Understanding IRMAA: How to Avoid Costly Surprises

A successful retirement plan often requires a careful balance between multiple income sources – such as retirement accounts, Social Security, or possible pensions.

Most retirees are very aware of the importance of managing their retirement income sources for tax efficiency purposes, but there is another reason that is often forgotten about.

Higher taxable income can significantly increase your Medicare costs through IRMAA (Income-related Monthly Adjustment Amount) surcharges. In this blog, we will explore what IRMAA is, and what you need to know so you can manage your taxable income in the most efficient way possible.

Key takeaways:

• If your income is above certain limits, IRMAA can increase your Medicare Part B and Part D premiums.
• Because IRMAA is based on your income from two years ago, higher retirement withdrawals today could mean increased Medicare costs later.
• Planning your retirement income carefully can help you reduce your IRMAA costs and make the most of your retirement savings.

What is IRMAA?

IRMAA is a surcharge on your Medicare Part B and Part D premiums that apply to people whose modified adjusted gross income crosses over a certain threshold.

IRMAA charges can apply whether you have Original Medicare or Medicare Advantage.

The IRMAA surcharge was created so that higher-income retirees would pay a larger share of Medicare costs, which helps the government fund the program by shifting the burden away from taxpayers with lower income.

How is IRMAA Calculated?

The Medicare IRMAA for Part B and D is calculated based on your modified adjusted gross income from two years ago. The threshold is adjusted year-to-year, but as of 2026, the threshold is:

• $109,000 if you filed individually
• $218,000 if you’re married and filing jointly.

If you cross that threshold, your Medicare premiums will increase anywhere from 40% up to 240%, depending on your income, as of 2026.

If you’re receiving retirement benefits from Social Security, and your Medicare premiums are already deducted from your benefits, your IRMAA will automatically be deducted from your Social Security benefits. And if you are not yet collecting Social Security or it is not automatically deducted, you will receive a separate bill for your IRMAA payment.

In some cases, it is possible to get your IRMAA reduced or eliminated for a qualified life-changing event such as divorce, death of a spouse, work hour reduction, or loss of pension. To appeal, you can file a Request for Reconsideration form with the Social Security Office.

Managing IRMAA Through Retirement

It’s important to note that if your IRMAA is re-evaluated every year. Meaning, if you cross the threshold for one year, and return below the threshold the next year, you will not have to pay the surcharge again.

There are many factors that can increase your taxable income as a retiree. Some that you might not have full control over, such as Required Minimum Distributions (RMDs) of your own or an inherited retirement account. And depending on the full scope of your financial situation, avoiding IRMAA might not be your highest priority. But paying for more coverage than you need or a premium that puts your financial plan at risk can have massive impact on your retirement goals.

Consider the following ways you can manage your taxable income:

• Make charitable contributions from RMDs: If you’re 70 ½ or older, charitable contributions from a traditional IRA can exclude up to $111,000 per individual from your taxable income, or 222,000 for a combined couple (this cap adjusts most years). Read our blog to learn more about tax-smart ways to give to charity.
• Invest in Tax-Free Bonds: High-income earners or those in higher tax brackets may find tax-free bonds, like municipal bonds, beneficial due to their tax exemption on interest income, which can help reduce federal, and sometimes state, taxes.
• Withdraw extra from tax-deferred accounts in low-income years: Consider withdrawing from your traditional IRA during years when your income may be less than others in the future (i.e., before you claim Social Security).

These strategies are general education, not personalized advice. Working with a financial adviser can help look at your whole financial picture and help create a coordinated plan for your income sources and Medicare plan that is most beneficial to your retirement long-term.

If you’d like to learn more about the basics of Medicare and how it fits into your overall retirement plan, check out our blog: Navigating Medicare Basics to Find the Right Plan.

And if you’d like to get connected with an adviser to discuss your overall retirement strategy, set up a complimentary consultation.