IRMAA and retirement. One of the most overlooked costs in retirement planning is the IRMAA surcharge — a Medicare premium add-on that catches many new retirees completely off guard. As a Medicare insurance broker serving clients across New York and New Jersey, I see this happen regularly: someone retires feeling financially prepared, then receives their Medicare bill and discovers they’re paying hundreds of dollars more per month than they expected. Here’s what you need to know before that happens to you.

What Is IRMAA and How Does It Work?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. Essentially, it’s the government’s mechanism for having higher-income individuals contribute more toward the cost of their Medicare benefits.

The Social Security Administration (SSA) determines whether you owe IRMAA based on your Modified Adjusted Gross Income (MAGI) using a two-year look-back period. So your current year’s IRMAA is based on your income from two years prior.

How IRMAA Brackets and Thresholds Are Set

IRMAA thresholds are adjusted annually by the SSA and divided into several income brackets, each with a corresponding surcharge level. For 2026, the surcharge begins for individuals with a MAGI above $109,000 and for married couples filing jointly above $218,000. The higher your income, the higher your monthly premium surcharge, and it applies to both Part B and Part D separately.

It’s important to understand that IRMAA is not a one-time assessment. It is recalculated every year based on your most recently available tax return, which means retirement and the income changes that come with it can directly affect what you owe.

How Retirement Affects Your Income and IRMAA

Retirement typically brings a significant reduction in income as you shift from a steady paycheck to a combination of Social Security benefits, pensions, and retirement account withdrawals. This income drop can lower your MAGI, potentially reducing or even eliminating your IRMAA surcharge over time. But the timing matters enormously.

The Two-Year Look-Back Rule Explained

Because IRMAA is based on income from two years prior, newly retired individuals often face a frustrating gap: you may have retired and dramatically reduced your income, but you’re still being charged IRMAA based on your higher pre-retirement earnings. This can mean paying elevated Medicare premiums for one to two years after you stop working — even if your current income is well below the threshold.

The good news: if you experience a life-changing event such as retirement, you can file Form SSA-44 with the Social Security Administration to request that they use your more recent, lower income when calculating your IRMAA. This is one of the most important and underutilized options available to new retirees.

How Retirement Account Withdrawals Impact Your MAGI

Not all retirement income is treated equally when it comes to MAGI. Withdrawals from traditional IRAs and 401(k)s count as taxable income and can push you into a higher IRMAA bracket. By contrast, Roth IRA withdrawals are tax-free and do not count toward your MAGI, making Roth accounts a powerful planning tool for managing IRMAA in retirement.

The Role of Medicare in Retirement Planning

Medicare isn’t just a healthcare decision — it’s a financial one. Part B and Part D both carry monthly premiums that can increase substantially with IRMAA surcharges, making it critical to factor these costs into your retirement budget from day one.

Understanding Medicare Parts A, B, and D Costs

• Part A — Covers hospital stays, skilled nursing facility care, and some home health services. Generally premium-free if you or your spouse worked and paid Medicare taxes for at least 10 years.
• Part B — Covers outpatient care, doctor visits, and preventive services. Carries a standard monthly premium, plus an IRMAA surcharge if your income exceeds the threshold.
• Part D — Prescription drug coverage. Also subject to a separate IRMAA surcharge on top of your plan’s base premium.

Each part has its own deductibles and cost-sharing structure. When IRMAA is layered on top, the difference in annual out-of-pocket costs between income brackets can be substantial — sometimes $3,000 to $5,000 or more per year for a couple.

Avoiding Late Enrollment Penalties

Missing your Medicare enrollment window can result in permanent premium penalties. If you are still working and covered by employer-sponsored health insurance at age 65, you may be able to delay Part B without penalty — but the rules are specific and depend on your employer’s plan size. Getting this wrong is a costly mistake I help clients avoid every day.

Key Income Changes to Expect After Retirement

The shift from employment income to retirement income involves several moving parts, each with different tax treatment and MAGI implications.

Social Security and Taxable Income

Social Security benefits themselves are not included in your MAGI for IRMAA purposes. However, depending on your total income, up to 85% of your Social Security benefits can be subject to federal income tax, which does affect your overall tax picture and can indirectly influence your financial planning decisions.

Traditional vs. Roth IRA Withdrawals

This distinction is one of the most important in IRMAA planning:

• Traditional IRA / 401(k) withdrawals — Fully taxable, counted in MAGI, and can push you into a higher IRMAA bracket
• Roth IRA withdrawals — Tax-free, not counted in MAGI, and do not affect IRMAA
• Required Minimum Distributions (RMDs) — Under the SECURE 2.0 Act, RMDs now begin at age 73 (rising to 75 in 2033). These mandatory withdrawals from traditional accounts are fully taxable and must be factored into your IRMAA projections.

