The Mysterious Risk of IRMAA. The Cost May Be Higher Than You Think

In retirement, when it comes to your health coverage, and you are 65 years of age or older, there is only one option: Medicare. Thankfully, for those who properly insure themselves and use the system prudently, Medicare is fantastic coverage. The bad news is that Medicare is not free and does decrease your Social Security benefits, too.

Federal regulations state that to receive any Social Security benefit, you must enroll in Medicare when you are eligible and no longer have health coverage through an employer. They also state that your Social Security benefit will automatically pay most of your Medicare premiums.

Failure to enroll in Medicare while on Social Security, without proper health coverage, will result in the immediate forfeiture of all Social Security benefits.

The other bit of bad news when it comes to Medicare is that depending on how much income you generate while on it, you may wind up paying an extra tax as well.

This unknown tax through Medicare is called IRMAA.

What is IRMAA?

IRMAA is short for Medicare's Income Related Monthly Adjustment Amount.

According to the Code of Federal Regulations, IRMAA is:

An amount that you will pay for your Medicare Part B and D coverage when your modified adjusted gross income is above certain thresholds.

Ultimately, the more income you have in retirement, the higher your Medicare Part B and Part D premiums will be, and again, this cost comes directly from your Social Security benefit.

Who Does IRMAA Impact?

The Social Security Administration states that IRMAA is for anyone enrolled in Medicare and who has a modified adjusted gross income (MAGI) of over $103,000 for individuals and $206,000 for couples.

Will You Really Reach IRMAA?

Whether IRMAA affects you comes down to how much income you generate in retirement. The more income you have, the greater the risk of triggering the surcharge — and that risk is growing.

According to the Medicare Trustees Report, about 5.1 million Medicare beneficiaries paid Part B IRMAA surcharges in 2025, representing roughly 7 percent of the 69 million total enrollees. The 2025 Medicare Trustees Report projects a steady increase in Medicare Part B premiums and IRMAA surcharges over the next nine years, driven largely by expected rises in healthcare costs, particularly for outpatient hospital services and physician-administered drugs.

For 2026, IRMAA applies to single filers with income exceeding $109,000 and joint filers above $218,000, with total monthly Part B premiums ranging from $284.10 to $689.90 depending on income tier. Crossing into the next bracket by as little as $1 can cause Medicare premiums to jump by more than $1,000 per year — and for married couples both on Medicare, that same $1 can trigger more than $1,000 in additional annual premiums for each spouse.

What Counts as Income for IRMAA?

The simplest way to find out if your income counts towards IRMAA is to ask yourself if your income is visible to the Internal Revenue Service (IRS) or not. If the IRS does recognize your income, then the chances of reaching IRMAA are even greater. If not, then you have nothing to worry about, especially when it comes to your Social Security Net Benefit.

The Social Security Administration (SSA) defines IRMAA income as being your Modified Adjusted Gross Income (MAGI) which consists of your:

Adjusted gross income (AGI) and tax-exempt interest or everything on lines 2a and 11 of the 2022 IRS tax form 1040.

Your MAGI that contributes to the IRMAA includes:

• Salaries and wages
• Taxable Social Security benefits
• Earned tips
• Interest earnings
• Capital gains
• Dividend income
• Income from stock options
• Pension distributions
• Rental revenue
• Royalties
• Alimony received
• Gambling proceeds
• Debt forgiveness
• Withdrawals from tax-deferred investments.

Yes, your savings in your Traditional 401(k) or Traditional IRA count towards IRMAA. So, the more you save for retirement using a tax-deferred strategy, the higher your Medicare premiums are going to be.

In a nutshell, IRMAA is driven by your Traditional 401(k) or Traditional IRA and your taxable portion of your Social Security benefits.

What Does Not Count Toward IRMAA

What does NOT count towards IRMAA is, unfortunately, a much shorter list as it only includes:

• Distributions from Roth Accounts, Health Savings Accounts, and 401(h) Plans.
• Portions of income from Non-Qualified Annuities.
• Loans from Primary Residences and Life Insurance Policies.

