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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. Darrell Bock Welcome to Finishing Well, with certified financial planner, Hans Scheil, and today's show, pretty awesome, Can You Appeal Irma? And so, you may not know at this point in time what Irma is, but we're hoping by the end of the show, you'll know that, wow, here's a great question. Can you appeal Irma? And the idea of that, when you think about it is, you know, can you appeal the law? In other words, is the law always the law?
Is that the way it is? And so, you know, when you look at the Bible, it's very interesting that there's certain circumstances where clearly God has made a law, yet it seems that God really blesses opportunities where these laws are appealed. And one of those great examples is actually in the book of Esther. And Esther actually is one of the most powerful rulers of all the Jewish history.
In other words, when she was queen, she was queen of the world of 127 provinces, which would arguably be the largest empire ever. Yet, she had some problems in that there was a plot to kill all the Jews, which happened to be one of them, although her husband did not know that she was Jewish. And you'll see in that that her uncle Mordecai, if you're familiar with the story, gets word to her that this is happening to the Jews. And she is told that she's to go before the king and plead the case, which means that she's essentially got a break the law of the Medes and the Persians and go before the king without him inviting her, which is, you know, kind of like the Secret Service or all around King Ahasuerus.
And so, she could easily die, not to mention she's got to break the law in order to do that. And actually, in order to do that, she's got to break a Jewish law, too. And so, she tells her uncle, okay, I'm going to do that, but I want you all to break the law, too, because even though this is Passover, and if you look carefully in chapter four of Ezra, you'll see it's the 14th day of Nisan that this is happening, the 14th day of the first month.
And so, she tells him to declare a fast. Well, this is Passover. This is the same week that Jesus—this is Holy Week. This is the week that Jesus would go to the cross, but for the Jews on the 14th day, they're supposed to slaughter the Passover lamb, and they're supposed to eat matzah, unleavened bread, and they're supposed to eat bitter herbs. And so, to not do that would be breaking the law, yet Esther calls for a fast.
And there's all sorts of reasons for that. I hope you'll study the passage, but the point of it is, if you're familiar—spoiler alert—the Jews live. Esther's found great favor and sits down at the right hand of the king with more power than ever as a result of this fast, or this appeal, as it were. And so, it's pretty cool to see that the Bible is clearly an opportunity sometimes to see that God is not easily put in a box, and that he knows his laws, and when they're to be used, and when they're not. And so, you know, this show today, Hans, is right along those lines, right?
It is. I mean, we're talking about a tax—it's kind of a hidden tax—that people are not too happy about it when it's assessed. It feels like something's getting you. And what we're going to really show today—we've talked about this before, and we're going to—ERMA—and what we're going to show today is how you go about appealing it, and if it's appropriate, and how you do that. Yeah, that whole word, ERMA, it sounds so intimidating. Okay, let's talk about what it is. So, it's an acronym, and it's Income Related Monthly Adjustment Amount. And that's straight from the government, and I don't know how you could read those five words and come up with a hidden Medicare tax on people that are well-to-do. But, in any case, the acronym spells out to ERMA, and it's something that can come up and bite you when you're on Medicare. And what we want to talk about is first today what it is, for those of you that are not familiar with it, and then how much it could cost you. And just kind of give you some general background about ERMA and the Medicare tax. And then we're going to talk about how you specifically—how you appeal it. So, Medicare—go ahead.
I was just going to say that you may think this doesn't apply to you, but, you know, fascinatingly, it may not apply to you now, but it may apply to your spouse were you to pass away. A lot of things happen that change incomes, and so I think that you'll find that there's a lot of interesting, very amazing information in here on how to plan well for the end and, you know, sit tight. Because I really think it amazed me to find out that, wow, there were certain circumstances I might see this tax as well, and it's good to know about it and to prepare for it. We have people that certainly don't look upon themselves as high-income people that still get hit with this. And where that comes is people that clean out a retirement account, sometimes by accident, and so you have a windfall in a given year of taxable income, maybe that you didn't even want, and you intended to roll it over, so that's a place that it comes up quite a bit.
