How Your Retirement Income Affects Medicare Costs (and What You Can Do)

Jun 25, 2024 | Financial Planning

Explore how your retirement income influences more than just taxes—it also impacts healthcare costs. Increased income can result in higher Medicare premiums. Find out how strategic income planning can help you prevent unnecessary charges and save on healthcare expenses.

Hi, I’m Tony Marquez, Senior Vice President and Wealth Advisor at GreenUp Wealth Management. Your income in retirement not only affects your taxes, it also affects your Medicare premiums. Let’s take a look at how this works.

Medicare beneficiaries who are enrolled in Medicare Part B and D who earn over $103,000 per year if single and over $206,000 per year if married pay a premium surcharge known as IRMAA, which stands for Income Related Monthly Adjusted Amount. Now here’s an example of how someone’s increase in income can make Medicare more expensive.

Janice is widowed, collects $4,000 per month in Social Security benefits, and started a part time consulting job netting $2,200 per month after expenses. She’ll turn 73 this year, which means she must start taking required minimum distributions from her IRA, and from the IRA she inherited from her late husband, which total $1 million.

Without the required distribution from her retirement accounts, Janice’s adjusted gross income would be $41,390 which would put her below the IRMAA surcharge for her Medicare Part B or Part D premiums. But with the additional income from her required minimum distribution, Janice’s adjusted gross income is now over $103,000 per year, which puts her in a higher bracket for IRMAA. Her combined Medicare Part B and Part D premiums will increase almost $1,000 per year.

What if Janice had done Roth IRA conversions before turning 73, thus lowering the amount of her required minimum distribution? What if Janice had earned slightly less from her part time job? Or what if she made qualified charitable distributions from her IRA to her favorite charities to reduce her income below the IRMAA threshold?

There are many considerations including Medicare premiums when it comes to income in retirement. At GreenUp, we believe that strategic retirement income planning is an important component of your financial plan. Speak with your GreenUp Wealth Advisor about how proper income planning might help you. I’m Tony Marquez, and thanks for watching.

Author

  • Tony Marquez, CFP®

    Senior Vice President | Wealth Advisor | Kansas City -- Tony is a Certified Financial Planner and has his master’s degree in Finance. Tony strives to be the expert, resource, and advocate that clients deserve when navigating a complex financial world. Prior to joining GreenUp Wealth Management in October of 2021, Tony worked as a Financial Advisor for a large financial services firm. There, he gained expertise in a variety of areas including financial planning, social security and retirement income strategies, college savings, and investment management.

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