IRMA for 2024

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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.

So today on Finishing Well, you could say the show... Well, it is kind of appealing. You'll find out that later in the show. But what we're going to talk about is Irma for 2024. And if that Irma is a word that you're not familiar with, I bet you will be by the end of it.

And one of the big issues when it comes to Irma is whether or not you may qualify, or even if you may qualify for an appeal that we might be talking about later in the maybe the more appealing part of the show. But, you know, I was thinking about, certainly a lot of people think about Matthew 7 22 as to whether or not they're going to qualify for heaven, right? As a lot of folks are, you know, deeply concerned about that question that Jesus asks, you know, department for me, I never knew you. And if you go back and look at Matthew 7 22, these people had done all sorts of things in Jesus's name, and they'd driven out demons, and they'd done this, and they'd done this. But yet Jesus says he never knew you. And I heard a friend, he was speaking on this, and I thought it was so profound what he said, Danny Marsh said in this talk, he said, it's not what you do for Jesus, it's what you do with Jesus. So like, if you're reading the Bible for Jesus, wrong answer. Reading the Bible with Jesus, oh my goodness, what an experience that can be.

And on that goes throughout it, whatever ministry that you get involved in, the qualification is that you get to know him, and he gets to know you. And that's the most amazing part of life on this side of heaven, as far as I'm concerned. But along those lines, you know, getting to know a little bit about Irma is what we got to do here, right Hans?

It is. And it's just one of those things that sneaks up on you, Irma does. So let's define it for starters, is that Irma IRMAA, it's an acronym, and it was made up by Medicare, and it's called income related monthly adjustment amount. And when I said it sneaks up on you, is I bet you're no closer, if you don't know what it is, you're no closer after me telling you all that.

It sneaks up on you. I mean, people when they get this IRMAA bill, when they didn't know it was coming, that's the part that makes them the most upset. And so we try, we try when people are in their 63rd and 64th year, and they're coming up on Medicare, or even younger than that, where we're doing financial planning for them.

And in our videos, we just try to educate people. And what this really is, is a tax. It's an indirect tax or a surtax on Medicare premiums for people that have a high income as Medicare defines it. And it's a high income in retirement. And if it's not looked at properly, it can be a high income before retirement causes a big Irma in retirement.

So that's the definition is the Medicare tax on the well to do, or it's extra tax in terms of Medicare premiums on people that have what Medicare thinks is a high income. And so what's the threshold in 2024? Yet for a single person, it's $103,000. And for a married couple filing jointly, it's $206,000. So if you're sitting here going, Whoa, whoa, I'm not near that.

Don't turn this off yet. Because there's still some things where we catch people, where people get caught up in this, that are way below that consistently. But just before retirement, they maybe sell their house. And they have a capital gain, which they maybe won't pay tax on, because of the exclusion. But yet it runs up their adjusted gross income. And that can cause an Irma letter, okay.

And it's going to be something we can appeal for you. But, you know, you could have somebody, for instance, that is a couple that made $100,000 a year. And they were way below the threshold between the two of them. And then they sold their house for $700,000. When they had only paid $300,000 for it years ago, and they have a $400,000 gain, which is going to be discounted through the credit. But all that happens a year or two before Medicare, they're all of a sudden going to get an Irma bill. So the same thing with retirement cash outs, where, you know, a retirement plan will just send you the money, or you just decide to take it and pay the taxes, because you need it. Well, all that's going to count in income in one of those years. And it's going to cause you to have to pay Irma, perhaps for both you and your spouse for a whole year.

So even people that are below that are way below that, you may want to listen and just listen to this and get a sense of what this is all about. Yeah, one of the ways that I always, or you talked about it years ago, and it's the way I always remember it. He's got Uncle Sam, right?

He's got his hand out April 15, which is actually the date we're recording this. And then you got Aunt Irma. And so, you know, to see that it is a tax, it simply is a tax, a way for them to offset. And again, in its own way to continue Medicare for those people on the other end of Medicare that are getting extra help or they're, you know, there's all sorts of people on the bottom end of the spectrum that are doing that. And part of the way the government makes that happen is having this extra tax for higher income folks. But, you know, I myself used to just kind of scoff at the whole idea, but as things have gone on into retirement, all of a sudden, wow, I need to be looking at this. I need to be thinking about it because it'll sneak up and you'll qualify it without knowing it. And you need to know and understand even, or maybe you'll know somebody who's complaining about Irma and you'll have some at least resources that you can send them to as a result of understanding it a little better, right?