It's also people that sell land or sell a business or sell something of value that they have to pay capital gains taxes on, and that causes a spike in income. So just because you don't meet these income thresholds, you're not completely exempt from this. So where they start, for a single person, the threshold is $103,000 of adjusted gross income. And for the married couple filing jointly, it's $206,000.
So this obviously excludes a lot of people. Actually, when I'm telling you adjusted gross income, it's actually modified adjusted gross income, so they throw some other numbers in there, like if you own any tax-free bonds, that sort of thing. But let's just look at income over $103,000 for a single, over $206,000 for a couple.
So that's the threshold. Irma can be as much as $6,000 a year extra per person. So in a married couple, we're talking about an extra $12,000 a year.
So this is not a small amount of money. And they collect the tax through your Medicare Part B premium and your Medicare Part D premium. And if you're getting a Social Security check, they take it right out of your Social Security check. So most people that are getting charged this, they're aware of it. Some are not. I mean, it just comes out of their Social Security check, and they just think it's taxes or something.
But this is something that if you're anywhere near those thresholds, you need to familiarize yourself. Now, what it does is it uses your income from two years ago. So just to make things an added confusion. So, in other words, if you're on Medicare, and this spike in income happens to you during 2024 this year, and you get up over the threshold, you're not going to actually start paying this Irma till 2026.
I mean, two years forward. Or another way to look at it when people are turning 65, not even aware of Irma is somebody that's, you know, born in 1959, they're turning 65 in 2024. And all of a sudden, they sign up for Medicare, and then they get this letter that says because your income in 2022 was was this much, we're assessing Irma and we're going to charge you much more for your Medicare Part B. So the government has a communication problem with this Irma because people just don't know about it until it hits them. And when it hits them, it's over income two years ago, and they people are really irritated by this. So the end, and so I try to communicate with our clients just what we're doing here on the radio is we're, we're trying to communicate. And we don't want to get into a lot of the details of Irma.
We have other shows other videos for you can call me and I'll give you an assessment. But the government will send you a letter if it applies. And you'll, you'll get a letter in the mail. And what the topic of today's show is that this can be appealed. So if, if you meet one of these criteria for an appeal, even though you get the letter that says your, you know, your Medicare Part B is going to be this high premium.
You can appeal based upon eight different life changing events that happen to you. So do you know what any of those are, Robbie? I'm guessing if you had a job change. That's a guess on my part, but there you go. Okay, what's the guess? Oh, was there a job change?
Okay. Yeah, a job change. It actually would be one of two things with your job, either a work stoppage, which is retirement, or you got laid off or you quit or whatever. So if your work is stopping, either right now, or in the year that we're charged in Irma.
So if you were, if it just stops, you retire. That's, that's a life event. And it's an appeal. It's also work reduction. So I have an attorney who's a friend of mine, and he does some work for me. He greatly reduced his hours. So he's still a partner in his firm. And but he greatly reduced his hours that he's working.
And so we got him an appeal approved under this work reduction business. That's awesome. Yeah.
Go ahead. No, I just, you know, that's the whole deal that so, you know, if people, as they get to that age of 65, all of a sudden, you know, they, they may well cut back. I have a good friend who's a doctor, same thing.
He doesn't take near the patients doesn't work near as much. And then so it's a life event and an opportunity to, you know, file an appeal because things have changed. Sure, that's two of the eight.
So let's go through them. If you got married, that's a life event cause for an appeal. If you got divorced, or there was an annulment, you're saying what's the cause for an appeal. If you had the death of your spouse, and incidentally, dying is not a good reason to reduce Irma.
I mean, it's just so I wouldn't recommend this one. But if your spouse passes away, you can appeal Irma. If you had loss of income producing property, so if you owned property or rental property, and that property was damaged, or something happened to that income, that's a life event.
Loss of pension income, that would be if something happened where your pension went belly up, or some type of employer settlement payment that you were you were paid, like a like a for a job. Well, and we're going to cover some more ground on the whole appeal process and more about, you know, how did it go about doing that. Of course, you are going to need resources to do that, which is why we want to let you know the show is brought to you by cardinal guide.com. And there at cardinal guide.com, you are going to find the seven worries tab and one of those worries tabs is Medicare. And so I'm sure you'll find Am I right, Hans that this video would I mean, the video in the in this show will be show will be under the Medicare worry tab, as well as show notes and those kinds of things. If you want more information on this, of course, you can simply contact Hans or Tom, right there on the contact information at cardinal guide.com.
