Trust Encompass

IRMAA Planning

Income-Related Monthly Adjustment Amounts can add thousands of dollars annually to Medicare premiums. Most retirees don't see them coming — until it's too late to prevent them.

IRMAA stands for Income-Related Monthly Adjustment Amount — an additional surcharge on Medicare Part B and Part D premiums applied to higher-income beneficiaries. What most people don't realize is that IRMAA is based on income from two years ago. A large Roth conversion, a business sale, or an unusually high RMD year can create IRMAA exposure two years into the future — long after you've forgotten about the income event that triggered it.

01How IRMAA Works

Medicare uses your Modified Adjusted Gross Income (MAGI) from two years prior to determine your current year's Part B and Part D premium tiers. If your income in 2024 exceeds the base threshold, you'll pay higher Medicare premiums in 2026. The surcharge tiers are structured so that each additional income bracket results in a progressively larger premium — with the highest tier approaching three to four times the standard Part B premium.

  • IRMAA uses MAGI from 2 years prior (2024 income affects 2026 premiums)
  • Base Part B premium is $185/month in 2025; IRMAA tiers can push this to $560+/month
  • Applies to both Part B (medical) and Part D (prescription drug) premiums
  • Married couples each pay the surcharge — doubling the annual cost impact

02What Triggers IRMAA

IRMAA exposure is often unexpected because it's triggered by one-time or irregular income events — not just ongoing retirement income. Understanding which income events can create a two-year-forward IRMAA spike allows for better advance planning and potential restructuring of how income is realized.

  • Large Roth IRA conversions add directly to MAGI
  • Required Minimum Distributions increase taxable income
  • Business sale proceeds and capital gain recognition events
  • Pension or deferred compensation income distributions
  • Mutual fund capital gain distributions from taxable accounts

03Proactive IRMAA Avoidance Strategies

The most effective IRMAA planning occurs before the triggering income event — ideally years in advance. By modeling projected MAGI across retirement years and identifying the specific dollar thresholds that separate IRMAA tiers, clients can make deliberate decisions about when to recognize income, convert assets, or realize gains.

  • Model MAGI projections across retirement years to identify IRMAA exposure windows
  • Size Roth conversions to stay below the first IRMAA threshold
  • Use tax-exempt income sources (Roth IRA, cash value policy loans) that don't contribute to MAGI
  • Consider tax-exempt bonds in taxable accounts to generate income without MAGI impact

04IRMAA Appeals: Life-Changing Events

If your income drops significantly due to a life-changing event — retirement, divorce, death of a spouse, or loss of pension income — you may qualify for an IRMAA appeal. Filing SSA Form 560 with documentation of the qualifying event can result in having your IRMAA recalculated using more recent income rather than the two-year-old data Medicare typically uses. This process is frequently overlooked but can result in immediate premium reductions.

  • Qualifying life events include: retirement, death of spouse, divorce, loss of pension
  • File SSA Form SSA-44 with supporting documentation
  • Social Security Administration can use more recent income data for recalculation
  • Worth pursuing if your income dropped by a meaningful amount in the prior year

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