Income in retirement is not what you think when your health is on the line

Income in retirement is essential. The problem, thanks to federal regulations, is the fact that having too much of it will lead to surcharges (taxes) on top of your Medicare premiums.

These surcharges are based on Medicare’s Income Related Monthly Adjustment Amount (IRMAA).

What types of Income will Medicare look at?


Income is defined, according to the IRS, as “your adjusted gross income plus any tax-exempt income you may have or everything that is reported on lines 37 and 8b or the IRS form 1040”.

Some examples of income in retirement are any:

Wages, Tips, Interest, your entire Social Security benefit, most Capital Gains (your primary residency may not count as it depends on the total amount of the gain and marital status), all Dividends, Pension Income, Rental Income and any distributions from any tax-deferred Qualified Account you may have.

What does not count as income in retirement:

Distributions from Roth Accounts, Health Savings Accounts (HSA’s), specific Life Insurance, certain types of Annuities, 401(h) plans and any monies from your primary residency do not count as income.

For those who do generate too much income the impact could be very costly as the Medicare IRMAA starts with a surcharge of 40% more on top of Medicare Part B and D premiums and can go as high as 240%.

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