And of course, Hans's book, the complete cardinal guide to planning for and living in retirement is all there as well. So we're going to be right back with a whole lot more on Can you appeal Irma? 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. Welcome back to finishing well with certified financial planner Han Shile and today's show Can you appeal Irma? And it's a real appealing idea. Just sailing.
Yeah, I thought I'll put that in my next video. Oh, so the gist of the thing is, your income is above the 103,000. If you're a single married filing jointly, it's above the 206,000. And for people turning 65, you can have a lot of people that are above these numbers. But once they retire, they're coming into us for doing retirement planning, they're going to retire, they're going on Medicare, and now they're going to get assessed based upon their 22 income, if they're just coming in now and turn 65 now. And so what we're going to do is we're going to look for a reason for appeal. Now, if they're if they're actually going to retire, one of them, if there are a couple, just one of them going to retire, that is a cause for an appeal. One of them is going to cut back their work, that's a cause for an appeal. If they just got married, and in the last year, or they're getting ready to get married, well, they're gonna have to wait till they get married.
But if that's soon, we have people coming in like that. So if you meet any one of these criteria that we listed before, you're eligible for appeal, you just check one box. And this is on form SSA-44.
So you could you could SSA stands for Social Security Administration, SSA-44, you'll see the appeal form right there. And so you need that and then you need a you need a firm date when this life event happened. And you need some kind of a letter or communication from the organization you work for or something proving that this life event happened on this date.
And that's really the only thing that you need to attach. And then what we've got to do is we've got to project your income for this year, and next year on the appeal form, because the gist of it is because this thing happened to me like retirement. So I retire this life event. And consequently, I'm going to make less money. So use the less money that I'm going to make in retirement instead of 2022.
That's the gist of it. And it's a projection because we don't down to the dollar don't know what you're going to make next year. But as financial planners, that's what we do is we're going to project how much you're going to you're going to make. And then if you have the luxury of having some money, that in a savings account where you've already paid taxes on that, perhaps we could live off a little bit of that to make your income a little bit lower and make you look kind of pretty for for next year. But whatever you come up with, you need to live up to it. Because if you try to lowball this thing for next year, and then when the year is over with, if you come in if you come in at a higher amount, they're going to come back and get it from you.
So we need to keep this stuff as accurate as we possibly can. But to some degree, this is a no brainer for some people. And so am I understanding, you know, just to, you know, kind of understand that, for some people when they appeal, it would come back where they would own no Irma, you know, that the man who retired after having the thing where he took all his pension, you know, and it went forward and all that stuff. So I could see that in his case, well, but you know, projection is he wouldn't pay Irma. But other cases, people when they do their appeal may still pay Irma, but not at the same amount. Yeah, they can lower their Irma.
We've had a great success with getting these things come back, and they're either approved, or, or they're lowered. We have a lot of these where they're just lower, somebody that made a really sweet income, and then they got a big Irma. And now in retirement, they still are going to live off of more than the threshold. But it's going to be less than we send that in.
Yeah, that works. We also have people come to us like I had some people in this week, that they are the guys like 67, the woman's like 60. One of them on Medicare, they're on his group insurance, he's going to retire at 70. And he's very interested in Roth conversions. And then I'm informing him that the next three years we do these big Roth conversions, that's going to drive his income up their income up. And he's going to ultimately pay for it. When Irma hits him at 70, you know, when he goes on Medicare and retires. And I said, but if that's when you retire, we can do all these Roth conversions knowing we're going to appeal it when you're 70.
And then in your 71st year, your income is going to be more, it's not going to have any Roth conversions that year. And it's going to be on at a much lower level. And so you're going to get first assessed it, and then we're going to make it go away. How does that get you?
I like it. Yeah, I mean, that's the whole planning process, right? When you understand that, yeah, that these things exist. But by planning ahead, you know, you can you can appeal and that's part of the process. Well, yeah, people call us a few years before retirement, just like him. He's been watching videos for years and just thought he better give us a call. He's heard some of these stories about other people.