Strategies to Manage and Reduce Your IRMAA

IRMAA isn’t always avoidable, but with the right strategies, it can be managed and reduced.

Timing Your Retirement Account Withdrawals

By spreading withdrawals across multiple years rather than taking large lump sums, you can avoid income spikes that push you into a higher IRMAA bracket. This requires careful coordination — especially in years when you also have other taxable income events like property sales or pension payouts.

Roth IRA Conversions

Converting funds from a traditional IRA to a Roth IRA can be a powerful long-term IRMAA management tool, since future Roth withdrawals won’t count toward your MAGI. The tradeoff is that the conversion itself creates a taxable event in the year it occurs, so conversions need to be carefully sized to avoid inadvertently triggering IRMAA or moving into a higher tax bracket. Many advisors recommend doing partial conversions in lower-income years, such as the gap between retirement and RMD age.

Qualified Charitable Distributions (QCDs)

If you are 70½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualifying charity — up to $105,000 per year (2025 limit, indexed for inflation). QCDs count toward your RMD but are excluded from your taxable income, meaning they do not increase your MAGI or trigger IRMAA. This is a significant benefit for charitably inclined retirees.

Tax Implications of Retirement Income

Effective IRMAA management is inseparable from tax planning. The types of income you draw in retirement and when determine your MAGI, your IRMAA bracket, and your overall tax liability. Key principles to keep in mind:

• Traditional IRA and 401(k) withdrawals are fully taxable and increase MAGI
• Roth IRA withdrawals are tax-free and do not affect MAGI
• RMDs beginning at age 73 are taxable and must be planned proactively
• Roth conversions are taxable in the year of conversion, but reduce future MAGI exposure
• QCDs satisfy RMDs without increasing taxable income

Working with a financial advisor or tax professional who understands Medicare’s IRMAA rules is strongly recommended, especially in the five years leading up to and following retirement.

Why Pre-Retirement Financial Planning Matters

The two-year look-back rule means that decisions you make before you retire can affect your Medicare costs for years afterward. Ideally, IRMAA planning should begin at least three to five years before your target retirement date. A comprehensive pre-retirement plan should address:

• Your expected income sources and their tax treatment
• The optimal timing for retirement to manage your IRMAA exposure
• Roth conversion opportunities in your final working years
• RMD projections and strategies to reduce their MAGI impact
• Whether to file SSA-44 in the year you retire to request a reduced IRMAA assessment

Real-Life IRMAA Case Studies

The following examples illustrate how different retirement approaches lead to different IRMAA outcomes.

Case Study 1: John and Mary

John and Mary retired in 2022 after years of high combined income. Because of the two-year look-back, their 2022 Medicare premiums reflected their 2020 earnings well above the IRMAA threshold. By strategically managing their retirement account withdrawals and executing partial Roth conversions in 2022 and 2023, they successfully reduced their MAGI below the IRMAA threshold by year three of retirement.

Case Study 2: Susan

Susan retired early at 62 and planned carefully. She had already built a substantial Roth IRA, allowing her to draw retirement income without affecting her MAGI. She spread her traditional IRA withdrawals over several years and filed SSA-44 the year she retired to reduce her IRMAA assessment based on her lower current income. Her proactive approach meant she avoided the full two-year penalty gap that surprises many new retirees.

Case Study 3: Tom

Tom retired without planning for IRMAA and was blindsided by significantly higher Medicare premiums in his first two years. After consulting a financial advisor, he learned about Roth conversions and QCDs — strategies that, once implemented, helped him reduce his MAGI and lower his IRMAA over the following years. His experience underscores why pre-retirement planning is so much more effective than catching up after the fact.

Resources for Navigating IRMAA

Several reliable resources can help you understand and plan for IRMAA:

• Social Security Administration (SSA) — ssa.gov — IRMAA income thresholds, how MAGI is calculated, and Form SSA-44 for life-changing event appeals
• Medicare.gov — Comprehensive information on Part B and Part D premiums, enrollment periods, and plan comparison tools
• IRS Publication 915 — Guidance on the taxability of Social Security benefits
• A licensed Medicare broker can help you understand how your plan choices and premium costs interact with your IRMAA bracket

Next Steps: Work With a Medicare Expert

IRMAA is one of the most misunderstood aspects of Medicare and one of the most financially impactful. Whether you’re a few years from retirement or just crossing into Medicare eligibility, understanding how your income decisions affect your premiums is essential.

As an independent Medicare broker serving clients across New York and beyond, I help people navigate exactly these kinds of questions, from understanding their IRMAA exposure to choosing the right Medicare plan to fit their overall retirement strategy.

📞 Contact Craig Smith Insurance Group today for a free Medicare consultation. We’ll review your coverage options, walk through your Part B and Part D costs, and make sure you’re not paying more than you have to.

IRMAA Calculator