Most people approaching retirement expect Medicare to be relatively straightforward. But Medicare isn’t one-size-fits-all, especially when it comes to how much you pay. One key factor that can significantly increase your monthly costs is IRMAA: the Income-Related Monthly Adjustment Amount.
Let’s break down what IRMAA is, how it’s triggered, and how smart income planning can help keep your premiums in check.
What Is IRMAA?
IRMAA is an additional charge added to your Medicare Part B and Part D premiums if your income is above certain thresholds. While standard premiums apply to most retirees, higher earners pay more. The Social Security Administration determines whether IRMAA applies based on your Modified Adjusted Gross Income (MAGI) from two years prior. That means your 2023 income determines your 2025 premiums.
If your MAGI crosses a set threshold, IRMAA kicks in, and it’s not exactly a small bump. For 2025, the standard Part B premium is $185 per month. If an IRMAA is applied, it can climb to $628.90 per month for high earners.
A premium of over $600 is only for an individual tax return over $500,000 or joint tax return over $750,000. The increases are tiered, but anyone making over $106,000 single or $212,000 joint should be prepared to pay more than the standard $185 per month. The first tier bumps premiums up to $259 per month, to see all the income brackets and associated premium amount, visit the 2025 Medicare Costs Fact Sheet.
Why IRMAA Matters in Retirement
IRMAA is not a one-time cost. It affects your budget every month and can last for years if not managed. Many retirees are surprised to see these charges appear even though they are no longer working. The reason? Retirement income sources, such as Required Minimum Distributions (RMDs), capital gains, Roth conversions, annuity payouts and other investment income, can all impact your income (MAGI).
The RMD Factor: A Key Planning Opportunity
One often-overlooked trigger for IRMAA is your Required Minimum Distributions. Starting at age 73 (or 75, depending on your birth year), the IRS requires you to begin withdrawing a variable amount each year from your Traditional retirement accounts. These withdrawals are considered taxable income and count toward your MAGI.
For many high income retirees, RMDs push their income over the IRMAA threshold. The Required piece of RMDs is what can make managing them challenging, it’s income that has to hit your bottom line whether or not the money is needed to cover living expenses.
Delaying RMDs by keeping money in tax-deferred accounts longer can give you more control over your income in the early years of retirement. For instance, if you retire at 65 but don’t have to take RMDs until age 73, you may be able to draw down other assets first. This type of distribution planning aims to keep your MAGI lower to avoid unnecessary IRMAAs.
How to Manage Your Income to Minimize IRMAA
While you may not be able to avoid IRMAA entirely, especially in high-income years, there are a few strategies that can help reduce the impact:
- Use Roth Accounts Strategically: Roth IRA withdrawals do not increase MAGI since you pay income tax before funding the account.
- Time Your Roth Conversions Carefully: Roth conversions create taxable income in the year they occur, so spreading them out over several years or doing them before Medicare enrollment can help you avoid an unforeseen MAGI spike unrelated to work income.
- Coordinate Capital Gains: Selling appreciated assets can increase your MAGI. Work with your advisor to time these events and to create a well-rounded withdrawal and retirement income strategy — there’s a lot to consider.
- Delay Social Security and Draw from Other Sources: Social Security benefits are partially taxable and contribute to MAGI.
- Appeal If Your Income Drops: If your income drops due to qualifying life events, you can file an appeal to request lower Medicare premiums.
These are examples to get you thinking ahead. Our hope is to spread knowledge and to help retirees understand that planning often pays off, but that doesn’t mean these options are right for you. This is a good topic to discuss with a trusted financial advisor.
Small Adjustments, Big Savings
Planning for IRMAA is about more than just avoiding an unexpected bill. It’s about controlling your retirement income in a way that supports your long-term goals. As we’ve laid out, Medicare premiums are one piece of the retirement planning puzzle.
Just as with taxes, proactive planning for IRMAA is often worth the effort. A thoughtful approach now can lead to real savings later.
About Foundation Wealth Management
Foundation Wealth Management is a CPA-led organization, that provides financial planning services and tax planning support; services and outcomes vary based on each client’s circumstances. Our team includes qualified professionals, such as CPAs and CFP®s, who are integral to our service offerings. Our team includes 3 Certified Financial Planners: Burt Hutchinson, CPA, CFP®, Paul LaViola, CFP®, and Stephen McDade, CFP®.
As Fee-Only planners, we are compensated directly by clients rather than through commissions from brokerage or insurance products, which we believe helps align our services with client goals.
- https://www.cms.gov/newsroom/fact-sheets/2025-medicare-parts-b-premiums-and-deductibles
- chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.medicare.gov/publications/11579-medicare-costs.pdf
- https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=Required%20Minimum%20Distributions%20(RMDs)%20are%20minimum%20amounts%20that%20IRA%20and,year%20they%20reach%20age%2073.
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This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice. All investments are subject to risk, including the possible loss of principal.
The client scenarios presented in this blog are entirely fictional and created solely for illustrative purposes. Any similarities to actual persons, entities, or events are purely coincidental and unintentional.
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