Like any taxes, there are strategies to legally lower these costs or avoid them completely.
The first thing to consider is your income immediately prior to retirement and immediately after. IRMAA is calculated from your tax return, but it’s your tax return from 2 years ago. In their first year of Medicare, many people are notified that they will be expected to pay IRMAA because when they were earning income from a job, their MAGI was above the threshold. However, your recent retirement probably significantly lowered your current MAGI, and so you can file an appeal to recalculate your obligations. Depending on how much income you have in retirement, the recalculation may drop you into a lower tier or eliminate the extra cost altogether.
Throughout your retirement, it will be important for you to monitor your taxable income and be strategic about where you are pulling the money you are living on. Most people have money in a variety of places, each with different tax classifications – there are Social Security checks, 401(k)s or pensions, traditional and Roth IRAs, stock dividends and gains (or losses) from selloffs, CDs and annuities, standard bank accounts, and more. If you are careful, you can move taxable money into tax-free accounts while living off of your tax-free money, all while staying in the lowest possible tax and IRMAA brackets.
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