By Les Bays
Ah, retirement. The golden years. You finally get to slow down, travel a bit, maybe even master that TV remote and the timer on the microwave oven. And just when you think you’ve sidestepped most of life’s little financial surprises, along comes something called IRMAA — an acronym that sounds harmless enough until it quietly starts costing you money.
We always heard the rule of thumb: “If you believe you’ll be in a lower tax bracket when you retire, save in a pre-tax 401(k) and IRA. If you think you’ll be in a higher tax bracket when you retire, save in a Roth.” I don’t recall anyone telling us in the early 2000s, when our government implemented IRMAA, that the rule of thumb should be modified to consider income taxes AND these surcharges.
IRMAA stands for Income-Related Monthly Adjustment Amount, which is Medicare’s polite way of saying, “Hey, you did pretty well this year — so your premiums are going up.” If your income crosses certain thresholds, you’ll pay more for Medicare Part B and Part D. And just to keep things interesting, those premiums aren’t based on what you’re making now — they’re based on what you made two years ago.