IRMAA: How to Avoid Medicare's Hidden Tax on Retirees

Most people are blindsided the first time it happens. You open a letter from Social Security and discover your Medicare Part B premium isn't the standard $185 per month — it's $370, or $518, or even more. Welcome to IRMAA: the Income-Related Monthly Adjustment Amount, Medicare's little-known surcharge that penalizes retirees who earn "too much."

What Is IRMAA and How Does It Work?

IRMAA is an extra charge added to your Medicare Part B (medical insurance) and Part D (prescription drug) premiums when your income exceeds certain thresholds. For 2025, the standard Part B premium is $185.00 per month. But if your Modified Adjusted Gross Income (MAGI) crosses the first threshold — $103,000 for individuals or $206,000 for married couples filing jointly — your premium jumps.

Here's what the brackets look like:

The critical detail: IRMAA is based on your tax return from two years prior. So your 2026 Medicare premiums are determined by your 2024 tax return. This two-year lookback creates both a trap and an opportunity.

The Roth Conversion Trap: A Real-World Example

Consider Gary and Linda, both 63, who decided to do a large Roth conversion the year before enrolling in Medicare. They converted $400,000 from Gary's traditional IRA to a Roth IRA, pushing their MAGI to $450,000 for that year. Two years later, when they enrolled in Medicare at 65, they were hit with the highest IRMAA bracket.

The extra cost: roughly $800 per month combined for Part B and Part D surcharges — nearly $9,600 for that single year. Had they spread the conversion over several years or timed it differently, they could have avoided thousands in surcharges.

Strategy 1: Delay Social Security Benefits

One of the most powerful IRMAA-reduction techniques is delaying Social Security. Here's why: Social Security benefits count toward your MAGI. If you're doing Roth conversions or have other income sources between ages 62 and 70, adding Social Security on top can push you into higher IRMAA brackets.

Example: Margaret, age 66, has $80,000 in pension income. If she claims Social Security at 66, her $28,000 annual benefit pushes her MAGI to $108,000 — just over the IRMAA threshold. By waiting until 70, she keeps her income below the threshold for four years, saving approximately $3,552 per year in IRMAA surcharges ($14,208 total). Meanwhile, her Social Security benefit grows by 8% per year through delayed retirement credits, eventually reaching roughly $37,000 per year at 70.

The formula for the break-even analysis:

IRMAA savings per year × years delayed + delayed SS increase per year × expected remaining years
vs.
SS benefits foregone during delay period

Strategy 2: Consume Roth Assets First (Strategic Roth Spending)

Since Roth IRA withdrawals are not included in MAGI, spending from your Roth accounts during the years that affect IRMAA calculations can keep your income below the thresholds.

Example: Tom and Susan have $200,000 in a Roth IRA and $1.2 million in a traditional IRA. Between ages 63 and 65, they draw $60,000 per year from the Roth for living expenses instead of from the traditional IRA. This keeps their MAGI low during the exact years that determine their IRMAA premiums for ages 65 and 66. The Roth withdrawals are completely invisible to IRMAA.

This is sometimes called the "Roth bridge" strategy — using Roth funds to bridge the gap between retirement and the period when IRMAA calculations no longer matter as much.

Strategy 3: Time Windfall Sales Carefully

If you're planning to sell a business, investment property, or a large stock position, the timing matters enormously for IRMAA.

Example: David, age 64, is selling his small business for $800,000 in capital gains. If he closes the sale in 2025, that income will affect his IRMAA premiums in 2027 (when he's 66). Instead, David considers:

• Installment sale: Spreading the gain over 5 years at $160,000 per year, potentially staying in a lower IRMAA bracket each year
• Selling before age 63: If possible, completing the sale early enough that the two-year lookback window has passed by the time Medicare enrollment begins
• Opportunity zones: Reinvesting gains into Qualified Opportunity Zone funds to defer and partially reduce the capital gains

Strategy 4: Income Segregation

This strategy involves carefully choosing which accounts to draw from and when.

• Tax-deferred accounts (Traditional IRA, 401(k)): Every dollar withdrawn counts toward MAGI
• Roth accounts: Withdrawals don't count toward MAGI
• Taxable brokerage accounts: Only the gains count, not the return of basis
• Health Savings Accounts (HSAs): Qualified withdrawals don't count toward MAGI
• Municipal bond interest: Tax-exempt, but it is included in MAGI for IRMAA purposes (a common surprise)

The segregation approach: In IRMAA-sensitive years, draw primarily from Roth and taxable accounts (selling positions with low gains or losses), while leaving traditional IRA money untouched.

Strategy 5: Qualified Charitable Distributions (QCDs)

If you're 70½ or older and charitably inclined, Qualified Charitable Distributions are an IRMAA gift. A QCD lets you transfer up to $105,000 per year directly from your traditional IRA to a qualifying charity. The distribution satisfies your Required Minimum Distribution but is excluded from your MAGI.

Example: Patricia, age 73, has an RMD of $32,000. She normally donates $15,000 to her church each year. By making that donation as a QCD directly from her IRA, she reduces her MAGI by $15,000 — potentially enough to drop her below an IRMAA threshold and save $888 per year in Part B surcharges alone.

When IRMAA Is Difficult to Avoid

Let's be honest — some situations make IRMAA nearly impossible to dodge:

• Large pensions: If you have a government or corporate pension of $100,000+, you may be locked into IRMAA regardless. You can't control when pension income arrives.
• Required Minimum Distributions (RMDs): Once you hit age 73, the IRS forces withdrawals from traditional retirement accounts. If your traditional IRA balance is $2 million or more, your RMDs alone may exceed IRMAA thresholds.
• Working in retirement: If you continue earning W-2 or self-employment income above $103,000, IRMAA applies and there's little you can do.
• One-time events: Inheriting a large traditional IRA, exercising stock options, or receiving a legal settlement can create unavoidable IRMAA spikes.

In these cases, consider filing a Life-Changing Event appeal using SSA Form SSA-44. Qualifying events include marriage, divorce, death of a spouse, work stoppage, work reduction, loss of income-producing property, or loss of pension income. If approved, Social Security will use your current-year income instead of the two-year-old return.

The Bottom Line

IRMAA planning isn't about avoiding income — it's about timing income. A well-structured retirement plan coordinates Roth conversions, Social Security claiming, asset liquidation, and account withdrawals so that the years feeding into IRMAA calculations show the lowest possible MAGI.

The two-year lookback window means you need to plan ahead. By the time you get the IRMAA letter, it's already too late for that year. Start mapping out your income strategy at least three years before you turn 65. Use our IRMAA planning tool to see how your income and withdrawals affect your Medicare premiums.

The IRMAA thresholds and premiums referenced are based on 2025 figures and are adjusted annually. Check Medicare.gov for current-year amounts.