Don’t Let IRMAA Catch You Off Guard: What High-Income Retirees Need to Know

If you’re approaching or already enjoying retirement, one hidden cost that might surprise you is IRMAA—the Income-Related Monthly Adjustment Amount. Simply put, IRMAA is an additional charge tacked onto your Medicare Part B and Part D premiums if your income crosses certain thresholds.

Many retirees are shocked when they find their Medicare costs significantly higher than expected, all because of income that could have been strategically managed.

In our tax practice this last season, we had quite a few people surprised to find that they had triggered IRMAA for the first time. Why? Simple really. Interest rates have gone up. They have gone up substantially from the first time the Fed increased rates in March of 2022. Believe it or not, because rates were so low before increases began, the Fed Funds rate had increased by over 2,100% by the time it peaked in July of 2023!! Before rates went up, it was not uncommon to see savings of $300k earn $3-4k per year. Now that same amount of money is earning $12-15k per year. In addition, if you are of the age required to take minimum distributions from your retirement accounts, those distributions can substantially increase your exposure to IRMAA.

What is IRMAA?

IRMAA is a Medicare surcharge applied to high-income earners. It affects:

• Medicare Part B (doctor visits, outpatient care)
• Medicare Part D (prescription drug coverage)

It’s based on your modified adjusted gross income (MAGI) from two years prior. So, your 2025 Medicare premiums are determined by your 2023 tax return.

Who Does IRMAA Affect?

*For 2025, IRMAA applies to individuals with MAGI (Modified Adjusted Gross Income) above $106,000 and married couples filing jointly above $212,000 (based on 2023 MAGI). The higher your income, the higher your Medicare premiums can climb, sometimes by hundreds of dollars per month.

How is IRMAA Calculated?

The Social Security Administration reviews your IRS tax return from two years prior. They then place you into one of several income brackets. Each bracket adds a specific monthly surcharge to your standard Medicare premiums.

How to Plan Around IRMAA

Avoiding IRMAA isn’t always possible, but with smart planning, you can reduce the impact:

1. Manage Your MAGI

Use tax-efficient income strategies like Roth IRA conversions (timed properly), qualified charitable distributions (QCDs), and tapping non-retirement accounts first.

2. Consider a Roth Conversion Window

The years between retirement and age 73 (when RMDs begin) can be ideal for converting traditional IRA funds to Roth— potentially lowering future MAGI by having reduced RMDs..

3. Delay Social Security Strategically

Delaying Social Security could help you stay below IRMAA thresholds, especially in early retirement years.

4. Watch Out for One-Time Income Events

Capital gains from a home sale, IRA withdrawals, or severance can trigger IRMAA. Timing matters.

5. Consider Tax Deferral Strategies 

If they fit within your overall financial plan. This can shelter savings that are earning interest from being taxed until you actually use the money. This reduces your MAGI in those years you defer.

 Common IRMAA Mistakes to Avoid

• Assuming it doesn’t apply to you
• Forgetting about one-time income events
• Ignoring Roth conversion timing
• Underutilizing tax planning in early retirement
• Missing appeals opportunities for life changes

Appealing IRMAA Surcharges

If you’ve experienced a life-changing event—like retirement, divorce, or loss of income—you may be eligible to appeal your IRMAA charges using SSA Form SSA-44.

Common qualifying events:

• Retirement
• Death of a spouse
• Work stoppage or reduction
• Divorce or annulment

Always review your IRMAA determination letter, and don’t hesitate to appeal if something doesn’t look right.

FAQ: IRMAA and Retirement Planning

Q: Can Roth IRA withdrawals trigger IRMAA?

A: No. Roth withdrawals (qualified distributions) are not included in MAGI, making them a valuable tool for managing Medicare costs.

Q: Is IRMAA permanent?

A: No. It is reassessed annually based on your income two years prior. If your income drops, IRMAA may no longer apply.

Q: Do Required Minimum Distributions (RMDs) count toward IRMAA?

A: Yes. RMDs from traditional IRAs and 401(k)s are included in your MAGI.

Q: Should I be concerned about IRMAA even if I’m not “rich”?

A: Yes. Many middle-income retirees can unintentionally trigger IRMAA due to poor tax planning or large one-time income events.

*Source: https://www.nerdwallet.com/article/insurance/medicare/what-is-the-medicare-irmaa