Mini Case Study: Reducing Medicare Surcharges

This week, we helped one of our retired clients in Eagle, ID, reduce her Medicare Part B surcharge, improving her retirement cash flow in those critical early years.

Here’s what that looked like:

• Carrie has had a very successful career, but it was time to “hang up the cleats” and enter the retirement she had been planning.

• Since she had reached the age of 65, she enrolled in Medicare with the help of a Medicare expert.

• Shortly after enrolling, Carrie got a not-so-friendly letter in the mail from the Social Security Administration. On top of the Part B “base” monthly premium amount of $202.90, she was getting charged an additional $446.30 per month as an income-related monthly adjustment amount, also known as IRMAA. A total of $649.2 a month for Medicare Part B!

• An IRMAA adjustment is designed to charge those with high incomes more for their Medicare premiums. The image below accurately reflects the surcharges by income level.

• To assess the premium surcharges, the Social Security Administration looks back at your tax return filed two years before the current calendar year. As an example, they used her 2024 income to assess her 2026 Medicare premium surcharges.

• We were expecting this and educated her before receiving the letter. Social Security does not know she had recently entered retirement, and her income would be substantially lower.

• Thankfully, the Social Security administration allows you to fill out Form SSA-44, which lets the administration know you had a qualifying life event. The qualifying life event allows you to inform them of lower income, which should result in lower premiums. The following events qualify:

  • Work stoppage

  • Work reduction

  • Marriage

  • Divorce

  • Death of spouse

  • Loss of income-producing property

  • Loss of pension income

  • Employer settlement payment

• We prepared the following package for Carrie to send to the Social Security Administration, letting them know of her work stoppage and reduced income:

  • Cover letter to be signed under penalty of perjury

  • Completed Form SSA-44

  • Final paystub

  • Letter of resignation

• Shortly after receiving the package, the Social Security Administration lowered her Part B premium to the base amount of $202.9 and eliminated the surcharge.

• It is important to note that the income projections provided to Social Security should be as accurate as possible, because they will verify that the income they based the premiums off of are accurate in comparison to the tax return you eventually file for that calendar year.

These letters can be frightening and daunting to deal with. With proper planning, you can successfully eliminate surcharges associated with qualifying life events.

With our holistic tax planning approach, we will ensure Carrie’s income stays within the range of what we told the Social Security Administration it would be.

Send me an email (dustin@swrpteam.com) or book a time on my calendar if you’re dealing with a similar situation and need a trusted Advisor that can help.

This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.