Understanding Medicare and IRMAA - Income Related Monthly Adjustment Amount

Income Related Monthly Adjustment Amount (IRMAA) is a mouthful but understanding the thresholds and additional premium costs for Medicare Part B and Part D is important for retirement planning.  The amount you pay for Medicare in New Jersey is dependent on your income from two years ago.  In 2021 your Medicare premium and IRMAA charges are based on your 2019 tax return.  If your income was below $88,000 filing single or $176,000 filing jointly then you will pay the standard Medicare premium amounts.  However, if you have a higher income then you will be charged an IRMAA on top of the $148.50 monthly premium for Part B plus an additional charge to your prescription drug plan.  The additional amount you are charged is based on which income bracket you fall within. 

Your Modified Adjusted Gross Income (MAGI), is used to determine if you have to pay an IRMAA.  MAGI is not found on your tax return; to calculate you will take your Adjusted Gross Income (AGI) typically line 11 on your 2019 tax return and add any tax-exempt interest income and certain deductions.  

Medicare Part B and IRMAA

Medicare Part B has six different brackets of premium costs based on your MAGI and tax filing status (filing individually versus filing jointly).  Please see the chart below for the 2021 Medicare Part B monthly premiums.  You will notice that the premium costs for Medicare Part B are double that of an individual making over $111,000 versus someone making $88,000 or less. While Medicare confirms your MAGI and tax filing status when you apply, having this information on hand at the time of enrollment will help you to avoid an unexpected premium increase.

Medicare Part D and IRMAA

IRMAA applies to Medicare Part D as well.  If you are enrolled in a Medicare Advantage plan (Part C) which includes prescription drug coverage you will still be charged the Medicare Part D IRMAA. Please see the chart below for the 2021 IRMAA amount on top of your Medicare Part D premium.

Appeal an IRMAA Medicare Decision

If you experienced a life-changing event and your current income is no longer as high as it was two years ago then you can request an appeal to the IRMAA decision.  You will complete a Life-Changing Event form and submit it to your local New Jersey Social Security office.  Examples of life-changing events include retirement, work reduction, marriage, divorce, or the death of your spouse. If your life-changing event is accepted and you are charged the lower premium amount you can be refunded for overpaid premiums you paid during the year.

If you have questions about Medicare and IRMAA you can contact New Jersey Medicare Brokers to review your costs and help you understand Medicare’s premiums and IRMAA expenses.