A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Pivotal Financial, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Pivotal Financial
(615) 732-6212




IRA distributions and Roth IRA conversions can affect the size the Medicare premiums you pay. Here’s how, and what to do about it.

Means Testing Medicare

Medicare consists of four “parts.”  Part A, which covers hospital costs, is paid for by the government. But the costs of Part B, which pays doctor, equipment and outpatient costs, and Part D, the prescription drug benefit, are partially covered by premiums paid by participants. (Part C, which provides Medicare Advantage plans, has rules that vary by plan.)

In 2018, the base monthly premium for Medicare Part B is $134. The base monthly premium for Part D plans varies, with the average about $35. However, high-income individuals are subject to an “Income Related Monthly Adjustment Amount (IRMAA),” or surcharge, that is added to these premiums. In 2018 the IRMAA surcharges apply to persons with Modified Adjusted Gross Income (MAGI) over $85,000 on a single return or $170,000 on a joint return. (MAGI is adjusted gross income as shown on the tax return plus tax- exempt interest and tax-exempt foreign income).

The IRMMA surcharges increase with income, as shown in this table:


Filing Single Married filing joint IRMAA Surcharge  Part B Total Premium   Part B IRMAA Surcharge  Part D Total of surcharges

Part B & D

Up to $85,000 Up to $170,000 $0.00 $134.00 $0.00 $0.00
Over $85,000 to $107,000 Over $170,000 to $214,000 $53.50 $187.50 $13.00 $66.50
Over $107,000 to $133,500 Over $214,000 to $267,000 $133.90 $267.90 $33.60 $167.50
Over $133,500 to $160,000 Over $267,000 to $320,000 $214.30 $348.30 $54.20 $268.50
Above $160,000 Over $320,000 $294.60 $428.60 $74.80 $369.40

Surcharges apply on a “cliff” basis. For instance, a single person with MAGI of $85,000 owes no surcharge, but just one extra dollar of income giving MAGI of $85,001 results in combined full Part B and D surcharges of $66.50 per month or $798 annually.

At the highest level the two surcharges total $369.40 per month or $4,432.80 per year.

It’s important to know that the IRMAA surcharge for a year generally is set using the MAGI reported on the tax return filed for two years previously. So this year’s 2018 tax return will be used to set premiums paid in 2020. This is because the return filed two years previously generally is the most recent available to Social Security for setting the premiums.

When income falls to a level much lower than reported on the tax return filed for two years previously, it may be unfair to incur surcharges due to income that no longer exists. In that case it is possible to ask to have the IRMAA income amount adjusted downwards.

Do this by submitting Form SSA-44, “Medicare Income-Related Monthly Adjustment Amount Life-Changing Event,” to the Social Security Administration.

Minimizing Surcharges

The simplest way to minimize surcharges is to look at a tax return when it is being prepared, and check to see if reported MAGI is near one of the threshold amounts. If so, then take steps to keep it under the threshold. If income is close enough, any of a number of tax return strategies may do the trick. Looking ahead, plan realization of income and deductions in the future to keep MAGI below the nearest threshold.

But also know that IRA actions may affect surcharges unexpectedly.
Taxable distributions and annual required minimum distributions (RMDs) from an IRA increase MAGI and may push it over a surcharge threshold — as an extra, unexpected expense of the distribution.

A Roth IRA conversion could also push income over the threshhold but it makes future distributions tax-free and will prevent them from increasing MAGI in any following years. Also:

  • If the income on a Roth conversion increases a surcharge in one year, the cost may be more than offset by savings from lower surcharges in later years.
  • Income from a Roth conversion made at age 62 or earlier will not increase Medicare surcharges due to the two-year lag, since Medicare coverage starts at age 65.
  • An IRA may be converted to a Roth IRA through multiple small conversions, to prevent income from ever piling up to reach top thresholds.

A qualified charitable distribution (QCD) lets IRA funds be transferred to charity while satisfying RMD requirements without increasing MAGI as a normal IRA distribution would.

Of course, these IRA possibilities are just some among many tax strategies that can be used to affect MAGI. So include them as part of a comprehensive financial strategy for retirement that is planned in advance.


Ready To Take



For more information about any of our products and services, schedule a meeting today.

Or give us a call at (615) 732-6212

Investment advisory services are offered through Foundations Investment Advisors, LLC and is a SEC registered investment advisor.