The 2022 Medicare IRMAA Brackets and How to Reduce This Surcharge

Taylor Schulte: Welcome to the Stay Wealthy podcast! I’m your host Taylor Schulte and today, I’m excited to share that, just like last summer, I’ll be stepping away from the mic for a few weeks to spend a little time with my family, work on some improvements to the show, and re-energize.

But don’t worry, I’m not replaying old episodes while I’m out like those other retirement podcast hosts, I would never do that to you.

Stepping in for me, once again, is a friend of the show and personal finance expert, Jeremy Schneider.

Jeremy is the owner of Personal Finance Club and now has close to 400,000 followers on Instagram. If you’re a long-time listener, you might remember that when Jeremy first joined me on the show back in early 2020, he was only about a year into Personal Finance Club, he had around 100,000 followers. So, needless to say, his platform has grown tremendously, and for very good reason.

He’s honest, he keeps things simple, he puts the consumer first, and like all of us here, Jeremy is an advocate for low-cost index fund investing. He also has a passion for uncovering all the hidden fees, dangerous investments, online scams, and common misconceptions in the investing and financial planning world.

Jeremy’s first guest episode airs right here next Tuesday, and as you’ll hear, he’s kicked things up a notch since taking over last summer. He was overwhelmed by the relentless and misleading sales pitches for indexed universal life insurance products. But instead of just talking about the pitfalls of these policies, he went out and bought one for himself. And through that process, he uncovered 10 lies that are told about these complex, very much misunderstood products and he’ll be sharing those with you.

From there, he’ll be covering the Vanguard target date fund debacle you might have caught wind of, ibonds, how to invest for your kids and grandkids, and finally, in his last episode, he’ll be sharing his ultimate investing checklist which includes seven different steps you can use to measure your own investment strategy against others that are out there.

So, enjoy your time with Jeremy and I will officially be back behind the mic the first week of August.

But, before I hand the controls over to Jeremy, I did want to leave you with some important information on Medicare IRMAA here in 2022.

Before we dive in, just a quick note that you can grab the links and resources mentioned in this episode by going to youstaywealthy.com/157.

So, for those who aren’t familiar with Medicare IRMAA, it’s a surcharge that high-earning Medicare members are hit with each month. For those with income above a certain level, IRMAA increases Medicare Part B and Part D standard monthly premiums.

IRMAA stands for Income Related Monthly Adjustment Amount and it’s based on your Modified Adjusted Gross Income or MAGI. However, what makes this pesky surcharge unique, is that it’s based on your income from two years ago.

In other words, the 2022 IRMAA brackets are based on your MAGI from 2020. And if your 2020 amount is not available, your 2019 MAGI is used.

Earlier this year, I wrote one of the most in-depth guides on the internet on Medicare IRMAA and the updated 2022 brackets. And by the way, it’s not one of those “give me your email address and I’ll send you the free guide thing”, it’s a live, public article on my website. I’ll link to it in the show notes for you so you can keep it handy and dig deeper, but one thing to note is that your MAGI for IRMAA purposes is different than your MAGI for non-healthcare purposes.

I share the formula for calculating your Medicare-specific MAGI in that article if you’re interested in crunching this number yourself. And with that number, you are then able to determine if you’ll be hit with an IRMAA surcharge by looking at the most recent brackets, the updated 2022 IRMAA brackets.

In short, if your Medicare-specific modified adjusted gross income in 2020 (remember, IRMAA looks at your tax return from two years ago), if your Medicare-specific modified adjusted gross income in 2020 was $91,000 or less as an individual or $182,000 or less as a married couple filing jointly, you will not be hit with an increase to your Medicare Part B and D premiums this year.

If you are above those limits, your Medicare part B premiums can be increased by as much as $408.20 per month and our Part D premiums by as much as $77.90.

There are 5 different income thresholds, each with a different premium increase, so if you want to see where you fall and what the surcharge is, head over to the show notes and review the table in my guide to IRMAA which again can be found by going to youstaywealthy.com/157. I’ve also linked directly to the guide in this episode description inside your podcast app for quick access.

So, naturally, when retirement savers learn about this medicare surcharge, they begin wondering what they can do to avoid IRMAA or reduce it. And in the guide that I wrote and linked to, I lay out 10 different ways you can avoid or reduce IRMAA surcharges.

One, in particular, is charitable giving, but it’s important to understand the different types of charitable gifts and how each is treated so you can determine how much it will impact your medicare premiums and I’ve summarized all of that for you. I also included strategies around generating tax-free income, avoiding investments that secretly spike your tax bill, Medicare Savings Accounts (or MSAs), tax-efficient withdrawal strategies, and I even share the process for appealing IRMAA.

Medicare IRMAA and strategies to reduce it are often hyper-specific to the individual, so I’ll spare you the details here and suggest that you read the article if you're interested in learning more. So, check out the guide if you’re interested in all of the details.

Lastly, because we’re already halfway through the year, I also provided the projected 2023 IRMAA brackets, so if you’re already thinking ahead and wondering what your premiums might look like next year, that’s all laid out in a nice table for you as well. However, just note that the 2023 IRMAA estimates are based on an assumed 0% rate of inflation. And we all know that’s not the case, so expect those estimates to be a little higher than stated.

If you only take one thing away from this short episode on IRMAA, it’s that your income this year will have a direct income on your IRMAA bracket two years from now. I regularly talk about not looking at your taxes in a vacuum, or in a single year, and to ensure you’re looking through a longer-term lens when making tax planning decisions. And Medicare IRMAA is one of many examples of why that’s important.

Once again, the links and resources for today, including my giant guide on IRMAA and strategies for reducing it, can be found by going to youstaywealthy.com/157.

I hope you enjoy your time with Jeremy, thank you for continuing to listen to the show and follow along, and I will see you back here in August.

Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.