This is the Truth Network. Yeah. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
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Well, welcome to Finishing Well with Certified Financial Planner Hans Scheil, and today's show is. Irma, the IRMAA, we'll get into all that. It's Medicare tax. for high-income people. And you might believe that a lot of people get angry about this particular text.
And a lot about why we're doing this show is to help you see Um There's better things to do than to get angry about taxes sometimes, is to figure out how to plan around that. And a perfect example of somebody that was in retirement. Yeah. And they let their anger, you know, kind of mess up their retirement, would be Moses. You might remember, Moses was getting up there somewhere around 120, and God asked him, people got really thirsty, that he was supposed to.
Speak to this rock. His sister Miriam had past and uh She was somewhat responsible for the water coming out of the rock. And so now Moses finds himself in this position and he gets really angry. uh with the people. Because they don't believe that God's going to come through with them.
But rather than actually realizing the rock that He was. Uh fixing to hit with that stick was in fact Jesus. And how often do we realize this when we're speaking to another person that God told us to love, right? That we're doing this. But even in this situation with Irma, right?
Don't let your anger keep you from going to the promised land. And that promised land is not. Clearly just you know, your financial security, et cetera, et cetera, to some extent. It's heaven while you're on earth, right? Your own mental.
Um place that you go to when you're angry is is not heaven. I'm just saying. And so Hans, you guys run into this all the time, right? Oh yeah, it's interesting that we're talking about anger. in the beginning of an Irma show, but uh a lot of times, it happens less now than it used to is that The first time people learn about IRMA or the income related monthly adjustment amount, which they have this nice Acronym that Medicare comes up with to describe.
It's a Medicare tag. First time they learn about it, is when they get the bill for it. And then they read it and they say, you know, if they're just getting this first bill, they're turning 65 in 2025. It's based upon their twenty twenty three tax return. And that just sends them through the roof.
I mean, um A lot of people. He had, like, what is this? Where'd it come from? You know, you're penalizing me. I paid in more than everybody else for all the years for Social Security and Medicare and all that stuff, and now.
Then I'm on Medicare, now you're going to charge me this surcharge And it's just people are upset. Yeah. Um You know, the reason that's notorious for us is almost, you know, I want to look at him, hey, I didn't make it. You know, just, you know, but, but. Of course, I don't do that.
Yeah. I've kind of learned that, like, what we're going to do today is we're going to give you some information about Medicare. Irma, and we're going to try to Help you understand it. But to somebody that's already mad about something, giving them this information. It doesn't help.
Okay. I mean it's just Yeah, and so I mean, I we wanna get into a psychology class today. And um but but if i i if anything really honks people off, It's it's it's this arm of business.
So Um Why don't we get started and just talk about so IRMA stands for income related monthly adjustment amount. I-R-M-A-A. Yeah. What it is, is it's a way to make people that have a high income in retirement. pay for a lot of their Medicare.
I mean, that's what it really boils down to.
So Medicare Part A comes at no cost. Whether you're rich, poor, or in between. I mean, everybody gets part A, you don't have to pay by the month. and Part A covers the hospital. And then part B.
Most people that are on Medicare pay one hundred eighty five bucks a month in twenty twenty five. 185. And if you're on Social Security, they take this out of your So security checker come up.
So, you don't even see it. And that's not Irma, that's just the regular Part B charge. for a person that is uh below the Medicare. They're not high income people.
Okay. Right. Yeah. Um When Irma kicks in, It does that for a single person. In 2025 at one hundred six thousand dollars of taxable income.
And in 2025, they're going to use your two years ago tax return. for 2023.
So this is where people really get like, what? Yeah. You know, I can't even do anything about my 2023 tax return. I mean, that's two years ago. It's already filed, paid.
But that's what they're using is the gauge. to see whether they're going to charge you. Extra for your Medicare.
Okay. I'm just telling you the facts here. And it starts at one hundred six. And then the next threshold is one hundred thirty four thousand. The next threshold is one hundred sixty eight thousand.
Um The next threshold is two hundred one thousand And then the next one after that is five hundred thousand. Yeah. The more you made in twenty twenty three, the more you pay.
