Medicare can seem straightforward until income comes into play. The Income-Related Monthly Adjustment Amount (IRMAA) is the extra amount some higher-income Medicare enrollees pay for Medicare Part B and Part D coverage.
IRMAA does not affect the Medicare coverage you receive, but it can increase the monthly amount you pay for Part B and Part D.
For Part D, IRMAA is an additional amount paid on top of your plan’s premium, rather than a change to the base premium itself.
IRMAA Medicare premiums can come as an unpleasant surprise because the income that triggers them may come from smart financial moves, not careless ones. The real issue is timing. Income decisions made in one year can affect Medicare costs two years later.
What Counts as Income for IRMAA Purposes
The Social Security Administration (SSA) determines IRMAA using modified adjusted gross income from two years earlier. That means your 2026 Medicare premiums generally connect to your 2024 tax return.
For IRMAA purposes, modified adjusted gross income generally means adjusted gross income plus tax-exempt interest (such as municipal bond interest).
Several common retirement events can temporarily boost income, including required minimum distributions (RMDs), Roth conversions, property sales, business sales, and large capital gains. A one-time income spike may not feel like your normal retirement income, but it can still affect your Medicare costs.
That timing catches many retirees off guard. By the time the premium increase appears, the tax year that caused it has already closed.
Why Federal Retirees Often Encounter IRMAA Later in Retirement
Many Feds retire with several income sources working together. A federal pension, Social Security, and Thrift Savings Plan (TSP) withdrawals can create a strong retirement income base. That is good news, but it can also raise taxable income later in retirement.
Many Feds build retirement savings heavily inside the TSP and other tax-deferred accounts. That can work well for years. Later, though, required minimum distributions can push taxable income higher than expected, especially when they land on top of a federal pension and Social Security. At that point, IRMAA Medicare premiums may become part of the planning conversation.
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Roth Conversions and IRMAA
A discussion about Roth conversions and IRMAA should start with the timing. A Roth conversion can raise taxable income for the year you make the move. Because Medicare looks back two years, that conversion may lead to higher premiums later. That does not automatically make the conversion a bad idea, but it does mean the Medicare cost belongs in the analysis.
Still, a strategic conversion may create meaningful long-term tax benefits for certain retirees. Paying more in Medicare premiums for a limited period may make sense if the conversion reduces future required minimum distributions, lowers long-term tax pressure, or gives a surviving spouse more flexibility.
The goal is not to avoid Roth conversions altogether, but to understand their potential Medicare impact before making the move. Roth conversions and IRMAA should be part of the same planning conversation before the conversion occurs, not after the Medicare notice arrives.
How to Reduce Surprise Medicare Premium Increases
For many Feds, the best time to look at IRMAA is before the income hits the tax return. That may mean spreading Roth conversions across several years, checking taxable income before selling property or realizing large gains, and coordinating larger TSP withdrawals with the rest of the retirement income plan.
Feds may also want to coordinate TSP withdrawals, taxable account sales, and charitable giving with their broader tax plan. Reviewing IRMAA thresholds annually can help as well.
The numbers can change, and small income changes near a threshold can create an outsized premium effect. IRMAA operates on a bracket system, so even a small increase in income above a threshold can trigger a full step-up in premiums.
When an IRMAA Appeal May Make Sense
Medicare allows appeals in certain life-changing situations. These may include retirement, marriage, divorce, death of a spouse, or a significant income reduction. These are formally referred to as “life-changing events,” and appeals are typically submitted using SSA Form SSA-44.
An appeal does not apply to every income spike. For example, a voluntary capital gain or planned Roth conversion may not qualify. Still, Feds who recently retired or experienced another qualifying event should review their options before assuming the premium increase must stand.
Plan for the Cost Before it Surprises You
IRMAA becomes much easier to manage when retirees understand how it fits into the broader retirement income plan. Treat it as one more planning factor alongside taxes, withdrawals, Social Security, and healthcare costs.
Before making a major financial move, evaluate the Medicare premium impact and the tax consequences. Thoughtful tax planning can create more flexibility, more control, and greater long-term stability.
Reach out to the team at Serving Those Who Serve at [email protected] if you want help thinking through how Medicare costs, Roth strategy, and retirement income may fit together.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
