Part B premium (and your Part D premium if you have Part D). So, if your income reported to the IRS on your tax return in 2023 is correct, Social Security will use that amount to determine next year’s Medicare premium.
IRMAA uses a sliding income scale to determine your Medicare premium. If you filed your 2022 taxes as “married/jointly” and your combined income for that year was $206,000 or less, for 2024 you are paying the standard Medicare Part B premium of $174.50, and there is no additional amount added to your Part D premium. But if your MAGI as a married couple was over $206,000 your Medicare premiums will be more – e.g., MAGI up to $258,000 makes your Part B premium $244.60 and results in a Part D supplement of $12.90 per month. And so on – as your MAGI further increases, so will your Medicare premiums until you reach the maximum. MAGI over $750,000 means a Part B premium of $594/month and a Part D supplement of $81/month. Thus, Medicare premiums are “means-tested” (those with higher income pay higher premiums).
A word about “MAGI” – MAGI starts with your Adjusted Gross Income on your tax return, to which is added any non-taxable interest you may have had, and 50% of the Social Security benefits (if any) you received during the income tax year. The total of those three amounts is your MAGI, from which your Medicare premium is determined for the forthcoming year.
So, if your 2023 combined income (your “MAGI”) as a couple was under $206,000 you will pay the standard 2025 Medicare premium which, for Part B, will be $185/month. If your 2023 MAGI as a married couple is more than $206,000, you will pay higher Medicare premiums in 2025 due to IRMAA.
Why not pay higher Medicare premiums when we are younger? Well, that’s because IRMAA only applies when you are enrolled in Medicare, and your premium relates to your income while receiving Medicare benefits.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.
