IRMAA: The Medicare Surcharge That Surprises High-Income Retirees Every Year

Jun 1

Most people preparing for retirement have heard of Medicare. Far fewer have heard of IRMAA. If your retirement income exceeds certain thresholds, you will pay significantly more for Medicare Part B and Part D than the standard premium. For some retirees, this surcharge adds $5,000 or more per year per person to their healthcare costs in retirement. For a married couple, the number can double.

The frustrating part is that most people do not find out about IRMAA until after they have already triggered it, and by then, the income decisions that caused it were made one to two years earlier and cannot be changed. Here is how IRMAA works and what you can do about it before it is too late.

What Is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a Medicare premium surcharge applied to higher-income beneficiaries on their Part B (medical insurance) and Part D (prescription drug) coverage. The Social Security Administration uses your Modified Adjusted Gross Income (MAGI) from your federal tax return two years prior to determine which premium tier you fall into for the current year.

The phrase two years prior is the most important detail in understanding IRMAA. Your 2024 tax return determines your 2026 Medicare premiums. Your 2025 return determines 2027 premiums. This lookback structure means planning must happen well in advance, not in the year Medicare begins.

How Much Can IRMAA Cost?

In 2026, the standard Medicare Part B premium is $202.90 per month. Depending on your income, you could pay significantly more. The 2026 Part B premiums for married couples filing jointly, based on 2024 income, are:

Income of $218,000 or less: standard premium of $202.90 per month

Income above $218,000 up to $274,000: $284.10 per month

Income above $274,000 up to $342,000: $405.80 per month

Income above $342,000 up to $410,000: $527.50 per month

Income above $410,000 and below $750,000: $649.20 per month

Income of $750,000 or more: $689.90 per month

For a married couple where both spouses are on Medicare, the top tier adds over $11,600 per year in Part B premiums compared to the standard premium, and Part D prescription coverage carries its own separate surcharge. That is real money, recurring every year, and for many retirees it comes as a surprise.

Because IRMAA is based on income from two years ago, planning must happen before the income event, not after. The decisions you make at 63 directly affect your Medicare costs at 65.

What Income Triggers IRMAA?

Any income event that raises your Modified Adjusted Gross Income can push you into a higher IRMAA tier. Common triggers for retirees include:

Required Minimum Distributions from traditional IRAs and 401(k)s

Roth conversions done without modeling the IRMAA impact

Selling a rental property, vacation home, or business

Realizing significant capital gains in a taxable brokerage account

Social Security benefits, up to 85 percent of which may be taxable

One of the most common patterns we see is a retiree who does a large Roth conversion in their early 60s without accounting for IRMAA. They receive a Medicare premium notice two years later that is hundreds of dollars per month higher than expected, with no recourse because the income event is in the past. The conversion itself may have been a good strategy. The problem was it was executed without full visibility into the downstream Medicare cost.

The Two-Year Lookback Creates a Planning Opportunity

Because IRMAA is based on income from two years ago, you have a window to plan around it, but only if you act early. If you are 63 and planning a Roth conversion, a property sale, or a large portfolio rebalancing, understanding the IRMAA thresholds before executing can allow you to structure the transaction more efficiently. Sometimes the right answer is to spread a large transaction across two tax years to stay under a tier boundary. In other cases, the tax or financial benefit of the strategy clearly outweighs the IRMAA cost, and you proceed with full awareness.

The key is making the decision with complete information rather than discovering the consequences two years after the fact.

Strategies to Manage IRMAA Exposure

Several planning tools can reduce IRMAA exposure for higher-income retirees:

Qualified Charitable Distributions (QCDs)

If you are age 70 and a half or older, you can give up to $111,000 in 2026 directly from an IRA to a qualified charity. Once you are required to take RMDs, a QCD counts toward your RMD, and the amount given is not included in your income or MAGI. For charitably inclined retirees, QCDs can help reduce both taxable income and IRMAA exposure at the same time.

