How Could IRMAA Affect You?

On this segment, I want to talk about something that often surprises many people when they retire and start Medicare, and that is IRMAA. Okay. IRMAA stands for income related monthly adjustment amount, and it’s basically a surcharge to your Medicare Part A or part B and part D premiums. Okay. So let’s start by just getting into the basics of Medicare.

Okay. Another surprise with Medicare is a lot of people assume that Medicare is free, okay. Because you’ve paid into it your whole working life, right. That Medicare tax rate out of your paycheck. And so when they get to Medicare age, you’re like, well, I shouldn’t have to pay anything for this. Well, that’s not true. Okay. You do have that part B premium and oftentimes a part D premium as well.

And so for 2026 the part B premium is $202.90. Okay. But that base premium is based on where your income actually falls. And it’s actually your modified adjusted gross income, what our government is looking at, okay. So if your income is too high you actually pay a surcharge. And that’s where IRMAA comes into play, that income related monthly adjustment amount.

So for 2026, the first IRMAA tier as far as income goes is $218,000 for a married couple and $109,000 for a single filer. But remember, that’s based on your MAGI number or modified adjusted gross income. Okay. Now, the Social Security Administration actually looks back two years, to what your previous income was. And that’s how they determine if you went over the income threshold or not.

Okay. So if you find yourself crossing these different IRMAA tiers and you can see the different tiers on the screen, there, but the first tier, if you get above &218,000 as a married couple, pushes that part B premium from $202.90 a month, all the way up to $284.10 a month. Okay. And then also your part D premium that goes up to $14.50 a month.

The big thing to remember with this is, well, Medicare. It’s not a family plan. Okay. So it’s individual. So you and your spouse, if you’re both on Medicare, you’re both going to be subject to that surcharge. Now also on the screen you’ll see those different tiers. And you can see if you have really high income, like over $750,000 as a married couple.

That’s the final tier or the highest tier of IRMAA. And that means that your part B premium would cost over $689 a month each, and that part D premium would be $91 each per month. Okay. So that can get very, very expensive. Now you’re probably watching this TV screen saying, Nick, my income in retirement is going to be nowhere near that, right?

With your Social Security benefits between you and your spouse and maybe you got a pension and, you know, small IRA distributions and so forth. And you’re probably right. Right? But oftentimes what surprises people with this IRMAA is the one off income situations. Okay. Like for example, let’s say that you sell a property and that property is subject to capital gains, right?

Well, those capital gains, they count towards your modified adjusted gross income and can push you into these different IRMAA tiers. Another thing to think about is large IRA distributions or 401(k) distributions. Okay. All that pretax money when you take it out in a large distribution to maybe buy that Corvette or buy that beach house down in Florida.

Well guess what? It’s all taxable. It counts towards your modified adjusted gross income and can make your Medicare premium cost more. Okay. So what are some specifics about this Irma? Well, one thing to think about is this is on an annual basis. Okay. So the Social Security Administration looks at your income each and every year. So if it’s just one year that you have this higher income and then it reverts back to a lower income, well, you’re only subject to those IRMAA surcharges for that year.

Okay? You’re not stuck with it for the rest of your life. Another thing that we’ve had clients do, is actually fight the surcharge. Okay. You can use SSA form 44, and, you know, you file an appeal for a life change and so forth. Now, it is very uncommon to actually win the appeal. But if you’re in one of those higher Irma tiers, it could make sense to try to fight that.

Okay. So just remember, IRMAA is a surcharge based on your modified adjusted gross income being a little bit higher than the base. Okay? And it makes your part B premium cost more. So if you have questions about how to plan for this or how to work in IRMAA to your overall retirement plan, please don’t hesitate to give the number on the screen a call and schedule a free, no obligation consultation where we can help you plan to retire well.