Medicare is an essential part of your retirement plan but there are some differences from the employer healthcare you are used to. One area that often catches retirees off guard is something called IRMAA the Income-Related Monthly Adjustment Amount. This surcharge can increase your Medicare premiums if your income crosses certain thresholds.
In this post, we’ll cover the Medicare basics, what IRMAA is, and how to plan around it.
1. Understanding the Basics: How Medicare Works
When you turn 65, you become eligible for Medicare, the federal health insurance program for retirees.
It’s divided into several parts:
- Part A: Hospital insurance (usually no premium)
- Part B: Doctor and outpatient services (monthly premium)
- Part D: Prescription drug coverage (monthly premium)
- Medigap or Medicare Advantage: Optional plans to cover costs Medicare doesn’t
2. Medigap (Medicare Supplement Insurance):
- Sold by private insurance companies
- Helps cover out-of-pocket costs like deductibles, copayments, and coinsurance that Original Medicare (Parts A & B) does not cover
- You keep the flexibility to see any doctor or hospital that accepts Medicare
- Does not include prescription drug coverage (you would typically pair it with a Part D plan)
3. Medicare Advantage (Part C):
- An all-in-one alternative to Original Medicare, offered by private insurers
- Often includes medical, hospital, and prescription drug coverage in one plan
- May offer extra benefits like dental, vision, or wellness programs
- Typically has a network of providers, so your choice of doctors may be more limited
- You still pay your Part B premium, and Advantage plans may have their own additional premiums
4. What Is IRMAA and Why It Matters
IRMAA is an income-related surcharge that applies to Part B and Part D premiums if your income is above certain levels.
The government looks at your Modified Adjusted Gross Income (MAGI) from two years prior. For example, your 2025 premiums will be based on your 2023 tax return.
If your income exceeds thresholds, your Part B and Part D premiums can jump, sometimes by hundreds of dollars per month, per person.
2025 IRMAA example thresholds (2025 numbers generally adjusted for inflation annually)
Individual income over ~$103,000
- Married couples filing jointly over ~$206,000
Higher income = higher surcharge.
5. How to Plan Around IRMAA
Proactive tax planning can help you stay under IRMAA thresholds or at least minimize the impact. Strategies start with awareness of the various thresholds and might include:
- Managing taxable income by balancing distributions from various account types (IRA, Roth, Brokerage, Savings)
- Spreading large IRA withdrawals across multiple years
- Doing partial Roth conversions or realizing capital gains before age 65
- Filing for an IRMAA reconsideration if your income dropped after retirement (you can appeal IRMAA in some cases)
At Morrison Wealth Advisors, we help clients fit Medicare, Social Security, and tax strategies into one cohesive plan. That way, you can enjoy retirement with fewer surprises and more control over your healthcare costs. Contact us today for a complimentary consultation.