Sure. So the way they get you or the way they charge this tax is let's look at your average person, which is on Medicare, for part B, you're going to pay $174.70 a month. And for you, Robbie, that's, my guess is that's exactly what you're paying for one month, $174.70. And you probably don't know it because it comes right out of your social security check and you get a little bit less or a lot less because of that. And that's the standard fare for people on Medicare part B.

And then part D, like DOG, for drugs, you're paying anywhere from a dollar a month to $20 a month, $40 or $50, but you're paying a premium. And that premium is the same for pretty much all average people that aren't on Irma. Now, what happens is, is once you go over the $103,000 if you're single, or the $206,000 if you're married filing jointly, the first category above that, it adds $69.90 a month to your part B premium, so about $70 a month. And to your part D, it's going to add about $13 a month.

So if you just go over one of these by a little bit, it's not the end of the world. And people, it happens to people all the time, but it's still $70 a month for all years, $70 a month. It's actually $83 a month when you add in the part D. But you get up into the higher brackets, or the highest bracket, and it's $419.30 a month added to the $174.70. And $600 a month, and you get that on a husband and wife, it's $1,200 a month. And the Medicare part D is an extra $81 a month. And so these people can clearly afford it.

But that doesn't mean we don't help them in planning for it. And generally, I find if people are informed, and they've had a chance to prepare for it, that it doesn't fall as such a hard blow. And it's everywhere in between. So there's more stuff to confuse you here.

I'm not done with the explanation. But just in principle is if you get over $103,000 for a single person, $206,000 for a married person, you're going to pay more for your Medicare. That's the bottom line.

Right. But what you said is it's your adjusted gross income. So it's not your gross income. It's after they take off the adjustments. Is it after the is it after the standard deduction?

Unfortunately, it's not. Okay, because adjusted gross income, the key word there is gross. Okay, the adjustment, I'm just going to add confusion by getting the adjustments because it's really modified adjustment, gross income. So I'm trying to be simple in general. So there's actually some more things beside your adjusted gross income or AGI.

But let's just use that number that we got. Because it's it's gross income. That's why I gave the example of the house.

If you sold your house, and you made a say a $300,000 profit between the two of you, you would be able to have an exemption to get rid of that whole $300,000. But it would still be includeable in your gross income. Okay, right.

I understand. So So yeah, they're using gross not net income after after deductions. So and to add more confusion, they're using your two years ago tax return. So the people that are paying Irma in 2024, they're using their 2022 tax return. And then in 2025, they're going to use your 2023 tax return, which you presumably just filed. And so why do they do this? Well, they do it because it's the only tax return they have when it's time to calculate Irma.

So they're going to go back two years. And so where this bites people is when they're 63 and 64. And I have no idea what this is, before Medicare, and they have a high income year, maybe because they sold a house, or they cashed in a retirement plan, or they exercise some stock options that they had, whatever caused it, they sold some land, they sold something they didn't want to deal with in retirement. So they had a big spike in income. And that big spike in income causes extra money to be added on to their Medicare for a whole year, it then and all the more reasons why you need those resources, right? That's why we have them all at Cardinal guide.com.

If you go to Cardinal guide.com, you're going to see the seven worries tabs. And on that you're going to find you know, one of those is taxes and one of them is Medicare and, and this has to do with both of them. And so you're going to find it there. But the video itself that you guys did on this, this would be under taxes, right? No, it'd be under Medicare. Okay, it's under Medicare.

And there you're going to see a video for Irma 2024. It has charts and all sorts of ways to give you more clarity on this as well. Of course, the contact page at cardinal guide.com, where you can just get up with those guys, either Tom or Hans, and they can help you walk through whether you need to make an appeal or whatever the situation may be.

It's all at cardinal guide.com, as well as Hans's book, the complete cardinal guide to planning for and living in retirement. So as I promised, the second part of the show is going to be a little more appealing. But also, you know, we're going to get into, you know, more of understanding what this is, because what I understand is that a lot of people when it sneaks up on and catches and they didn't expect it, that's what gets you upset. So we want to make sure that you have some information.