Now for married file and joint. That number is two hundred twelve thousand is the threshold of combined Husband and wife. income, married, filing jointly. two hundred twelve thousand is the threshold. And then it's The next one's 267, 335, 401.
and then seven hundred and fifty thousand.
So these are clearly The well-to-do people. That America but it picks up a lot of people. that consider themselves middle income or upper middle income. Regardless, there's the numbers. and it's a threshold kind of thing.
You go one dollar into the place, it's a cliff or whatever you want to call it. you pay the extra money for Part B. And so, if everybody pays 185, you're going to pay 185. But if you go into that first threshold, you're going to pay an extra Um unrestricted looking chart. Um Hundred and A twelve bucks.
So Um So you're going to pay extra. And then each grid where you had it higher, it's more and more and more. and it can get up to seven hundred bucks a month per person. seven hundred and some dollars per month per person. Oh no.
total Medicare Part B and Part D charges.
So How do you like them, Apple? Yeah. Say And You know, it's a fascinating thing that You know, part of the reason that we were doing this show was to let you know that there are Situations where people's income can spike. And and there are You know, they can File What do you call the the form in order to um amend it or something? It's an appeal.
It's an appeal form. The government doesn't call it an appeal form. They call it a life-changing event. Um form SSA dash forty four. And don't worry about writing that down or whatever.
You can just Google Irma Appeal. on Google and form SSA forty four will come right out. Which is one of the ways that you guys can help them, obviously, is in doing that. But part of the reason to do the show is to make you aware of what it is, how it is. And then what can you do about it?
But also To some extent, from what I understand from The video right along the same lines that you guys did, which is by the way at cardinalguide.com. Is that some people have a knee-jerk reaction? Knee-jerk reaction is like, I am going to do everything I possibly can in order to not do this, and then they make bad decisions as a result, right?
Well, yes.
So you can start I mean, we are financial planners, and this is a financial planning show. For retirees. And so we're talking about Irma, and we don't want to talk about anything In the context that you can't do anything about it. I mean, we don't go over taxes and say here they are, too bad. I mean, we're so we're explaining Irma to you.
And then we're going to say, okay, so now every time we make a move in financial planning, where we suggest a move and you make a move, we're going to look at the impact on Irma. And what I was saying about the bad decisions is some people, when they start learning about this thing, and they're very angry about it. They start making all their financial decisions. Around trying to lower Irma. And that's not real smart if you have significant money.
So Um Do all your planning around Irma. Um I mean, it's a factor. But it's not the biggest Stick in the game. It's just one of many things. And so now I want to get back to the appeal.
I mean, what the appeal allows you to do. is most people are going on Medicare right when they retire. Yeah. Uh or right when their spouse retires. Yes, most people are going to expect a reduction in income.
because of their retirement. Yeah. So the government, they're saying, look, we're using it two years ago. Tax return. With 2023 and you're retiring.
or you just retired in 2025, or you're going to retire at the end of 2025. And your income is going to go way down, it's going to be lower than it was back in 2023.
So you need to retirement is Or work stoppage. is a life changing event, and it's right on the form. And so in the second part of the show, we'll get into how to complete the form and what to do about it. Um But I just want to let you know that, that's the thing that's going to grant your appeal. It's not how the money moves around, it's going to be whether you had a life changing event or not.
Yeah, and We will again get into that, but we want to remind you at this point in time that the show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, you're going to find the seven worries tabs. And today's show is, you know, Medicare. And this particular worry being Irma, but if you go to the Medicare tab, you're going to see videos that are right along these same In fact, it's got the exact same title: Irma Medicare Tax for High Income People. And the show notes are phenomenal.
They really are, in that they not only show you the appeal, they show you the guide and the levels and give you real details that may be helpful if. You want to do a little understanding before you do some planning. And of course, one of the favorite things there, obviously, is to contact Hans and Tom Page yourself to help you with an appeal or whatever. and and as well as Hans's book. Complete Cardinal Guide.
to planning for and living in retirement. And so it's all right there at Cardinal Guide.
So when we come back, we'll be doing more with the Irma Medicare tax for high-income people. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM. a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil, and today's show is. Um which is a Medicare tax on High-income people. And so Wow, we've got it. And now you've had a big life-changing event, you know, or something happened, you went into retirement or.
something um you you sold a rental house or something and now you you you need to file an appeal, right?
