IRMAA Planning: The Hidden Medicare Surcharge Many Retirees Miss
For many retirees, one of the biggest financial surprises in retirement is discovering that Medicare is not always as inexpensive as expected.
While most people understand they will pay premiums for Medicare Part B and Part D, far fewer realize those premiums can increase significantly based on income. This additional cost is known as IRMAA — the Income-Related Monthly Adjustment Amount.
At North Sister Wealth, we believe retirement planning should go far beyond investment management. Tax planning, income planning, and healthcare costs are deeply connected. IRMAA is one of the clearest examples of how seemingly small planning decisions can create unintended financial consequences later.
For affluent retirees and pre-retirees, understanding IRMAA has become an increasingly important part of building a tax-efficient retirement strategy.
What Is IRMAA?
IRMAA is an additional surcharge added to Medicare Part B and Part D premiums for higher-income retirees. In simple terms, the more taxable income you report, the more you may pay for Medicare.
These surcharges are determined using your Modified Adjusted Gross Income (MAGI) from two years prior. That means your 2026 Medicare premiums are generally based on your 2024 tax return.
For retirees with substantial retirement account balances, investment income, or large one-time gains, this can create unexpected premium increases.
2026 IRMAA Brackets
Below are the 2026 Medicare IRMAA brackets based on Modified Adjusted Gross Income (MAGI). Medicare uses your 2024 tax return to determine your 2026 premiums.
The standard Medicare Part B premium for 2026 is $202.90 per month. Higher-income retirees pay additional surcharges on top of that amount.
Single Filers
MAGI Total Monthly Part B Premium Part D IRMAA
$109,000 or less $202.90 $0 + plan premium
$109,001 – $137,000 $284.10 $14.50 + plan premium
$137,001 – $171,000 $405.80 $37.50 + plan premium
$171,001 – $205,000 $527.50 $60.40 + plan premium
$205,001 – $500,000 $649.20 $83.30 + plan premium
Above $500,000 $689.90 $91.00 + plan premium
Married Filing Jointly
MAGI Total Monthly Part B Premium Part D IRMAA
$218,000 or less $202.90 $0 + plan premium
$218,001 – $274,000 $284.10 $14.50 + plan premium
$274,001 – $342,000 $405.80 $37.50 + plan premium
$342,001 – $410,000 $527.50 $60.40 + plan premium
$410,001 – $750,000 $649.20 $83.30 + plan premium
Above $750,000 $689.90 $91.00 + plan premium
For affluent retirees, these premium increases can add several thousand dollars annually to healthcare costs. What makes IRMAA particularly frustrating is that the brackets operate like a “cliff” — in some cases, just one additional dollar of income can push retirees into a materially higher Medicare premium tier.
Why IRMAA Matters
Many retirees assume Medicare premiums are relatively fixed. In reality, IRMAA can add thousands of dollars per year in additional healthcare costs.
What makes IRMAA especially frustrating is that it often functions like a hidden marginal tax rate.
A relatively small increase in income can push a retiree into a higher IRMAA bracket, causing a disproportionately large jump in premiums.
In some situations, generating an extra dollar of income can trigger hundreds or even thousands of dollars in additional annual Medicare costs.
For affluent households, these surcharges can quietly compound over time if retirement income is not managed strategically.
Common Triggers That Can Increase IRMAA
Many retirees unintentionally trigger higher Medicare premiums because they are unaware which transactions increase taxable income.
Some of the most common triggers include:
• Large IRA withdrawals
• Roth conversions
• Required Minimum Distributions (RMDs)
• Capital gains from investment sales
• Selling a business or investment property
• High dividend income
• Pension income
• Deferred compensation payouts
Even well-intentioned tax planning moves can temporarily increase Medicare costs if not coordinated carefully.
The Retirement Tax Trap
One of the biggest planning mistakes we see is retirees delaying tax planning until Required Minimum Distributions begin.
Many investors spend decades accumulating wealth inside pre-tax retirement accounts without fully appreciating the future tax implications. By the time RMDs start, retirees may suddenly find themselves with:
• Higher taxable income
• Increased Medicare premiums
• Greater taxation of Social Security benefits
• Reduced flexibility for tax planning
This is why proactive retirement income planning matters.
Roth Conversions and IRMAA
Roth conversions are one of the most powerful retirement tax-planning tools available. However, they must be coordinated carefully around IRMAA thresholds.
A Roth conversion increases taxable income in the year it occurs. If the conversion amount is too large, it can push a retiree into a higher Medicare surcharge bracket two years later.
That does not mean Roth conversions are bad. In many cases, paying slightly higher Medicare premiums today may still create substantial long-term tax savings by reducing future RMD exposure.
The key is thoughtful coordination.
In many situations, partial multi-year Roth conversions may help smooth income and reduce the likelihood of large future IRMAA spikes.
Tax-Efficient Withdrawal Strategies Matter
IRMAA planning is also closely tied to how retirement income is sourced.
Where retirees pull income from can significantly impact taxable income and Medicare costs.
For example:
• Taxable brokerage accounts may generate lower taxable income if managed efficiently
• Roth IRA withdrawals are generally tax-free and do not impact IRMAA
• Traditional IRA distributions increase taxable income directly
• Municipal bond income may still count toward IRMAA calculations despite being federally tax-exempt
This is why retirement withdrawal sequencing is often far more important than many investors realize.
IRMAA Is Not Just About Healthcare Costs
At its core, IRMAA planning is really tax planning.
The goal is not necessarily to avoid every surcharge at all costs. Sometimes strategically recognizing income today can still produce better long-term outcomes.
Instead, the objective is to make intentional decisions rather than accidental ones.
For affluent retirees, effective planning often involves balancing:
• Current tax rates
• Future tax exposure
• RMD projections
• Medicare premiums
• Estate planning considerations
• Legacy goals
All these pieces work together.
Planning Ahead Creates Flexibility
The most effective IRMAA planning typically happens before retirement and before RMD age.
Retirees who proactively manage taxes earlier often have more flexibility later.
This may involve:
• Gradual Roth conversions
• Tax-aware portfolio construction
• Coordinated withdrawal strategies
• Charitable giving techniques such as QCDs
• Managing capital gains intentionally
• Reducing future pre-tax account balances
The earlier planning begins, the more opportunities investors generally have available.
The Bottom Line
IRMAA is one of the most overlooked retirement planning issues facing affluent retirees today. While Medicare surcharges may seem small initially, they can become a meaningful long-term expense if income is not managed thoughtfully.
More importantly, IRMAA highlights a broader reality of retirement planning: taxes matter. Often far more than investors expect.
At North Sister Wealth, we believe retirement planning should integrate investment management, tax strategy, healthcare considerations, and long-term income planning into one coordinated approach. Because in retirement, it is not simply about generating income — it is about keeping more of it.
