I got a call last week from a recent retiree, visibly frustrated. They had just opened their Medicare premium notice and couldn't figure out why they were paying nearly $600 more per month than their neighbor down the street. Same age. Same coverage. Very different bill.
The answer was IRMAA, and once I explained it, the frustration turned into something more useful: a plan.
If you're a higher-income retiree and your Medicare premiums feel like a penalty for having saved well, you're not imagining things. IRMAA (Income-Related Monthly Adjustment Amount) is exactly that, a surcharge layered on top of your standard Medicare Part B and Part D premiums because your income exceeded certain thresholds two years ago. The good news is that IRMAA isn't always permanent, and with the right strategy, you can reduce or even eliminate it over time.
Here's what you need to know.
"Wait, why are my 2026 Medicare premiums based on income from 2024?"
This is the first thing that trips people up, and honestly, it trips up a lot of advisors too.
The Social Security Administration (SSA) uses a two-year lookback rule to set your Medicare premiums. That means your 2026 Medicare costs are determined by the Modified Adjusted Gross Income (MAGI) you reported on your 2024 tax return. MAGI is essentially your adjusted gross income plus certain add-backs like tax-exempt interest, so it can be higher than you might expect.
The standard 2026 Medicare Part B premium is $202.90 per month, up 9.7 percent from 2025, according to United Medicare Advisors (June 2026). But if your 2024 MAGI crossed certain thresholds, you're paying considerably more than that.
For 2026, the IRMAA surcharges kick in at:
- Greater than $109,000 for single filers
- Greater than $218,000 for married couples filing jointly
And the cliff is steep. Earning just $1 over the $218,000 joint threshold triggers Tier 1 IRMAA, adding $81.20 per month per person for Part B and $14.50 per month per person for Part D, according to Define Financial (June 2026). For a couple, that's nearly $1,900 per year in extra premiums for crossing the line by a single dollar.
At the high end, couples with MAGI of $750,000 or more pay an extra $13,872 combined annually in Part B and Part D surcharges, per Sentient Financial LLC (June 2026). That's real money, and its money that can be managed with planning.
About 8 percent of all Medicare beneficiaries are subject to IRMAA surcharges, according to We Can Help You (March 2026). It's not a tiny group, and if you're reading this, there's a good chance you're in it.
"What if my 2024 income was unusually high and doesn't reflect where I am now?"
This is one of the most underutilized escape hatches in Medicare planning, and I want to make sure you know it exists.
If you experienced a life-changing event since your 2024 tax return was filed, you don't have to silently accept the surcharge. Life-changing events that qualify include:
- Retirement or reduced work hours
- Marriage or divorce
- Death of a spouse
- Loss of income-producing property
In these situations, you can file Form SSA-44 with the Social Security Administration. This form lets you request that SSA use your current, lower estimated income rather than your 2024 MAGI to calculate your 2026 IRMAA tier. You'll need to provide documentation, but it's absolutely worth the paperwork.
I had a client a few years back who sold a business in 2023 and retired shortly after. When her 2025 Medicare premiums arrived based on that sale income, she nearly fell out of her chair. She was sitting on a modest pension and Social Security at that point, nowhere near the income level that triggered the surcharge. We filed Form SSA-44, documented her retirement, and got her premiums corrected. She got a meaningful refund of surcharges she shouldn't have paid in the first place.
If this sounds like your situation, don't wait. Contact the SSA or work with your financial advisor to initiate the appeal process.
"How do I actually lower my IRMAA going forward, not just appeal it?"
This is where the long game begins, and it's where I spend a lot of my time with clients.
Because IRMAA is based on your income from two years prior, the decisions you make today directly affect your Medicare costs in 2028 and beyond. The most powerful lever most retirees have is controlling which accounts they draw from and how much taxable income they generate each year.
Roth Conversions Done Strategically
One of the most effective tools is a Roth conversion, which means moving money from a traditional pre-tax IRA or 401(k) into a Roth IRA. You pay income tax on the converted amount in the year of conversion, but future withdrawals from the Roth account are tax-free and do NOT count toward your MAGI for IRMAA purposes.
The critical word there is "strategically." Done wrong, a Roth conversion can spike your income and bump you into a higher IRMAA tier in two years. Done right, it methodically lowers your pre-tax account balances, which reduces future Required Minimum Distributions (RMDs), which in turn reduces future MAGI and future IRMAA surcharges.
The approach I use is called bracket topping: converting just enough each year to fill up a tax bracket without crossing into the next one or triggering the next IRMAA cliff. For example, for a married couple filing jointly, the 24 percent tax bracket extends up to $403,550 in 2026, per US Bank (January 2026). Stopping conversions just below that line, and just below the next IRMAA threshold, can make a significant difference over a decade.
The TCJA tax brackets, by the way, are now permanent law. The One Big Beautiful Bill Act (OBBBA), signed in 2025, extended and made the TCJA provisions permanent. So the 10 to 37 percent rate structure isn't going anywhere. That gives us real, reliable planning certainty that we simply didn't have before. You can model out Roth conversions over a 10 or 15-year horizon and trust that the brackets will hold.
The Roth 401(k) Advantage
If you're still working or your spouse is, here's something worth knowing: Roth 401(k)s have no income limits for contributions, unlike Roth IRAs which phase out at higher income levels. High earners who can't contribute to a Roth IRA directly can still fund a Roth 401(k) through their employer plan.
And under the SECURE 2.0 Act, Roth 401(k) accounts no longer require RMDs. That's a major shift. Previously, even if you preferred to leave the account untouched and growing, the IRS forced you to take distributions from your Roth 401(k), potentially inflating your MAGI and triggering IRMAA. That's no longer the case.
For high-income earners who want to keep growing tax-free assets without the drag of future RMDs, a Roth 401(k) deserves a serious look.
"Are there other income sources I should be aware of that count toward MAGI for IRMAA?"
Yes, and this is where a lot of people get surprised.
Your IRMAA MAGI includes more than your W-2 or pension income. It also includes:
- Taxable Social Security benefits (up to 85 percent of your benefit may be taxable)
- Capital gains, including from the sale of a home or investment property
- Required Minimum Distributions from traditional IRAs and 401(k)s
- Taxable interest and dividends
- Tax-exempt bond interest (yes, municipal bond interest is added back in for IRMAA purposes)
I had another client, a retired physician, who was carefully managing his spending and thought his income was well under the IRMAA threshold. What he hadn't accounted for was the sale of some appreciated stock his wife held, which pushed their joint MAGI over $300,000 that year. Two years later, they were in a higher IRMAA tier and had no idea why until we traced it back.
The lesson: tax planning and Medicare premium planning cannot live in separate boxes. They have to be managed together, ideally with a multi-year lens.
A Few Additional Levers Worth Considering
Depending on your situation, there are other moves that can help reduce your MAGI and potentially lower your IRMAA tier:
- Asset location: Keeping income-generating investments in tax-advantaged accounts and holding growth assets in taxable accounts can reduce the income you recognize each year.
- Harvesting losses: Realizing capital losses to offset gains can help you stay under an IRMAA threshold in a given year.
None of these is a silver bullet, but together they form a coherent strategy that compounds over time.
IRMAA is one of those things that feels punitive right up until the moment it starts feeling manageable. Thirty-plus years of doing this work has shown me that the retirees who navigate it best aren't necessarily the ones with the lowest incomes. They're the ones who planned two, three, sometimes five years ahead.
If you'd like to look at your current income picture and map out a strategy for reducing your IRMAA exposure in future years, I'd be glad to walk through it with you. Reach out and let's take a look together.
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Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.