Client Profile
A recently retired client had spent decades building her savings through disciplined contributions to a public pension and a workplace retirement plan. Like many new retirees, she found saving far easier than spending. Turning off decades of saving habits and beginning to draw on her own portfolio brought real anxiety, even though her plan showed she was well positioned to do it.
The Challenge
This client came to us with two challenges that turned out to be more connected than she expected. The first was emotional: after a lifetime of saving, she felt guilty every time she considered spending the money she had worked hard to set aside. The second was easy to miss: her Medicare Part B and Part D premiums still included an income-related monthly adjustment amount, commonly known as an IRMAA surcharge, based on the income she earned during her final working years rather than her new, lower retirement income.
Drawing on one's own savings can feel like undoing decades of hard work. A retirement plan is built so that savings can be spent with confidence once income from work stops. In fact, spending on schedule is the plan doing what it was designed to do.
Retiring also does not automatically update what Medicare charges you. The Social Security Administration typically bases the IRMAA surcharge on a tax return from about two years earlier. For someone who has just retired, that means Medicare can keep billing a surcharge tied to income that no longer reflects reality, sometimes well into retirement, unless the retiree proactively reports the change.
What We Discovered
While reviewing her overall transition into retirement, including consolidating a former employer retirement plan into her individual retirement account (IRA), we noticed her Medicare premiums did not reflect her new income. Because retirement counts as a life-changing event, she had the option to ask Social Security to reconsider her IRMAA surcharge using her current income instead of waiting for her tax returns to catch up on their own.
The MPM Approach
We talked through a sustainable monthly distribution from her portfolio, sized to fit her plan, so spending became a scheduled part of her income. We walked her through Form SSA-44, the form the Social Security Administration uses to request a reduction in the IRMAA surcharge after a life-changing event such as retirement, work stoppage, or a pension change. We pointed her to the Social Security Administration's online tool for reporting the change in income, so she could complete the request digitally rather than duplicating effort by also mailing or faxing paperwork. We coordinated the timing with a direct transfer of her former retirement plan into her IRA, so her accounts and her income picture stayed simple and easy to track going forward.
The Outcome
With a plan in place, our client began receiving a steady, modest monthly distribution from her portfolio rather than facing an open-ended decision every time she wanted to spend. She submitted her Form SSA-44 to ask Social Security to reassess her Medicare Part B and D premiums based on her current retirement income rather than her last working year. Social Security agreed, and her premium was later reset to the lowest payment tier, removing the surcharge that had been based on outdated income. Just as importantly, she left our conversation knowing she was not navigating this alone.
Key Takeaway
Retirement income and Medicare costs are closely connected. An IRMAA surcharge is often based on income from before retirement, and it will not correct itself. Filing Form SSA-44 after a life-changing event like retirement is one of the more overlooked ways to ask Social Security to reconsider that surcharge. At the same time, spending your own retirement savings on schedule is not a departure from your plan. It is the plan working the way it was designed to.
Curious how a life change, like retirement, could affect your own Medicare costs? Schedule a call with our team.
Compliance disclosure: This case study represents a real client experience. Names, identifying details, and account information have been modified or omitted to protect client privacy. Individual circumstances and results will vary. Submitting Form SSA-44 does not guarantee a reduction in Medicare premiums or the IRMAA surcharge. MPM Wealth Advisors provides investment management and financial planning services. We do not provide legal, tax, or accounting advice, and nothing here is a recommendation to take any specific action. Clients should consult their attorney, CPA, or other qualified professional, and contact the Social Security Administration directly, before submitting any forms or making changes to Medicare coverage.
This content is for informational purposes only and is not individualized advice.