IRMAA: How Your Retirement Income Can Raise Your Medicare Premium

What IRMAA is

Medicare Part B covers doctor visits and outpatient care. Medicare Part D covers prescription drugs. Most people pay a standard premium for Part B and whatever their plan charges for Part D.

If your income is above certain levels, you pay an additional amount on top of those premiums. That additional amount is IRMAA. It's added to Part B and to Part D, and it increases as your income goes up.

Only a minority of Medicare enrollees pay it. About 8% of people with Part B pay a higher premium based on their income, according to CMS. But for those who do, it can add up to thousands of dollars a year.

The 2026 IRMAA brackets

Here are the 2026 Part B premiums and Part D surcharges, based on modified adjusted gross income:

The Part D surcharge is added to whatever your Part D plan's premium is. If you're on a Medicare Advantage plan that includes drug coverage, the Part D surcharge still applies.

The brackets are adjusted for inflation each year. The 2027 figures are typically announced in the fall.

The cliff problem

IRMAA doesn't phase in gradually. It works in tiers. If your income is even a dollar over a threshold, you pay the full surcharge for that tier.

Let's look at a hypothetical married couple, both on Medicare, filing jointly.

• If their modified adjusted gross income is $217,000, they're under the $218,000 threshold. Each pays the standard $202.90 for Part B and no Part D surcharge.
• If their income is $220,000, they're over by $2,000. Each pays $284.10 for Part B, plus a $14.50 Part D surcharge.

That's an extra $95.70 a month per person, or about $1,148 a year each, roughly $2,297 a year for the couple, because of a $3,000 difference in income.

In plain terms: with IRMAA, a small amount of extra income can cost far more than it's worth, if it pushes you just over a line.

The two-year lookback

This is the part that confuses people most.

Medicare generally uses your tax return from two years earlier to decide whether you owe IRMAA. So:

• Your 2026 premiums are generally based on your 2024 income.
• Your 2027 premiums are generally based on your 2025 income.
• Your 2028 premiums are generally based on your 2026 income.

That means income decisions you make at 63 can affect your Medicare premiums at 65. And a big income year in the year you retire can raise your premiums two years later, even after your income has dropped.

What counts as income for IRMAA

IRMAA uses modified adjusted gross income, or MAGI. For IRMAA purposes, that's generally your adjusted gross income from your tax return plus any tax-exempt interest, like interest from municipal bonds.

Things that generally count:

• Wages and salary, including from part-time work in retirement
• Pension income, including FRS pension payments
• Withdrawals from traditional IRAs, 457 plans, 403(b)s, and 401(k)s
• Taxable DROP payouts
• Roth conversions
• Taxable Social Security benefits
• Interest, dividends, and capital gains, including from selling investments or property
• Tax-exempt municipal bond interest, which is added back

Things that generally don't count:

• Qualified withdrawals from Roth IRAs and Roth accounts
• Money you already have in savings
• Qualified charitable distributions from an IRA, if done correctly
• Most loans

Common IRMAA triggers for public employees

A few situations come up again and again.

A taxable DROP payout

If you take part or all of your DROP payout as cash rather than rolling it over, the taxable amount is generally income in that year. For many people, that one year's income can be far higher than normal, high enough to trigger IRMAA two years later. How you take your DROP money is a big decision with a lot of consequences, and IRMAA is one of them.

The last working year plus a lump sum

The year you retire can combine a partial year of salary, a payout of unused leave, a DROP distribution, and pension income all in one tax year. Together, that can push income into an IRMAA bracket.

Roth conversions

Converting money from a traditional IRA or 457 plan to a Roth IRA can be a smart long-term move. But the amount converted counts as income in the year of the conversion. Large conversions can trigger IRMAA two years later. Many people who convert do it in smaller pieces over several years to manage the tax and IRMAA impact.

Selling a home or investments

Selling a home with a gain beyond the exclusion limits, selling a rental property, or selling investments with large gains can all add significant income in one year.

Required minimum distributions

Once required minimum distributions start, they add income every year, whether you need the money or not. For people with large pre-tax balances, RMDs alone can push income into IRMAA territory.

