What Is IRMAA and How Can It Affect Your Retirement?

Retirement planning often focuses on how much you've saved, when you'll retire, and when you'll begin taking Social Security.

But there's another expense that can catch some retirees by surprise: higher Medicare premiums based on income.

That's where IRMAA, or the Income-Related Monthly Adjustment Amount, comes in.

Understanding how IRMAA works can be an important part of tax and retirement planning, particularly because financial decisions you make today may affect your Medicare costs later.

What Is IRMAA?

IRMAA is an additional amount that higher-income Medicare beneficiaries may have to pay for Medicare Part B and Medicare Part D prescription drug coverage.

It isn't a separate tax. Instead, it's an adjustment that increases your Medicare premiums when your income exceeds certain thresholds.

For 2026, IRMAA begins when modified adjusted gross income, or MAGI, exceeds $109,000 for most individual filers or $218,000 for married couples filing jointly. These thresholds can change from year to year.

Why Does IRMAA Matter Before You Retire?

One of the most important things to understand about IRMAA is that Medicare generally looks at your income from two years earlier.

For example, your 2026 Medicare premiums are generally based on income reported on your 2024 federal tax return.That means decisions made before or during retirement can potentially affect your Medicare premiums later.

Income from sources such as wages, retirement account distributions, investment income, and other taxable income can affect your MAGI. Tax-exempt interest is also included when determining MAGI for IRMAA purposes.

This is one reason tax planning and retirement planning often need to work together.

Can Tax Planning Help With IRMAA?

Depending on your financial situation, proactive tax planning may help you understand how different financial decisions could affect your taxable income and potential IRMAA exposure.

This doesn't mean everyone can avoid IRMAA. It means understanding the rules ahead of time gives you an opportunity to make informed decisions rather than finding out about higher Medicare premiums after the fact.

For someone approaching retirement, reviewing projected income before making major financial moves can be especially valuable.

What If Your Income Drops After You Retire?

There's another important point retirees should know. Because IRMAA generally looks back two years, your tax return may show income from when you were still working, even though your current retirement income is considerably lower.

Social Security allows beneficiaries to request a lower IRMAA in certain circumstances when a qualifying life-changing event causes income to decrease. Work stoppage, including retirement, and work reduction are among the qualifying events.

Other qualifying events can include marriage, divorce, the death of a spouse, loss of certain pension income, and certain other circumstances.

Think About IRMAA Before It Becomes a Surprise

IRMAA is a good example of why retirement tax planning isn't only about how much you'll owe the IRS. Your income can also affect other expenses, including what you pay for Medicare.

If you're approaching retirement, already retired, or concerned about how your income could affect your Medicare premiums, schedule a consultation with Sentinel Tax Pros. We can review your tax situation and help you better understand how today's financial decisions may affect the years ahead.