When people picture taxes in retirement, they think about income taxes, capital gains, or maybe required minimum distributions. What almost no one sees coming is IRMAA: the Income-Related Monthly Adjustment Amount. This quiet surcharge can start to jack up your Medicare premiums once your income passes certain levels.
IRMAA isn’t technically a tax, but it behaves like one. It’s automatic, unavoidable once triggered, and most retirees only find out about it when they get a notice from Social Security saying their Medicare premiums are going up. By then, it’s too late to do anything about it.
This is one of those areas where smart planning can make a huge difference. Understanding IRMAA before you hit retirement can save you thousands of dollars every year and prevent a nasty surprise later on.
What Exactly Is IRMAA?
Medicare Part B (which covers doctor visits) and Part D (which covers prescription drugs) both have monthly premiums. Every retiree pays the standard premium amount, but higher-income retirees pay extra. That extra charge is called IRMAA.
The Social Security Administration determines who owes it by looking at your Modified Adjusted Gross Income (MAGI) from two years prior. So your 2023 income determines your 2025 Medicare premiums.
That two-year lookback is what catches people off guard. A one-time event like a Roth conversion, a big stock sale, or even a large IRA withdrawal can increase your income for a single year, yet you don’t feel the full impact until two years later when your premiums jump.
How Much More Could You Pay?
In 2025, the standard Part B premium is roughly $175 per month per person. For most retirees, that’s all they pay. But if your income goes above certain thresholds, IRMAA kicks in and those premiums rise quickly. There is a 2-year lookback on your income, so 2026 premiums will be based on 2024 income.
Here’s what that can look like for a married couple filing jointly:
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Up to around $206,000 MAGI: Standard $175/month per person
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$206,001 to $258,000: About $245/month per person
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$258,001 to $322,000: About $350/month per person
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$322,001 to $386,000: About $455/month per person
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$386,001 and above: Over $560/month per person
Part D premiums also rise on a similar sliding scale, adding another $15 to $80 per month per person depending on income.
So, even a small income increase can push you into the next bracket and cost an extra $1,000 to $5,000 per year in total premiums. Once IRMAA applies, the higher rate lasts for the entire year.
Why IRMAA Feels Like a “Hidden” Tax
IRMAA doesn’t show up on your tax return or come with a separate bill. Instead, it’s quietly deducted from your Social Security benefits every month. You’ll just notice your deposit is smaller, and a letter from Social Security will tell you why.
That’s what makes it feel like a hidden tax. It isn’t technically a tax by definition, but it reduces your cash flow just the same.
For couples who both pay IRMAA, the impact can easily reach $4,000 to $6,000 per year. And because it’s triggered by your income, it affects everything from how much you withdraw from retirement accounts to whether you do Roth conversions, sell investments, or even take capital gains distributions from mutual funds.
The Triggers That Push You Over the Line
The biggest mistake retirees make is thinking IRMAA only affects the very wealthy. In reality, the income brackets haven’t grown much with inflation, so more middle- to upper-middle-class retirees are getting hit each year.
Here are the most common triggers:
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Roth conversions: Large conversions done after age 63 can bump up MAGI and cause surcharges two years later.
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RMDs: Once you hit required minimum distributions, your taxable income often jumps, especially if you haven’t planned ahead.
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Large investment sales: Selling a property, a business, or even a large stock position in one year can cause a temporary income spike.
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IRA rollovers: A mishandled indirect rollover or an extra distribution can add unexpected income.
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Mutual fund capital gains: In taxable accounts, year-end distributions can push income higher without you even realizing it.
Since IRMAA brackets are strict and cliff-based, even going one dollar over a threshold means paying the full higher premium for the entire year. That’s why proactive planning matters so much.
How To Plan Around IRMAA
Avoiding IRMAA isn’t always possible, but you can reduce how often or how severely it hits you. The goal is to control your taxable income year by year, especially once you’re in your early 60s.
Here are a few strategies to consider:
1. Time Roth conversions before Medicare eligibility.
Conversions can be an incredible long-term tax strategy, but they often spike income. Doing them before age 63 lets you build up tax-free assets without worrying about IRMAA yet. Once you’re on Medicare, be much more surgical about how much you convert each year.
2. Manage capital gains and distributions.
If you plan to sell appreciated investments or rebalance your portfolio, coordinate those moves carefully. Sometimes spreading sales over multiple years or using tax-loss harvesting can keep your MAGI below a key IRMAA threshold.
3. Control your withdrawal sequence.
Many retirees draw from IRAs first out of habit. A better approach may be blending withdrawals from taxable, Roth, and pre-tax accounts strategically each year to smooth your income curve. This not only reduces taxes but helps you avoid crossing into higher IRMAA tiers.
4. Consider Qualified Charitable Distributions (QCDs).
If you’re charitably inclined and over age 70½, donating directly from your IRA can satisfy RMDs without raising your taxable income.
5. Appeal when your income changes.
If your income drops due to retirement, death of a spouse, or another life event, you can file an appeal to ask Social Security to adjust or remove your IRMAA. Many retirees don’t realize this option exists, but it can save thousands.
A Real Example
A couple filing jointly had a MAGI of $240,000 in 2023 after completing a large Roth conversion. Two years later, they received a notice from Social Security that their Medicare Part B and Part D premiums would increase by roughly $400 per month combined.
The Roth conversion was long finished, but because IRMAA looks back two years, the higher income from 2023 caused their 2025 Medicare costs to rise by nearly $5,000 for the year.
Had they spread that conversion over two tax years or completed it before enrolling in Medicare, they could have stayed below the threshold and avoided the surcharge entirely.
Final Thoughts
IRMAA is one of the most overlooked costs in retirement. It’s not something you see until it hits, and once it does, it’s already too late to fix for that year.
The best defense is planning ahead. If you’re in retirement or approaching it, now is the time to create a strategy surrounding your income. You need to understand how all your decisions: Roth conversions, withdrawals, and capital gains, will ripple through to Medicare premiums later if you want to avoid a bigger bill in the future.
When managed correctly, you can reduce IRMAA exposure, smooth out your taxable income, and keep more of your Social Security benefits.
If you’d like help running an IRMAA projection and identifying ways to minimize its impact, reach out. We can work with you to create a custom plan that incorporates your income, tax strategy, and Medicare timeline so you don’t get blindsided by this hidden retirement tax.
– Clint Kraft
Founder and Financial Advisor, Kraft Capital