Dear Rusty: My wife is on Medicare and receiving Social Security benefits each month. We built a house and used money from our investments to pay for it. We knew we would pay taxes on that withdrawal, but my wife received a letter from the Social Security Administration (SSA) saying that because the money we […]
Dear Rusty: My wife is on Medicare and receiving Social Security benefits each month. We built a house and used money from our investments to pay for it. We knew we would pay taxes on that withdrawal, but my wife received a letter from the Social Security Administration (SSA) saying that because the money we withdrew was listed as income, her 2024 Medicare premium went up by more than $500. And since Medicare is taken out of her Social Security, that results in a $6,000 loss to our budget. Is there anything that can be done about this situation? We sent a letter to the SSA, but it responded that unless her situation was one of only a few categories (loss of house, divorce, etc.) nothing could be done for the year. The money was used strictly on another investment — our new house. It wasn’t like we took it out and spent it wildly. Can you please advise?
Signed: Frustrated Homeowner Dear Frustrated: Unfortunately, it sounds like your wife is a victim of the Medicare provision known as “IRMAA” — the “Income Related Monthly Adjustment Amount.” Each person’s Medicare Part B premium (coverage for outpatient health care) is determined yearly from his/her income from all sources as reported to the IRS two years prior. IRMAA sets income thresholds, depending on your IRS filing status. And if those thresholds are exceeded, you must pay a higher Medicare Part B premium (and also a higher Part D premium if you have prescription drug coverage).
Assuming you file your taxes as “married/jointly,” if your combined 2022 income as a couple was between $206,000 and $258,000 your wife’s 2024 Part B premium is $244.60 (instead of the standard $174.70); if your combined 2022 income was between $258,000 and $322,000 then your wife’s Part B premium for 2024 is $349.40; if your combined income in 2022 was between $322,000 and $386,000, her Part B premium is $454.20; if your combined 2022 income as a married couple was from $386,000 to $750,000, then your wife’s 2024 Part B premium is $559; and if your 2022 income as a married couple was over $750,000, your wife’s Part B premium is $594. If your wife also has private Part D prescription drug coverage, IRMAA also increases those premiums. Note that the IRMAA thresholds are different for other income-tax filing statuses.
As the SSA office has already explained, you could appeal your wife’s IRMAA premium increase if she had a “life changing event,” but the list of acceptable life-changing events is quite small (see form SSA-44). The only good news is that your wife’s Medicare premium will be calculated anew for next year, so her Medicare premium for 2025 will — if your 2023 joint income is less than the first IRMAA threshold — revert to the standard 2025 premium.
FYI, it doesn’t matter what you used the money to buy or fund. Your withdrawal was reported to the IRS as taxable income, which is what caused IRMAA to apply to your wife’s Medicare premium for 2024. Many people don’t realize that Medicare premiums are higher for those with a higher income, but since your withdrawal was a one-time event, your wife’s Medicare Part B premium next year should be much less and her Social Security benefit correspondingly higher.
Russell Gloor is a national Social Security advisor at the AMAC Foundation, the nonprofit arm of the Association of Mature American Citizens (AMAC). The 2.4-million-member AMAC says it is a senior advocacy organization. Send your questions to: ssadvisor@amacfoundation.org. Author’s note: This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). The NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity.