Most people spend decades planning for retirement. They save diligently, invest wisely, and imagine a future where their hard work finally pays off. But there is one area that catches even the most prepared retirees completely off guard — Medicare. And buried inside Medicare is a charge that very few people see coming until it is already too late to do anything about it.
At Cardinal Guide, we work with clients across all 50 states, and we see it constantly. People who have done everything right suddenly find themselves staring at a Medicare bill that is hundreds of dollars higher than they expected. That is why we created this video series — and why Medicare needs to be treated not as a separate checklist item, but as a fully integrated piece of your retirement financial plan.
The Story of Tom and Susan
To bring this to life, we want to walk you through the real financial plan we built for two of our clients. We will call them Tom and Susan. Tom is 68, Susan is 67, and Tom is retiring this year. Tom is a physician who has spent decades running his own practice. They are financially well off, they are smart, and they came to us three years ago wanting to make sure they got Medicare right.
And it is a good thing they did.
Getting the Sign-Up Date Right
The very first decision anyone approaching Medicare has to make is deceptively simple — do I need to sign up now, or can I wait? And it is one of the most common places we see people make costly mistakes, in both directions.
When Tom first came to us, he was still practicing and covered by his own group insurance plan. He had heard that you could delay Medicare if you had group coverage, and he wanted to know if that applied to him. Many people in his situation assume the answer is yes. It was not.
Medicare allows you to delay enrollment only if you have group coverage from an active employer with more than 20 employees. Tom’s practice was small. It did not meet that threshold. That meant that even though he was still working and insured, he was required to sign up for Medicare Part B at 65 or face permanent late enrollment penalties.
This is a nuanced rule that trips up a surprising number of people. The size of your employer matters. Whether your coverage is from an active employer or a retiree plan matters. And because the stakes are so high — penalties that follow you for the rest of your life — this is not a decision to make without guidance.
Original Medicare or Medicare Advantage?
Once you have determined that you need to enroll, the next decision is equally important. Are you going to stay on Original Medicare and purchase a supplement plan? Or are you going to hand your Medicare over to a private insurer through a Medicare Advantage plan?
This is an either-or decision, and it is one that people frequently misunderstand — or forget they even made. In our experience working with thousands of clients, if you randomly called one of them and asked whether they were on Medicare Advantage or a Medicare supplement, roughly half would not be able to tell you with confidence. That matters, because the rules are very different between the two, and mixing them up can lead to real problems.
Tom and Susan chose Original Medicare with a supplement, and their reasons are worth understanding. Original Medicare with a supplement comes with no networks. You can see any doctor in the country who accepts Medicare, without checking a directory, without worrying about referrals, and without getting prior approval from an insurance company. For a couple who travels frequently and has family spread across the country, that freedom was invaluable.
Medicare Advantage plans, on the other hand, typically come with networks and managed care requirements. They often carry lower monthly premiums, which is attractive to many people. But the trade-off is real. You may need prior authorization for procedures. You may be limited to doctors and specialists within your plan’s network. For some people, that trade-off makes sense. For Tom and Susan, it did not.
Choosing the Right Supplement
Tom and Susan both enrolled in Plan G, which is the most comprehensive Medicare supplement available to people newly coming onto Medicare today. And here is something important to understand about Medicare supplements — they are completely standardized. A Plan G from one insurance company offers the exact same benefits as a Plan G from any other company. The only difference is the price.
That means it always pays to shop around. Not just when you first sign up, but every two to three years throughout your time on Medicare. Supplement premiums increase as you age, and companies raise their rates over time. If you are healthy and can pass underwriting, switching to a lower-cost plan with identical benefits is often straightforward. Many of our clients have saved meaningful money simply by making that switch.
There is an important window to understand here. When you first enroll in Medicare, you are in open enrollment for six months. During that window, you can purchase any supplement plan available in your state without answering a single health question. That right does not last forever. Once open enrollment closes, switching supplements requires underwriting, and serious health conditions can disqualify you. The decision you make at 65 may be one you live with for a very long time.
The Part D Drug Plan
Alongside their supplement, Tom and Susan each enrolled in a Part D prescription drug plan. And here is something that surprises many couples — they are on different plans. That is not a mistake. It is by design.
Unlike Medicare supplements, Part D drug plans are not standardized. They vary significantly from plan to plan in terms of which drugs they cover, what they charge for those drugs, and which pharmacies they work with. The right plan for you depends entirely on the specific medications you take and where you prefer to fill your prescriptions.
Every fall, between October 15th and December 7th, Medicare holds an annual enrollment window during which you can switch drug plans with no health questions required. We encourage everyone on Medicare to at least review their plan during this window, because plans change their formularies and pricing every year. What was the best plan for you last year may not be the best plan for you this year.
What Is IRMAA?
Now we arrive at the part of the Medicare conversation that most people have never heard of — until it is too late.
