A Phoenix couple retires in 2023. (They’re fictitious, but their situation isn’t.) The following year, they sell a rental property they’d owned for two decades — a smart move that freed up capital and simplified their finances. The property had appreciated nicely. The timing made sense. The decision freed up capital for long-awaited travel.
Then, in late 2025, a letter arrives from the Social Security Administration.
Their Medicare Part B premium was jumping from $175 to $578 per month, effective January 2026. Not because of a mistake or some obscure penalty they’d overlooked. Because of how Medicare calculates premiums.
The culprit is IRMAA (Income-Related Monthly Adjustment Amount) — one of the most frequently overlooked costs in retirement planning.
What makes IRMAA particularly frustrating is that it’s based on what you earned two years ago. So, a one-time income event like selling property can trigger higher Medicare premiums long after the financial dust has settled and your income has returned to normal.
Unlike income taxes, which you settle once a year, IRMAA shows up every month in your Medicare bill. And if you weren’t expecting it, the added cost can become an unwelcome surprise in retirement.
Fortunately, IRMAA is plannable, if you know how it works. Below, we’ll break down how IRMAA works and how to factor it into your retirement income strategy before the bill arrives.
What Is IRMAA?
IRMAA is a surcharge that higher-income Medicare beneficiaries pay on top of standard Medicare Part B and Part D premiums.
In 2026, if your modified adjusted gross income (MAGI) exceeds $109,000 (individual) or $218,000 (joint filers), you’ll pay more for Part B (medical insurance) and Part D (prescription drug coverage).¹
IRMAA was introduced in 2007 as a way to make Medicare more progressive. Rather than charging everyone the same premium regardless of income, higher earners contribute more toward the cost of the system.
This is quite consequential because many retirees don’t think of themselves as “high-income,” especially when income spikes are temporary. Yet one strong year (thanks to asset sales, conversions, distributions, etc.) can be enough to trigger higher Medicare premiums later on.
Standard 2026 premiums vs. IRMAA-adjusted premiums
In 2026, most Medicare beneficiaries will pay the standard Part B premium, which is $202.90 per month.² If IRMAA applies, however, the increase can be substantial. Even at the lowest tier, combined Part B and Part D adjustments can add nearly $100 per person per month. At the highest tier, the surcharge reaches $578 per month.
| Insight: Roughly 8% of Medicare beneficiaries pay IRMAA in a given year.³ It’s not the norm — but it’s common enough that anyone doing thoughtful retirement planning should understand how it works. |
How IRMAA Is Calculated: The Two-Year Lookback
IRMAA is calculated on a sliding scale based on MAGI, which includes your adjusted gross income plus tax-exempt interest.
Now, here’s the complication. Medicare doesn’t look at your current income. Instead, it uses your tax return from two years prior. So, your 2024 tax return determines your 2026 IRMAA. This creates a timing mismatch that catches many retirees off guard.
Let’s say you retired in 2025. Your 2026 Medicare premiums will still reflect your 2024 income — when you were working full-time and likely earning significantly more. The surcharge won’t adjust until 2027.
The lag exists so the IRS can finalize tax data, creating a reliable, documented record of income. But it’s also why the bill arrives long after the income event that triggered it.
The Medicare IRMAA Income Brackets for 2026
In 2026, the standard Part B premium is $202.90 per month for individuals earning $109,000 or less, or joint filers earning $218,000 or less. If you earn more than this, you’ll pay a total Part B IRMAA ranging from $284.10 to $689.90, depending on your income.
For Part D, the IRMAA surcharge ranges from an additional $14.50 to $91 per month on top of your plan premium, again depending on your income.
| If your income in 2024 was: | You’ll pay this each month in 2026: | |||
| Individual tax return | Joint tax return | Married & separate tax return | Medicare Part B premium | Medicare Part D cost |
| $109,000 or less | $218,000 or less | $109,000 or less | $202.90 | Your plan premium |
| Above $109,000 and up to $137,000 | Above $218,000 and up to $274,000 | Not applicable | $284.10 | +$14.50 |
| Above $137,000 and up to $171,000 | Above $274,000 and up to $342,000 | Not applicable | $405.80 | +$37.50 |
| Above $171,000 and up to $205,000 | Above $342,000 up to $410,000 | Not applicable | $527.50 | +$60.40 |
| Above $205,000 and less than $500,000 | Above $410,000 and less than $750,000 | Above $109,000 and less than $391,000 | $649.20 | +$83.30 |
| $500,000 and above | $750,000 and above | $391,000 and above | $689.90 | +$91.00 |
IRMAA uses income tiers. Cross a threshold by even one dollar, and you pay the full premium for that bracket.
