Generally speaking, you understand what the bracket is, and you'll wanna try and keep all of your activities below it if that's already the income you wanted. Welcome to the Retire on Time podcast. I'm Mac Decker with David France, and here from Kedric Wealth. This show is all about answering your financial questions about retirement. This is not about the oversimplified advice you've heard hundreds of times.

We wanna get into the nitty gritty. Now that said, remember, it's just a show. This is not specific financial advice for you. This is generally we're we're giving you context here. So enjoy, do your research, and text your questions to (913) 363-1234, and we will feature them on the show.

David, what do we got today?

Hey, Mike. How do you plan around IRMA? K.

IRMA is not your crazy aunt.

Okay.

IRMA is the surcharge or the additional fee for Medicare.

Oh, okay. Yes. Yes.

And that's whether it's Medicare, traditional Medicare, if you have an Advantage plan, if you have a Medigap plan, or it's really around part b Mhmm. Of Medicare and part d. Generally speaking, that's what Irma is about your modified adjusted gross income. So your municipal bonds get calculated in here. Your capital gains, your your Social Security, all of it is calculated in a different way to then figure out what is your modified adjusted gross income because they basically said if you're rich and trying to hide it, we at least want you to pay more for your health care costs.

Ah, yes. That's not a bad deal. Yeah. I'm not I'm not saying I want my clients or anyone to pay more for health care than they need to, but I understand the rationale. Sure.

Health care is heavily discounted for the 65 through the Medicare program. Heavily discounted. Mhmm. Okay? Now, the the question's more about IRMAA.

So basically, your modified adjusted gross income exceeds a certain threshold, you're going to pay more per month for your premiums. And the deeper you go into these IRMAA brackets, the more you pay. Yes.

And this is either married filing jointly or or single person.

And they're different brackets Yeah.

Depending on how you file. Sure. So the the question is, you wanna understand the brackets for your current year, but you're not gonna see the consequences really until two years later. Yeah. That's a curveball.

Okay? Yeah. It's it was kind of a curveball, but it's not like they're arbitrarily saying, hey. Here's your income, and here's the new brackets we figured out, and now there's some cross or whatever. They give you a heads up of what it is, but the consequences are two year delayed.

Okay. Yes. Okay? So it's not like they're saying, hey, in two years, here's the magic bracket. Oh, you didn't know and you went $1 over.

It's just there's a delay because the the Medicare, Social Security, IRS, whoever's communicating, it's not a very efficient form of communication, however it works. Yeah. Okay? So that's the first part. The second part is when when you consider IRMA, you have to consider things like, is it worth paying IRMA for a year or two so you can get more IRA to Roth conversions accomplished?

Maybe you can, maybe you can't. Maybe it makes sense, maybe it doesn't make sense. So there there's just there's things you need to at. K? So the question was how to plan for Irma?

How do you plan around it? Generally speaking, you understand what the bracket is, and you'll wanna try and keep all of your activities either below it if that's already the income you wanted. So if you want $10,000 a month and you're doing some IRA to Roth conversions, you should be able to build a plan around that and stay under the 200 and some thousand dollars of your modified adjusted gross income. You should be able to do that. If you want $20,000 a month, that's $240,000 a year as net income, you're in the Irma brackets.

Knocking around that. Yeah. You're gonna pay a little bit more for your part b. I guess you could, like, take out half of it from a Roth, but let's assume that it's all in your IRA or brokerage account, and it's just it's difficult to get to the money and accomplish that. So you might need to pay Irma for a couple of years as you're repositioning things, and then you can get underneath Irma.

And that you wanna be below those brackets, those situations. A a a sidebar, real quick, for women, because women typically live longer than men Yeah. You need to be very careful about IRMAA because you might be comfortable with the income that you have while you're doing a married filing jointly situation. Your spouse is alive. You've got a higher IRMAA bracket.

But when your spouse passes, the surviving spouse might now want more income than the single tax bracket for IRMA and might start paying for IRMA. So this is why tax planning is an important part for longevity purposes. Okay? So just a quick aside there. There's one interesting form that the IRS has that allows you to protest or contest Irma in any given year.

Okay. It's form SSA dash four four. And it basically says, if you have a life event Uh-huh. You can fill out this form, send it in, and you might get approved for reconsideration that you don't need to pay IRMA. That was a one off situation.

So we've had clients that were transitioning to retirement, which is a life event. Yeah. So work reduction or retirement are two of the six to eight life events that qualify. Okay. And we just said, yeah, they bought a new house in preparation for retirement, but they had to pull money out from different sources and things like that.

It it crossed their Irma threshold, wrote a nice letter, filled out the form, sent it in, and they approved it. Oh. I'm not saying that's guaranteed approval every single time, but they approved it. Medicare is actually a very kind government organization. If you're just respectful with them Mhmm.

If you're very open about what's going on and you stay within the guidelines or the threshold of their parameters, like, they're they're very forgiving. They're not sitting there saying, well, if I reject this, my income goes up. That's not really a situation for Medicare. Right. So when you understand work reductions and or one time events or just one off, just things that happen Yeah.

You can usually write a letter, pair it, go into the office, contest it, get a review. If you get a rejection of review, you can then appeal it, and then there's a couple of other things that you could do at that point on how to kind of escalate it. Maybe it could be for medical reasons or or other things that aren't in the standard SSA dash four four form. But it's not hard necessarily to to do this. Now here's where I'm going with it.

Okay? Let's say you wanna retire at 60 years old. K? K. And RMDs are a concern.

Taxes are a concern. Yeah. And they're concerning because? You expect tax brackets to go up in the future. Your I most of your assets are saved in the IRA.

Okay. And so all of your income is gonna be taxed on ordinary income. If taxes go up or RMDs become an issue, RMDs meaning that you're gonna pull more from RMD than the income you already want. It forces you into a higher tax bracket. There are many reasons why you might be concerned about the future.

So from '60 to '61, '62, '63, '64, you're retired, and and you're doing high rate IRA to Roth conversions. Well, what if you can kind of work part time too, kind of create a situation to where you would qualify for life event. What if you are working from 60 to 65 years old or 60 to 64 years old, and in that, you have a work reduction? So you're just you're earning less. You're part time retired, part time working.

You do more aggressive conversions. And then at 65, when you retire, you say, oh, I retired. Fill out form. Put it in there. Mhmm.

You'll get the letters in December. You have until January to protest it. But there are are many ways that you can line up strategies, life events, and so on that you are completely honest with Medicare and and the Social Security Administration. You never wanna lie to the government. Yeah.

Don't do it. Don't screw around with that. Don't try to fudge the numbers. Be honest with the government. But if you're able to craft your narrative in an honest way that lines up with the parameters that they're looking for, then it might be you turn 65, you're on Medicare, now it's a thing, but you qualify to not pay it because things shift.

Not a bad way to do it. Yeah. But this goes back to micro or mini portfolios where this portfolio is really what you're doing from 60 to 65 years old. This one's 65 to 67 years old. Mhmm.

You file for Social Security now 67 on. This there you've got different strategies for different timelines with different groups of money. Yeah. The detailed planning makes a difference, especially when it comes to planning for Irma. Yeah.

Thanks for watching this show. Make sure to like and subscribe to the show as we're coming back over and over again with new content answering your retirement questions. Don't forget to text your questions to (913) 363-1234. And most of all, go to retireontime.com to grab a copy of the book, the workbook, the checklist, the prompts, the calculators, all the resources we have available to help you prepare to retire on time. I'm Mac Dagger with David Franson.

Wanna thank you for spending your time in our show today. From all of us here at Kedric Wealth, thank you. We'll see you in the next episode.