For retirees in Medicare the tax of IRMAA is happening and at a more alarming rate than ever before, so much so that the future of IRMAA will impact many more retirees than anyone is planning for.
In 2007, when IRMAA first came into existence, roughly 1.7 million Medicare beneficiaries were hit with this tax.
Today, in 2023, the amount of people in IRMAA is over a staggering 6.8 million. This is an increase of 9.00% annually from 2007 and the future doesn’t look like it will decrease either.
What is the Future of IRMAA?
According to recent reports from the Trustees of Medicare, by 2030 there will be at least 12.8 million or 25% of all eligible Medicare beneficiaries in IRMAA.
This amount of Medicare beneficiaries who will be in IRMAA, according to the Trustees, must occur, regardless of what the IRMAA thresholds may become as the program itself (Medicare) will be insolvent in just a few years without it.
IRMAA is simply a revenue source for both the Medicare and Social Security programs, without it both programs will be in serious jeopardy.
What is IRMAA?
IRMAA, short for Medicare’s Income Related Monthly Adjustment Amount, is a surcharge on to of Medicare Part B and D premiums for those who earn to much income.
IRMAA is a tax on income.
If you earn an income over a certain limit, then your Medicare premiums will increase accordingly. The more you make in oncome the higher your premiums will be.
Compounding this issue of IRMAA and its surcharges is that any surcharges you are hit by will reduce your Social Security benefit too.
You pay for your IRMAA surcharges through your Social Security benefit.
So, the more income you earn in retirement the more your Medicare premiums will be and the lower your Social Security benefit will be too.
IRMAA 2025 and into the Future:
Today, in 2024, the IRMAA Thresholds and surcharges are:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $103,000 | < $206,000 | $174.70 | Premium (varies) |
| $103,000 to $129,000 | $206,000 to $258,000 | $244.60 | $12.90 |
| $129,000 to $161,000 | $258,000 to $322,000 | $349.40 | $33.30 |
| $161,000 to $193,000 | $322,000 to $386,000 | $454.20 | $53.80 |
| $193,000 to $500,000 | $386,000 to $750,000 | $559.00 | $74.20 |
| > $500,000 | > $750,000 | $594.00 | $81.00 |
By next year the Thresholds, if inflation remains constant, IRMAA 2025, according to the Trustees of Medicare, will increase to:
| Single | Couple MAGI | Part B | Part D |
|---|---|---|---|
| < $105,000 | < $210,000 | $185.00 | Premium (varies) |
| $105,000 to $131,000 | $210,000 to $262,000 | $259.00 | Premium + $13.70 |
| $131,000 to $163,000 | $262,000 to $326,000 | $369.90 | Premium + $35.30 |
| $163,000 to $196,000 | $326,000 to $392,000 | $480.80 | Premium + $57.00 |
| $196,000 to $500,000 | $392,000 to $750,000 | $591.90 | Premium + $78.60 |
| > $500,000 | > $750,000 | $628.90 | Premium + $85.80 |
How many people will reach IRMAA 2025?
The Trustees of Medicare are reporting through its annual report that next year IRMAA 2025 will impact roughly 8.3 million retirees. This is an increase of over 10% from 2023 annually.
These 8.3 million retirees who will hit IRMAA 2025 will pay an extra $23.7 billion in surcharges because they earn too much income, and the amounts are just going to get bigger each year.
IRMAA is a revenue generator for both the Medicare and Social Security programs.
What is income for IRMAA 2025?
When it comes to IRMAA 2025 everything is about your income and the government defines your income as your adjustable gross income (AGI) plus any tax-exempt intertest you may have.
To figure out your amount of IRMAA income simply look at lines 2a and 11 of your 2022 IRS form 1040.
Some examples of income that the government counts towards IRMAA are:
| Wages | Traditional IRA Distributions |
| Rental & Pension Income | Traditional 401(k) Distributions |
| Interest | Traditional 403(b) Distributions |
| Capital Gains | Qualified Annuity Income |
| Dividends | Taxable Social Security benefits |
For a more comprehensive list of the income that counts towards IRMAA please click here.
How the IRMAA Brackets adjust:
When Congress created Medicare IRMAA back in 2003 through the passing of the Medicare Moderniztion Act, they ruled that the IRMAA Brackets would adjust by
“The percentage (if any) by which the average of the Consumer Price Index for all urban consumers (United States city average) for the 12-month period ending with August of the preceding calendar year exceeds such average for the 12-month period.”
So, if the CPI-U at the end of August of the current year is greater than the previous August then the IRMAA Brackets will increase. Note the inflation rate does not determine IRMAA costs.
By the way there is no language that would stop the IRMAA Brackets from going down if the CPI-U would actually deflate from year to year.
In terms of the all the Thresholds within the IRMAA Brackets, due to the passing of the Bi-Partisan Budget Act of 2018 the 5th Threshold in the IRMAA Brackets will not adjust for inflation until 2028.
Conclusion of IRMAA 2025
With Medicare reportedly going insolvent and the federal government getting deeper into debt the hidden tax of IRMAA is NOT going to go away any time soon.
The federal government is clearly reporting that surcharges that coincide with IRMAA will increase year after year and this must happen.
At stake is your income, your Social Security benefit and your retirement.
The only way to completely avoid IRMAA is to ensure that your income is not visible to the federal government. This means utilize Roth Accounts, Life Insurance and Non-Qualified Annuities whenever possible.
