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 2026, the lowest IRMAA tier kicks in at a single-filer modified AGI above $109,000 (or married-filing-jointly above $218,000). 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 | ≤ $109,000 | ≤ $218,000 | $0 |
| Tier 1 | $109,001 – $137,000 | $218,001 – $274,000 | $1,148.40 |
| Tier 2 | $137,001 – $171,000 | $274,001 – $342,000 | $2,884.80 |
| Tier 3 | $171,001 – $205,000 | $342,001 – $410,000 | $4,620.00 |
| Tier 4 | $205,001 – $499,999 | $410,001 – $749,999 | $6,355.20 |
| Tier 5 | ≥ $500,000 | ≥ $750,000 | $6,936.00 |
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 $9,240 combined annually, not $4,620.
- 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 $212K (just below the $218,000 MFJ standard-tier threshold). 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 $252K (second tier from bottom, $218,001–$274,000 MFJ), adding ~$2,300 in 2026 Part B+D surcharges across both enrolled spouses ($1,148.40 per spouse, per the 2-year lookback). True conversion cost: ~$11,100 — a 26% understatement under bracket-blind logic.