Key Takeaways:

• IRMAA (Income-Related Monthly Adjustment Amount) is an extra charge added to your Medicare Part B and Part D premiums based on your income from two years prior. Planning ahead can help you manage these costs.

• The income brackets for IRMAA adjust annually, and even a small increase in your income could push you into a higher bracket, resulting in higher Medicare expenses.

What Is IRMAA and Why Should You Care?

If you’re planning for Medicare, you might have heard about IRMAA, but what exactly is it? IRMAA, or the Income-Related Monthly Adjustment Amount, is an extra charge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. The Social Security Administration (SSA) determines whether you owe IRMAA based on your modified adjusted gross income (MAGI) from two years prior. That means your 2025 IRMAA is based on your 2023 income. Understanding how IRMAA works can help you avoid unexpected costs and plan your retirement budget more effectively.

1. How Does IRMAA Affect Your Medicare Costs?

IRMAA is a surcharge that applies on top of your standard Medicare Part B and Part D premiums. The higher your income, the more you’ll pay in additional charges. Medicare uses a tiered system, meaning small increases in your income could push you into a higher IRMAA bracket. In 2025, these brackets are adjusted for inflation, so it’s essential to check where you stand each year.

These additional costs can add up quickly, and many retirees are caught off guard by the increased expenses. If you’re on a fixed income, a sudden IRMAA charge could take a significant bite out of your budget. This makes it crucial to evaluate your income sources and plan accordingly to minimize unexpected Medicare costs.

Another aspect to consider is that IRMAA is deducted directly from your Social Security benefits if you’re already receiving them. This means you may see a lower deposit than expected each month, which can disrupt financial planning if you aren’t prepared.

2. What Income Counts Toward IRMAA?

IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. MAGI includes:

• Wages and salaries

• Self-employment income

• Rental income

• Investment earnings (including dividends and capital gains)

• Taxable Social Security benefits

• Withdrawals from tax-deferred retirement accounts

• Interest from municipal bonds

• Alimony payments (if applicable under older divorce agreements)

Understanding what counts as income can help you take steps to stay within lower IRMAA brackets. Many retirees assume their taxable income will decrease in retirement, but factors like required minimum distributions (RMDs) from retirement accounts can unexpectedly push them into higher brackets.

3. When Does IRMAA Apply, and Can It Change Annually?

The Social Security Administration reviews your income annually to determine if you owe IRMAA. If your income fluctuates, your IRMAA charge can change each year. You may see an increase or decrease depending on how your income compares to the established thresholds.

Each year, new IRMAA brackets are announced, and if your income is near a cutoff point, even a small increase can push you into a higher category. This is why strategic tax planning is essential, as it can help you smooth out taxable income and stay within a manageable bracket.

4. Can You Appeal an IRMAA Determination?

Yes! If your income has significantly decreased due to specific life events, you can file an appeal with the SSA. Life events that may qualify include:

• Retirement or reduced work hours

• Marriage, divorce, or death of a spouse

• Loss of a pension

• Settlement of an employer’s bankruptcy

• Significant property loss due to natural disasters

To request a review, you need to complete Form SSA-44 and provide supporting documents showing your reduced income. Acting quickly can help lower your Medicare costs sooner.

Filing an appeal can be a complex process, and it’s important to provide strong documentation proving that your current income no longer justifies the IRMAA charge. If your appeal is denied, you do have the right to request further reconsideration.

5. How Can You Plan Ahead to Avoid Higher IRMAA Charges?

If you’re nearing retirement, consider strategies to keep your income within a lower IRMAA bracket:

• Delay Social Security Benefits: Lower taxable Social Security income can reduce MAGI.

• Use Roth Accounts: Roth IRA and Roth 401(k) withdrawals do not count toward IRMAA calculations.

• Manage Capital Gains: Timing investment sales to spread out capital gains over multiple years may help you stay below thresholds.

• Consider Qualified Charitable Distributions (QCDs): Donating directly from an IRA can lower taxable income.

• Utilize Health Savings Accounts (HSAs): HSA withdrawals for qualified expenses do not count toward MAGI.

Proper planning can prevent unnecessary IRMAA charges and save you money.

6. How Much Could You Pay in IRMAA Charges for 2025?

While standard Medicare Part B and Part D premiums apply to all beneficiaries, those with higher incomes pay additional IRMAA charges. The IRMAA brackets for 2025 are based on 2023 income levels and are adjusted yearly. The lowest IRMAA tier applies to individuals with a MAGI above $106,000 and couples above $212,000. The charges increase progressively with higher income levels.

Checking the latest IRMAA brackets each year ensures you’re prepared for any cost adjustments. Staying informed about upcoming tax changes and retirement account withdrawals can help you anticipate costs and avoid surprises.

7. What Happens if Your Income Unexpectedly Increases?

A sudden increase in income—such as selling a property, withdrawing from a 401(k), or receiving a large inheritance—can push you into a higher IRMAA bracket. If this happens, you may see a substantial increase in your Medicare costs for the following year.

If your increased income was due to a one-time event, you might not be able to appeal the IRMAA charge. Planning your financial moves carefully can help you avoid unnecessary Medicare surcharges. Using tax-efficient withdrawal strategies and spreading out income events over multiple years may help keep you within a lower bracket.

8. Where Can You Find Help with IRMAA Planning?

Navigating IRMAA can be complicated, but you don’t have to do it alone. Financial advisors, tax professionals, and Medicare specialists can help you develop a strategy to manage your income and avoid unnecessary IRMAA charges.

If you need assistance understanding how IRMAA applies to your situation or want to explore ways to reduce your Medicare costs, getting in touch with a licensed agent listed on this website can help you make informed decisions.

Keeping Your Medicare Costs Under Control

IRMAA is an important factor in your Medicare and retirement planning. By understanding how it works, what counts as income, and how you can plan strategically, you can avoid unexpected costs and keep your healthcare expenses manageable. Whether you’re approaching Medicare eligibility or already enrolled, reviewing your income and adjusting your strategy can make a significant difference in your overall retirement budget.