Avoid Unanticipated Medicare Surcharges
The Medicare Income-Related Monthly Adjustment Amount (IRMAA) is a cost that's often overlooked by clients as they approach retirement. Not all Medicare beneficiaries are treated equally when it comes to premium payments. Higher-income taxpayers are subject to an income-based surcharge on top of their basic Medicare premiums. Clients who are familiar with the Medicare IRMAA might think they'll be in the clear once they finally retire—or even start earning less during a phased retirement. In reality, Medicare uses a two-year lookback system to calculate the IRMAA. This system means that many beneficiaries are charged the IRMAA even if their income doesn't currently exceed the relevant thresholds. Fortunately, it's possible to appeal and reduce Medicare premiums when circumstances change—by proving to the Social Security Administration that a "life changing event" has occurred.
Medicare IRMAA: The Basics
Medicare premium surcharges apply to taxpayers based on modified adjusted gross income (MAGI). MAGI for this purpose is adjusted gross income plus certain tax-exempt income and nontaxable income earned abroad. It's the individual's MAGI from two years prior that counts for IRMAA purposes (a client's MAGI from 2024 determines their 2026 IRMAA).
The IRMAA itself is calculated based on a sliding scale that includes five income brackets, topping out at $500,000 for single filers and $750,000 for joint returns in 2026. Taxpayers with MAGI below $109,000 (single returns) or $218,000 in 2024 are not subject to the IRMAA in 2026.
In 2026, for single taxpayers with MAGI greater than $109,000 and less than or equal to $137,000 (between $218,000 and $274,000 for joint returns), the IRMAA is $81.20 for Part B and $14.50 for Part D coverage. For single taxpayers with MAGI greater than $137,000 and less than or equal to $171,000 (between $274,000 and $342,000 for joint returns) the IRMAA is $202.90 for Part B and $37.50 for Part D. The IRMAA continues to increase each time the taxpayer's MAGI enters a higher tier.
While a tiered system applies, it's really a cliff for Medicare beneficiaries. The IRMAA automatically applies if MAGI exceeds one of the IRMAA thresholds by even a single dollar.
Appealing the IRMAA
Medicare beneficiaries can request that the SSA reevaluate their IRMAA if a life changing event has occurred. Most often, this event is retirement or a significant drop in income. Additional events can include loss of pension income, loss of income-producing property, an employer settlement payment or marriage, divorce or death of a spouse.
The SSA sends notice when a beneficiary is subject to the IRMAA. To appeal, clients complete and file Form SSA-44 with the SSA. They'll also have to provide supporting documentation (tax returns in the case of retirement, a death certificate when a spouse has died, etc.). The SSA website allows individuals to complete the process online, or they can mail, fax or hand-deliver the documents to a local SSA office. It's possible that the SSA may require an in-person meeting.
If the SSA denies the request, further appeals are possible. Individuals can appeal to the Office of Medicare Hearings and Appeals, the Medicare Appeals Council, and or even file an appeal in federal district court.
Understanding Likely Outcomes
Obtaining an IRMAA reduction is relatively simple if the request is based on one of the SSA's listed events. Unfortunately, it can be much more difficult if the IRMAA was generated by a one-off event. Things like large Roth conversions, sale of a business or even a gain-generating home sale can trigger the IRMAA. Even a single-year income spike can mean higher Medicare premiums.
The SSA is unlikely to reverse an IRMAA based on a one-off MAGI spike. However, that doesn't mean it's permanent.
The SSA recalculates beneficiaries' income every year. While a temporary MAGI spike can result in higher Medicare premiums two years later, the surcharge won't apply indefinitely.
Individuals can also take steps to proactively reduce the possibility that IRMAA surcharges will apply. For example, executing a Roth conversion strategy over a period of years can mitigate the impact of a large overall conversion (by spreading out the associated tax liability). Continuing to fund pre-tax retirement accounts can also serve to minimize MAGI and the associated IRMAA impact.
Conclusion
Keeping the IRMAA in mind can be key to minimizing Medicare premiums even during retirement. However, once clients reach retirement or experience another qualifying event, requesting a reconsideration of the SSA's IRMAA calculation can save valuable retirement dollars.