The Income Decision You Made Two Years Ago Just Raised Your Medicare Premium
Every year, thousands of retirees open a letter from the Social Security Administration and learn their Medicare premium just went up — sometimes by hundreds of dollars a month. Not because of anything they did this year. Because of income they earned two years ago.
It's called IRMAA, and if you're approaching Medicare — or already on it — it's one of the most common and most avoidable surprises in retirement. The frustrating part: by the time the letter arrives, the decision that triggered it is two tax years behind you.
What Is IRMAA?
IRMAA — the Income-Related Monthly Adjustment Amount — is a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds. For 2026, the standard Part B premium is $202.90 per month. But if your modified adjusted gross income (MAGI) was above $109,000 as a single filer or $218,000 as a joint filer, you pay more — anywhere from $284.10 up to $689.90 per month for Part B alone, plus additional Part D surcharges.
Here's the detail that catches people: those 2026 premiums aren't based on your 2026 income, or even your 2025 income. They're based on your 2024 tax return.
Four Things That Make IRMAA Different
1. The two-year lookback means the damage is already done — or already avoidable. Your income today sets your Medicare premium two years from now. A large Roth conversion, a business sale, or a big capital gain in 2026 shows up as a higher premium in 2028. That works in both directions: the years before you turn 65 — especially age 63, your first lookback year — are when IRMAA planning actually happens. By 65, the first premium is already locked in.
2. It's a cliff, not a slope. IRMAA doesn't phase in gradually like a tax bracket. Cross a threshold by a single dollar and you pay the full surcharge for that tier — roughly an extra $974 per year per person at the first tier. For a married couple both on Medicare, one dollar of extra income can cost nearly $2,000 a year.
3. Income you might not expect counts. MAGI for IRMAA is your adjusted gross income plus tax-exempt interest. That means Roth conversions, required minimum distributions, capital gains from a home or portfolio sale, and even municipal bond interest all push you toward a threshold. Retirees are often surprised that "tax-free" municipal income still raises their Medicare premium.
4. You may not have to accept it. If your income has dropped because of a life-changing event — retirement, reduced work hours, the death of a spouse, divorce — you can appeal using Form SSA-44 and ask Social Security to use your more recent, lower income instead. Many retirees pay an inflated premium for a full year simply because they didn't know the appeal existed. You generally have 60 days from the determination notice to respond.
What To Do
If you're 63 or older, every income decision you make is now a Medicare pricing decision, whether you realize it or not. Before executing a Roth conversion, realizing a large gain, or taking an unusually large withdrawal, know where you sit relative to the IRMAA thresholds — and what one more dollar of income actually costs.
If you retired recently and your premium reflects your final working years, look into an appeal before you pay a surcharge your current income no longer justifies.
And if your retirement plan treats taxes, Medicare, and withdrawals as three separate topics, that's the real problem — because IRMAA lives exactly where they intersect.
If you're a current CRA client, this is already part of your ongoing review. If you're not yet working with us, our 20-Minute Due-Diligence Conversation is a straightforward place to find out whether your income plan is coordinated with your Medicare timeline — before the next lookback year gets written.
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