Dear Liz

If someone inherits my retirement account, is there a way to prevent an increase in Medicare premiums for a year?

Answer

A significant retirement account can influence Medicare premiums for as long as 10 years, not just a single year.

Typically, inheritance isn’t taxable; however, retirement accounts are an exception. When someone withdraws from an inherited retirement account, it’s often taxed as income. Most heirs, especially spouses, must empty the retirement account within 10 years. On the contrary, withdrawals from inherited loss accounts are not taxed, yet the heir must also clear these accounts within the same timeframe.

If the heir is on Medicare, taxable withdrawals can boost their income enough to raise the Medicare premium due to income-related monthly adjustments (IRMAA). This extra charge kicks in when the modified adjusted gross income surpasses a specific threshold. For 2025, these limits will be $106,000 for single filers and $212,000 for married couples filing jointly.

Anyone who inherits a retirement plan should consult a tax expert, particularly because withdrawals can impact both tax brackets and Medicare premiums. A professional can guide you through making thoughtful financial decisions, ensuring your heirs can maintain their needs effectively.

Dear Liz

I waited until I was 70 to start collecting Social Security. My wife just turned 65 this year, which means her full retirement age is 67. Can she start receiving Social Security benefits based on my account, or should I hold off until she reaches her full retirement age?

Answer

If she applies for Social Security now, she will be treated as if she’s applying for both her own benefits and spousal benefits, receiving the higher amount of the two. However, she cannot switch to other benefits subsequently.

Many individuals prefer to wait until reaching at least their full retirement age. In fact, a lot of people optimize their lifetime benefits by delaying claims until age 70. But of course, individual circumstances can vary.

Liz Weston, a certified financial planner, provides personal finance insights. Questions can be submitted to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or through the Contact form.