Watch Your Step: The Medicare IRMAA Cliffs That Trip Up Retirees

Medicare’s IRMAA (Income-Related Monthly Adjustment Amount) is an income-based surcharge added to Part B and Part D premiums—and for higher earners, it can cost thousands of dollars more per year. Those age 65 or older are probably well aware of the potential additional costs of IRMAA. For those not yet at this stage, it’s helpful to familiarize yourself with this potential future retirement expense.

What Is Medicare IRMAA?

IRMAA is an additional monthly fee added to your Medicare Part B and Part D premiums if you qualify as a high-income individual. Each fall, the Social Security Administration reviews your most recently filed tax return to determine whether you will pay IRMAA in the coming year. As a result, your IRMAA is based on your income from two years prior. For example, the SSA reviewed your 2024 tax return in the fall of 2025 to determine whether you must pay IRMAA in 2026.

Does IRMAA Apply to Me?

Importantly, your modified adjusted gross income (MAGI)—your AGI plus tax-exempt interest income—determines both your IRMAA bracket and the amount you will pay. In 2026, those with a 2024 MAGI greater than $109,000 on their individual tax return or $218,000 on their married filing jointly tax return will pay an IRMAA.

Those enrolling in Medicare generally have two options: Original Medicare (Parts A and B) or a Medicare Advantage plan (Part C). In addition to Parts A and B, many individuals also elect Part D for prescription drug coverage. IRMAA affects Part B premiums and any Part D coverage.

For a deeper overview of Medicare’s components, including Medigap, see Medicare IRMAAs by former Bragg Financial advisor Mary Lou Daly.

What Does IRMAA Actually Cost?

The table below shows 2026 IRMAA-adjusted premiums (Part B) and surcharges (Part D), based on 2024 MAGI:

Crossing a bracket threshold can increase premiums by thousands of dollars annually, making careful income planning especially important. Unlike the marginal, graduated structure of the U.S. income tax system, IRMAA functions as a “cliff tax.” If your MAGI exceeds a threshold by even one dollar (e.g., $109,001), you owe the full surcharge for that bracket—meaning one extra dollar of income could cost you more than $1,100 per year.

If you receive Social Security benefits, IRMAA is automatically deducted from your monthly payment. If you’re not receiving Social Security benefits at the time IRMAA is due, you can establish a monthly payment via your Medicare account. 

What Can Help Reduce or Eliminate IRMAA?

The quick answer: Reducing your MAGI may help reduce your IRMAA. Some specifics:

For those in retirement and on Medicare

IRA Qualified Charitable Distributions (“QCDs”): For those in retirement, and particularly those subject to Required Minimum Distributions (RMDs), sending funds directly to charity from an IRA is one of the most powerful tools for reducing MAGI. The amount transferred via QCD is excluded from your MAGI, reducing the taxable income generated by your IRA RMD. Since the RMD is satisfied without the money being included in your MAGI, it directly reduces the income used to calculate IRMAA. By contrast, a regular charitable gift of cash or stock may lower your taxable income through a deduction, but it doesn’t reduce your MAGI the same way—making QCDs uniquely effective for Medicare planning. For more details on QCDs, see Donating in Retirement: Give More and Owe Less with QCDs.

Tax-Efficient Investment Portfolio Construction: Asset Location is the practice of placing more of your growth-oriented investments (stocks) in after-tax and Roth accounts and more income-oriented investments (bonds and high-dividend stocks) in pre-tax accounts. Year over year, this limits the portfolio’s annual income. Longer term, this strategy shifts more growth into after-tax and Roth accounts and limits growth in pre-tax accounts, effectively reducing future RMDs. Additionally, you’ll want to follow an investment approach that avoids excessive trading or a high allocation to actively managed mutual funds in taxable accounts, as this can increase annual capital gains income. Lastly, look for tax-loss harvesting opportunities in the portfolio when appropriate.

Delaying Social Security: Delaying Social Security until age 70 can help lower your MAGI in early retirement years. We’re happy to discuss the other potential benefits of delaying your Social Security filing and whether it makes sense for your specific planning situation.

Efficient Retirement Withdrawal Strategy: Strategically source your annual retirement spending needs from your various buckets: pre-tax IRAs and 401(k)s (ideally only draw the RMD amount if congruent with your account types and draw needs), after-tax brokerage accounts, then tax-free Roth and Health Savings Account (HSA) assets.

Life-Changing Event Form: Each fall, typically in November, the Social Security Administration will mail a letter to you with your IRMAA calculation for the upcoming year. If you have experienced a life-changing event or will have one within the next year—think marriage, divorce, death, work reduction, retirement, or loss of income—consider filing an appeal. You have 60 days from receipt of the letter to submit Form SSA-44 Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event. We recommend calling the Social Security Administration to inform them that you intend to appeal the calculation.

For those not yet in retirement

Build your Roth & HSA Balances: Maximize your tax-free investment bucket, which includes Roth and HSA accounts. Building up tax diversification during your accumulation years can help you in retirement. Post-retirement, it may be prudent to study Roth conversion opportunities. Qualified withdrawals from Roth and HSA accounts are tax-free and don’t increase your MAGI.

Ways to build tax-free dollars:

• Roth 401(k) contributions and, if available, Mega Backdoor Roth Contributions
• Roth IRA contributions, or perhaps backdoor Roth IRA contributions if you’re ineligible for regular Roth contributions
• Strategic Roth conversions: Convert pre-tax dollars, which count toward MAGI when withdrawn, to a Roth IRA during your low-income pre-Medicare years. The Roth IRA distributions won’t count toward MAGI when needed down the road. Remember the two-year IRMAA look-back period, so consider completing Roth conversions more than two years before the year you turn 65.
• HSA contributions: HSA withdrawals used for qualified medical expenses, including Medicare premiums, are tax-free and do not increase your MAGI.

Remember that IRMAA is just one piece of your retirement and tax planning puzzle and should be considered alongside the broader aspects of your planning. Tax laws will continue to evolve, so it’s essential to review your strategy regularly with a trusted advisor. Don’t hesitate to contact your Bragg Financial team if you’d like to discuss the nuances of your specific planning situation.

Thank you for trusting Bragg Financial Advisors with your planning and investing.

This information is believed to be accurate at the time of publication but should not be used as specific investment or tax advice as opinions and legislation are subject to change. You should always consult your tax professional or other advisors before acting on the ideas presented here.