When you’re retired and living on a fixed income, extra money may seem like a good thing – until you get hit with extra Medicare costs. The income-based Medicare IRMAA surcharge can take many retirees by surprise, but insurance agents can help by educating their clients.
What Is the Medicare IRMAA?
The income-related monthly adjustment amount (IRMAA) is a surcharge that can increase the monthly cost of Medicare Part B coverage and Medicare Part D for Medicare enrollees with earnings above a certain threshold.
There are different IRMAA brackets based on income ranges, and the surcharges get pricier as a person’s income goes up. People in the top bracket can pay more than triple for Medicare Part B coverage.
How Is the Medicare IRMAA Charge Calculated?
IRMAA surcharges are based on the modified adjusted gross income from the IRS tax return from two years prior. This means that 2026 IRMAA surcharges are based on 2024 tax returns.
In 2026, individuals who earned less than $109,000 in 2024 and couples who earned less than $218,000 in 2024 pay no IRMAA surcharge. They pay the standard Medicare Part B premium of $202.90 a month and the regular premium for their Medicare Part D plan. Once you go over these thresholds – even by just a dollar – the IRMAA surcharge kicks in.
- For individuals who earned $109,000.01 to $137,000, and for couples who earned $218,000.01 to $274,000, you’ll pay $284.10 a month for Medicare Part B and an extra $14.50 for Part D coverage.
- For individuals who earned $137,000.01 to $171,000, and for couples who earned $274,000.01 to $342,000, you’ll pay $405.80 a month for Medicare Part B and an extra $37.50 for Part D coverage.
- For individuals who earned $171,000.01 to $205,000, and for couples who earned $342,000.01 to $410,000, you’ll pay $527.50 a month for Medicare Part B an extra $60.40 for Part D coverage.
- For individuals who earned $205,000.01 to $499,99, and for couples who earned $410,000.01 to $749,999, you’ll pay $649.20 a month for Medicare Part B and an extra $83.30 for Part D coverage.
- For individuals who earned $500,000 or more, and for couples who earned $750,000 or more, you’ll pay $689.90 a month for Medicare Part B and an extra $91.00 for Part D coverage.
How the IRMAA Causes Problems for Retirees
At first glance, the IRMAA surcharge may seem reasonable. If you’re pulling in a good income during retirement, you can probably afford to pay a little more for health coverage. However, the two-year lookback period can cause problems for seniors.
Consider a retiree who earned $550,000 in 2024 and then retirees in 2025. In 2026, this retiree is charged a pricy IRMAA surcharge based on income that they’re no longer earning.
Or what about a couple who sells their house to fund their retirement? If the house has increased in value since they bought it – something that is very common for retirees who purchased their homes decades ago – the capital gains from the sale can boost their income. Two years later, they may end up paying a hefty Medicare IRMAA surcharge as a result.
In situations like this, the IRMAA surcharge often takes retirees by surprise, and it can wreak havoc on a fixed retirement budget. However, there are ways to manage and even appeal these charges.
How Can Retirees Navigate IRMAA Surcharges?
- Make sure your taxes are right. Certain types of income do not count toward your modified adjusted gross income and should therefore not contribute to an IRMAA surcharge. An accountant or tax preparer can help ensure that everything is correct in your tax return.
- Anticipate the IRMAA thresholds. IRMAA surcharges operate on strict brackets, so just being a single dollar over the threshold can trigger an extra charge. Retirees should be aware of the brackets so they can use this when planning their income and retirement strategies. If you are going to have to pay the surcharge, it’s important to budget for this.
- If your income has gone down due to a major life event, you can file an appeal with the Social Security Administration. Common life-changing events include marriage, divorce, death of a spouse, work stoppage, work reduction, loss of income-producing property, loss of pension income, and employer settlement payment.
Agents can help their clients navigate the Medicare IRMAA surcharge – and PTT Financial can help agents navigate Medicare issues. See how PTT Financial supports agents.