What You Need To Know About Medicare and IRMAA

If retirement is on the horizon, Medicare is not something to leave until the last minute. Many people assume they can sort it out a few months before they retire, but some of the most important decisions should begin several years in advance because of how IRMAA is calculated.

IRMAA stands for Income-Related Monthly Adjustment Amount. It is an extra charge added to Medicare Part B and Part D premiums for higher-income retirees, and Social Security generally uses income from two years prior to determine whether that surcharge applies. This means your income before retirement can directly affect what you pay for Medicare after retirement.

That is why planning several years before retirement is so important. If someone retires in 2026, Medicare premiums may still reflect 2024 income, which could include salary, bonuses, stock sales, business income, or large retirement account withdrawals. Without advance planning, retirees can be surprised by higher Medicare premiums just as they are trying to settle into a more predictable retirement income plan.

Roth conversions are a good example of why Medicare planning needs context. A Roth conversion can increase taxable income in the year it is done, which may push someone into a higher IRMAA tier and temporarily increase Medicare premiums later. At first glance, that may make Roth conversions seem counterproductive.

In practice, though, Roth conversions can still be a very valuable planning tool. When done thoughtfully over time, they can help reduce future required distributions, create more tax flexibility later in retirement, and make it easier to manage taxable income and Medicare premium tiers over the long term. A short-term increase in IRMAA may sometimes be worth it if it helps reduce lifetime taxes and future Medicare surcharges.

That is where our role as advisors becomes especially important. The goal is not simply to avoid IRMAA in one isolated year. The goal is to help manage your lifetime tax liability and Medicare costs together, while coordinating retirement income, withdrawals, Social Security timing, and tax strategy in a way that supports the bigger picture.

Marital status is also a major part of this analysis. Married couples filing jointly and single filers are subject to different IRMAA thresholds, so a plan that works while both spouses are alive may look very different after the death of a spouse or after a divorce. This often becomes especially important for widows and widowers, who may face the shift from married filing jointly to single filing status while still drawing income from retirement accounts, investments, or survivor benefits.

This is often referred to as the widow’s penalty. Even if household income goes down after one spouse dies, the surviving spouse may still face higher taxes and higher Medicare premiums because single filer thresholds are lower. That can be particularly important for age-gap couples, since the younger spouse may spend many years as a surviving single filer.

It can also matter for couples with different life expectancies. If one spouse is expected to live significantly longer, whether because of age, health, or family longevity such as parents living into their late 90s or beyond, the long-term impact of single-filer tax brackets and IRMAA thresholds becomes even more important to plan for ahead of time. In those situations, proactive tax diversification and income planning can be especially valuable.

The same idea can apply after divorce. A newly single retiree may move from married filing jointly to single filing status, and that change can make it easier to trigger higher IRMAA tiers, even if spending has not changed dramatically. For single clients in general, there is often less room for error because the income thresholds are lower than they are for married couples filing jointly.

There may still be opportunities to respond after retirement. If income drops because of a life-changing event such as work stoppage or retirement, Social Security may allow you to request a lower IRMAA determination. Still, the better approach is usually to plan several years ahead so these decisions are made intentionally rather than under pressure.

For anyone within a few years of retirement, this is a good reminder that Medicare planning is closely tied to tax planning and retirement income planning. This is often where a planning conversation becomes especially valuable, because small decisions made before retirement can have ripple effects on healthcare costs for years to come.