What Is IRMAA? The Medicare Surcharge Most Retirees Don't See Coming
Most people planning for retirement have a rough idea what Medicare will cost. Part B, a supplement, maybe Part D.
What catches them off guard is finding out that their income from two years ago is about to make those premiums significantly more expensive.
That's IRMAA. Income-Related Monthly Adjustment Amount. It's a Medicare premium surcharge applied to higher-income retirees, and it's one of the most common surprises I see in meetings with new clients.
How It Works
Medicare uses your Modified Adjusted Gross Income from two years prior to determine whether you pay extra on Part B and Part D premiums. The base Part B premium in 2025 is $185 per month. Cross certain income thresholds and that number goes up in tiers, each tier adding more to your monthly cost.
For 2025, IRMAA starts at $106,000 for single filers and $212,000 for married couples filing jointly. At the highest tiers, a married couple can be paying several hundred dollars more per month per person above the base premium.
For a married couple both on Medicare, IRMAA at the higher tiers can add $5,000 to $7,000 per year in additional Medicare costs. And because it's based on income from two years prior, a high-earning final year of work can trigger surcharges in year one and two of Medicare, right when you're least expecting extra bills.
What Counts as Income for IRMAA
IRMAA is triggered by Modified Adjusted Gross Income, which includes more than most people realize. W-2 wages and self-employment income, obviously. But also traditional IRA and 401k withdrawals, RMDs, Roth conversions, capital gains, Social Security income (up to 85%), and rental income.
The Roth conversion piece is worth paying attention to. A large Roth conversion in a single year counts as ordinary income and can push income above an IRMAA threshold two years later. Conversions spread across multiple years, sized to stay under the thresholds, avoid the problem. One large conversion can create it.
The Two-Year Lookback Is the Tricky Part
Medicare looks back two years. If you retire at 63 and your final year of work was a high-income year, you'll pay IRMAA for your first year on Medicare based on income you earned before you even enrolled. There's nothing you can do about past income, but you can appeal.
Retirement is a qualifying life event for the IRMAA appeal process. If your income dropped significantly because you retired, you can file Form SSA-44 and request that Medicare use more recent income data. Most people don't know this exists. It's worth filing.
What You Can Do Before You Turn 65
Spread Roth conversions across multiple years rather than doing one large conversion that crosses a tier. Stay under the thresholds where possible and convert the rest in a year when other income is lower.
If you're planning a large capital gains event, a property sale, or any other one-time income spike, consider and be aware of the IRMAA impact before executing it.
Build Roth balances before retirement. Roth withdrawals don't count toward MAGI and don't affect IRMAA. Having a tax-free income source to draw from in Medicare years gives you flexibility to keep MAGI under the thresholds when it matters.
IRMAA isn't a problem you can solve after it hits. The decisions that reduce it have to happen before Medicare enrollment or in year one when the appeal window is open. I start modeling IRMAA exposure for clients five or more years from retirement, not the year before.
I'm a fee-only CFP in Pleasant Grove, Utah. If you're within ten years of Medicare enrollment and haven't looked at your IRMAA exposure, book a free intro call here.