When your healthcare is tied to your employer, your coverage costs are relatively predictable. It doesn’t matter if you had a record-breaking sales year or a quiet one; the premium is the premium.
Retirement has a way of complicating things.
Medicare enrollees with higher incomes don’t just pay a set premium. They pay a surcharge called IRMAA (Income-Related Monthly Adjustment Amount). Think of IRMAA as the cranky aunt who shows up to crash your retirement party.
What makes IRMAA particularly tricky is that she’s a time traveler. The surcharge is calculated based on income from 2 years ago. Many retirees don’t see the increase coming until it’s too late to do much about it.
And with Medicare Part B premiums jumping nearly 10% from 2025 to 2026 while IRMAA’s income thresholds barely moved, careful planning has never mattered more.
What Is IRMAA, Exactly?
IRMAA isn’t a penalty, although it can definitely feel like one! It’s a cost-sharing mechanism between the enrollee and the federal government. As income increases, the government subsidizes a smaller share of the Medicare Part B premium, and the enrollee pays a larger share, ranging from 35% to 85% of the total cost. For most Medicare beneficiaries, the federal government pays about 75% of the Medicare Part B premium, and the enrollee pays the remaining 25% through the standard monthly premium.
Because of the two-year lookback, 2026 premiums are based on reported income on 2024 tax returns. A Roth conversion, a large IRA withdrawal, or the sale of the beach condo could potentially trigger a much larger Medicare bill down the road. Too often, people make a smart tax move today without realizing they’ve set off an unintentional ripple effect for the future.
Why Crossing an IRMAA Threshold Hurts More Than You’d Expect
Our federal tax system is progressive, like a slope. IRMAA, however, is a cliff.
Single filers with 2024 modified adjusted gross income or MAGI (AGI plus tax-exempt interest) above $109,000, and married couples above $218,000, are subject to surcharges on top of their 2026 standard Part B and Part D premiums.
If clients exceed an income tier even by a single dollar, they don’t just pay a surcharge on that dollar. They owe the full surcharge for that entire tier, for the entire year.
For married couples, the impact doubles. Each spouse is charged for IRMAA independently, using the same household MAGI, meaning one income event can knock both into a higher tier simultaneously.
What Triggers the IRMAA Surcharge?
IRMAA has a wide net and a long memory. Almost anything that spikes someone’s Modified Adjusted Gross Income (MAGI) can push them over the cliff into surcharge territory. While these decisions are often made in a vacuum, they can have a very loud echo:
- Roth Conversions
- Inherited IRA Withdrawals
- Appreciated Asset Sales
- Municipal Bond Interest
- The Sale of a Lucrative Business
A Potential Escape Hatch: SSA-44
Good News: If your client’s income dropped due to one of these Life-Changing Events (LCEs), they can appeal the IRMAA surcharge using form SSA-44:
- Retiring
- Reducing Work Hours
- Death of a Spouse
- Divorce
- …and a few others
The Most Critical Planning Window
The late 50’s to early 60s (specifically before age 63) is the most valuable retirement income planning window. Why? Because the two-year lookback hasn’t started yet. The opportunity window could be longer if creditable workplace coverage delays Medicare enrollment beyond 65; But whatever that magic Medicare enrollment age is, subtract 3, and that is the last year before MAGI modeling should account for the future impact on Medicare.
If clients plan to implement Roth conversions or harvest capital gains, they should typically do so before age 63. Once they hit that birthday, every dollar they take is being watched by the Medicare lookback machine. Once they’re enrolled in Medicare, the game shifts to sequencing, or thoughtfully spreading income across years to stay on the plateau and to avoid the cliff.
The Bottom Line
The goal isn’t to dodge IRMAA at all costs. Sometimes, the long-term math of a Roth conversion or a strategic asset sale is so lopsided in your favor that the extra Medicare premium is just a small convenience fee for a bigger win.
The problem isn’t paying the surcharge. It’s paying for it by accident.
Retirement planning doesn’t happen in a vacuum, yet too many decisions are still being made in silos. If you’re looking at tax strategy without looking at your Medicare premiums, or Social Security timing without looking at RMDs, you’re only seeing half the map.
With costs rising and thresholds lagging behind, IRMAA is an important consideration. Success in this stage of life requires a high-level view of the interplay between every dollar a client takes and the ripple effect it creates.
Heather’s Hitting the Road!
Heather Schreiber will join the nation’s leading thought leaders in retirement income planning at the 2nd annual American College of Financial Services Horizons conference, sharing insights on the latest research, strategies, and future trends.
The conference is now sold out, but stay tuned! Heather will be bringing back the Cliff Notes version of everything the brightest minds in the room shared.
Click here to learn more.
Want more client-ready talking points delivered to your inbox?
Subscribe to Retirement Strategy Report, my free newsletter for advisors who like their strategies sharp and their clients sleeping soundly.
As Founder and President of HLS Retirement Consulting, she partners with forward-thinking advisors nationwide to design strategy-based solutions that help clients grow, protect, and preserve their retirement income. She also serves as Editor-in-Chief of Heather Schreiber’s Social Security Advisor, a nationally distributed monthly newsletter focused on turning complex Social Security rules into strategy-driven, value-creating solutions that help advisors strengthen relationships, retain clients, and drive growth.
Off the clock, Heather is a hiker, humorist, and proud matriarch of a family of six (plus four furry sidekicks). Having recently joined the ranks of America’s 63 million family caregivers, she shares her own caregiving journey through her writing, offering empathy, perspective, and hard-won lessons to others walking a similar path. Her signature blend of technical expertise, human connection, and a touch of sass makes her a trusted voice for advisors guiding clients through life’s most important financial transitions.
Click here to sign up for the Retirement Strategy Report, Heather’s free monthly newsletter for financial professionals.
- Medicare, IRMAA, and Retirement Income: Why These Decisions Can’t Live in Silos - April 27, 2026
- Your Clients Are Hearing That Social Security Taxes Are Going Away. Here’s What’s Really Changing. - March 24, 2026
- ‘A Bird in the Hand’? Why Claiming Social Security Early Still Isn’t the Safety Net It Seems - February 17, 2026
