Medicare Tax 2024 IRMA Rates

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This is the Truth Network. 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. Now let's get started with Finishing Well. Well, welcome to Finishing Well with financial planners, Hans Scheil and Tom Griffith.

And today, Medicare tax, the 2024 IRMA rates, and you may go, what in the world are you talking about, Robbie? Well, that's all the more reason you even need to listen to this show. And it's interesting to me, we talked about the last episode about ties, but there's another aspect of that. It's called offerings. And when you think about it, and depending on how you want to look at taxes, in a way, you're making an offering to the government. I don't know if you've ever thought about that.

It depends on your attitude. But the thing, one of the things that I think is really a huge blessing is if you look in Malachi 3.8, God talks about, you know, don't rob me of my ties and offerings. And so a lot of people, they give a tithe, but they don't realize the real benefit of offerings is another great way to give back to God. And the neat thing about giving back to God is you can do it in your time, talent, and treasure. And so, you know, one of the offerings from my standpoint that I know is the reason that God has blessed this podcast to be the number one podcast as of this moment on the Truth Podcast Network and the YouTube channel and all that it does is because, you know, Hans is just clearly giving you an offering of wisdom and understanding that he's gained over the years in helping people.

And Tom is doing the same thing and coming in partnership with, you know, Hans who mentored him. They're giving you an offering and as a result, God blesses that. But that's not the reason they're giving the offering. They just enjoy, you know, sharing what it is that they've been taught. And so today, you know, you're going to go, well, gee, I don't see Hans, you know, any return on your time of explaining all this about tax rates.

But it comes in just an understanding of the overall idea of finishing well. And since this is a little bit hard to understand, this is really a neat show from my standpoint to listen to Hans and Tom's offering of ways that you can understand these things that not only help, you know, obviously people with higher income that this really affects, but those with other incomes and understanding the wisdom behind really getting more than one counselor when it comes to these financial matters. And so with all that said, you know, a lot of people are wondering what in the world is IRMA, Hans? Okay.

IRMA is Income Related Monthly Adjustment Amount. How's that for a mouthful? It is.

And I-R-M-A-A. And it's the government. I truly don't think they were trying to hide this thing.

But it really, you could never gather that this is a tax on the well-to-do that get Medicare. And they, whatever, I don't know if that was their intent. But what I'm going to tell you in experiencing, we talk to a lot of people turning 65. That's just when people tend to come in and see us.

And they just come into our focus. And I'm telling you that a lot of people just don't see this coming. And that's the thing that upsets them the most, is that all of a sudden, they're turning 65.

They've got all these perils that they've got to face and taxes and taxes on Social Security. Most of them are aware that part of that's taxable, or a lot of it is. And they know about a lot of the things, or a little bit about a lot of things.

This catches them blindsided. And, you know, it can be I think about an example, just last night, somebody that got in touch with me, who's very, very well to do. And they were a referral from somebody else. And I never really got down to income numbers. But I just knew this. And so I just gave her some examples of this.

And it's just, you know, a single person turning 65, that's going to go on Medicare Part B, over $500,000 a year of income. So it's hard to feel sorry for her. And I don't feel sorry for her. And she wasn't really upset about this.

But she just, you know, if there was anything that bothered her a little bit, this is the first she's ever heard of it. And she was apologizing for having to call a consultant to sign up for Medicare, because she's a former CEO of a healthcare company. So that sells Medicare insurance. But any case, over $500,000 of income, and I'm not 100% sure she's there, but I'm guessing she is $419.30 a month in 2024 is what her extra Part B is going to be. And that'll be in addition to the $174.70 a month that everybody pays. So she's almost at 600 bucks a month just for Part B. Okay. And then she's going to pay a surcharge on her Part D of 81 bucks a month, in addition to the other premium that she pays for that.

So around 700 bucks. And, you know, I'm sure that she was paying much more than that for her health insurance, or her company was. So but I don't try to make people feel good about this in the first conversation when they're hearing about it. What I try to do is just explain it to them, and then explain, and Tom's going to get in to some of the things you can do about this. So there's there's some more details to come.

But I just in the beginning, I want to talk about the shock value of just hearing about it for the very first time. Yeah, I mean, I think and we've experienced this a lot in our practice. And a lot of times we're meeting people right as they're retiring, they're starting Medicare, that's a big part of what we do here. And they've never heard about this. And they come in because they've gotten this letter saying, hey, because you've made so much income, you have to pay more for Medicare. And they get really some of them are very angry, not everybody, but some people are just really upset about this.

And it has nothing to do with the amount of money. I mean, that that part is a little frustrating, but really upsets them is that they never heard about this, they never knew about it, no one warned them about them. And then they start doing everything to avoid it for the future, which is also a mistake.

