Most people planning for retirement have never heard of IRMAA. Then they retire, take a large IRA distribution or complete a Roth conversion, and receive a letter from Medicare informing them that their premiums are going up — significantly, and retroactively based on income from two years prior. The first encounter with IRMAA is usually an unpleasant surprise.
It does not have to be. IRMAA is entirely predictable, and for most retirees with the income levels it affects, it is also manageable with deliberate planning. The key is understanding how it works well before the income decisions that trigger it.
What IRMAA Is
IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. It is not a penalty for doing something wrong — it is simply how Medicare prices its premiums for higher-income enrollees.
The standard Medicare Part B premium applies to everyone up to the first income threshold. Above that threshold, surcharges are added in tiers — each tier representing a progressively higher income range with a higher premium. In 2025, the surcharges ranged from roughly $70 to over $420 per person per month added on top of the standard premium. For a married couple both on Medicare, that can mean anywhere from $1,680 to over $10,000 per year in additional Medicare costs, depending on which tier they fall into.
Part D drug coverage carries its own separate IRMAA surcharge, calculated using the same income thresholds as Part B but with different dollar amounts. The combined Part B and Part D IRMAA surcharge for a couple in the highest tier can exceed $12,000 per year.
How IRMAA Is Calculated — The Two-Year Lookback
This is the detail most people miss: IRMAA is based on your income from two years prior. Your Medicare premiums in 2026 are determined by your Modified Adjusted Gross Income (MAGI) from your 2024 tax return. Medicare receives this information from the IRS and applies it automatically.
The two-year lag creates a planning window — and a planning trap. The window: if you can anticipate and manage your income in any given year, you can control your Medicare costs two years later. The trap: a high-income year you did not plan for can unexpectedly push you into a higher IRMAA tier for two years, with no way to retroactively fix it.
MAGI for IRMAA purposes includes all sources of income that appear on your tax return: wages, Social Security benefits (the taxable portion), IRA and 401(k) distributions, pension income, rental income, capital gains, and Roth conversions. Tax-exempt municipal bond interest also counts. Roth IRA withdrawals do not count, which is one of the reasons Roth accounts are so valuable in retirement.
The Income Thresholds — Where the Tiers Start
Medicare updates the IRMAA thresholds annually, so the specific dollar amounts change each year. The structure, however, remains consistent: there is a base tier where the standard premium applies, followed by four or five progressively higher tiers with increasing surcharges. For 2025, the first IRMAA tier for married couples filing jointly began at income above approximately $212,000.
For retirees with significant pre-tax accounts — large traditional IRAs or 401(k)s — the combination of Required Minimum Distributions, Social Security income, pension income, and any additional withdrawals or conversions can push MAGI into IRMAA territory even without extraordinary income events. Many retirees with $1 million or more in investable assets are at or near the first IRMAA threshold in most years.
The jump from one IRMAA tier to the next can be triggered by relatively small additional income. A retiree whose MAGI is $209,000 and the first tier starts at $212,000 might take a $5,000 Roth conversion and inadvertently push themselves across the threshold — adding hundreds of dollars per month to their Medicare premiums for an entire year. This is why IRMAA monitoring requires working with your actual projected income number, not a rough estimate.
What Triggers IRMAA — The Common Scenarios
The most common events that push retirees into or up through IRMAA tiers are:
- Large Roth conversions. Converting a significant amount from a traditional IRA to a Roth IRA creates ordinary income in that year. A Roth conversion that is optimal from a lifetime tax perspective may nonetheless cross an IRMAA threshold, requiring a tradeoff analysis between the long-term tax benefit and the near-term Medicare cost.
- Required Minimum Distributions. RMDs from large pre-tax accounts begin at age 73 and increase each year as the required percentage rises. Retirees who delayed drawing down their pre-tax accounts in early retirement can find their RMDs growing large enough to push them into IRMAA territory regardless of other income decisions.
- Capital gains realizations. Selling a business, investment property, or large block of appreciated stock creates income in one year that can be several times normal. Even if the gain is long-term, it counts toward MAGI for IRMAA purposes.
