7 Ways IRMAA Could Affect Your Medicare Costs If You Are in a Higher Income Bracket and What You Can Do to Prepare

Key Takeaways:

• If your income exceeds certain thresholds, you may face higher Medicare Part B and Part D premiums due to IRMAA (Income-Related Monthly Adjustment Amount).

• Planning strategies, such as income adjustments and tax-efficient withdrawals, can help reduce or manage IRMAA-related costs.

Understanding IRMAA and Its Impact on Your Medicare Costs

If you earn above a certain income level, you may be subject to IRMAA, an additional charge added to your Medicare Part B and Part D premiums. This surcharge is based on your modified adjusted gross income (MAGI) from two years ago, meaning your 2023 income determines your 2025 IRMAA assessment.

The Social Security Administration (SSA) reviews your tax return to determine if you owe IRMAA. If your income surpasses the established thresholds, you’ll receive a notice detailing your additional costs. While IRMAA is unavoidable for some, there are steps you can take to prepare and minimize its financial impact.

IRMAA isn’t just a one-time cost—it follows you for as long as your income remains above the threshold. This means planning is essential to keep your expenses manageable over time. Fortunately, various strategies can help you navigate these higher costs, ensuring that you don’t pay more than necessary.

1. How Income Affects Your Medicare Costs

Your IRMAA tier is determined by your MAGI, which includes wages, Social Security benefits, pensions, capital gains, rental income, and tax-free interest. The more you earn, the higher your Medicare premiums will be. In 2025, IRMAA adjustments start at an income of $106,000 for individuals and $212,000 for couples filing jointly.

Medicare Part B IRMAA Tiers

• The standard Part B premium in 2025 is $185 per month.

• Higher-income beneficiaries may pay several hundred dollars more per month depending on their IRMAA tier.

Medicare Part D IRMAA Tiers

• IRMAA adds an extra cost to your Part D plan premium.

• This additional amount is deducted directly from your Social Security benefits or billed separately.

• The higher your income, the more you pay, making it crucial to manage income sources efficiently.

2. Strategies to Reduce Your IRMAA Liability

If you anticipate falling into an IRMAA bracket, consider these strategies:

Manage Withdrawals from Retirement Accounts

• Withdrawals from traditional IRAs, 401(k)s, and other tax-deferred accounts count toward your MAGI.

• Consider Roth conversions or tax-free withdrawals from Roth IRAs to reduce taxable income.

• Spreading out withdrawals over multiple years can help keep you in a lower IRMAA tier.

Time Your Capital Gains Wisely

• Large asset sales can push your income over an IRMAA threshold.

• Spreading gains across multiple years or using tax-loss harvesting can help lower taxable income.

• Consulting a financial planner can help identify tax-efficient strategies to avoid unnecessary increases.

Consider Charitable Giving

• Donating to qualified charities through Qualified Charitable Distributions (QCDs) from an IRA can lower your MAGI.

• QCDs allow you to donate up to $100,000 per year without increasing taxable income.

• This strategy can be particularly useful for retirees who want to support causes while lowering their tax burden.

3. How Life-Changing Events Can Reduce IRMAA

If your income has dropped due to specific life events, you can appeal your IRMAA assessment. Qualifying events include:

• Retirement or reduction in work hours

• Loss of a pension

• Divorce or death of a spouse

• Property loss due to disaster

• Significant financial hardship that results in lower taxable income.

To request an IRMAA reduction, file Form SSA-44 with supporting documentation. If your income has permanently decreased, your IRMAA charges may be adjusted accordingly. The appeal process can take time, so it’s important to act quickly once you qualify.

4. Planning for Retirement to Minimize IRMAA

Since IRMAA is based on past income, strategic retirement planning can help you stay below the thresholds. Consider:

• Delaying Social Security benefits to reduce MAGI until required minimum distributions (RMDs) start.

• Using a Roth IRA for tax-free income, as withdrawals do not count toward IRMAA calculations.

• Consulting a financial professional to structure tax-efficient withdrawals.

• Spreading out large withdrawals rather than taking them all in one year.

5. Annual IRMAA Adjustments and Future Projections

Each year, IRMAA brackets adjust for inflation. While the income thresholds typically rise, it’s essential to track changes annually.

In 2025, the IRMAA determination uses 2023 tax returns, so income changes in 2024 will affect your 2026 Medicare costs. Staying informed about these yearly updates helps you adjust your financial strategy. Proactive management of taxable income each year can prevent unexpected Medicare cost increases.

6. IRMAA Appeals: What to Do If You Disagree

If you believe your IRMAA determination is incorrect, you can appeal through SSA-561 Request for Reconsideration. Supporting documents, such as tax returns or proof of reduced income, strengthen your case.

The appeal process includes:

1. Requesting a review through SSA-561

2. Providing documentation to support your claim

3. Following up with Social Security to ensure proper processing

4. Seeking assistance from financial or legal professionals if the appeal process becomes complicated.

7. How a Licensed Agent Can Help You Plan for IRMAA

Navigating IRMAA’s impact on your Medicare costs requires careful planning. A licensed agent listed on this website can help you understand your options and find ways to manage your healthcare expenses effectively. These agents are familiar with Medicare rules and can help ensure you’re not overpaying for coverage.

Preparing for IRMAA Can Save You Money

IRMAA can significantly increase your Medicare costs, but strategic planning can help you manage its impact. By monitoring your income, using tax-efficient withdrawals, and staying informed about annual changes, you can take control of your Medicare expenses and avoid unnecessary costs.

Planning ahead can prevent surprises, allowing you to make the most of your retirement income while minimizing avoidable expenses.