And so we just want to position this properly. We do a lot of planning where we consider this, but we don't let it drive every decision we make in our plans, because that sometimes you just you miss the big picture if you're focused on one thing solely like this Irma. But one of the other really sort of quirks and some people find it frustrating, is they look at your income from two years ago. So people starting Medicare in 2024, the income they are using to determine your Medicare premium is 2022's income. And so some people say, well, I'm not making that much anymore. And depending on what happened, there's a ways to appeal it. So we might get into that a little bit later.

But that's the other thing that's rushing. That's where the planning comes in, because you need to do some advanced planning if you're trying to plan around this number. Because if you've already made the mistake two years ago, we really can't help you. Maybe with the appeal we can help, but we can't go back and change the past. Looking forward, we might be able to help you, but you really need to start at least knowing about this and thinking about this when you're 63, assuming you're going to start Medicare at 65.

If you're delaying Medicare, which if you're still working, a lot of people delay Medicare, you don't really need to worry about this until two years prior to you retiring. Yeah. And so we started with, I think that might have been a mistake, starting with the single person over $500,000 a year. So let's go to the other end and let's say, where does IRMA start?

Okay. So if you're a single tax filer in 2024, and you go $1 over 103,000 of income, you're going to pay the first level of IRMA. And that was your income from 2022. If your income from 2022 was $1 over 103,000, you're into that first level of IRMA.

Okay. And that is just $69.90 a month of extra part B and $12.90 a month for extra part D. Now, if we go further along and you get up to like, as a single, you get up to $161,000 a year, then you're going to pay double essentially. You're going to pay $174.70 a month in addition to the $174.70 that everybody pays.

And so it's a graduated scale. If you get $1 into the next bracket, you pay the amount. And it uses, as Tom said, the two years ago tax return.

And so a lot of people turn in 65, they, you know, they're retiring. And if they retire, and they might've made more money two years ago, or their spouse has since retired, I mean, it's just, there's all kinds of scenarios. And if you're going to make under those thresholds of, as a couple $206,000, or as a single $103,000, or you did make that in 2022, and now in 2024, you're going to make under the threshold, we can help you file an appeal.

I'm going to throw one other sort of weird thing. Cause you say, okay, if I make above this amount, what are they counting? Like what income are they counting? They look at essentially all income, but specifically they're looking at what they call modified adjusted gross income, which is, it's kind of a made up term. You're not going to see that listed anywhere on your tax return, but how they get to that number is if you do look at your tax return, one of the stated items right on the front of your 1040 is the adjusted gross income. That number is important for lots of other things in the tax code, but you're going to start there because you're going to look at your adjusted gross income. And then for Medicare, for this Irma purposes, you add back in any tax exempt interest, which that is also listed on the front of your 1040. Those are the two numbers that they add together to look to see if you have exceeded those thresholds. And so if you have some questions or you think you might be close, go back out, pull out your 2022 tax return. You can see the two numbers they're going to look at on your tax return to determine whether you exceed these. We get a question oftentimes, do Roth conversions impact this? And the answer to that is yes.

If you do a Roth conversion, that income is considered taxable income in the year you do the Roth conversion. So that could help you go above these Irma thresholds. And that's really where the planning comes into play because when we're doing the financial planning, a lot of times we're recommending Roth conversions. We take into consideration the Irma thresholds, not necessarily having that drive every decision we make, but we have that be a factor that we're considering.

All right. Well, we got to head to a break, but we want to remind you that this show is brought to you by Cardinal guide, cardinal guide.com. And there you're going to find the seven worries tab that make it easy to navigate through the website. And one of those tabs is the Medicare tab, and that's pretty easy to find. And there, you're going to find a video on the same subject of the 2024 Irma rates, and there you're going to find show notes of all sorts of details about the things that Hans and Tom are talking about today about this tax, as well as of course, Hans' book, the complete Cardinal guide to planning for and living a retirement. I mean, what a neat way to get the whole package and familiarize yourself with, you know, the total vision of how to finish well in so many different ways by getting that book. And again, it's all there at cardinal guide.com as well as an easy way to just get up with these guys. There's a contact tab there where you can actually call or talk to Tom or Hans. It's all there again, one more time at cardinal guide.com.

We'll be right back with a whole lot more finishing well. 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 planners, Han Shyle and Tom Griffith. And today's show, we're talking about the 2024 Medicare tax Irma, the rates have been released. And so we have updates on that and, and further information. So Tom, you got some stuff for us.

