How to Reduce IRMAA Surcharges Before Retirement

Most people know Medicare Part B has a premium. Fewer know that Medicare charges significantly higher premiums to higher-income retirees — and that the income used to calculate those surcharges is based on your tax return from two years prior.

Quick answer: IRMAA is a Medicare surcharge added to your Part B and Part D premiums if your income exceeds $109,000 (single) or $218,000 (married) — based on your tax return from two years prior, not your current income.

This two-year lookback is the critical detail. It means that the income you report at age 63 determines your Medicare costs at 65. And it means that strategic income planning in the three to five years before retirement can permanently reduce your Medicare costs in retirement.

The surcharge program is called IRMAA — Income-Related Monthly Adjustment Amount. Understanding how it works and how to avoid it is one of the highest-value tax planning opportunities available to anyone approaching retirement.

How IRMAA works

Medicare uses your Modified Adjusted Gross Income from two years prior to determine your Part B and Part D premiums. MAGI includes wages, self-employment income, capital gains, dividends, taxable IRA distributions, taxable Social Security benefits, and Roth conversion income.

For 2026, the standard Part B premium is approximately $185 per month. If your MAGI exceeds the first IRMAA threshold — approximately $212,000 for married filing jointly — your premium increases by roughly $70 per month per person. At higher income levels, the surcharge escalates further. At the top tier, above approximately $750,000 MAGI, the surcharge adds over $400 per month per person.

These surcharges apply to both Part B and Part D. A married couple at the first IRMAA tier pays approximately $1,700 more per year in Medicare premiums than a couple just below the threshold. A couple at a higher tier can pay $5,000 to $10,000 more per year.

Over a 20-year retirement, even one IRMAA tier can represent $34,000 to $200,000 in additional Medicare costs. This is not a footnote. It is a major retirement expense that most planning tools ignore entirely.

Why Roth conversions reduce IRMAA exposure

Traditional IRA and 401(k) withdrawals are taxable income. They count toward MAGI and can push you into IRMAA territory in retirement. Roth IRA withdrawals are not taxable and do not count toward MAGI at all.

This is why the window between retirement and age 73 — when Required Minimum Distributions begin — is so valuable. If you retire at 65 and have not yet claimed Social Security or started RMDs, your taxable income may be relatively low. That creates an opportunity to convert Traditional IRA funds to Roth at a lower tax bracket than you would face later, while also reducing the future RMD amounts that will eventually count toward MAGI.

Every dollar you convert before IRMAA-triggering income begins is a dollar that will never count toward your Medicare surcharge calculation in retirement.

The Roth conversion strategy for IRMAA

The goal is to convert enough each year to fill the lower tax brackets without crossing an IRMAA threshold. For a married couple filing jointly, this typically means converting up to the top of the 22% or 24% bracket — roughly $200,000 to $300,000 of taxable income per year — while keeping total MAGI below the first IRMAA threshold.

This requires modeling total income including Social Security benefits if already claimed, any pension income, capital gains distributions from taxable accounts, and the conversion amount itself.

The key is the two-year lookback. Conversions done at age 63 affect Medicare premiums starting at 65. Conversions done at 65 affect premiums at 67. Planning the conversion schedule requires mapping out which years' income will affect which years' Medicare costs.

The IRMAA appeal process

IRMAA is calculated based on the most recent available tax return, which is typically two years old. If your income has declined significantly — because you retired, sold a business, or had a one-time income event that will not repeat — you can appeal the surcharge using a Life Changing Event form.

Qualifying life events include retirement, reduction in work hours, divorce, death of a spouse, and loss of income from income-producing property. The appeal can use your current year's estimated income rather than the two-year-old return.

If you retired mid-year and your full-year income in the retirement year was still high, you may be paying IRMAA in your first year of Medicare that does not reflect your actual retirement income. Filing an appeal is straightforward and can eliminate the surcharge immediately rather than waiting two years for the tax return to roll off.

HSA contributions as a buffer

Health Savings Account contributions reduce MAGI dollar for dollar. If you are still working and enrolled in a high-deductible health plan in the years before Medicare begins at 65, maximizing HSA contributions is one of the cleanest ways to reduce the MAGI that will eventually determine your Medicare costs.

You cannot contribute to an HSA after you enroll in Medicare. But the funds already in your HSA can be used tax-free for any qualified medical expense, including Medicare premiums. Maximizing HSA contributions in the final working years is one of the most tax-efficient things you can do in the pre-retirement window.

What most tools miss

Standard retirement calculators do not model IRMAA. They calculate your projected income and your Medicare premium based on the standard rate, ignoring that income above the threshold triggers surcharges that compound over decades.

A complete retirement plan needs to model the interaction between your income sources, your Roth conversion strategy, your Social Security timing, and your projected MAGI in each year of retirement — and then check that MAGI against the IRMAA thresholds for each year.

This is not simple arithmetic. It requires modeling your complete income picture year by year, adjusting for the two-year lookback, and optimizing your conversion and withdrawal strategy to stay below the thresholds that make sense for your situation.

The good news is that the window to act is usually larger than people realize. For most people retiring in their mid-60s, the years from 60 to 63 are the highest-leverage period. Strategic Roth conversions during those years can reduce Medicare costs for the entirety of retirement.