Retirees often overlook Medicare surcharge IRMAA

By the Editorial Team · Tuesday, September 22, 2026

Retirees with higher incomes may face additional Medicare premiums called IRMAA, which are calculated based on income reported two years prior and can significantly increase healthcare costs. Careful income and tax planning starting in the early 60s can help minimize these surcharges and manage Medicare expenses more effectively.

As retirement planning becomes increasingly complex, one often overlooked expense is the Income-Related Monthly Adjustment Amount (IRMAA), a surcharge applied to certain Medicare premiums. Beginning in their mid-60s, retirees with higher incomes may encounter this additional cost, which can lead to unexpected annual increases in healthcare expenses.

Medicare eligibility typically begins at age 65 in the United States. While the program includes multiple parts, IRMAA specifically affects premiums for Medicare Part B, which covers outpatient services and doctor visits, and Part D, which provides prescription drug coverage. In 2026, the standard base premium for Part B is $202.90 per month, and Part D averages roughly $38.99 monthly. Combined, most retirees pay about $242 monthly for these basic coverages.

However, Medicare premiums are income-sensitive. Individuals whose modified adjusted gross income (MAGI) exceeds federally established thresholds are required to pay higher premiums in the form of IRMAA surcharges. The federal government bases these surcharges on a sliding scale, with income defined as adjusted gross income plus tax-exempt interest income. Importantly, IRMAA uses a two-year lookback period, meaning 2026 premiums are calculated with income reported in the 2024 tax return.

For single filers earning $109,000 or less annually, or married couples filing jointly with $218,000 or less, only the standard premiums apply. Income above these levels triggers escalating surcharges. Part B surcharges can range from an additional $81.20 to $487 per month, while Part D surcharges add between $14.50 and $91 monthly to the base premium. Because the surcharge brackets operate as cliffs rather than progressive scales, exceeding a threshold by even a small amount means the full surcharge for that tier applies for the entire year.

Financial advisors emphasize the importance of monitoring income closely starting around age 63, as income in this year influences Medicare premiums at age 65 and beyond. Since retirees often have some control over their reported income, strategic management of withdrawal sources from pensions, Social Security, and retirement accounts can help mitigate IRMAA liabilities.

Tax planning approaches include balancing distributions among tax-deferred accounts, Roth IRAs, and taxable brokerage accounts to minimize taxable income. Long-term strategies may involve recognizing income during lower-earning years, such as early retirement before required minimum distributions begin. Annual tactics to manage income include planning capital gains to avoid spikes, limiting investments with unpredictable income distributions, making qualified charitable distributions from traditional IRAs, and using Health Savings Accounts to pay qualified medical expenses tax-free.

Retirees should note that IRMAA is recalculated each year, so a single financial event may only increase premiums temporarily. Additionally, individuals who experience qualifying life changes—such as marriage, divorce, job loss, or the death of a spouse—can apply to have their surcharges recalculated using current income rather than that from two years prior.

While controlling IRMAA is important, experts caution against allowing it to dominate retirement financial plans. In certain situations, paying a temporary surcharge to fund broader goals, like completing a Roth conversion or taking a planned higher-spending year, may better align with long-term objectives.

Ultimately, understanding IRMAA’s structure and incorporating it into comprehensive tax and income planning can help retirees manage Medicare costs effectively and reduce unexpected financial strain during retirement.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.