The 2-Year IRMAA Rule Blindsided You, Spiking Your Medicare Costs. Now What?
A sudden spike in your income can trigger costly Medicare surcharges two years down the road. Here is how affluent retirees can protect their wealth.
One of the biggest misconceptions people have about Medicare ahead of retirement is that coverage under it is free. In addition to coinsurance and deductibles, Medicare enrollees are charged a premium for Part B, which covers outpatient care, and Part D, which covers prescription drugs.
Medicare Part B has a standard monthly premium that changes annually. In 2026, it’s $202.90.
There’s no standard monthly premium for Part D, as those costs are plan-specific. But in either situation, you could end up facing surcharges on your Part B or Part D premiums if you’re hit with an income-related monthly adjustment amount, or IRMAA.
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IRMAAs drive the cost of Medicare coverage up for higher earners. And the tricky thing is, they’re based on your income from two years prior.
In 2026, you'll face an IRMAA if your 2024 income was greater than $109,000 as a single tax-filer, or greater than $218,000 as a married couple filing jointly. IRMAA thresholds change annually, so they can be tough to plan for.
But what makes IRMAAs even worse is that a spike in income for a single year could drive your costs upward after the fact. That said, if you’re now facing Medicare IRMAAs and are struggling to keep up with your premium costs as a result, you may have options.
You can always appeal an IRMAA
IRMAAs can substantially increase the cost of Medicare. But you’re not necessarily stuck with IRMAAs forever, says Brian Schmehil, CFP, Managing Director, Wealth Management at The Mather Group.
“IRMAA is recalculated annually, based on your modified adjusted gross income from two years earlier,” he explains. “If your income has since dropped below the applicable thresholds, your premiums will be adjusted accordingly for the following year — no action required.”
Schmehil says you may also be able to appeal an IRMAA if your circumstances have changed over the past two years and your income was higher two years ago due to a specific reason.
If you’ve since experienced a life-changing event, such as retirement, divorce, the death of a spouse, or the loss of income-producing property, you may be able to reduce your current premiums sooner, he explains.
“You can appeal the IRMAA determination by filing Form SSA-44 with the Social Security Administration,” Schmehil says. “If your appeal is approved, your premiums may be lowered and any overpayments reimbursed.”
Brandon Hill, Senior Advisor at Beckett Financial Group, says it pays to go through the motions even if you’re not sure you’ll be let off the hook as far as IRMAAs go.
“If your income today is no longer what it was two years ago, there is no harm in filing an appeal,” he says.
How to avoid IRMAAs
Your age matters, so plan ahead.
While appealing an IRMAA is always an option, a better bet may be to avoid one altogether. To that end, Schmehil suggests being mindful of your income in the year of your 63rd birthday if you intend to enroll in Medicare at 65, when eligibility typically begins.
One thing you could do, he says, is accelerate income before turning 63, such as by taking investment gains. That way, it doesn’t count against you in IRMAA calculations.
Make withdrawals strategically.
Hill, meanwhile, suggests strategically drawing on investments to avoid IRMAAs.
"Try to avoid withdrawing from tax-deferred, qualified fund vehicles like traditional IRAs or employer plans like 401(k)s, 403(b)s, etc., as all of that income has never been taxed and would be taxable to you as ordinary income," he says.
Convert traditional accounts to Roth, but carefully.
However, Hill notes that Roth IRA withdrawals do not count toward IRMAAs. It could pay to do a Roth conversion ahead of retirement for this reason.
But be careful with the timing of that conversion. You may want to do Roth conversions before age 63 so they don't push you over the threshold at which IRMAA would apply, since funds converted from a traditional IRA to a Roth are treated as taxable income in the same year.
Certain charitable donations may help.
If a Roth conversion isn't feasible and you're facing RMDs, Schmehil says it pays to look at qualified charitable distributions.
“If you suddenly find yourself stuck in a higher IRMAA bracket due to spending needs or higher than expected required minimum distributions, you can look to doing qualified charitable distributions if you’re over 70½," he explains.
Doing so, says Schmehil, "will help lower your income in hopes of reducing or eliminating IRMAA in future years."
Use workplace benefits to lower your income.
Hill also says that if you're still working at the time you become eligible for Medicare, there are steps you can take to reduce your likelihood of facing a surcharge.
"Maximize contributions to your retirement plans to get your taxable income down," he says.
Delay Social Security.
Another potential option? If you’ve had a spike in income later in life, it could pay to delay your Social Security claim so those benefits aren’t added to your income. Incidentally, delaying Social Security past full retirement age results in boosted monthly benefits for life, so there’s the perk of more guaranteed income to enjoy, too.
Of course, larger Social Security benefits in retirement also put you at risk of future IRMAAs if, combined with retirement plan withdrawals, they result in a very large income.
But if your income in retirement is going to be consistently high, IRMAAs may have to become a part of life for you — and an expense to brace for. The plus side is that if you’re liable for IRMAAs year after year in retirement, it means you’re probably enjoying a generous income that softens the blow.
Learn to cope with IRMAAs
Sometimes, avoiding IRMAAs isn't possible. If that's the case, Schmehil says, the key is to plan for the added expense so it doesn't come as a surprise.
Schmehil also says that if you’re stuck with IRMAAs, there are ways to help mitigate the higher costs.
"If you haven’t claimed Social Security yet and you have a health savings account, you can have your HSA pay the [Medicare] premiums directly. If you already claimed Social Security, you could submit a reimbursement request for your Part B and D premiums," he says.
Although Medicare enrollees are not allowed to make new HSA contributions, that money can be used to cover qualified Medicare expenses. And since HSA withdrawals are tax-free when used for eligible healthcare costs, tapping that account should not increase your tax liability.
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