We'll be right back. 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. Well, welcome back to Finishing Well, and today's show is Irma for 2024. And part of the challenge, of course, Hans, is it's just a whole lot of misunderstanding, right? Well, it is. I mean, so this is the government. You know, what they're doing is they're saying, look, if you make a lot of money in retirement, you're going to pretty much pay for your own Medicare, or you're going to pay a good share of the Part B and the Part D, because you can.

And they're putting this on the people that paid the most Social Security and Medicare tax. And I guess that's what bothers some people. And I kind of walk them through that. And, you know, we kind of grieve that. And then we, you know, we either need to plan to pay it.

We need to get beyond it. And then if there's a possibility for an appeal, we're going to vet people for that. So let's talk about an appeal and how you can do that, and what it is and that sort of thing. So the appeal form is SSA-44. So that's the form that you use. And it's a pretty simple form.

I can get one to you. If you call over here, you can just Google Irma Appeal. You can find it for yourself, or it's on the Social Security website, under Medicare. And so, first of all, the grounds for an appeal. It gives a very clear list. It's the certain life event has happened, or a list. It's called marriage, divorce, death of a spouse. And this is not worth your spouse dying just to get an appeal. I mean, it's just, I think that's a pretty severe measure. It's also not worth getting divorced.

So let's not get in with the joke. So marriage, divorce, death of spouse, work stoppage, which is the same thing as retirement, work reduction is like semi-retirement, or just cutting back. Either one of those is a grounds for an appeal. Loss of income property. So if you had some property paying you an income, and it was lost due to some disaster or something happened that just made that income go away. A loss of pension. Employer settlement payout. So most of the appeals that we do are over work stoppage and work reduction. That's the biggest area that we utilize.

We do some with the others. And so with work stoppage, it just means, did you stop working in the year right before 2024? Or did you stop working in 2024? So one thing I want you to be clear on is you can't appeal ERMA until it gets assessed. So a lot of people want to do this in advance. You can't do that. You just got to wait until they assess you in the year that you and then as soon as they assess you, they're going to send you a letter. You can call me and send me the letter, a copy of it, and I'll tell you what you can do about it and I'll vet you for an appeal. But if you retired anytime in the zone here, then that's going to be enough to open up an appeal. Now, the other piece of the appeal is your income has to go down substantially, either to a lower threshold or out of the threshold altogether. So, you know, for instance, if somebody they're using their 2022 tax return and they were working and they were single and whatever else they've made off investments or some say, let's just say they had $160,000 a year in 2022. And so they'd be up, well, let's call it 162,000 a year and they'd be up in the category where they're paying double for Medicare Part B and an extra 33 bucks a month, not very appealing.

So we do the appeal. If they retired at the end of last year, beginning of this year, whatever, and now in retirement, they're going to do a projection and their projection of their income is $70,000 in retirement. Well, this is going to be real easy. I mean, we're just going to fill out the stuff, have a letter that proves that they retired. Only one letter, we don't need to send five, I mean, just one. And we're going to check the box work stoppage and we're going to project income for 2024.

And if they retired during 2024, we might throw a 2025 projection in there and have them sign it and send it off. And we have a very good success rate. People do these on their own. Typically they come to us and they got turned down because they just didn't understand part of the process. Now, I also do work reductions. I mean, you have some people that you know, they're just working less now that they're in retirement. And the kind of the cool thing about working less, like if you have a lawyer or a real estate agent or somebody that's in control of their hours, it's pretty easy for them to just declare, well, I'm working less and then I'm going to make less. But even if you have a regular employment and you just, that's where you're going to kind of wind down to retirement, we can do an appeal based upon the work reduction. And you may a few years later, you may have a work stoppage or a further work reduction. And so we can keep on appealing this year by year by year.

So it's kind of cool. And for the spouse, we have a way if the spouse retired a few years ago, where the spouse is still working, where the spouse was just still part of that income problem. We have a way of filling it out where we're still going to use the work reduction or the retirement of the spouse that retired even if the other spouse is still working. So I mean, there's a lot of flexibility in terms of how we fill out the form. We got to fill it out accurately. But when people try to interpret these rules themselves, they get themselves in trouble.