Imagine a married couple with MAGI of $342,100. That extra $100 over the $342,000 threshold moves them into the third IRMAA tier, which costs them an additional $324.60 per person per month for medical insurance, plus applicable drug coverage premiums. For this couple, $100 in additional income triggers roughly $7,800 in annual Medicare surcharges.
That’s why IRMAA is best understood before income decisions are finalized. Once the tax return is filed and the lookback clock starts, making reactive changes becomes much more complicated.
The IRMAA Timeline: What to Expect
You file tax return → IRS shares income data → SSA calculates IRMAA → CMS bills you → Medicare premiums increase
One frustrating aspect of IRMAA is how delayed the impact is.
Income events that boosted earnings two years ago may no longer reflect your current financial reality, yet the higher Medicare premiums still apply. If those costs weren’t anticipated and incorporated into your planning, they can disrupt an otherwise stable retirement budget.
Here’s how the process typically unfolds:
- You file your tax return. Your Modified Adjusted Gross Income (MAGI) is reported to the IRS, just like every other year.
- The IRS shares income data with the Social Security Administration (SSA). The SSA uses your tax return from two years prior to evaluate whether IRMAA applies.
- The SSA calculates your IRMAA surcharge. Based on where your income falls in the IRMAA tiers, the SSA determines your adjusted premiums.
- You receive an IRMAA determination notice. This formal letter outlines your adjusted premiums and your appeal rights.
- Your Medicare premiums increase. If you’re already receiving Social Security benefits, the higher Part B and Part D premiums are deducted directly from your monthly benefit. If you’re not receiving Social Security, you’ll be billed quarterly.
| Insight: Once enrolled, you can view and track your Medicare premiums through your Social Security account (ssa.gov) or Medicare.gov. |
Common IRMAA Triggers: What Pushes You Over the Threshold
IRMAA is rarely triggered by overspending or poor decisions. More often, it follows smart, intentional financial moves made during retirement — such as selling a property, liquidating stock, or even taking RMDs.
Below are the most frequent IRMAA triggers we see:
- Capital gains events (e.g., selling appreciated stock, rental property, or businesses). For example, the couple mentioned above realized a large capital gain after selling their second home in retirement. Even after applying the primary residence exclusion (if eligible), the remaining gain pushes their MAGI into a higher IRMAA tier — resulting in elevated Medicare premiums for the next two years.
- Roth conversions: Many new retirees use Roth conversions as a tax planning tool in the years between retirement and required minimum distributions. While effective, they also increase taxable income in the year of conversion, especially when conversions are large or executed all at once.
- Required Minimum Distributions (RMDs): Once required distributions begin, the increase in taxable income could push you into IRMAA territory for the first time. This is especially common for retirees who deferred retirement savings aggressively, limited taxable withdrawals earlier in retirement, or didn’t factor RMD planning into their overall cash flow strategy.
- Bonuses/deferred compensation: Late-career income spikes are another frequent trigger, including final-year bonuses, deferred compensation payouts, severance packages, pension lump sums, annuity distributions, or proceeds from the sale of a business.
- Investment income: Dividends, interest, and rental income all count toward MAGI, and can unintentionally put you into a new IRMAA threshold without any single dramatic event.
Why Proactive Planning is Important
Selling property, executing Roth conversions, and drawing retirement income are all normal, healthy financial decisions. The key is understanding how they interact with Medicare before the decisions are made.
Because of the two-year lookback, the impact often shows up long after the income event itself. That’s why proactive planning matters. Not to avoid these strategies, but to understand the trade-offs and make intentional decisions.
That’s why we urge our clients not to avoid these decisions, but rather understand how they interact with Medicare, so the trade-offs are intentional rather than surprising.
Life-Changing Events: When You Can Appeal IRMAA
While IRMAA is largely formula-driven, it isn’t completely inflexible.
If your income has decreased since the year Medicare used to calculate your surcharge, you may qualify for an adjustment. The provision accounts for real-life changes that make a prior-year tax return a poor proxy for your current financial reality.
Social Security allows IRMAA appeals when income drops due to specific, qualifying circumstances. These include:
- Death of a spouse
- Marriage or divorce
- Loss of income-producing property
- Loss or reduction of pension income
- Employer settlement payments ending
- Reduction in work hours or full retirement
The Appeal Process: Form SSA-44
IRMAA is not automatically adjusted, even in obvious situations like retirement or divorce. To request a change, you must file Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event).