Yeah. I mean, in the first part of the show, we were sort of giving you some of the thresholds for a single file and there's more that we didn't and we're not going to list every single one of the brackets. If you have questions, you can find that on our website, or you can even Google it and see what those numbers are. But what I want to do is go through sort of the same levels, but just for a married couple, because we just did the single filers because most, a lot of people are married and you have a little bit higher thresholds. And so we're on a single, someone who files a single tax return, the starting threshold was 103,000. For a married couple, it's 206,000. So you can see it's double for someone who's married, which again, this, this is a little easier. You know, might have one spouse who's working, one spouse who's not. 206 is a much larger number than that 103, obviously. The 161 for a single filer was where you have to pay double the cost for Medicare. For a married couple, that's 322.

Not all of them are just exactly double, but you get the idea that the thresholds are much higher for a couple, and they're a little bit lower for a single filer. Again, not this wouldn't be a reason to go get married, but if you're thinking about it already, this, you know, maybe this will get you over the line. But one of the things that we want to talk to next a little bit is, okay, we've explained the problem. Maybe you've already received this letter and you, you didn't know it's coming.

Hopefully you know now what it is and you're like, what do I do about this? And so depending on the situation, and I had mentioned this in the first part of the show, is there is a way, there's a way to appeal this extra cost. Now it's a very specific form you have to fill out and there's specific things that need to be happened, but I'll run through a couple examples. One of the most common reasons that you might be getting this letter is you were working two years ago, say you were 63 and still working, had a decent income, or maybe both you and your spouse were working, whatever the situation is, and now you've retired. Your income is much less. Your threshold, your income now does not exceed those thresholds, but they're looking at two years ago tax return.

You can fill out this form. Retirement is one of the life-changing events because this form is really a two-part test is you need a life-changing event and then your income also needs to be lower. Well, retirement, work stoppage or work reduction, so you maybe go down to part-time or something like that, is considered a life-changing event.

And that's for either spouse. And so let's say you have a couple who's working, the one spouse retires, they start Medicare, but the other spouse is still working and they exceed those thresholds. But then two years later, the second spouse retires and now their income is less, you can appeal it for both spouses even though the one spouse retired two years ago. So when either spouse retires, if you're a couple, that opens up the window to appeal it. And essentially what you're doing is you're asking Medicare and Social Security, who determines this, to look at your income projected forward for this current year versus your two years ago income from the prior two years.

So you're able to essentially fast forward the clock. You don't have to wait for it to run out on its own and they can appeal it. That also brings up something that's often confused is this does get revisited every year. And so if you've done this and maybe your income isn't below the threshold or you don't have a life-changing event and you're not able to get this appeal approved, every January they're going to look back from the two years prior what that income is. So eventually this will fall off assuming your income comes down if you don't do anything. With the appeal, we can essentially speed up that process and get them to review it sooner.

Sure. And so sometimes people, we said earlier in the show and I'm going to repeat it, that people just hear about this for the first time when they come to see us. We're not only talking about Medicare, although they might be turning 65 and that's the highlight of the conversation, but we're going to be talking about tax planning and income planning and then comes in Roth conversions. And so we start doing things and recommending things that are going to increase their income at least for a few years as we're doing Roth conversions if they're right for them. And so we get some pushback from people that are like, man, I don't want to pay any more ERMA. And that's a valid pushback where they're saying, look, this is bad enough just off of my income that I was making. Now I've got, you're going to add to that by doing these Roth conversions.

And well, yes or no. I mean, you're going to be the one that's going to make the decision, but we're still recommending it because this ERMA surcharge or tax is just for one year, whereas the benefits of a Roth conversion could last generations. So, you know, we don't want to get so focused on this that we, ERMA, that we start doing our financial planning. All of it revolves around getting our income down because as financial planners, what we're trying to do to a certain extent is get people's income up so they can enjoy their money.

Yeah. I mean, I have an example here and this is kind of an extreme example, but I have this client, he lives down in Texas and he has, I think it's about $5 million in his IRA, which is, he's done a really good job saving and he really does not want to pay taxes. So the sort of the problem is we know that the IRA, you have to pay tax on that money at some point, and he doesn't want to pay this ERMA.

He's really worried about the ERMA. He wants to keep his income low enough to not have to face the ERMA, which is fine for the next several years. What he has a problem with and what he is really wrestling with is when RMDs start, the required minimum distribution start from his account, which for him will be 73, the year he turns 73, those RMDs plus his other income is going to push him above these thresholds anyways. And so what we're trying to get him to do, and he's a little bit stubborn and is slow to do this, is intentionally pay the ERMA now, let's convert some of that money to a Roth IRA so we can avoid the future ERMA costs, avoid the RMDs pushing you into those thresholds. So a little bit of pain now from a tax standpoint to avoid much higher taxes in the future. That's just an example of where some of the planning comes in where we might have you intentionally paying more ERMA now to avoid higher taxes in the future. You know, I'm seeing there that divorce and death also count for an ERMA appeal.