Yeah, I mean, to me, that's just so clear why it's really beautiful that all these resources are available to you at cardinalguide.com. Clearly, several videos explaining it. But most importantly, there's no need to try this at home because you guys made it so clear in the video, a lot of folks want to write a book when they go to filling out that form and they check three or four boxes when they really only should have checked one because they're trying to make their case rather than somebody that's got experience has done this form time and time and time again, knowing what makes it work and what makes it get rejected, right? These are not IRS agents at the appeal desk at Social Security. I mean, they're just taking the information they have from the IRS. We need to make sure our information is accurate.

But we need to make sure it's not more than they need. That's what it really boils down to. And people try to throw in stuff because they don't really understand the law. They try to throw in more information, something about their tax return this year, something about the way something's going to pay off in the future.

None of that is relevant. Now, I'm going to add one more concern that I see that happens is the people that get really upset about it when they're first learning it from me. You know, fortunately, most of them don't turn that on me, their upsetness or their anger. But what they do is they turn it on their financial planning, and they start planning everything they can do to make their income lower so that they get out of IRMA because they're mad about it. And the reality is, just pay the IRMA. If you have a high income, and it could be that we're recommending some Roth conversions, sometimes we purposely end up owing IRMA because the IRMA is just for one year.

The benefits of a Roth conversion are over a lifetime, and perhaps beyond your lifetime to your children when they receive the money. So this is a factor, but it's not the only thing we do our planning around. Yeah, and as I started to process it the first time thinking, wow, that might be something I'm facing it, it does get angry.

You feel like this is what's happening, but that's beautiful. There's no sense in biting off your nose to spite your face. It is not the only thing that is just one element of the plan.

But again, information, as always, gives you options and a better understanding, a better knowing of what's going on, provides for better stewardship. That's just how it works. Well, and I pay dearly to IRMA. My old aunt, Irma, every month, I started Medicare last summer, and I just messed up my knee.

And we had surgery, and I'm recovering from that. And my bills were up in the tens of thousands of dollars. And I've paid a grand total of $224 or something like that, my Part B deductible. And between that and my supplement, I've paid nothing else. And so the other side of this, the way I look at it is I'm paying $500, $600 a month, plus the Medicare supplements. And now I'm up at $700, $800 a month, which is a lot of money. I can afford it, but I've got unbelievable insurance. Original Medicare plus a supplement, and if it makes anybody feel any better, is just that you're well protected.

And I plan, when I'm done working, whenever that is, I'll be out of the IRMA thing, and I'll appeal it, and I'll do all that. But in the meantime, while I'm making high income, I just am accepting of that, and this is just something I got to pay. Yeah, it's just like the old saying, death and taxes. They're part of what it is.

And again, letting it rob your joy is a huge mistake, because this is part of your life. And obviously, the government's trying to take care of as many people as possible. And that, like you said, I got lots of friends that are just can hardly wait to get on Medicare, because they can't afford to have surgeries they desperately need. Yeah. Medicare, it gets trashed a lot. It's got its problems. The coverage, especially if you're on Original Medicare, and you buy a supplement, is just unbelievable. Yeah, this is just a penalty that the well-to-do are paying.

And you know, I'm not going to try to make you like it, but I'm going to try to make it the best that it can be. And a lot of times, there's ways we can work cash flows in retirement, that we can bring this in as a factor, and we can get either get it lowered, or make it go away, if you're spending out of your retirement account. There you go. And as always, you know, the way to do that is go to cardinalguide.com. And there, obviously, the contact page to me is the most significant where you can get up with Hans, get up with Tom, have them help you walk through that. Of course, all those resources there as well at the Seven Worries tab today's under Medicare. And so when you look at that, you're going to see a video on the whole, you know, Irma 2024, and lots of videos on the whole subject of Irma, understanding it and seeing those things. And of course, you got Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement. Irma's in there as well, even a picture, if I recall, of Aunt Irma. But anyway, you know, it's just amazing stuff. It's all at cardinalguide.com. A great show, Hans, as always, you know, just love having you on.

Yeah, 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 Whale 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 Whale 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. If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.