Understanding IRMAA in 2026: What It Means for Your Medicare Costs
For many people in their early 60s, Medicare eligibility feels like a milestone worth celebrating. Friends and family often share stories about how much money they’ve saved after enrolling, and it’s easy to assume the same will happen for you. But here’s the surprise: for some retirees, Medicare doesn’t lower costs at all. In fact, certain financial situations can lead to higher premiums (sometimes even more than before). One of the biggest reasons? IRMAA, or Income-Related Monthly Adjustment Amount. As we move into 2026, understanding how IRMAA works and how your income decisions today can affect your premiums tomorrow has never been more important for retirees and pre-retirees.
Why IRMAA Matters in 2026
IRMAA is an additional charge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. These surcharges aren’t minor; they can add hundreds of dollars per month to your healthcare costs. And here’s the catch: IRMAA is based on your income from two years prior. That means your 2024 tax return determines whether you’ll pay IRMAA in 2026.
For families approaching retirement or already enrolled in Medicare, this two-year lookback rule makes proactive planning essential. Decisions you made (or will make) about withdrawals, conversions, and asset sales can ripple forward into your healthcare budget.
Medicare Basics and Where IRMAA Fits
Medicare has several parts. Part A covers hospital care and is generally premium-free for most people, but it is not free for everyone. Those with fewer than 30 quarters of work credits may pay up to $565 per month, and those with 30–39 credits pay $311 per month for Part A. A spouse’s work history may also count toward these credits, which can reduce or eliminate your Part A premium. Part B covers doctor visits and outpatient care, while Part D provides prescription drug coverage. Both Part B and Part D have standard premiums, but if your income crosses certain thresholds, IRMAA adds a surcharge on top of those base costs.
Individual situations can vary, especially for divorced individuals and widows. It’s important to verify your eligibility and premium details with a financial planner or CPA to ensure you’re making informed decisions.
In 2026, the standard Part B premium is $202.90 per month, and the deductible is $283. For those subject to IRMAA, monthly costs can climb significantly higher depending on income brackets.
How IRMAA Is Calculated
The Social Security Administration determines IRMAA using your Modified Adjusted Gross Income (MAGI) from your tax return two years prior. MAGI starts with your Adjusted Gross Income and adds back certain items, including tax-exempt interest. For 2026, if your MAGI exceeds $109,000 for individuals or $218,000 for married couples filing jointly, you’ll pay more for Medicare Part B and D.
The surcharge increases in tiers. For example, someone with MAGI just above the threshold might pay an extra $74 per month for Part B and $13.70 for Part D. At the highest levels, surcharges can exceed $400 per month for Part B alone. These amounts apply per person, so a married couple can see costs double.
Here’s the critical point: IRMAA thresholds are cliffs. One penny over the limit triggers the full surcharge for that bracket. There is no gradual or blended increase like you see with tax brackets. If you exceed the threshold—even by a dollar—you pay the entire higher amount. This makes careful planning essential.
What Counts Toward MAGI
Understanding what drives MAGI is key to managing IRMAA. It’s not just wages or Social Security benefits. MAGI includes:
- Earned Income: Salaries, bonuses, and business income.
- Retirement Distributions: Withdrawals from IRAs, 401(k)s, qualified plans, pensions and annuities.
- Annuity withdrawals: Gains withdrawn from a non-qualified annuity
- Investment Income: Capital gains, dividends, and interest—even tax-exempt municipal bond interest.
- Other Sources: Rental income, farming income, unemployment compensation, gambling winnings, certain tax-free income from bonds, as well as certain trust income.
Specific actions can spike your MAGI unexpectedly. Roth conversions, large property sales, and inherited IRA withdrawals all count. Even well-intentioned moves, like converting to a Roth IRA for long-term income tax benefits, can trigger IRMAA two years later.
Life-Changing Events and Appeals
What if your income drops after retirement? The SSA allows appeals for IRMAA through Form SSA-44 if you experience a qualifying life-changing event, such as retirement, marriage, divorce, or loss of income-producing property. These exceptions can reduce or eliminate surcharges, but they require documentation and timely filing. This is an available option that can make a big difference for someone newly retired—don’t overlook it.
Strategies to Manage IRMAA
The good news: IRMAA isn’t inevitable. With thoughtful planning, you can minimize its impact. Here are a few strategies to discuss with your Financial Planner and Tax Professional:
- Time Your Income: Consider the two-year lookback when scheduling Roth conversions or realizing capital gains.
- Coordinate Withdrawals: Balance distributions from taxable and tax-deferred accounts to keep MAGI below thresholds.
- Charitable Giving: Qualified charitable distributions from IRAs can satisfy required minimum distributions without increasing MAGI.
- Monitor Thresholds: IRMAA brackets are cliffs—exceed by even one dollar, and you move to the next surcharge level.
For many families, working with a tax-informed advisor can make the difference between paying thousands in extra premiums or staying within the standard rates. At McGee Wealth Management, we help clients navigate these decisions with clarity and foresight, so they can focus on retirement without surprises.
Looking Ahead: Why Planning Starts Now
Because IRMAA is based on prior-year income, planning for 2026 and beyond starts today. If you’re nearing Medicare eligibility or already enrolled, review the income reported on your 2024 income tax return and income projections for 2025. Early in the year, there may be steps you could still take such as a deductible IRA contribution that can help reduce your previous year’s income if you are slightly over the IRMAA bracket. Understand how portfolio moves, property sales, and retirement account withdrawals will affect your MAGI. A little foresight now can prevent costly surprises later.
Closing Thoughts
Medicare is designed to provide security in retirement, but IRMAA can complicate the picture for higher-income households. By understanding how it works and taking proactive steps, you can manage your healthcare costs and keep your financial plan on track. For official guidance consider whether a strategic review of your income plan with your financial planner could help you avoid unnecessary future surcharges.
Disclosure
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a brokerdealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. McGee Wealth Management and Cambridge are not affiliated. Cambridge does not offer tax or legal advice.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP® in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.