And I just laid out the next three years. And it's really the Roth conversions are more impactful to him than the Irma even if he had to pay it is, but it's still a big factor. I mean, he doesn't want to pay it, and he can have both. So anyhow, you need a letter proven it, you need a projection of income that's realistic, we can help you with that. And what gets assessed, we can make go away. Now, I really wanted to talk here about some income planning. So once we know this, and we take this Irma thing into account, when we do financial planning for clients, we're not just looking at one area like Medicare, and we're looking at all seven worries and all seven things. And so, and we're planning out the next several years of what people's income with their taxes are going to be. We're talking about estate planning, we're withdrawing money out of the IRA 401k to live, we're doing Roth conversions.
So how does Irma affect income planning? And the first thing I have down here is Roth conversions before Medicare. I can't stress this enough that, you know, don't wait till 65 to call us. When we're going to help you with Medicare, then we're going to tell you about Roth conversion, you say, boy, I want to do that. Well, then Medicare is starting right now. And you're going to be you're going to be paying some Irma. So it'd be great if you called us at 60 or 61 or 62. When you're planning on going on Medicare at 65 and retiring at 67, we can sit down and do some, do some Roth conversions while you're still working.
But before you go on Medicare to just think through this. So that's, you know, that's an issue. I also say with Irma, some people learn about this. And they become so angry and obsessed about this government hitting them with this Irma tax, that they start doing all their planning around it. I mean, it's, it's one year at a time. It is a big deal, but it's not enough that we get so hooked up with it that we don't do some other planning things, or we don't pull out some of our money and enjoy it.
Just because we've got to pay a little bit of Irma. So I'm trying to minimize the consideration or appropriately consider it would be a better word. Right. And so to get back to the Roth conversion idea, you know, for some people, maybe it's the first show they've ever listened to that, you know, a traditional IRA, you know, you've got all sorts of tax implications, you know, when you begin to use that as income. However, if you've got your money in a Roth and you begin to take money out of that, you've got no income tax attached to that. And so when he's saying to make these Roth conversions before, you know, you go on social security, I mean, before you go on Medicare, then, you know, clearly they're there in lies the opportunity to not have taxable income. And that's, that's why you make the Roth conversions earlier, right? Sure.
Sure. I mean, it's just, it's the plan out what's coming every year, and then what actions do we want to take now and next year and the year after, perhaps to get these things over with. So when we get to another point, we're stopping something else.
And to put all these things together, they all mix together like soup. And so just the earlier you come in, the better. Don't let that stop you from coming in late to either work. We're experts at, you know, now with people that maybe have even found themselves a little bit of a mess and unwinding it. Think about when RMDs, required minimum distributions start at 73. If you just postpone dealing with this, we have a lot of people that get driven into Irma when they're 73 and older because they never took any money out of their traditional IRA or didn't take much and now they're being forced to. And besides paying the tax on the money they pulled out of their IRA, they get hit with Irma because it jacked up their income. Yeah, and even worse, when it's your widow, when you think about it, because you know, when she drops down to that one person income and she's got to support all that stuff. And that I bet happens more than people realize, right?
Oh, it happens all the time. I mean, there's several things, you know, so the widow is now, or widower, we're dealing with going from two social security checks to one. And then we're dealing with RMDs are the same because it's the same amount of money in the IRAs.
But we're dealing with single taxpayer rates. Yeah, there you go. Well, as usual, we've run out of time before we ran out of show. But we want to remind you once again, this show is brought to you by cardinalguide.com and at cardinalguide.com. You know, all these resources and all this information about what we've talked about today on how to finish well with so many different ideas. It's all there today's show under the Medicare tab under the seven worries at cardinalguide.com and their show notes, all sorts of ways that you can find out information on this as well as the contact page for Hans and Tom.
Just contact them and obviously you can get a customized, you know, whole plan around your income. And of course, Hans has booked the complete cardinal guide to planning for and living in retirement. So great show, Hans. All right. Thank you. And God bless you.
God bless you. The opinions expressed by Hans Shile 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 Hans' bestselling 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 Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. CardinalGuide.com. This is the Truth Network.