Well, yeah. But again, selling the rental house won't be Reason for an appeal. I mean, so if we had somebody that had their income regular income in twenty twenty three And then they sold a rental house. Um In 2023. And that was really their only significant asset.
outside of their own home. and they made three hundred thousand dollars profit on the selling of the rental house. And that drove their income up to $400,000 in 2023. And now they get this Irma bill like they're a rich person, and they're saying, well, we're not a rich person. Um But according to the IRS you are and according to Medicare people, And so what's going to be foundational for the appeal is the fact that you're retiring now, or you are retired already now.
or your spouse is already retired.
So when that happens, when that life changing event happens, All we're going to do is we're going to get the government to look at your twenty twenty five income instead of the 2023 income. That's really all the appeal form does is that it first evaluates the life changing event to make sure it's real and that you qualify. And once you qualify, then you know you you might want to get my help doing this We're going to put down a projection. of 2025 Income. and we're going to put down a projection of twenty twenty six income.
And that's just a projection, but they're going to accept it. Yeah. that twenty twenty five and twenty twenty six are not going to include the sale of a rental house, so your income is going to be your postretirement income. and presumably below those thresholds, We get the thing appealed. They'll even give you the money back they already took.
Yeah. Thank you.
Okay. That'll be worth the effort, obviously.
Well, sure. And let's just say we have a single person So you know, legitimately makes $120,000 a year or $140,000 a year. They do quite well. And that in and of itself We put them into Irma. if that was their income in twenty twenty three, but they were the ones that sold the rental house.
Yeah. They sold this rental house. And they made $300,000 of profit.
So now their income is going to be $440,000, and that's going to drive. as a single person It's going to drive almost $6,000 a year. of Irma during twenty twenty five as they paid it for the whole year. Um That's a lot of money. And so it's going to get a little bit tricky to Um First of all, we've got to have a life changing event.
I mean, if they didn't retire. And they didn't get divorced, or they didn't get married, or they didn't have a work reduction like they went part-time or something. Um then it doesn't matter how their income went down, that this is not going to be approved.
So Um A real gray area that we're going to capitalize on, like there's one. that I used with my attorney. because he legitimately reduced his work At 65. He's a partner in a a small law firm. And Hmm.
Um yes. you know, he went from working like five days a week to two days a week. And His income went down substantially. Um And he was fine with that. And we got all that certified.
So that was a work reduction, not a work stoppage, because he didn't really retire. Um So we got all that documented and then Sent it in and showed a lower income, and his Irma didn't get to go away. but it got significantly reduced, which he was real happy about. Yeah, a bit. Um Another thing I'm going to tell you is that people write at retirement that are well to do They get That was a really smart move that he made.
Okay, but another smart move. Or not so smart move. that he's making is he has a whole lot of money in an IRA. like lots of money in an IRA. Yeah.
Um He doesn't really need it to live. just the money he gets out of his Um Practice and then some other things. I mean, they're fine. The end. Um But sooner or later he's going to have to start taking money out of that IRA.
And if he puts off doing it until he's seventy three and minimum distributions, He's not going to like the Irma bill. that he's going to see at seventy three when he has to start taking out these minimum distributions.
So my advice to him would be to start doing some Roth conversions or just start pulling some money out of there. Just use a Just doing something. to get money out of the IRA and pay the taxes.
so that it's not creating this mandatory large income later on.
Okay. And sometimes that people have to willingly accept Irma. And that becomes an even harder case. Is that people say, I came into you to reduce this thing, and now you're talking about increasing it.
Well, yeah, that's kind of like your tax bill, but We're thinking long term here, not short term. And we're thinking about your widow or widower, we're thinking about the surviving spouse who will be a single taxpayer. Um and they also have a lower threshold single Irma Um I mean The the tax code is not real friendly to surviving spouses or to single people that are 80 years old. that were married their whole life, and now their spouse died. They become a single filer and they pay a lot more.
And the minimum distributions really don't change appreciably so You know, I'm showing up how I helped him lower his Irma bill. But I'm also pointing out Some of the other financial planning that he didn't do. that is going to bite him later on. Um Where it may have been better off. Take some mermaid.
