Many retirees carefully plan for healthcare expenses, expecting to pay the standard Medicare
premiums. What often comes as a surprise is that Medicare premiums are not the same for
everyone.
If your income exceeds certain thresholds, you may pay an Income-Related Monthly
Adjustment Amount (IRMAA)—an additional charge added to your Medicare premiums. This
Medicare high income surcharge can significantly increase what you pay for both Medicare
Part B and Medicare Part D.
The good news is that IRMAA isn't random, and in some situations it may be possible to reduce
or appeal the surcharge. Understanding how IRMAA works can help retirees make more
informed tax and retirement income decisions.
IRMAA stands for Income-Related Monthly Adjustment Amount.
Rather than charging every Medicare beneficiary the same premium, Medicare requires
higher-income individuals to pay additional monthly premiums for:
The surcharge is determined by your income, specifically your Modified Adjusted Gross
Income (MAGI) reported on your federal tax return.
Many retirees are surprised to learn that Medicare premiums are based on income rather than
simply age or Medicare enrollment.
The Social Security Administration determines whether you owe an IRMAA surcharge using
your Modified Adjusted Gross Income (MAGI) from your tax return.
For Medicare purposes, MAGI generally equals:
This calculation is commonly referred to as Modified Adjusted Gross Income for Medicare or
MAGI Medicare premiums.
If your MAGI exceeds the annual income thresholds established by Medicare, you'll pay higher
monthly premiums.
One of the most confusing aspects of IRMAA is that Medicare does not use your current
income.
Instead, Medicare uses a two-year look-back period.
For example:
This means that income decisions you make today may not affect your Medicare premiums until
two years later.
Because of this delay, retirement income planning often requires looking several years ahead.
Your IRMAA surcharge depends on both:
The IRMAA brackets for 2026 are adjusted annually for inflation.
For 2026, the first IRMAA tier begins when MAGI exceeds:
Higher income levels result in progressively larger Medicare Part B and Part D surcharges.
Because the brackets are adjusted periodically, retirees should review the current year's income
thresholds during retirement planning.
IRMAA affects two parts of Medicare:
Most beneficiaries pay the standard monthly Part B premium.
If your income exceeds an IRMAA threshold, you'll pay the standard premium plus an additional
monthly surcharge.
IRMAA also applies to prescription drug coverage.
The Part D IRMAA surcharge is added to your prescription drug plan premium and varies based
on income.
Together, IRMAA Part B and Part D can substantially increase annual healthcare costs for
higher-income retirees.
One of the most common questions retirees ask is:
"Does Social Security income count for IRMAA?"
The answer depends.
Social Security benefits themselves are not automatically included in your MAGI.
However, if a portion of your Social Security benefits is taxable under federal tax rules, that
taxable amount becomes part of your Adjusted Gross Income (AGI), which contributes to your
Medicare MAGI calculation.
Other common income sources that may increase MAGI include:
Because multiple income sources can affect MAGI, retirees often benefit from coordinating
withdrawal strategies before Medicare enrollment.
Many people ask whether it is possible to avoid IRMAA altogether.
The answer depends on your overall financial situation.
The goal generally isn't to avoid IRMAA at all costs—it is to make informed decisions that
balance taxes, retirement income, and healthcare expenses.
Potential planning strategies may include:
For some retirees, paying IRMAA may still make financial sense if a strategy—such as a Roth
conversion—produces greater long-term tax savings.
IRMAA planning should always be evaluated within the context of your broader retirement plan
rather than in isolation.
Yes.
If your income has decreased because of certain qualifying events, you may be able to request
a reduction in your IRMAA surcharge.
This process is known as an IRMAA appeal.
The Social Security Administration recognizes several IRMAA life-changing events, including:
If one of these events significantly reduced your income, Medicare may adjust your premium
based on your current circumstances instead of the tax return used under the normal two-year
look-back rule.
Individuals requesting a reduction generally complete Form SSA-44, titled:
"Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event."
The SSA-44 form allows you to:
Examples of documentation may include:
Submitting Form SSA-44 does not automatically guarantee approval, but it provides an
opportunity for Social Security to reconsider your IRMAA determination based on updated
financial information.
Retirees often encounter unexpected Medicare premium increases because they overlook how
income decisions affect future premiums.
Common mistakes include:
Understanding how retirement income decisions affect future Medicare costs can help reduce
surprises.
IRMAA is one of the most overlooked aspects of retirement planning.
Because Medicare premiums are based on income, decisions involving retirement account
withdrawals, Roth conversions, capital gains, and other taxable income sources may affect what
you pay for Medicare years later.
Understanding:
can help retirees make more informed financial decisions.
Rather than viewing IRMAA as simply an unavoidable surcharge, many retirees benefit from
incorporating Medicare premium planning into a broader retirement tax strategy.
At Legacy Wealth Management, we help individuals and families understand how taxes,
retirement income, Medicare, and investment decisions work together throughout retirement.
Our team provides guidance on:
Whether you're approaching Medicare eligibility or already enrolled, understanding how today's
income decisions may affect tomorrow's healthcare costs can be an important part of
comprehensive retirement planning.
If you'd like help reviewing your retirement strategy and understanding how Medicare premiums
fit into your overall financial plan, you can schedule a complimentary meeting by visiting
www.lwealthmanagement.com/contact or calling (877) 650-4738.
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Ready to take the first step in your financial journey? Speak with one of our advisors today.
