Strategies to Reduce Your IRMAA: A Comprehensive Guide

by | Financial Planning

As a high-income beneficiary, you might be subject to a surcharge on your Medicare Part B premiums known as the Income-Related Monthly Adjustment Amount (IRMAA). This can be a significant additional cost, so it’s essential to understand how it works and explore strategies to manage it effectively.

Understanding IRMAA

IRMAA is determined based on your modified adjusted gross income (MAGI) two years prior. For example, if your MAGI for 2022 exceeds $103,000 for single filers or $206,000 for joint filers, you will be subject to IRMAA in 2024. Unlike typical tax systems where only the excess amount over the threshold is taxed at a higher rate, IRMAA applies a surcharge to the entire premium once you cross the income threshold. This can result in significant additional costs.

Strategies to Reduce IRMAA

  • Roth Conversions: Converting traditional IRA or 401(k) funds to a Roth IRA can be effective. While you will pay taxes on the converted amount, Roth IRAs provide tax-free growth and withdrawals, which do not count towards your MAGI in future years. This can lower your MAGI and reduce your IRMAA. Considering the five-year rule and other tax implications, it’s important to plan these conversions carefully.
  • Health Savings Accounts (HSAs): HSAs offer a unique triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Investing in an HSA can reduce your taxable income, potentially lowering your MAGI and IRMAA. HSAs are an excellent tool for managing healthcare costs and minimizing tax liabilities.
  • Qualified Charitable Distributions (QCDs): For those over 70 ½ years old, QCDs allow you to donate up to $100,000 directly from your IRA to a qualified charity. These distributions are excluded from your taxable income, which can help lower your MAGI. QCDs can also count towards your required minimum distributions (RMDs), providing a dual benefit of meeting charitable goals and reducing tax burdens.

Proactive Planning is Key

Reducing your IRMAA requires strategic and proactive planning. While each strategy can be effective, it’s crucial to consider your overall financial situation and long-term goals.

If you want to explore these options and develop a tailored plan to manage your IRMAA, contact us at SFA Wealth. Our team of experts is here to help you navigate these complex decisions and optimize your financial strategy.

Contact us at 615-216-1048 or email us at to schedule a consultation.