What is IRMAA and how do retirees avoid the Medicare surcharge?

What counts as income for IRMAA?

Medicare’s version of income is modified adjusted gross income, or MAGI: your adjusted gross income plus any tax-exempt interest, including municipal bond interest people assume the IRS cannot see. A Roth conversion counts. A large capital gain from selling concentrated company stock counts. A required minimum distribution counts. A withdrawal from a Roth account does not, since you already owed the tax at conversion. A Qualified Charitable Distribution does not either, because a QCD comes off the top of your IRA before it touches your adjusted gross income.

Why does the two-year lookback catch people off guard?

Picture a couple who retires at 63 and converts a large pre-tax balance to Roth that year, a sound move during the low-income window before Social Security and RMDs begin. Two years later, at 65, they enroll in Medicare. Medicare bases their premium on that conversion year, the highest-income year of their retirement so far. Their income has since dropped, but the lower number will not reach Medicare’s formula for another two years. The conversion that helped their long-term tax bill also set their first Medicare premium at its highest tier, for one year, before the numbers catch up.

The reverse trap catches people who retire right at 65. Retire in January and enroll in Medicare the same month, and the lookback return is from two years earlier, when you were still drawing a full salary. Your income drops the moment you stop working, but Medicare will not see that drop for two years. You pay a surcharge at whatever tier that salary reached for your first two years of retirement, the years your cash flow is tightest, based on a paycheck you no longer collect.

How much does the surcharge cost?

The tiers move with inflation, so a number printed here would be stale within a year. For 2026, the top IRMAA tier adds $487.00 a month per person to the standard $202.90 Part B premium, for $689.90 in all, plus a Part D surcharge of up to $91.00 a month. For a couple who both cross the threshold, that is two surcharges, every month, for the full year the determination covers. Check the current premium tables on Medicare.gov before you plan around a specific figure.

Filing status changes the math too. Couples who file separately for reasons that have nothing to do with Medicare run into a steeper IRMAA schedule than joint filers, with surcharges starting at a lower income and reaching the top tier fast. If your CPA has you filing separately for another reason, check the Medicare impact before you commit to it for the year.

How do you avoid or reduce the IRMAA surcharge?

Two levers matter most. The first is timing. Size Roth conversions, capital gain harvesting, and NQDC distribution elections around which tax year becomes the Medicare lookback, not around the lowest bracket alone. The second is the appeal. Retirement itself is a recognized life-changing event under Social Security’s rules. If your income has dropped since the return Medicare is using, Form SSA-44 lets you report your current, lower income instead of waiting two years for the number to update on its own. Few retirees know the form exists until they need it.

How does IRMAA fit into a retirement income plan?

The Roth conversion window, the stretch between your last paycheck and your first RMD (at 73, or 75 if you were born in 1960 or later), overlaps the years that set your first Medicare premium. Convert enough to shrink future RMDs and the same year can land your MAGI in an IRMAA tier the moment you enroll. Hold back on conversions and the RMD problem waits for you at 73 or 75 instead. Neither choice is free, which is why the plan has to model the conversion schedule and the Medicare enrollment date together, not decide them one at a time.

A non-qualified deferred compensation payout scheduled years in advance behaves the same way: the distribution election you signed while still employed can land in a Medicare lookback year with no way to move it. Delaying Social Security to 70 raises MAGI once the larger benefit starts, since up to 85% of it is taxable, and Medicare sees that income two years later. None of these decisions sits in isolation from the others. A spouse’s death changes the threshold as well: a survivor filing as single meets the first surcharge tier at half the joint income, as the Crossville and Fairfield Glade page shows.

What should you do next?

Map your MAGI for the two specific tax years that determine your Medicare premium, not your income in general. Size any conversion or gain-harvesting year against the IRMAA tiers as well as your tax bracket. Keep Form SSA-44 in mind the year you retire, since that drop in income may qualify you for an immediate adjustment instead of a two-year wait.

IRMAA is one piece of a withdrawal sequence that also has to account for RMDs, Social Security timing, and the Roth conversion window. Schedule a consultation to see how the surcharge fits into your plan.