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Retirees who are being hit by the hidden tax of IRMAA are asking the question “Does IRMAA Adjust Automatically?” and the answer is yes, but keep in mind that answer can be “iffy” at best.

What is IRMAA?

IRMAA, which is short for Medicare’s Income Related Monthly Adjustment Amount, is a surcharge on top of a retiree’s Medicare Part B and Part D premium if they have too much money.

IRMAA is a tax on income through Medicare.

What is income for IRMAA?

Social defines income for IRMAA your Modified Adjusted Gross Income or MAGI.

Your MAGI is your adjustable gross income (AGI) plus tax-exempt interest. You can find this on lines 2a and 11 of your 2022 IRS tax form 1040.

Some examples of where the income that IRMAA will use come from:

Taxable Social Security benefitsTraditional 401(k) Withdrawals
WagesTraditional IRA Withdrawals
Pension & Rental IncomeTraditional 403(b) Withdrawals
Capital GainsQualified Annuities

For a comprehensive list on what counts towards IRMAA please click here.

Ultimately, if you have your savings in a Traditional 401(k) or Traditional IRA there is a good chance that you will reach IRMAA at some point in your retirement.

Please note:

  • All IRMAA surcharges reduce your Social Security benefit.
  • Not only will you pay more for Medicare if you reach IRMAA, but you will receive less in Social Security benefits too.
  • Your goal should be to plan accordingly today so you can avoid IRMAA later. This will allow you the ability to keep more of your income especially when you are no longer working.

What does not count towards IRMAA?

Roth Account Withdrawals
Life Insurance Loans
Non-Qualified Annuities
Health Saving Account Withdrawals
401(h) Plans
Home Loans or Reverse Mortgages

But Does IRMAA Adjust Automatically?

IRMAA is all about your income and if your income will stay the same each year or will it increase or even drop.

When does IRMAA Adjust Automatically happens in only two instances which are:

  • 1. Your income or MAGI decreases before the next new year and that amount of income (MAGI) is less than the IRMAA Thresholds that are set by the Centers for Medicare Services (CMS) for that upcoming year.
  • 2. Your income (MAGI) did in fact increase before the next new year and because of that you are in a higher IRMAA Threshold.

If your income or MAGI remains constant or is still equal to the IRMAA Threshold you may already be in, then IRMAA will not adjust automatically.

How Social Security Determines IRMAA?

  • Typically, every November the Social Security Administration electronically sends the Social Security Numbers of every person that is in Medicare and who is not receiving financial assistance.
  • If the IRS concludes that a person’s MAGI is above the first IRMAA threshold for the upcoming new year then the IRS will electronically send back both the SSN and the MAGI amount.
  • If the IRS concludes that a person’s MAGI does not reach the first IRMAA Threshold, they will electronically send back only their SSN.
  • Once the SSA receives the data of who will be in IRMAA for the upcoming year they will contact them by mail usually in the first 2 weeks of November.

Once you receive notice from the SAA you have 20 days from the mailing date to contact the SSN and request for an appeal.

Conclusion to Does IRMAA Adjust Automatically.

IRMAA, according to the process that Congress created back in 2003, does in fact adjust automatically each year.

All changes to IRMAA are dependent on both your income (MAGI) and what the Centers for Medicare Services has set for the IRMAA Thresholds for the upcoming year.

For more information on IRMAA and specifically how to avoid it we invite you to contact an IRMAA Certified Planner in your area.