Spreading Roth Conversions Over Multiple Years

Rather than converting a large IRA balance in a single year, spreading conversions over several years allows you to convert meaningful amounts while staying within lower IRMAA tiers. This approach requires annual modeling of your projected income, bracket thresholds, and IRMAA tiers together.

Timing of Capital Gains and Property Sales

If you are planning to sell investment real estate or take a large gain in your portfolio, reviewing the IRMAA impact before executing, and considering whether the transaction could be structured across two calendar years, can reduce the surcharge.

Municipal Bond Interest Still Counts

Interest from municipal bonds is generally exempt from federal income tax, but it is not exempt from IRMAA. For IRMAA, the Social Security Administration adds tax-exempt interest back to your adjusted gross income. Shifting from taxable bonds to municipal bonds may lower your income tax, but it does not by itself lower your IRMAA tier.

You Can Appeal IRMAA After a Life-Changing Event

If your income drops significantly due to a qualifying life-changing event, such as retirement, the death of a spouse, divorce, or loss of employer-provided pension income, you can appeal your IRMAA surcharge using Form SSA-44. The Social Security Administration will consider using a more recent tax year's income if the change is documented. This is worth knowing if you had a one-time high-income year, such as a business sale, and your income has since returned to a lower level.

Why This Requires Integrated Planning

IRMAA is not purely a tax problem. It is not purely an investment problem. It is a retirement income planning problem that requires simultaneous visibility into your tax return, your portfolio income, your Social Security timing, and your RMD projections. Investment planning and tax preparation are often handled by different professionals, and they may not be working from the same projections. Without both perspectives working together, IRMAA is often triggered inadvertently.

At Paragon, investment management and tax preparation are built into a single integrated relationship. That means the income decisions we help clients make, including Roth conversion timing, RMD strategy, and asset allocation, are developed with Medicare premium impacts already accounted for. We are not managing one part of your financial life while another part creates unintended costs.

Frequently Asked Questions

Q: Does IRMAA apply to everyone on Medicare?

A: No. IRMAA only applies to Medicare beneficiaries whose income exceeds certain thresholds. In 2026, the surcharge applies when 2024 income is above $109,000 for individuals or above $218,000 for married couples filing jointly.

Q: Is IRMAA permanent once triggered?

A: No. Your IRMAA tier is recalculated every year based on income from two years prior. If your income decreases, your premiums will decrease two years later. You can also appeal using more recent income data after a qualifying life-changing event.

Q: Can Roth IRA withdrawals trigger IRMAA?

A: Qualified Roth IRA withdrawals are not included in MAGI and do not count toward IRMAA thresholds. This is one of the key retirement benefits of Roth accounts: they provide tax-free income that does not affect your Medicare premiums.

Q: Does Social Security income count toward IRMAA?

A: Up to 85 percent of your Social Security benefit may be taxable and included in your MAGI, depending on your total income. For most retirees with significant assets, the majority of their Social Security income will factor into their IRMAA calculation.

Q: What is Form SSA-44 and when should I use it?

A: Form SSA-44 is used to appeal an IRMAA surcharge based on a life-changing event that reduced your income. You can file it with your local Social Security office. If you retired, lost a spouse, or experienced another qualifying event that significantly reduced your income, it is worth filing to request that SSA use more recent income data.

Want to know if IRMAA will affect your Medicare premiums in retirement? Allen Buckley, CFP®, is the Managing Partner of Paragon Private Wealth Management in Franklin, Tennessee. Paragon integrates investment management with tax preparation through Paragon Tax, so income decisions are made with the full retirement picture in view. If you are approaching Medicare age and want to understand how your income strategy affects your premiums, let's talk. Schedule a 30-minute call at paragonpwm.com or call (615) 249-4091.

Advisory services offered through Savvy Advisors, Inc, a SEC registered investment adviser. Paragon Private Wealth Management is a DBA of Savvy Advisors, Inc. Tax services provided through Paragon Tax, a separate and distinct entity from Paragon Private Wealth Management and Savvy Advisors, Inc.

Allen Buckley