IRMAA stands for Income Related Monthly Adjustment Amount. In plain terms, it is a Medicare surcharge for higher earners. If your income exceeds certain thresholds, you pay more for Medicare Part B and Part D. Significantly more. And the income Medicare uses to calculate your surcharge is not your income this year. It is your income from two years ago.
For Tom and Susan, whose combined income in 2024 fell between $410,000 and $750,000, the IRMAA surcharge in 2026 amounts to over $700 per month each. Add that to the standard Medicare Part B premium of $202.90 per month, which every Medicare enrollee pays regardless of income, and their Medicare costs are substantial. When you layer in the Part D surcharge and the supplement premium on top of that, the total monthly cost of Medicare for this couple runs well into the thousands of dollars.
For Tom, it was still less than the $1,500 per month he had been paying per person for his small group insurance plan. But for most people who encounter IRMAA for the first time, it is a genuine shock.
Can You Appeal IRMAA?
The answer is yes — under the right circumstances.
IRMAA can be appealed using a form called the SSA-44. To qualify for an appeal, you need two things. First, you must have experienced a qualifying life-changing event. The most common one we work with is work stoppage — retiring or significantly reducing your hours. Second, your income must actually be lower as a result of that event.
When both of those conditions are met, Medicare will use a more recent income figure to determine your IRMAA level rather than the two-year-old tax return they would otherwise rely on. We have helped a great many clients file these appeals successfully, and the process works well when the form is filled out correctly and the income projection is accurate.
That last point deserves emphasis. If you file an appeal and estimate your income at a certain level, your actual income needs to match that estimate. We have seen situations where clients filed a successful appeal, then made additional financial decisions later in the year — an extra Roth conversion, for example — that pushed their income above what they had projected. Months or years later, Medicare came back and clawed the money back, requiring the client to repay the difference. In some cases, the ripple effects extended two more years into the future.
IRMAA and the Bigger Picture
Here is where IRMAA becomes a genuinely complex planning challenge.
IRMAA operates on a two-year rolling basis. The income decisions you make this year affect your Medicare costs two years from now. That means that Roth conversions, IRA withdrawals, the sale of appreciated assets, and other income-generating financial moves all need to be evaluated not just for their immediate tax implications, but for their Medicare implications down the road.
This is where we see a real gap in the marketplace. Medicare specialists often focus exclusively on Medicare and miss the tax and income planning picture entirely. Financial advisors who are deep in tax planning and Roth conversion strategy sometimes fail to account for the Medicare implications of what they are recommending. The result, in both cases, can be a client who is blindsided by a bill they did not see coming.
The IRMAA brackets are structured like tax brackets — graduated, with more income meaning higher surcharges. But they also function like a cliff. If your income exceeds a threshold by even one dollar, you owe the full surcharge for that bracket. That makes precision important. We typically recommend planning to stay comfortably below a threshold rather than right at the edge, because unexpected income — even a small amount of bank interest — can push you over the line.
At the same time, we want to be clear about something. IRMAA is a factor in retirement planning, but it should not be the only factor. We have seen clients so focused on avoiding IRMAA that they passed up Roth conversion opportunities that would have been enormously beneficial over the long run. When required minimum distributions begin, sometimes in the early 70s, the income they generate can push people into IRMAA brackets regardless of what they did or did not do to avoid it. In those cases, doing more Roth conversions earlier — even at the cost of some IRMAA — would have led to a far better outcome overall.
What We Did for Tom and Susan
For Tom and Susan, the plan we built takes all of this into account. They are on Original Medicare with Plan G supplements. They each have an appropriate Part D drug plan. They have been paying IRMAA while Tom was working, and there was no avoiding that given his income.
Now that Tom is retiring, we are going to file an IRMAA appeal on his behalf using the SSA-44, citing his work stoppage as the qualifying life event. That will allow Medicare to use his projected 2027 income rather than his 2025 income to determine his IRMAA level — a significant difference.
Looking further ahead, we are also recommending a series of Roth conversions designed to reduce the size of their traditional IRA accounts before required minimum distributions begin. Those conversions will be structured carefully to stay within IRMAA thresholds where possible, while also acknowledging that some level of IRMAA may be worth accepting in exchange for a lower tax burden and smaller RMDs in the years ahead.
The Bottom Line
Medicare is not simple. It is not something you can figure out by reading a government pamphlet. The decisions you make at 65 can follow you for the rest of your life, and the interaction between Medicare, income, taxes, and retirement planning is more complex than most people realize.
That is why we built Cardinal Guide around the idea that Medicare cannot be planned in isolation. It has to be part of a larger, coordinated financial plan — one that looks at the full picture and makes sure every piece is working together.
If you are approaching 65, already on Medicare, or simply want to make sure you are not paying more than you have to, we would love to talk. You can find our full video series, show notes, IRMAA brackets, and more at cardinalguide.com. And as always, we are here if you have questions.