A simple rule of thumb: if you have what you consider to be at least a decent amount of money saved in your Traditional 401(k), then you are most likely going to reach IRMAA at some point in retirement.

The other rule for the other thumb: if you have all your retirement savings in Roth Accounts and Life Insurance, you will never reach IRMAA…ever!

Is IRMAA a Real Problem?

For those who reach IRMAA today, the extra cost on top of standard Medicare premiums can add up fast. In 2026, IRMAA surcharges can total up to an additional $6,936 annually per person — $5,844 for Part B and $1,092 for Part D. For a couple, that means IRMAA exposure ranges from roughly $2,300 to nearly $14,000 a year depending on income tier. 

The bigger concern is the trajectory. The 2025 Medicare Trustees Report projects that the standard Part B premium could reach nearly $350 per month by 2034 — an increase of 88 percent from the 2025 level of $185 — driven by higher projected spending on outpatient hospital services and physician-administered drugs. IRMAA surcharges, which are calculated as a percentage of total Part B costs, are expected to rise proportionally. The Trustees project surcharges at the lowest IRMAA tier reaching roughly $82.60 per month and the highest bracket hitting an estimated $495.60 per month — well above 2025 levels — with further increases projected through 2034. 

If those projections hold, a couple in the highest IRMAA bracket could face annual surcharges approaching $24,000 by the mid-2030s — on top of standard premiums that are themselves rising sharply.

IRMAA's Other Impact – Social Security

Besides possibly costing thousands of dollars in extra taxes through Medicare premiums, IRMAA, again, comes directly out of your Social Security benefit.

According to the Social Security Board of Trustees, the cost-of-living adjustment (COLA) each retiree receives annually to keep up with inflation is going to be no higher than 2.40% through at least 2032.

With Medicare premiums and IRMAA inflating by more than 7.25% over time, it is only a matter of time before your Social Security benefit will decrease.

Interestingly, Medicare and IRMAA are inflating by more than 3 TIMES, and your Social Security benefit will increase each year.

Avoiding IRMAA Altogether

How do you avoid IRMAA altogether? You now know that IRMAA is all about your income and, more specifically, about the income you generate, which the IRS will see on lines 2a and 11 of the 2022 IRS Form 1040.

Your goal should be to take advantage of what the IRS does not see, which consists of Roth IRAs and 401(k) 's, Non-Qualified Annuities, and, more importantly, Life Insurance.

We understand that Life Insurance may not be the sexiest financial instrument out there, but it accomplishes three things as well as it can:

1. Provide your family with protection; God forbid the tragedy or your death hits you.
2. Generate a source of tax-free revenue in what is known as the Cash Value, and this revenue will not count towards IRMAA or the taxation of your Social Security benefits.
3. Allow you to insure yourself in the event you need to pay for Long-Term Care Expenses.

There is no other financial instrument, like Life Insurance, that can provide you with all of this at the same time.

Self-Funding Future Long-Term Care and IRMAA

Without Long-Term Care Insurance, you will likely have to liquidate assets to pay for care — and that creates a compounding problem most people never see coming.

Every IRA withdrawal, capital gain and Roth conversion counts toward your Modified Adjusted Gross Income, and a single large income event — selling a rental property, taking a substantial required minimum distribution, or executing a poorly timed Roth conversion — can trigger a notice from the Social Security Administration 18 to 24 months later, well after you can do anything about it. 

That's exactly the trap that self-funding long-term care sets. A capital gain, a business sale, a large IRA withdrawal, or investment income pushing income above a threshold can cause an unpleasant IRMAA surprise — and for higher-income retirees, IRMAA isn't just a Medicare issue. It's a tax-planning issue hiding in a healthcare costume. 