Working part-time while collecting a pension

Many retired public employees take on part-time or consulting work. Wages plus pension income plus Social Security can add up faster than expected.

A hypothetical retiree example

Here's a simplified example of how IRMAA can show up for a public employee. It's illustrative, not a projection.

Let's say a single FRS member retires at 62 in 2026. Their normal retirement income will be a pension of about $60,000 a year. But in 2026, their last year, they also receive part of a year's salary, a payout of unused leave, and they take $80,000 of their DROP balance as cash instead of rolling it over.

Their 2026 income ends up around $190,000. Because of the two-year lookback, that 2026 income is what Medicare will use for their 2028 premiums, the year they're already on Medicare.

At 2026 bracket levels, income of about $190,000 for a single filer falls in the fourth tier, with a Part B premium of $527.50 a month instead of $202.90, plus a Part D surcharge. That's thousands of dollars more for the year than they'd pay on their normal pension income.

A few things could change that picture:

• Rolling over the DROP money instead of taking it as cash would keep that $80,000 out of 2026 income.
• Spreading withdrawals over several years could keep income lower in any single year.
• Filing an appeal after retirement, using retirement as a life-changing event, might allow Social Security to use a lower, more recent income figure.

The point isn't that one choice is right. It's that the choice has consequences beyond the tax bill, and seeing them in advance lets you decide on purpose.

IRMAA and married couples

IRMAA works on a per-person basis. If both spouses are on Medicare and their joint income is over a threshold, both pay the surcharge.

There's also something worth planning for called the survivor issue. When one spouse dies, the surviving spouse generally files as a single taxpayer after a transition period. The single-filer IRMAA thresholds are about half of the joint thresholds. But the surviving spouse's income often doesn't drop by half. They may keep the larger of the two Social Security benefits, a pension with a survivor benefit, and all the investment income.

That can push a surviving spouse into an IRMAA bracket they never faced as a couple, at the same time they're adjusting to a big loss. It's one more reason to think about survivor income, pension survivor options, and Roth savings as a couple, well before either spouse needs to.

The death of a spouse is a qualifying life-changing event for an IRMAA appeal, which can help in the first years.

Appealing IRMAA: life-changing events

If your income has dropped because of certain life events, you can ask Social Security to use a more recent year's income instead of the two-year-old figure. That can reduce or eliminate your IRMAA.

Qualifying life-changing events include:

• Marriage
• Divorce or annulment
• Death of a spouse
• Work stoppage, such as retirement
• Work reduction
• Loss of income-producing property, in certain circumstances
• Loss or reduction of certain kinds of pension income
• Receipt of certain employer settlement payments

For many new retirees, retirement itself is the key event. If you retired and your income dropped significantly, but Medicare is still using your higher income from your last full working years, you can request a new determination.

The request is made to Social Security, typically using Form SSA-44, with documentation of the event and your estimated current income. It's worth doing if it applies to you. People often don't realize they can.

You can also request a reconsideration if you believe Social Security used incorrect tax information.

How people plan around IRMAA

IRMAA planning is really income planning. The goal isn't to avoid IRMAA at all costs. Sometimes paying it is the right trade-off. The goal is to make sure you're making income decisions with IRMAA in view, rather than being surprised by it.

A few approaches people commonly consider, ideally with a tax professional:

Map your income year by year

Sketch out your expected income for each year from a few years before Medicare through your 70s. Where does it land relative to the IRMAA thresholds? Which years have room below a threshold, and which years are at risk of going over?

Time big transactions

If you have a choice about when to take a large distribution, sell an investment, or do a Roth conversion, timing it for a year when your income is otherwise lower, or spreading it across several years, can help keep you below a threshold.

Use the years before 63 thoughtfully

Because of the two-year lookback, income before age 63 generally doesn't affect Medicare premiums. For some people, the years between retirement and 63 can be a window for Roth conversions or other income-generating moves without an IRMAA effect, though income in those years can affect other things, like health insurance subsidies if you're buying coverage on the marketplace.

