If you’re approaching retirement, chances are you’ve heard of Medicare and maybe even something called IRMAA. But what is IRMAA, and why does it matter?
I often see retirees blindsided by IRMAA surcharges that increase their Medicare premiums, sometimes by thousands of dollars per year. The good news? With the right planning, you can potentially reduce or avoid these extra costs.
Let’s break it down.
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an extra charge added to your Medicare Part B and Part D premiums if your income is above certain thresholds.
Medicare looks at your Modified Adjusted Gross Income (MAGI) from two years ago to determine if you’ll owe IRMAA. That means your 2023 income affects your 2025 premiums.
2025 Single Medicare IRMAA Income Limits (Based on 2023 Income)
MAGI | Monthly Part B Premium |
$106,000 or less | $185.00 (standard) |
$106,001 to $133,000 | $259.00 |
$133,001 to $167,000 | $370.00 |
$167,001 to $200,000 | $480.90 |
$200,000 to $500,000 | $591.90 |
Above $500,000 | $628.90 |
For married couples filing jointly, the thresholds are double except for the highest starting at $750,000.
Note: Part D IRMAA adds an additional $13.70 to $85.80/month depending on your income tier.
Why IRMAA Planning Matters
IRMAA is effectively a stealth tax on your retirement income. Many retirees don’t realize their Social Security, required minimum distributions (RMDs), capital gains, or even Roth conversions can push them into a higher bracket.
Even just one dollar over a threshold can result in hundreds of dollars in higher premiums.
Strategies to Plan Around IRMAA
Here’s how I help clients plan proactively:
1. Use Roth Accounts Strategically
Withdrawals from Roth IRAs and Roth 401(k)s don’t count toward MAGI. Consider Roth conversions before you turn 65 or before RMDs begin, when your income may be lower.
2. Time Capital Gains Carefully
Selling investments? Spread gains over multiple years if possible. Avoid stacking large one-time income events in a single year unless planned.
3. Delay Social Security (Strategically)
Delaying Social Security can help reduce early income and open up years where Roth conversions or tax-smoothing strategies make sense.
4. Manage RMDs
Once RMDs begin (age 73 as of 2025), they can push you into higher IRMAA tiers. Planning ahead with qualified charitable distributions (QCDs) or Roth conversions can help reduce future RMDs.
5. Appeal IRMAA in Certain Situations
If your income dropped due to life changes (retirement, divorce, death of a spouse), you may be able to appeal IRMAA using Form SSA-44. This can help save you in premium cost.
Conclusion: Proactive Planning Pays Off
IRMAA isn’t a tax in the traditional sense, but it certainly feels like one. For high-income retirees or those with large savings, it’s one of the most overlooked expenses in retirement.
With the right planning, you can potentially avoid or reduce these extra charges and keep more of your money working for you.
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