IRMAA
IRMAA is an income-driven surcharge on Medicare Part B and Part D premiums for higher-income retirees. It is calculated using a 2-year income lookback — your IRMAA tier in year N is determined by your modified adjusted gross income in year N-2.
IRMAA was introduced to means-test Medicare. For 2024, the lowest IRMAA tier kicks in at a single-filer modified AGI above $103,000 (or married-filing-jointly above $206,000). The surcharge increases through five tiers, reaching the highest level at $500K+ single / $750K+ married. The surcharge applies separately to Part B (medical) and Part D (prescription drug) premiums.
The 2-year lookback creates non-obvious planning implications. A Roth conversion in 2024 doesn't affect Medicare premiums until 2026 — but it does affect them, sometimes substantially. A retiree planning a one-time large income event (Roth conversion, capital gain harvest, deferred-compensation receipt) needs to anticipate the IRMAA impact two years downstream. Planning engines that don't propagate the lookback miss this entirely.
IRMAA can be appealed using SSA Form SSA-44 if the income spike was due to a 'life-changing event' (work stoppage, marriage, divorce, death of spouse, loss of pension, settlement payment). The appeal is non-trivial and approval is not guaranteed; the SECURE Act 2.0's inflation-indexing of the IRMAA brackets reduces but does not eliminate the planning value of staying below the next tier.
| MAGI 2-yr prior (Single) | MAGI 2-yr prior (MFJ) | Part B+D surcharge / year | |
|---|---|---|---|
| Tier 0 | ≤ $103,000 | ≤ $206,000 | $0 |
| Tier 1 | $103,001 – $129,000 | $206,001 – $258,000 | ~$1,050 |
| Tier 2 | $129,001 – $161,000 | $258,001 – $322,000 | ~$2,620 |
| Tier 3 | $161,001 – $193,000 | $322,001 – $386,000 | ~$4,200 |
| Tier 4 | $193,001 – $500,000 | $386,001 – $750,000 | ~$5,770 |
| Tier 5 | > $500,000 | > $750,000 | ~$6,300 |
Synthetic Medicare-age households need a rolling 2-year MAGI history per filer, not just current year. Per-spouse enrollment dates matter — IRMAA applies once each spouse is enrolled, often staggered. Bracket-crossing cases (MAGI within $5K of any tier boundary) are the test fixtures that distinguish a tier-aware planner from a marginal-rate-only one. Households with a one-time MAGI spike followed by reversion (Roth conversion year + recovery year) exercise the rolling-history logic.
Common pitfalls
- Computing IRMAA off current-year MAGI instead of N-2. The lookback is fixed; using current-year flatters early-retirement projections that haven't yet hit the spike.
- Modeling brackets as a slope. The brackets are step functions — $1 of MAGI across the boundary triggers the full tier's surcharge for the full year.
- Forgetting per-spouse surcharges. Each enrolled spouse pays the surcharge separately on their own Part B and Part D; couples in tier 3 pay roughly $11K combined annually, not $5.5K.
- Omitting the appeal pathway. SSA-44 'life-changing event' appeals are real, often successful, and engines that don't model the recompute on a qualifying event misstate post-event projections.
Examples
MFJ household, both 67, current-year MAGI projected $202K (just below the lowest IRMAA tier at $206K). Planner proposes a $40K Roth conversion. Without IRMAA-aware logic the engine reports federal-tax cost only ($8,800 at 22%). With IRMAA-aware logic: the conversion lifts MAGI to $242K (third tier from bottom), adding ~$3,140 in 2026 Part B+D surcharges across both spouses (per the 2-year lookback). True conversion cost: $11,940 — a 36% understatement under bracket-blind logic.