Build tax-diversified savings

Having money in Roth accounts and taxable accounts, not just pre-tax accounts, gives you more control over how much income shows up each year. Roth withdrawals generally don't count toward IRMAA.

Consider qualified charitable distributions

If you're 70½ or older and give to charity, donating directly from an IRA through a qualified charitable distribution can satisfy part of your required minimum distribution without adding to your income.

Watch the thresholds, not just the brackets

Because IRMAA uses cliffs, it's worth knowing exactly where the thresholds are each year. A little planning can sometimes keep income just below a line.

Putting IRMAA in perspective

IRMAA can feel frustrating, especially when it's triggered by a one-time event. It's worth keeping a few things in mind:

• It's temporary if your income drops. IRMAA is recalculated every year based on your income. A one-time spike affects premiums for one year, not forever.
• It's not a reason to avoid good decisions. A Roth conversion or selling an appreciated investment can still make sense even if it triggers IRMAA for a year. The key is doing it on purpose, with the full cost in view.
• It's one piece of a bigger picture. IRMAA interacts with income taxes, the taxation of Social Security benefits, and health insurance subsidies. The best decisions look at all of them together.

What I'm not going to do

I'm not going to tell you to avoid IRMAA at any cost. Sometimes the income that triggers it is worth far more than the surcharge. And I'm not going to rank DROP payout options, because each has real trade-offs that depend on your situation.

What I will say is this. When it comes down to it, IRMAA mostly hurts the people who didn't see it coming. A little planning, a few years ahead, can make the difference between a surprise and a decision.

Let's map your income before Medicare does

IRMAA is one of the clearest examples of why retirement income planning matters. The way you take your DROP payout, when you convert to Roth, when you start Social Security, and how you draw from your 457 or IRA can all change what you pay for Medicare, sometimes by thousands of dollars a year.

This is exactly the kind of planning I do. We'll map your expected income year by year, see where you stand relative to the IRMAA thresholds, look at how your DROP and retirement account decisions affect your premiums and your taxes, and build a plan that keeps more of your money working for you. If you're already paying IRMAA after retiring, we'll also look at whether an appeal makes sense.

I work as a fiduciary, which means I'm required to act in your best interest.

Medicare looks back two years. The best time to plan is before it does.

Frequently asked questions

What is IRMAA?

IRMAA, the Income-Related Monthly Adjustment Amount, is an extra charge added to Medicare Part B and Part D premiums for people whose income is above certain thresholds.

What are the 2026 IRMAA income limits?

In 2026, IRMAA begins when modified adjusted gross income is above $109,000 for individuals or $218,000 for married couples filing jointly. Premiums increase in tiers from there, with Part B reaching $689.90 a month at the highest incomes.

What income year is used for IRMAA?

Medicare generally uses your tax return from two years earlier. Your 2026 premiums are generally based on 2024 income, and 2027 premiums on 2025 income.

Does a DROP payout count toward IRMAA?

The taxable portion of a DROP payout taken as cash generally counts as income in the year received and could affect Medicare premiums two years later. Amounts rolled over directly to another retirement account generally aren't taxable at the time of the rollover.

Do Roth conversions affect IRMAA?

Yes. The amount converted counts as income in the year of the conversion and can raise Medicare premiums two years later.

Can I appeal IRMAA?

If your income dropped because of a qualifying life-changing event, like retirement, marriage, divorce, or the death of a spouse, you can ask Social Security to use more recent income, typically using Form SSA-44.

Educational content only. Not individualized investment, tax, legal, or insurance advice. Examples are hypothetical and for illustration only. 2026 figures from CMS; brackets change annually. Benowitz Wealth Management is a brand of Joy Financial Group LLC, a Florida state-registered investment adviser. Consult a qualified tax professional regarding your specific situation.

Neither Joy Financial Group LLC nor Benowitz Wealth Management is affiliated with, endorsed by, or employed by the Florida Retirement System, the Florida Division of Retirement, the State Board of Administration of Florida, MyFRS, or any government agency. FRS members may obtain free, unbiased guidance from the MyFRS Financial Guidance Line at 1-866-446-9377.