The form requires you to:
- Identify the qualifying event
- Estimate your current-year income
- Provide supporting documentation
You generally have 60 days from receiving your IRMAA determination notice to file the appeal. Reviews typically take several weeks to a few months, and approved changes usually apply going forward.
However, IRMAA appeals are intended for genuine income reductions — not strategic tax planning.
They generally do not apply to:
- Roth conversions
- Voluntary asset sales
- Planned withdrawals
- Investment income you intentionally realized
- Minor income dips or temporary fluctuations
| Insight: Appeals can correct IRMAA when life changes unexpectedly. But the most effective way to manage IRMAA is still proactive planning (i.e., understanding how today’s income decisions may affect Medicare costs two years from now). |
IRMAA and Your Retirement Income Strategy
IRMAA doesn’t exist in a vacuum. It’s one variable in a broader retirement income equation that also includes taxes, cash flow, portfolio longevity, and flexibility.
Therefore, income decisions should be evaluated across multiple tax years, not just the current one.
Working with an advisor can help manage your income brackets strategically. In some cases, making modest adjustments can keep you just below a bracket threshold, saving $3,000 to $4,000 per person per year in Medicare premiums.
Strategies include:
- Splitting capital gains across multiple years
- Staggering Roth conversions
- Coordinating withdrawals across account types
Other times, a temporary surcharge may be a reasonable (even prudent) trade-off. For example, a Roth conversion that triggers one year of IRMAA may make sense if it meaningfully reduces future required distributions and lowers lifetime taxes by $50,000.
Coordinated planning helps ensure IRMAA is a known cost, aligned with taxes, withdrawal strategies, and conversion sequencing.
IRMAA Applies Regardless of Medicare Coverage
Your choice of Medicare coverage doesn’t eliminate IRMAA.
With Original Medicare, IRMAA increases:
- Your Part B premium
- Your Part D premium (if you have prescription coverage)
With a Medicare Advantage plan, IRMAA still applies. You continue to pay:
- The standard Part B premium
- Any applicable IRMAA surcharge
Standalone Part D plans are also subject to IRMAA surcharges, regardless of which plan you choose.
Medicare Part A (hospital insurance) typically has no premium for most people and is not affected by IRMAA.
| Insight: IRMAA is tied to income, not Medicare plan selection. Changing coverage options alone won’t eliminate the surcharge. |
The Bigger Picture: IRMAA as Part of Comprehensive Retirement Planning
IRMAA is rarely the deciding factor in a retirement plan. But it is a factor — one that’s most relevant during the transition decade (ages 60 to 70) when retirees have the greatest flexibility.
During this time, income tends to be more fluid, and decisions about withdrawals, conversions, and asset sales can have lasting effects.
This is where comprehensive financial planning (not just investment management) can add meaningful value. Investment decisions don’t happen in isolation. Taxes, Medicare costs, Social Security, and withdrawal strategies are interconnected, and thoughtful planning considers how each decision affects the others.
The most productive questions to ask are:
- Should we accelerate/defer this income?
- What’s the total cost (taxes, IRMAA, and other benefits combined)?
- How does this fit our 5- and 10-year income plan?
Planning for Clarity, Not Surprises
IRMAA catches many retirees off guard because it’s effects are delayed and easy to overlook.
But it’s only one piece of the retirement income puzzle. When taxes, Medicare, Social Security, and portfolio withdrawals are planned together, surprises become less common and decisions become more intentional.
At TCI, we help clients navigate these interconnected choices with clarity so they can focus less on unexpected costs and more on the life they want to live.
Schedule a complimentary consultation to discuss how IRMAA fits into your broader retirement income strategy.
¹ Centers for Medicare & Medicaid Services, “2026 Medicare Parts A & B Premiums and Deductibles”
² Medicare.gov, “Costs”
³ Centers for Medicare & Medicaid Services, “2025 Medicare Parts A & B Premiums and Deductibles”
TCI Wealth Advisors, Inc. is an SEC registered investment advisor. This material is provided for informational purposes only and should not be construed as investment advice or a recommendation. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. TCI is neither a law firm nor a certified public accounting firm, and this material should not be construed as legal or accounting advice. Moreover, you should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if TCI is engaged, or continues to be engaged, to provide investment advisory services.
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