IRMAA surcharges can add thousands of dollars per year to Medicare Part B and Part D premiums for retirees above certain income thresholds. For Vanguard employees whose deferred compensation distributions, profit-sharing income, and Roth conversion plans create predictable income spikes, proactive IRMAA planning is an important and often overlooked piece of the retirement plan.
IRMAA, the Income-Related Monthly Adjustment Amount, is a surcharge on Medicare Part B and Part D premiums for beneficiaries whose modified adjusted gross income exceeds certain thresholds. It is calculated based on income from two years prior. For 2025, the base Part B premium is $185 per month per person. With IRMAA surcharges at the highest income tier, that can increase to over $600 per month, per person.
Vanguard retirees are particularly exposed because their retirement income picture often includes multiple sources: deferred compensation distributions, profit-sharing, Social Security, and distributions from very large 401(k) and IRA balances. Each source adds to MAGI, and the combination can push total retirement income well above IRMAA thresholds even without any active income.
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IRMAA surcharges begin for single filers with MAGI above $106,000 and married filers with MAGI above $212,000. The surcharge increases through several tiers. At the highest tier, single filers above $500,000 and married filers above $750,000 pay the maximum surcharge. The specific dollar amounts within each tier are updated annually by CMS.
Yes. Nonqualified deferred compensation distributions are ordinary income and count fully toward Modified Adjusted Gross Income, which Medicare uses to calculate IRMAA. A large distribution year creates a two-year-forward Medicare premium increase. This is a key reason to think carefully about deferred compensation distribution timing at the point of election.
A Roth conversion adds to ordinary income in the conversion year, which increases MAGI and can push you into a higher IRMAA tier two years later. The permanent benefit of having Roth assets needs to be weighed against the temporary IRMAA cost of the conversion. For most Vanguard employees, the right approach is to size annual conversions to stay within a target IRMAA tier rather than converting large amounts all at once.
A QCD allows IRA owners age 70.5 or older to donate up to $105,000 per year directly from their IRA to a qualified charity. The distribution counts toward the required minimum distribution for the year but is excluded from MAGI. This is one of the most effective tools for reducing IRMAA exposure while satisfying charitable goals and RMD requirements simultaneously.
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