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What you need to know about Medicare NOW

Is Medicare a big deal to be concerned about? The answer is yes, and if you don’t plan accordingly, what you don’t know will hurt you.


If you plan on retiring ever, you need to know about what is happening to Medicare. If you don’t sign up when you are eligible there maybe penalties. The article is not about all those television commercials you have been bombarded with lately. Yea, you know, the various spokes person talking about Medicare Advantage plans vs. traditional Medicare. Captain Kirk promoting Medicare plans! Please beam me up Scotty and get me out of here!

No, this article is about something called IRMAA. An acronym which stands for Income Related Monthly Adjustment Amount. What is happening is that the amount you pay for Medicare is now earnings based. Earnings are things like IRA withdrawals, rental income, pensions, social security income, anything that you are getting income from in retirement. Some of the exceptions are withdrawals from cash value life insurance and Roth IRA income. The history of this dates to the first earnings bracket being created during the GW Bush administration, with additional brackets being added during the Obama administration. There are now 4 earnings brackets, and the surcharges for the highest bracket are much higher than in the lowest bracket. Anytime your income pushes you into a higher bracket, you will get an IRMAA letter stating that your Medicare Parts B and D premium will be increased (Your IRMAA is calculated every year). Key triggering events to remember regarding IRMAA earnings brackets are social security income increases due to inflation adjustments, required minimum distributions at age 72 if you are not using your IRAs for income, taking out extraordinary withdrawals for accounts to pay for something, anything that will increase your taxable income in a year after you begin using Medicare. Inflation is the primary concern when considering this issue. Medicare premiums are forecasted to increase an average of 6% per year (Medicare Trustees Report, 2021). Another important factor is the demographics in the Untied States and other developed countries around the world. There are not as many young people paying into the Medicare system as there are old people relying on the system to pay their health care costs (Yarmuth, 2019).  According to the Congressional Budget Office, population aging is expected to account for a larger share of spending growth on the nation’s major health care programs through 2039 than either “excess spending growth” or subsidies for the coverage expansions provided under the Affordable Care Act. When I have run the analysis for my clients on what the future costs may be, it ends up being a significant health care expense that people need to plan for. Further exasperating the issue, is that your Medicare premiums are deducted from your social security check, and eventually could be more than your social security check requiring a separate payment for Medicare Part B and D in addition to your social security deduction (IRMAA Solutions, 2021)

What can you do?

Make sure that understand what your future IRA distributions will look like at age 72. Have a plan to minimize what happens then. If you plan on using IRA accounts for legacy plans for your beneficiaries, begin taking distributions from these accounts as soon as possible and use those distributions to purchase life insurance. This is the best strategy for passing your assets to your children.

If it makes sense, you may want to consider converting your IRAs to Roth IRAs on a scheduled basis each year. You may be better off paying the tax now rather than later. Convert as much as you can each year that allows before being forced into the next tax or IRMAA bracket.

You may not want to keep deferring your IRA money to avoid taxes. This concept is a setup and trap for other taxes that will occur later. Use your IRA money for income or employ the two strategies mentioned above.

We help people develop strategies for increasing their wealth, reduce their risk and taxes, and increase their protection. Give us a call so we can help you!


Work Cited

2021 Medicare Trustees Report –

Yarmuth, John. “Retirement Security for an Aging Population Requires Higher Federal Spending.” House Budget Committee Democrats, 4 Nov. 2019,

Medicare IRMAA Calculator: What You Need To Know. Dir. IRMAA Solutions. 2021.


This information does not replace that information provided to you by the Social Security Administration.



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