hey guys you know what i hate i hate stealth taxes you know those taxes and fees in small print that
silently suck away wealth you know what one of the bigger ones are for those that don't prepare
Medicare part b premium surcharges also known as IRMAA no matter your age in my opinion
you should know what this stealth tax is who it applies to and think about planning now to
reduce the likelihood it impacts your retirement stick with me as i explain
what the Medicare surcharge or IRMAA is how she can suck money out of your retirement
and how to minimize the chance she does it
Colin Exelby here and i'm a certified financial planner professional with over 20 years of
experience providing financial planning for business owners and their families that just
make sense i own the financial advisory practice celestial wealth management and provide advice
virtually to clients all over the country let me paint this picture for you you work your entire
life paid your social security and Medicare taxes and now at 65 you get your Medicare
and it's all free false this is a good spot to point out important disclosures the information
in this video is for educational purposes this is not specific financial planning health insurance
or investment advice in addition everyone's tax situation is different you should discuss your
tax situation with a qualified tax advisor before implementing any planning strategy when people
think of free Medicare they're thinking of part a which covers hospital stays care in a skilled
nursing facility hospice care and some home health care this is what most Americans qualify for free
but Medicare part b is a completely different animal and a lot of people don't really understand
how it works or where the stealth tax lies but that is where the opportunity is if you plan for
it early enough what is Medicare part b part b covers two types of services first part b covers
medically necessary services services or supplies that are needed to diagnose or treat your medical
condition and that meet accepted standards of Medicare practice second part b covers
preventative services the cost to see your doctor health care to prevent illness like the flu or
detect it at an early stage when treatment is most likely to work best it also covers things like
ambulance services inpatient and outpatient mental health and equipment like crutches and commodes
hospital beds wheelchairs and blood sugar meters these are items that many people will
need at some point in their lives what many people don't know is that Medicare part b
the cost is income adjusted the more income you make in retirement the more part b costs if you
don't want to be surprised stick with me and i'll tell you all about that irritable old lady IRMAA
and if you don't want IRMAA to come after you make sure you smash that subscribe button
hit that little bell so you're notified whenever i release a new planning video let's think about all
your potential income sources when you qualify for Medicare at age 65 you or your spouse may still be
working you may be taking distributions from your 401k or IRA you may be lucky and receive a pension
maybe you have rental properties or stocks and bonds that produce income and all of that income
counts as IRMAA income first there is a base premium that everyone pays for Medicare part b
it's currently 170 per month per person if you have any income including social security
you're going to have at least that Medicare part b premium now let's talk about that mean old lady
IRMAA IRMAA stands for income related monthly adjustment amount it's an extra amount added on
that you pay in addition to that 170 dollars per month if your income is above certain levels now
irma sets four income brackets to stealthily take away more and more of your wealth if you
are married in 2022 the first level of income that irma takes effect is when your modified adjusted
gross income or magi is between one hundred and eighty two thousand dollars and two hundred and
twenty eight thousand dollars if you are single it's over ninety one thousand dollars and under
one hundred and fourteen thousand you can see that your monthly premium increases from 170 to 238.
you can see the additional income brackets right here and how the monthly payments really start
escalating now i know many people whose income incomes due to employment income investments or
roth conversions make it possible for irma to stealthily take your wealth what's worse
the surcharge is cliff meaning you only have to go into those brackets by one dollar and you pay the
entire increase if you're in your early 60s make sure your tax planner and tax preparer know about
irma and do everything you can to stay in the lowest bracket possible unless there's a really
good reason to be in a higher bracket now when we talk about the difference between the single and
the married filing jointly there's an important thing to note here if one of your spouses were to
pass away you would move from the joint bracket to the single bracket but you
most likely would have a similar income so often people who start out in retirement
married and not subject to irma end up with what i call the widow's surcharge and that's
after one spouse has passed away the increase in the irma surcharge hits because you move from
a joint to a single tax bracket it's something to watch out for as you're doing your planning
but you know what's really weird the way this works is that your current medicare payment
is based off of your income two years ago for many people that makes this even more confusing so i'm
filming this in 2022. anyone paying for medicare in 2022 it's based off of your reported income
from 2020. now in 2023 it'll be based on your 2021 income and so on it's always two years behind this
can be interesting for financial planning if you had large incomes two years ago but no longer do
when income falls substantially you can appeal the surcharge by submitting form ssa-44 to the social
security office and crossing your fingers alright what about medicare part b prescription drug plans
they are also affected by irma not as much but here's a chart of irma on part d your monthly cost
increases here as well as your income increases same income levels but the premium increases are
smaller than part b thank goodness okay now that you know all about that nasty old lady irma she's
one of those stealth taxes not many people talk about cpas don't really talk about it i've seen
people whose wealth was taken by that old lady for going only a few hundred dollars over and not many
financial planners talk about it either but you know what when you're trying to maximize your
retirement cash flow knowing how the government can take it is really important so what can you do
about it as your tax return is being prepared make sure you and your cpa are aware of the thresholds
and check to see if your modified adjusted gross income is near one of those thresholds if you are
speak with your cpa about steps you can take to stay under those levels there are a number of
strategies that you could use now many of my videos i talk about provisional income
take a look at those videos to learn more about how to keep your provisional income
lower in retirement it takes planning today are you in your 40s 50s or early 60s
that window is right now take a look at the current tax brackets they are some of the lowest
on record maybe it makes sense to stop deferring taxes in the future pay some now and increase your
tax free investment accounts like roth iras and roth 401ks mandatory distributions from your ira
count as magi income so working now to reduce those later can help if you are under 62 you
can do roth conversions and not worry at all about your magi increasing into one of those thresholds
but once you hit 63 you want to be aware of the limits still if you pay irma for one year to maybe
not pay at all in the future the cost can be more than offset by the savings in the later years a
higher end strategy to look at for those that are charitably inclined is to look into a qualified
charitable distribution or a qcd this lets ira funds be transferred directly to a charity
while satisfying the rmd requirements without increasing magi as a normal ira distribution
would that can be a pretty powerful way to stay under those thresholds maybe stocking wealth into
tax sheltered vehicles like cash value life insurance can help the tax advantages of
permanent life insurance are well documented unfortunately for many people it's too late
they're having sticker shock over the medicare premiums but i bet if you are still watching this
you are one of the ones who could benefit from planning now if you own a business and want to
discuss how we can help with your financial planning just head over to celestialwm.com
click on the start here link and we can see if or how we can help you plan for a successful
retirement are you interested in learning more planning strategies check out this video next and
be sure to watch the entire series on creating a 100 tax-free retirement income get clear be clear