IRMAA: Why High Earners Pay More for Medicare
If you've recently enrolled in Medicare — or you're approaching age 65 — you may have noticed a surprising line item on your premium statement: an extra charge tacked onto your Part B or Part D premium.
This isn't a billing error. It's called IRMAA, and if you're a higher-income retiree, it's worth understanding well before you turn 65.
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It's a surcharge the Social Security Administration adds to your Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums if your income is above certain thresholds.
In plain terms: the more you earn, the more you pay for the same Medicare coverage everyone else receives.
How Your Income Is Measured
IRMAA isn't based on your current income — it's based on your Modified Adjusted Gross Income (MAGI) from two years prior. In other words - your 2026 Medicare premiums are determined by your 2024 tax return.
This two-year lookback catches a lot of people off guard. A large one-time event — selling a business, a Roth conversion, a big capital gain, or even a spike in required minimum distributions — can trigger IRMAA surcharges two years later, even if your income has since dropped back to normal.
Understanding IRMAA Brackets
The Social Security Administration adjusts these thresholds annually. As a general guide:
IRMAA applies in tiers — the more your MAGI exceeds the base threshold, the higher your monthly surcharge climbs, for both Part B and Part D.
There are five surcharge tiers above the standard premium
The highest tier applies to the highest earners.
Because these thresholds and dollar amounts change each year, you want to check the current-year figures before making any income or distribution decisions.
Why This Matters More Than You Might Think
A few things make IRMAA particularly worth planning around:
It's a cliff, not a slope. If your MAGI is even $1 over a bracket threshold, you pay the full surcharge for that entire tier — not a prorated amount. Precision matters.
It compounds for couples. Married couples filing jointly are evaluated on combined income, and if both spouses are on Medicare, the surcharge applies to each of you individually.
It can persist even after your income drops. Because of the two-year lookback, a single unusual income year can follow you into retirement planning long after that income is gone.
It's often overlooked in retirement income planning. Many people focus on tax brackets when planning withdrawals and conversions, but forget that Medicare premiums are effectively a second, parallel "tax" tied to the same income figures.
Six Strategies to Manage IRMAA
The good news: because IRMAA is based on reportable income, it responds to planning. Here are approaches we often discuss with clients:
1. Time Roth conversions carefully. Roth conversions can be a powerful long-term tax strategy, but converting too much in a single year can push you into a higher IRMAA bracket two years later. Spreading conversions across several years — and modeling the IRMAA impact before you convert — helps avoid unnecessary surcharges.
2. Manage the timing of capital gains. If you're selling appreciated assets, we can look at whether spreading the sale across multiple tax years, or timing it around other income events, keeps you further from a bracket threshold.
3. Use qualified charitable distributions (QCDs). If you're 70½ or older and charitably inclined, QCDs let you direct IRA distributions straight to charity. This satisfies your required minimum distribution without adding to your MAGI — a direct way to reduce IRMAA exposure.
4. Sequence your withdrawals thoughtfully. Coordinating which accounts you draw from — taxable, tax-deferred, or Roth — in a given year can help smooth your reportable income and avoid unnecessary spikes.
5. Know your appeal rights. If you've experienced a "life-changing event" — retirement, divorce, the death of a spouse, or a significant income reduction — you may be able to appeal your IRMAA determination using Social Security's Form SSA-44. This is one of the most underused tools available, and it can meaningfully reduce your premiums if you qualify.
6. Plan two years ahead, not just for the current year. Because of the lookback period, the most effective IRMAA planning happens well before you actually enroll in Medicare. If you're in your early-to-mid 60s, the income decisions you make now can directly affect your Medicare costs starting at 65 and beyond.
The Bottom Line
If you're within a few years of Medicare eligibility, or you're considering a Roth conversion, a large asset sale, or any other move that could bump your reportable income, it's worth reviewing the IRMAA impact together before you act — not after.
As a fee-only, fiduciary financial planning firm in Raleigh, NC, we help clients across the Triangle coordinate Medicare, tax, and retirement income decisions so surprises like this don't catch them off guard. If you'd like to talk through your own timeline, we're happy to help.
This article is for general educational purposes and does not constitute tax, legal, or Medicare advice specific to your situation. IRMAA thresholds and surcharge amounts are updated annually by the Social Security Administration; figures should be confirmed for the current tax year. Please reach out to our office to discuss how this applies to your individual circumstances.
Stephanie H. Murray, EA, CFP®
Planning and Operations Manager
Find out more about Stephanie on her profile page here! Be sure to listen to her episode on Finance in a Flash to hear what got her interested in Financial Planning!