How Our Tax Planning Saved a Client Over $6,000! A Case Study on IRMAA Premiums
We're often asked by prospective clients to share examples of how our financial planning expertise can benefit them. Whether it's reducing taxes, avoiding a costly mistake or higher investment returns with less risk, we're constantly working to help you make the most of your money.
Our latest YouTube video goes in depth on an actual client's case study, so be sure to watch it.
How to Keep IRMAA Premiums Low
For people on Medicare, your Modified Adjusted Gross Income (MAGI) determines your Income-Related Monthly Adjustment Amount or IRMAA premium. Even a small income spike can significantly raise your Medicare premiums. In our case study we were able to reduce a client's MAGI to save them over $6,000, while maintaining their required annual income level of $240,000.
Beware the IRMAA Tax Cliff
Unlike regular income taxes, which are progressive, meaning that only the income over a certain amount gets taxed at the higher rate, IRMAA premiums are what we call a “tax cliff.” If your income exceeds the threshold by even one dollar, you’re taxed at the higher premium tier for all your Medicare costs—no gradual phase-in.
This case is just one example of how our team of experienced certified financial planners analyze your entire financial picture on an on-going basis to uncover opportunities for savings. Whether it’s tax reduction, investment optimization, or maximizing Social Security benefits, we customize strategies to your situation.
Frequently Asked Questions
Q: How is IRMAA calculated? A: IRMAA is calculated based on your Modified Adjusted Gross Income (MAGI) from two years prior to the current year.
Q: How can I reduce my IRMAA premiums? A: Strategies may include managing your taxable income, using cash reserves instead of retirement account withdrawals, possibly taking Roth IRA distributions or making Qualified Charitable Distributions.
Q: How far in advance should I plan for IRMAA? A: It's best to plan at least two years in advance, as IRMAA is based on your income from two years prior.
Q: Can I appeal an IRMAA determination? A: Yes, you can appeal if you've had a life-changing event that reduced your income, such as retirement or divorce.
Q: How often should I review my tax situation for IRMAA planning? A: It's advisable to review your tax situation annually with a financial planner or tax professional to optimize your strategy.
Q: Does IRMAA affect Social Security claiming strategies? A: Yes, it can. The timing of when you claim Social Security can impact your overall income and potentially affect your IRMAA premiums.