What Is IRMAA, and Why Should Affluent Retirees Plan for Medicare Premiums Years in Advance?

One of the least welcome pieces of mail a new retiree can get comes from Social Security. It says the Medicare premium will be higher than the standard amount, and it points to a tax return filed two years ago. Most people read it twice and wonder whether it’s a mistake. It usually isn’t.

That letter is about IRMAA, and we see it catch thoughtful, well-organized people every year. Here’s how it works, and why you should deal with it long before the letter shows up.

What IRMAA is

IRMAA stands for income-related monthly adjustment amount. It’s a surcharge added to your Medicare Part B and Part D premiums once your income passes a set line. Your coverage doesn’t change. Only the price does.

In 2026, the standard Part B premium is $202.90 a month. For people above the first income threshold, the total Part B premium runs from $284.10 to $689.90 a month, and there’s a separate Part D surcharge of $14.50 to $91.00 on top of whatever their drug plan costs. Medicare estimates that about 8% of people with Part B pay one of these surcharges.

Your 2026 premium is generally based on your 2024 income

Social Security generally doesn’t use your current income. It uses the most recent federal tax return the IRS has passed along, which for 2026 premiums is generally the return filed in 2025 for tax year 2024.

That two-year lag is the heart of the problem. The year you were still working, or the year you sold a property, is the year that follows you into Medicare. It also means the reverse is true in your favor. What your tax return says this year is what sets your premium in 2028.

The thresholds work like a cliff, not a ramp

For 2026, the first surcharge line sits at $109,000 for a single filer and $218,000 for a married couple filing jointly. Cross it by one dollar and you don’t pay slightly more. You generally move into the next bracket for that year.

That first step costs $81.20 a month for Part B and $14.50 a month for Part D. For a couple both on Medicare, that’s roughly $2,297 a year for crossing a line by a dollar.

At the top of the scale the numbers get serious. Someone with income of $500,000 or more, or a married couple filing jointly with income of $750,000 or more, pays $487 a month above the standard Part B premium, plus $91 a month for Part D. Over a year, that’s $6,936 per person.

Income here means more than your paycheck

Social Security uses modified adjusted gross income, or MAGI. That’s the adjusted gross income on line 11 of your Form 1040 plus the tax-exempt interest on line 2a.

That last piece surprises people. Municipal bond interest is free of federal income tax, and it still counts toward the number that decides your Medicare premium. Capital gains count. Taxable withdrawals from a traditional IRA or 401(k) count. The taxable portion of a Roth conversion counts in the year you make the conversion. The taxable portion of your Social Security benefit counts too.

Required withdrawals can push you over the line

Required minimum distributions from traditional IRAs generally begin at age 73 for people born from 1951 through 1959 and at age 75 for those born in 1960 or later. The IRS includes them in your taxable income.

Workplace retirement plans may have different rules.

A large pre-tax balance can throw off a required distribution big enough to move you into a surcharge bracket without your doing anything at all. Roth IRAs work differently. The IRS doesn’t require withdrawals from a Roth IRA while the owner is alive, so money sitting there isn’t adding to the figure Social Security is measuring.

What planning ahead looks like

The years between the end of your paycheck and age 73 are often your lowest-income retirement years. They’re also your best working room. Roth conversions done deliberately in those years, sized to stop short of the next threshold, can shrink the pre-tax balance that would otherwise drive future required distributions.

Timing helps too. If a planned withdrawal would carry you a few thousand dollars past a threshold, splitting it across two tax years can keep you under the line in both.

Charitable giving is another lever. If you’re at least 70½, you can send money directly from your IRA to a qualified charity. For 2026 the IRS allows up to $111,000 per person to be excluded from gross income this way. The gift counts toward your required distribution and never lands in your adjusted gross income.

When you can ask Social Security to reconsider

If your income has dropped because of a major life event, you can ask Social Security to use a more recent year instead. Form SSA-44 covers a specific list of events: marriage, divorce or annulment, the death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and an employer settlement payment. You’ll need to document both the event and the lower income.

Notice what isn’t on that list. Converting to a Roth and selling an investment or another transaction that produces a large capital gain won’t qualify. Those are choices you made. A temporary jump in income isn’t enough on its own.

You can appeal a determination you believe is simply wrong, though that’s a different matter from asking for relief on income you chose to recognize.

The takeaway

IRMAA feels arbitrary until you see the calendar behind it. Social Security is reading a tax return that’s already two years old, and there’s nothing you can do about that return now. What you can decide, this year, is what the next one will say.

If you’re within a few years of Medicare, or already on it and watching a pre-tax balance grow, it’s worth mapping out where your income is likely to land over the next several years. The savings from staying a dollar on the right side of a threshold are real, and they repeat every year you manage it well.