Social Security Matters: Will IRA withdrawals affect my Medicare premiums?

Dear Rusty: I am a member of AMAC and learn so much from the Ask Rusty column. I hope you can give me some information about a question that has come up in my family. My husband is retired and has reached full retirement age. He is considering withdrawing money from an IRA to pay off our mortgage. We are wondering what, if any, penalties may be incurred on Social Security, Medicare and income tax. Thank you for your help in this matter.

Concerned Taxpayer

Dear Concerned: Thank you for contacting the AMAC Foundation Social Security Advisory Service. Regarding your question on the impact of withdrawing IRA funds, there is no impact to your husband's gross Social Security benefit. The amount withdrawn, of course, is considered ordinary income for federal income tax purposes and will need to be included as such on your federal income tax return and will therefore affect your federal income tax liability when you file the return.

Depending on the amount withdrawn, there could be an impact to the Medicare premium due to the Income-Related Monthly Adjustment Amount (IRMAA) provision. Assuming you file jointly, you will pay a higher Medicare Part B premium if your modified adjusted gross income is above certain thresholds (i.e., more than $103,000 for an individual and $206,000 for a married couple). Please note that Medicare's procedures will not note this income change for two years, so if you make the withdrawal in 2024 it will not trigger the increases until your 2026 Medicare premiums. A change to your Medicare premium might also result in a change to your net Social Security payment at that time (since Medicare is automatically deducted from your Social Security payment).

Also depending on the amount withdrawn, you may have to pay an additional amount on top of your Medicare Part D premium. The Part D adjustment amount is calculated based on a percentage of the Part D national base beneficiary premium, not on a percentage of the plan premium.

The Social Security Administration mails letters to beneficiaries who currently pay a Part B Income-Related Monthly Adjustment Amount (IRMAA) and, according to the Centers for Medicare & Medicaid Services (CMS), are in a Part D plan. The letter explains the additional Part D amount and how exactly Social Security will collect it. You can contact SSA at 1-800-772-1213 or your local SSA agency if you have any further questions about your Part D IRMAA premium.

Dear Rusty: My wife and I are going to be taking Social Security at 62. She will be 62 on April 15, 2025. I will be 62 Aug. 7, 2025. When should we apply for Social Security?

Ready to file

Dear Ready: Social Security recommends you apply for benefits about 2-3 months prior to when you want your benefits to start (to get them time to process your application). You will specify on your application when you wish your benefit to start, so applying early isn't a problem. Just a few things to keep in mind:

Your first month of eligibility will be the first month you are 62 for the entire month. In your wife's case, her first month of eligibility will be May 2025, and in your case your first month of eligibility will be September 2025. Your wife's benefits will be paid on the third Wednesday of every month, and your benefits will be received on the second Wednesday of every month (payment dates depend on when your birthday falls).

Social Security has an earnings test for those collecting early benefits (before your full retirement age). If you are working and exceed the earnings limit, SS will take away some of your benefits. The earning limit for 2024 is $22,320 and, if that is exceeded, SS will take away $1 in benefit for every $2 you are over the limit (the limit changes annually, so the 2025 limit will be more). Thus, if you plan to work after collecting, you must stay aware of the earnings test. If you earn substantially more than the earnings limit, you even may be temporarily ineligible to collect benefits (until you either earn less or reach your full retirement age (FRA) when the earning test no longer applies).

By claiming at 62, you will incur a cut in benefits of about 30% from the amount you would get by waiting until your FRA to claim. And, except for annual cost-of-living adjustments, that is a permanent reduction. FYI, your benefit will continue to grow if you wait longer to claim.

Deciding when to claim Social Security should take into account your financial needs, your life expectancy and your goals as a couple. Claiming at 62 is the right choice for many, but waiting longer, if feasible, will result in a higher monthly amount, which could be beneficial if your life expectancy is long. Of course, we are here for you if you have any additional questions, so please don't hesitate to contact us again if needed.

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). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity.

To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.

About AMAC

The 2.4 million member Association of Mature American Citizens [AMAC] www.amac.us is a vibrant, vital senior advocacy organization that takes its marching orders from its members. AMAC Action is a non-profit, non-partisan organization representing the membership in our nation's capital and in local Congressional Districts throughout the country. And the AMAC Foundation (www.AmacFoundation.org) is the Association's non-profit organization, dedicated to supporting and educating America's Seniors. Together, we act and speak on the Association members' behalf, protecting their interests and offering a practical insight on how to best solve the problems they face today. Live long and make a difference by joining us today at www.amac.us/join-amac.