Medicare IRMAA Explained: How Income Impacts Your Medicare Costs

What do high earners pay for Medicare in retirement? For beneficiaries whose income exceeds certain thresholds, the federal government assesses an additional charge on Medicare Parts B and D premiums. 

That surcharge is called IRMAA, the Income-Related Monthly Adjustment Amount, and it is a commonly overlooked cost in retirement income planning. 

What is Medicare IRMAA?

IRMAA is a premium surcharge applied to Medicare Parts B (medical coverage) and D (prescription drug coverage) for beneficiaries whose Modified Adjusted Gross Income (MAGI) exceeds established thresholds.  

For decades after Medicare was established, coverage cost the same for everyone regardless of income. That changed in the mid-1980s, when the program faced financial strain and Congress determined that higher-income beneficiaries should bear a greater share of the cost. The result was a tiered premium structure that has grown more consequential as retirement incomes have risen. Today, the Social Security Administration determines a beneficiary’s IRMAA tier each year and collects the additional premium through direct withholding from Social Security benefits.  

In practice, IRMAA functions like an income tax. As income rises in retirement, the cost of the same Medicare coverage rises with it. There is no added benefit, no expanded coverage, and no difference in the insurance itself. It is simply a higher price for the same product, tied directly to income reported on a tax return. At Boulay Wealth, it is treated as such when building a comprehensive retirement income plan. 

What Does Medicare IRMAA Actually Cost?

IRMAA follows a cliff-style bracket structure, meaning crossing a threshold by even one dollar moves a beneficiary into the next tier and triggers the full surcharge for that bracket. The table below reflects estimated 2028 Medicare total costs for Parts B & D, projected from current thresholds with income brackets and premiums adjusted for inflation based on historical averages.

This is meant to be a reference/guide; individual circumstances may influence outcome. Verify planning with accounting and finance professionals.  

For a single filer, the difference between the lowest and highest tier represents an estimated $7,800 in additional annual Medicare costs. For a married couple filing jointly at the highest tier, estimated costs can approach $22,100 per year. What makes these figures particularly significant is not just their size, but their timing. The income that determines which bracket applies was earned two years prior to these costs appearing on a Medicare bill. 

The Detail Most People Miss: The Two-Year Lookback

One of the most common points of confusion around Medicare IRMAA is timing. A Medicare premium in a given year is not based on current income, rather, it is based on the tax return from two years prior. This means 2026 Medicare premiums are determined by 2024 MAGI. The 2027 premium will reflect 2025 MAGI, and so on. 

This detail creates meaningful planning risk. A one-time income event in a single tax year, such as a large Roth conversion, a business sale, a property disposition or a required minimum distribution spike, can push MAGI above an IRMAA threshold and result in higher Medicare premiums two years later, even when income has since returned to a normal level. Those not working with an advisor often discover this connection only after the fact, when the Social Security Administration sends notice of a new, higher premium amount. 

What Income Counts Toward Medicare IRMAA?

IRMAA is calculated using MAGI, which captures most sources of taxable income: 

• • • Wages and self-employment income  

• • • Required minimum distributions (RMDs) 

• • • Roth conversions 

• • • Capital gains, including from the sale of a home or investment property 

• • • Rental income 

• • • Taxable Social Security benefits 

• • • Interest and dividend income 

Qualified distributions from Roth IRAs and Roth 401(k)s do not count toward MAGI. This is one of the central reasons Roth planning is such a valuable tool for those approaching or already age 65. 

How Boulay Approaches IRMAA Planning

For higher-income retirees, IRMAA is often not a question of if, but how much. The tier a client lands in, however, does not have to be left up to chance. Boulay Wealth helps clients stay within the lowest applicable tier and avoid unnecessary surcharges from income events that could have been managed differently.  

Visualizing the full picture.

Boulay Wealth advisors regularly use the Tax Heatmap in client conversations to illustrate how different income levels interact with IRMAA thresholds alongside other tax considerations, including Social Security taxation, capital gains rates, and the net investment income tax. Seeing these layers together brings the real cost of certain planning decisions into focus.  

Holistic tax modeling.

Boulay Wealth uses Holistiplan alongside the Tax Heatmap to model how IRMAA fits into a client’s broader tax picture. Because the surcharge is withheld through Social Security rather than billed separately, it can be easy to overlook when projecting retirement cash flow. Accounting for it early makes for more accurate, more useful planning.  

Life-changing event appeals.

When income has dropped significantly since the year used to calculate an IRMAA tier due to a life-changing event, such as retirement, divorce, the death or a spouse or the loss of income-producing property, beneficiaries may be eligible to appeal the surcharge using more recent income data by filing Form SSA-44 with the Social Security Administration. This is a frequently overlooked option that can provide immediate premium relief. 

Planning for Medicare IRMAA

IRMAA is one piece of a larger retirement income puzzle, and the decisions that affect it are often made years in advance. Boulay Wealth advisors help clients understand their position and build a plan that accounts for the full cost of retirement, including Medicare. If you are approaching eligibility or anticipating a significant income event, connect with a Boulay Wealth advisor today.