You are officially retired. It’s time to load up the RV, hit the golf course, or perhaps get to the stacks of books you haven’t been able to read until now. You’ve squared away the budget, enrolled in Medicare, and even picked out your supplement and Part D prescription drug plan. Things are looking good until one day you notice a letter from the Social Security Administration (SSA) you weren’t expecting. It’s called an initial determination notice, and if you think it says you owe more than the stated Part B premium amount, you are correct.

What is IRMAA and how does it affect Medicare Premiums?

The standard, monthly Part B premium for 2022 is $170.10, so why are some retirees finding themselves paying hundreds of dollars more per month? Let me introduce you to the Income-Related Monthly Adjusted Amount, more affectionately known as IRMAA. These graduated surcharges added to Part B premiums kick in when a couple filing jointly has modified adjusted gross income (MAGI) of more than $182,000 or an individual’s MAGI is greater than $91,000.

Your Part D premiums for your prescription drug plan can be affected too. According to the Centers for Medicare and Medicaid Services, 7% of recipients will have to pay these charges. If you are one of these folks, you too will receive a letter from the SSA, putting you on notice.

What can you do to lower income-related charges?

SSA uses your MAGI from two years prior, so for 2022 they look at your 2020 tax return. If you have had a life-changing event during the last two years and your income situation is very different now, it may be worth asking for a reconsideration. Work stoppage, work reduction, divorce, and death of a spouse, among others, all qualify as life-changing events. You need to complete Form SSA-44 downloadable from the SSA website to file this appeal.

If you haven’t experienced one of these events, you still have options for lowering your MAGI. Understand what IRMAA bracket you fall into and how close you are to moving up or down into the next one. Retirement distributions from an IRA or 401(k) plan count toward your income, so efforts to reduce those when possible can help. If you make charitable gifts, consider giving them directly from your IRA as a qualified charitable contribution. Explore the idea of Roth conversions. And revisit your withdrawal strategy to ensure you are tapping accounts in the most efficient way possible.