- Pension and Social Security income. For CalPERS and CalSTRS retirees with substantial pension income plus Social Security, the baseline MAGI may already be close to the first IRMAA threshold before any investment income is counted. Portfolio withdrawals or conversions on top of that can push them over.
- Income spikes in the year of retirement. If you work part-year in the year you retire, your combined employment and retirement income may be higher than any future year. That income shows up in your IRMAA calculation two years later.
How to Plan Around IRMAA
IRMAA planning is fundamentally income smoothing. The goal is to manage your MAGI across years so you stay below the relevant tier thresholds — or, when crossing a threshold is unavoidable, to make sure the income that causes the crossing is worth the Medicare cost it generates.
The most powerful tool for IRMAA management is the Roth conversion strategy executed in the years before RMDs begin. If you reduce your pre-tax IRA balance through conversions while your income is relatively low — during the gap between retirement and Social Security, for example — you reduce the size of future mandatory RMDs. Smaller RMDs mean more control over your taxable income in later retirement, which means more control over IRMAA.
Roth conversions themselves add to MAGI in the year they occur, which is why sizing them carefully against the IRMAA tiers is important. A conversion that fills your current tax bracket without crossing an IRMAA threshold is almost always preferable to one that breaches the threshold, unless the long-term benefit of the conversion is large enough to justify the near-term Medicare cost.
Capital gain harvesting and loss harvesting can also be used strategically to manage the timing and size of capital gains in any given year. Moving gains into years with more headroom below a threshold — or using losses to offset gains in a high-income year — gives you more flexibility over MAGI.
Qualified Charitable Distributions (QCDs) are another valuable tool for IRMAA-impacted retirees. A QCD allows an IRA owner over 70½ to direct up to $105,000 (indexed for inflation) per year from their IRA directly to a qualified charity. The distribution satisfies the RMD requirement but does not count as taxable income — meaning it does not add to MAGI for IRMAA purposes. For retirees who give to charity anyway, the QCD is one of the most efficient tax moves available.
The IRMAA Appeal Process — Life-Changing Events
If your income in a prior year was unusually high due to a specific one-time event — a business sale, a year of partial employment before retirement, a large capital gain — and that income no longer reflects your current situation, you can request an IRMAA review through Social Security.
CMS (the Centers for Medicare & Medicaid Services) allows beneficiaries to appeal their IRMAA determination based on a qualifying life-changing event: retirement, reduced work hours, loss of income-producing property, death of a spouse, divorce, or loss of certain other income. If your 2024 income was high but you retired in 2025 and your current income is substantially lower, you can submit SSA Form 44 with documentation to have your IRMAA based on a more recent estimate.
This is not an automatic process — it requires filing and supporting documentation — but it is available and worth pursuing when the qualifying circumstances apply.
FAQ: How Do I Know If I Will Be Subject to IRMAA?
If your Modified Adjusted Gross Income — which includes Social Security income, IRA distributions, pensions, capital gains, and Roth conversions — exceeds approximately $106,000 for single filers or $212,000 for married couples filing jointly (2025 thresholds, adjusted annually), you will pay IRMAA surcharges on your Medicare premiums. The best way to know your specific situation is to run a projection of your expected income two years before Medicare eligibility begins — because that income determines your premiums in the first year of Medicare enrollment. A projection also tells you how much room you have below each IRMAA tier before executing Roth conversions or other income-generating decisions, so you can optimize the timing without inadvertently crossing a threshold.
If you are approaching retirement and want to understand how your income in the next few years will affect your Medicare premiums — and how to use Roth conversions, RMD planning, and other strategies to keep your costs as low as possible — this is one of the highest-value planning conversations available.
Schedule a complimentary Medicare cost planning consultation with our office. We will project your IRMAA exposure based on your specific income sources, identify the thresholds that matter most for your situation, and build a multi-year income plan that minimizes Medicare surcharges while optimizing your lifetime tax picture.
