Dear Rusty: I don’t know if my situation is unique but here it is. Years ago, I bought savings bonds to add to my retirement and now that I have cashed some in, I not only must pay income tax on the interest, but the added income has put me above an established allowable income, so my Medicare premiums have increased, and that increase is taken out of my Social Security benefits. It seems I am being punished for being someone who planned ahead for retirement. It’s bad enough that I am taxed on 85 percent of my Social Security payments but with this added surprise my benefits are declining each year. There seems to be a lack of information on Social Security and Medicare benefits and penalties. Thanks for providing a forum to air my situation. Signed: Surprised and Frustrated 

Dear Surprised: I fully understand your dilemma, and I agree that some of the risks to Social Security benefits from changing income levels aren’t widely publicized. From what you’ve told me, it appears that you are being affected by a Medicare provision referred to as “IRMAA,” or the Income-Related Medicare Adjustment Amount. The IRMAA provision provides that if a beneficiary’s annual Modified Adjusted Gross Income exceeds certain levels, they must pay a higher Medicare Part B premium and a supplemental amount for their Part D premium for prescription drug coverage. And since the Part B premium is deducted from your Social Security benefit, IRMAA can, indeed, lower your net Social Security benefit payment. The base Part B premium for 2018 is $134 but exceeding the base income amount of $85,000 filing “single” (or $170,000 filing “Married-Jointly) will mean a higher Part B premium – anywhere from $187.50 to $428.60 (instead of $134) depending upon the level of annual income. 

Since you told me you cashed in some savings bonds, which pushed you “above an established allowable income,” there may be something you can do to ease the impact. Medicare recognizes that situations sometimes occur which temporarily boost one’s income into the IRMAA range, and so provides for a way you can prove that your normal annual income isn’t truly as high as recently reported to the IRS. You can do this by submitting Form SSA-44 and claiming a “life changing event” which will allow you to explain that your annual income was artificially high for just one year. That form can be found at: https://www.ssa.gov/forms/ssa-44.pdf. If approved, this could result in your Medicare premium in subsequent years being returned to the amount it was before cashing in those savings bonds. You will have to pay the higher premium for the year in question and if your income in subsequent years continues to exceed the IRMAA level your Medicare premium will not be adjusted. But since you’re now aware of IRMAA you may be able to better manage redeeming any investments you may have. I recently published another article on this topic, which you may find of interest. That article can be found at: http://socialsecurityreport.org/ask-rusty-irmaa-and-medicare-premiums/. 

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 and the AMAC Foundation are not affiliated with the Social Security Administration or any other governmental entity. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.