What Is IRMAA and Why Does It Matter?
For many people turning 65, signing up for Medicare feels like an exciting milestone—until a letter arrives saying you owe more than you expected. This extra charge is called IRMAA, short for Income-Related Monthly Adjustment Amount. Medicare even describes it as the “tax for high-income people.” It applies to those with incomes above certain levels and adds an additional cost to your Part B and Part D premiums.
The frustrating part is that most people have never heard of IRMAA until after they are already enrolled. By then, it feels like an unwelcome surprise and can create stress at a time when you hoped healthcare would be simpler.
How IRMAA Is Calculated
One reason IRMAA feels confusing is that it uses your Modified Adjusted Gross Income from two years ago. That means the income you reported on your 2023 tax return determines your 2025 Medicare premiums. If you filed jointly, your spouse’s income counts too, and the total is compared to Medicare’s brackets.
Modified Adjusted Gross Income is based on the number at the bottom of your tax return but also adds back certain income items like municipal bond interest. Many retirees do not realize that actions like selling a property, taking a large IRA withdrawal, or completing Roth conversions can trigger a spike in income and bump them into a higher IRMAA bracket. The extra amount is added on top of the standard premiums everyone pays, and for married couples the amounts are doubled. For households with significant assets, the impact can add up quickly.
Why IRMAA Comes as a Shock
Most retirees first learn about IRMAA when they get a notice from Medicare. By that point, the income year being used is long past, and there is nothing you can do to change it. That adds to the frustration and confusion many people feel. If you are married, you receive two letters with two separate amounts, which makes the numbers seem even larger. The reality is that Medicare will look back two years to calculate this adjustment every year going forward.
It is natural to feel upset when you discover you owe more, but once you understand how IRMAA works, you can begin to plan for it. Having the knowledge ahead of time gives you the ability to make thoughtful financial decisions rather than reacting in anger when the letter arrives.
Can IRMAA Be Appealed?
There are times when an appeal makes sense and can successfully reduce your IRMAA. The Social Security Administration allows appeals when you have experienced a life-changing event that lowers your income. Retirement, a reduction in work hours, the death of a spouse, or a change in marital status are all examples of situations where an appeal may be approved.
To appeal, you use Form SSA-44 and submit documentation along with your projected income for the current and following year. If your income has dropped and you can show evidence of that change, Medicare may lower your IRMAA based on your new circumstances. It is important to know that not all reasons qualify. For instance, you cannot appeal IRMAA simply because you chose to do Roth conversions or sold an asset that increased your income.
Planning Ahead for IRMAA
Even if you cannot appeal, there are many ways to plan for IRMAA so that it does not take you by surprise. Careful income management is key. Understanding how different income sources affect your tax return allows you to make strategic decisions about withdrawals and conversions. Timing matters too. Knowing that even a small amount over the threshold can bump you into a higher bracket helps you evaluate when and how to realize income.
Planning also involves looking ahead to future required minimum distributions, Social Security benefits, and how they interact with your Medicare costs. Some retirees choose to convert portions of their IRAs to Roth accounts earlier to manage income later. Others delay Social Security or Medicare if they are still working for an employer with group coverage. The right strategy depends on your overall retirement picture.
The Bigger Picture: IRMAA as Part of Retirement Planning
While IRMAA can be frustrating, it should not control every financial decision you make. Sometimes it makes sense to pay some IRMAA now if it means lower taxes and lower costs later in retirement. Comprehensive retirement planning looks at your entire financial life, not just one year’s Medicare premiums.
Understanding IRMAA gives you the power to make informed choices about your future. It is one cost among many in retirement, and with proper planning, you can navigate it without unnecessary stress.
Moving Forward with Confidence
If you are approaching Medicare or already enrolled, it is worth taking the time to understand how IRMAA works. Knowing that Medicare uses income from two years ago, understanding the appeal process, and being aware of how financial moves affect your future premiums can help you avoid unpleasant surprises.
Our goal in discussing IRMAA is simple: to help you enter retirement with your eyes open and your finances in order. By taking the time to learn about this adjustment and planning around it when possible, you can make confident decisions about your healthcare and your financial future. For a deeper dive into this topic and to see examples of planning strategies in action, watch our full IRMAA video and review the helpful charts we share there.