And I just want to tell everybody that ERMA is not so bad as worth dying for to get your spouse an appeal. I wouldn't recommend that. No, that's our official recommendation is don't take that route. But what might be helpful is I can just read off to you what the acknowledged life-changing events that Medicare will look at. So this is directly off their form. If you want to go look at the form, the form number is SSA dash 44.

Don't try to fill it on your own. We've had lots of people before they've met us where they've tried to do the appeal. They end up putting up way too much information on, sending way too much to Medicare, and it gets denied. When we help clients do it, we try to keep it simple, keep it very clear, straightforward.

We have a very high success rate on these if the situation is one that can be appealed. But here are the life-changing events that are recognized on that form. Marriage is one. So you're found single, and you're at these lower income thresholds we just talked about. And now all of a sudden you're married. Well, the thresholds double immediately. So now that might get you out of the ERMA window. So that's marriage is one, divorce is one. So that's kind of going the other direction. But that is a life changing event that allows you to have them relook at your income. But now you're looking at the single rates versus the married rate. So that could be, you know, if you don't appeal it, it's going to put you into a higher ERMA bracket.

So look at the numbers before you start filling this out. But that's one. Death of your spouse. And so again, that's from a planning standpoint, don't plan for that. But if it does happen, that is a window, something that allows you to appeal it. Work stoppage, that's the most common one we use. Someone who's retired and no longer working. Work reduction. So this is where you're not completely having stopped work, but you maybe have taken less hours, you've gone down to part time, your income is lower because of that.

That's also one that can be appealed. This one's a little often confused. And so I'm going to explain it a little bit. And I hesitate to even tell you it, but it's what it's called on the form is loss of income producing property. So you read that and you say, well, I have a rental property, I no longer have a rental property.

I'm good. I should appeal it. That's not what that means. The loss of income producing property is you have a property and it's destroyed like in a hurricane or like a fire. Some natural thing happens, some disaster happens, and that's the loss they're talking about.

Selling the property does not qualify for loss of that. Employer settlement payment, I've never used that one. Loss of pension income, I guess if you had a pension that went belly up and they stopped paying you, I guess that would be one you could appeal. Those ones I've never used. I guess theoretically you could. But the ones that are most often used that we use almost weekly is work reduction and work stoppage.

Those are the most common ones that can be used. And then you need to have a corresponding reduction in income. But again, Medicare doesn't normally go match all that back up. They don't have to see that your income dropped by this amount. They just see that you retired and your income's less. That's good enough for them. The people that really get stuck with this is somebody that maybe never made more than 30, 40, $50,000.

They're nowhere near this amount. But they saved in their IRA, 401k, and perhaps they had a pension plan and they worked there a long time and then they give them an opportunity for a cash out. And then they tell them, well, we got to make the check out to you and they don't come find somebody like us. And so the former employer, the people holding the money for the pension plan, the custodian, make the check out to them for like $180,000.

I have an example of this. And all of a sudden their income two years ago just happened to be $220,000 because of that settlement right when they left. And all of a sudden they get this Irma letter. And we can appeal that, but it's kind of difficult because they incurred the income two years ago.

You can't do anything about your two year old tax return. As often we've run out of time before we ran out of show and we just want to thank you all for listening. It means so much that you guys invested in finishing well. And as we talked about offerings at the beginning of the show, you might consider offering this to a friend. Like, you know, you've heard something interesting on this show and share the podcast or share the broadcast when you hear it on the radio station that you hear it on with a friend, right?

And then that would help them as well to be able to finish well. As always, we want to remind you the show is brought to you by Cardinal Guide, cardinalguide.com. When there you're going to find the seven worries tab. One of those is, you know, of course, Medicare, which is where you're going to find this as well as a video on the same topic and the show notes that go along with that.

And of course my favorite part is a contact page where you can contact either Tom or Hans and of course Hans's whole book, The Complete Cardinal Guide to Planning for and Living in Retirement. Because as you can tell, the Irma thing that we've talked about this show is a piece of the puzzle, but the whole big piece when you can get up to 20,000 feet and look at it is all there so that you can finish well in so many aspects of your life and be able to spend some time thinking about things and getting wisdom that you really hadn't considered. And that's what we're here for. So thanks, guys. Great show. All right. Thank you.

Thank 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.

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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 Hans' 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 Hans' book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on The Finishing Well Radio Show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com. This is the Truth Network.