So if I'm understanding. Since it's a cliff that you fall off, so to speak, based on the level, That if he were to take some and and make some Roth conversions now of the money that's in that RRA. That would in fact If you're planning it, you're going to raise his income. to where it's not going to take him over the next cliff. In order to reduce the IRA, so that when he does have to start taking minimum.
Um Reduct um minimum distributions that it wouldn't send him over the next cliff, right?
Well, it's mostly right. But the Irma chart is not the cliff that we're looking at. It's the tax bracket chart.
So you know, like in his case, I think that his you know, his um twenty 2023, well, this was a couple of years ago.
So his two years ago income. was like 400,000 or something like that. And then his part-time income. is gonna be like two hundred thousand. And so Just enough to get him under There are my thresholds.
Okay. Or maybe it was more like $250 or something, just to get him into the first bracket. And so All I'm saying is we would have gone ahead and done the appeal. But when I give him the rest of the financial plan, I would have said, you're probably going to need to do Like two hundred thousand dollars a year of Roth conversions. start now The end.
We're starting next year, maybe we give this one year to enjoy the lower Irma. the next calendar year, we're going to do two hundred thousand dollars in Roth conversions each year from now till seventy three, So we're going to reduce the balance of your IRA by one million dollars. Um And we're gonna pay the taxes on them. which is not going to be real happy to him. And those have no minimum distributions.
And it's going to make the Roth doesn't, and it's just going to make this big balance that he has an even smaller RMD or required minimum distribution.
So I'm getting a little complicated here, but there's a bunch of moving parts. going on Yeah. When people are angry about Irma, all they want to do is Focus on Irma. Yeah, that's easy for me. but it sets off in motion a number of other things where it becomes limiting in other areas that are actually more important to him.
Does that make sense? Yeah, and so as I'm thinking about it, the beauty of moving that money into that Roth IRA is not only obviously what it may do for Irma. But also, you know, it it None of that income on this new money, and in his case, you're moving a ton of money. Um none of the income ever taxed, right? It's it's correct.
Yeah. you know, his Widow can live off of that in her 80s. After it's grown a bunch, Without paying any tax. When she's in these higher tax brackets because she's a single filer. if that scenario played out, Um I mean, there's all kinds of things.
And then, if they both die, their kids are going to inherit. a whole bunch of money in an IRA and the part that's in the Roth is going to have no tax on it for the kids.
So it's just Um He's just got a problem lingering out there. that he needs to deal with. And there's no time better than the present to get started in bits and pieces. And that works against the IRMA planning. And that's you know, we have to deal with this with all the time is that we do things in one area to help people out.
Yeah. reduce their taxes over the long term, that creates increased taxes In the present. Yeah. That's a tough pill to swallow. But people swallow it all the time.
Right. Right. So Um yeah, and so just around this is a this is a lightning rod subject and I've just come to realize that as long as I'm working and doing well. which I'm very thankful to God for that I you know have a great income in what i'm doing I'm just going to pay a lot of Irma for my wife and myself. thankful for the health insurance I get from the government.
Yeah. Um when I retire, whenever I do, Which I hope is a long time from now. I've got my thing all set up so that I'm not going to pay a lot of taxes and I won't I won't pay a lot of Irma because I'll file an Irma appeal, right? As soon as I do that, and my income, my taxable income, is going to be pretty low in retirement because I have moved all my stuff to a Roth, or not all of it, but a lot of it.
So All right.
Well, as usual, we've run out of time. Before we ran out of the show, we want to remind you that the show is brought to you by CardinalGuide.com. At CardinalDietGuide.com, you're going to find seven worry tabs or like menus. And you go to the Medicare one, and you're going to find this titled IRA, I mean, excuse me, Irma, Medicare Tax for High Income People, and you're going to find a video with the same title, all sorts of wonderful show notes as we described before. Of course, Hans's book, The Complete Cardinal Guide to Planning for Living in Retirement, and the Contact Hans and Tom page.
It's all there at CardinalGuide.com. Thanks, Hans. Thank you, and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment. Advisor. BCM and Cardinal Advisors are independent of each other.
Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com.
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