How IRMAA Quietly Increases Retirement Costs
Henry Supinski, ChFC® · 4 min read · April 2026
The Income-Related Monthly Adjustment Amount (IRMAA) is a Medicare surcharge that most high earners have never heard of, until they get the bill. Here's how it works and what you can do about it.
What Is IRMAA?
IRMAA increases your Medicare Part B and D premiums based on your income from two years prior. If your income exceeds certain thresholds, you pay more, significantly more at the top brackets. For a married couple at the higher brackets, the surcharges can add thousands of dollars per year.
The Planning Problem
Because IRMAA is based on income from two years ago, a large Roth conversion, a business sale, or an unusual income event in one year can trigger IRMAA surcharges two years later, often as a complete surprise. Understanding this dynamic is essential to retirement income planning.
The Two Year Lookback, Step by Step
The mechanics matter, so walk through them once. Medicare sets your premium using your modified adjusted gross income from the tax return filed two years earlier. Your income at 63 sets your premium at 65. Your income at 65 sets your premium at 67. The brackets work like cliffs, not ramps. Cross a threshold by a single dollar and the full surcharge for that bracket applies for the whole year. The threshold amounts adjust over time, so the specific numbers change, but the structure does not: lookback, brackets, cliffs. And it resets every year, which cuts both ways. One well-planned year saves you a surcharged year, and one careless year buys you one.
A Hypothetical Worth Studying
Say a couple retires at 63 with $2 million in traditional IRAs. Their income drops, so they use the quiet years to convert $250,000 to Roth, all in one calendar year. The conversion itself may be sound. But that income lands on the tax return that sets their Medicare premiums at 65, and both spouses pay the surcharge, because IRMAA applies per person. Spreading the same conversion across several years, or weighing the premium cost against the long-term tax benefit before acting, could have changed the outcome. Nothing about the strategy was wrong. The calendar was.
The Income Sources People Forget
IRMAA is calculated from modified adjusted gross income, and the definition is broader than most people expect. Required minimum distributions count. Capital gains count, including the gain from selling a long-held house beyond the exclusion. Even tax-exempt municipal bond interest gets added back for this purpose. The common thread is that income you think of as already taxed, or not taxed at all, can still push you across a bracket line. Qualified Roth withdrawals are the notable exception. They do not appear in the calculation, which is a large part of why Roth assets earn their keep in retirement.
When You Can Appeal
IRMAA is not always the last word. If your income dropped because of a life-changing event, you can ask Social Security to use your more recent, lower income instead. The form is SSA-44, and the qualifying events include stopping or reducing work, marriage, divorce, and the death of a spouse, among others. The most common case is simple. You retired, your income fell, but Medicare is still looking at a tax return from your working years. If you are still working at 65 and deciding whether to enroll at all, start with Medicare while still working. That is exactly what the appeal process exists for. What SSA-44 does not cover is a one-time spike you created yourself, like a Roth conversion or a large capital gain. Those you have to plan around in advance.
How We Approach It
We treat IRMAA as a scheduling problem. Before any Roth conversion, capital gain, or large withdrawal, we project where the household's income lands relative to the current thresholds. Then we size and time the move to stay under the line where that makes sense, or cross it deliberately when the long-term math justifies the surcharge. We do this work often for retirees from SAP and Vanguard, where pension elections and deferred compensation make the income picture lumpy. The goal is never to avoid IRMAA at all costs. It is to make sure you never pay it by accident.
Questions We Hear
Is IRMAA permanent once it starts?
No. It is recalculated every year using that year's lookback return. If your income falls back below the thresholds, the surcharge goes away on its own. One expensive year does not follow you forever, which is exactly why the timing of income matters so much.
What income counts for IRMAA?
Modified adjusted gross income, which is your adjusted gross income plus tax-exempt interest. That means municipal bond interest counts, Roth conversions count, capital gains count, and required minimum distributions count. Qualified withdrawals from a Roth account do not, which is one reason Roth assets are so useful in retirement income planning.
Can I appeal an IRMAA determination?
Yes, if a qualifying life-changing event reduced your income. You file form SSA-44 with Social Security and document the event and your new, lower income. Stopping or reducing work is the most common qualifying event. A voluntary one-time income spike, like a conversion or an asset sale, does not qualify.
Do both spouses pay the surcharge?
Yes, if both are enrolled in Medicare. IRMAA is assessed per person, but it is based on the joint return. That doubles the cost of crossing a threshold for a married couple, and it is why we model conversions and gains at the household level, not account by account.