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Retired Military Finances 201: Say Hello to IRMAA Thumbnail

Retired Military Finances 201: Say Hello to IRMAA

Tricare Insurance

I’m pretty sure I had a Great-Aunt named Erma. Or maybe I’m just remembering it wrong. In any event, that’s not the Erma we’re going to talk about today. IRMAA (Income Related Monthly Adjustment Amounts) is an adjustment (read increase) made to your Medicare premiums. 

When did IRMAA Start?

IRMAA was created in 2003 to try to address the solvency of Medicare. At the time of enactment, it only affected Medicare Part B. The Affordable Care Act (ObamaCare), passed in 2010, added IRMAA surcharges to Medicare Part D (prescription drug coverage). 

In 2018 the Bi-Partisan Budget Act added a 5th (highest) bracket. 

How Does My Income Affect IRMAA?

IRMAA for the current year is based on your tax return from 2 years prior. For example, your 2025 IRMAA is calculated off your 2023 income. Income includes your Adjusted Gross Income plus tax-exempt interest. Notably, it does not include tax-free VA benefits or Roth IRA distributions. 

How is IRMAA Calculated?

Depending on your income a percent of the basic premium is added to the basic premium to arrive at your total premium. Let's look first at the basic brackets.

Bracket
Increase
0
0%
1
40%
2
100%
3
160%
4
220%
5
240%


Let's take a look at how that might play out in real life. Here are the IRMAA amounts for 2025, based on 2023 income.

Single Taxpayer (AGI)
Married Taxpayer (AGI)
IRMAA
Total Part B Premium
<= $106,000 <= $212,000
$0.00
$185.00
> $106,000 and <= $133,000 > $212,000 and <= $266,000
$74.00
$259.00
> $133,000 and <= $167,000 > $266,000 and <= $334,000
$185.00
$370.00
> $167,000 and <= $200,000 > $334,000 and <= $400,000
$295.90
$480.90
> $200,000 and < $500,000 > $400,000 and < $750,000
$406.90
$591.90
>= $500,000 >= $750,000
$443.90
$628.90



As a reminder, these are monthly premiums per person. Those who are married and file separately have compressed IRMAA brackets (2 to be exact). Part D IRMAA is similar to Part B IRMAA. But since most of you will have Tricare for Life, Part D isn't really a factor. 

What Planning Opportunities are there Related to IRMAA?

Required Minimum Distributions (RMD) are your worst enemy when it comes to IRMAA. Once RMDs start, you have to take them and they will count as income whether you need them or not. By the way, if you’re not already taking RMDs, you’re required to start them at either 73 or 75 (depending on how old you are). So, controlling your RMDs is a big deal. How do you do that? 

In most cases a good strategy to control RMDs is to take distributions before they’re mandatory by filling up lower tax and IRMAA brackets. The distribution can be done as either a Roth Conversion or just a withdrawal. It is a tough pill to swallow, but it may save you more in taxes and IRMAA by making BIG Roth Conversions now and make all future growth tax-free. To do this right, you need some pretty sophisticated software. 

If you work on or after you or your spouse turn 63, there is a good chance that you’ll be subject to IRMAA and there isn’t a lot you can do about it. If you retire, retire at or before 65, and your age 63 and 64 earnings were high, you can file for relief from IRMAA by filing a Form SS-4 .

Military Finances are Different

All Americans are faced with the IRMAA issue. But most Americans don't have a pension, and that pension makes it more likely that as a retired Senior Military Officer or NCO you are more likely to get hit with IRMAA. That means your planning has to take your military pension into account, early. That's why we think you should work with a financial planner or advisor that deals with active and retired military members each and every day. If you'd like to find out how we work with people just like you, use the button below to schedule a free, initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 101: Don't Lose Your TRICARE


How Much Will I Pay for Tricare for Life?


Retired Military Finances 101: Tricare, Medicare and Employer Provided Health Insurance







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