The mechanism varies depending on the asset. Traditional IRA and 401(k) withdrawals count as ordinary income and flow directly into your MAGI. When you sell an investment in a taxable account, only the gain above your original cost basis is counted as income — but that capital gain is still included in your MAGI for IRMAA purposes. Every dollar of MAGI-increasing income — whether from a retirement account withdrawal, a capital gain, a pension, or rental income — can cost you between 12 and 85 cents in additional IRMAA surcharges, depending on which bracket it pushes you into. Either way, the result is the same: liquidating assets to pay for care raises your income, and a higher income raises your Medicare premiums — two years later, when there's nothing you can do about it. 

The math gets worse fast. A couple converting $250,000 in a single year may push their MAGI to a level that triggers thousands in annual IRMAA surcharges, while spreading that same conversion across three years — staying below the $218,000 joint threshold — could result in zero surcharges for each of those years. Most people liquidating assets to pay for long-term care aren't spreading anything — they're taking whatever the care costs require, whenever care requires it. 

Taking large IRA or 401(k) withdrawals in a single year for a major expense can push you into a higher IRMAA tier, and splitting withdrawals across two calendar years often helps contain the damage. But when you're paying $10,000 or more a month for a memory care facility or home care aide, you rarely have that luxury. 

The contrast with Long-Term Care Insurance is stark. Tax-qualified Long-Term Care Insurance benefits come to you tax-free, and while insurance companies are required by the IRS to issue a Form 1099-LTC to report those payments, there are generally no tax implications from the benefit itself. Those benefit dollars don't count toward your MAGI, which means they don't push you into a higher IRMAA bracket. Benefits paid from a tax-qualified policy — including linked-benefit life insurance or annuity hybrid plans — are tax-free under IRC Section 7702B. 

The result is a significant financial divergence. Self-funding care depletes retirement assets, generates taxable income events, and inflates your MAGI — potentially triggering IRMAA surcharges on top of the care costs themselves. A tax-qualified Long-Term Care Insurance policy pays benefits tax-free, leaves your retirement savings intact, and keeps your MAGI lower, protecting your Medicare premiums at the same time.

👉Learn More: Long-Term Care Insurance Learning Center

Frequently Asked Questions About IRMAA, Medicare Premiums, and Long-Term Care Planning

Will Medicare premiums really increase if my income is too high?

Yes. Medicare uses a surcharge called the Income-Related Monthly Adjustment Amount (IRMAA). If your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds, you'll pay higher premiums for both Medicare Part B and Part D. In 2026, IRMAA begins at $109,000 for individuals and $218,000 for married couples filing jointly.

What income counts toward IRMAA?

Most taxable income reported to the IRS counts toward IRMAA calculations. This includes:

• Traditional IRA withdrawals
• Traditional 401(k) distributions
• Pension income
• Taxable Social Security benefits
• Interest and dividends
• Capital gains
• Rental income
• Business income

The Social Security Administration uses your MAGI, which includes adjusted gross income plus tax-exempt interest.

Do Roth IRA withdrawals affect IRMAA?

Generally, no. Qualified distributions from Roth IRAs and Roth 401(k)s do not count toward MAGI for IRMAA purposes. This is one reason many retirees use Roth accounts as part of their tax and retirement income strategy.

Can a small increase in income trigger a much higher Medicare premium?

Yes. IRMAA is based on income brackets. Exceeding a threshold by even a small amount can move you into the next bracket, resulting in significantly higher Medicare premiums for an entire year.

Why do large IRA withdrawals create Medicare problems?

Large withdrawals from traditional retirement accounts increase your taxable income. That higher income can trigger IRMAA surcharges two years later, increasing Medicare costs at the same time your retirement assets are already being depleted.

How can paying for long-term care trigger IRMAA?

Many people self-fund long-term care by withdrawing money from IRAs, selling investments, or liquidating assets. These transactions often create taxable income that increases MAGI and can push retirees into higher IRMAA brackets, resulting in higher Medicare premiums.

Does Long-Term Care Insurance affect IRMAA?

Benefits received from tax-qualified Long-Term Care Insurance policies are generally tax-free and do not count toward MAGI. Because these benefits do not increase taxable income, they typically do not trigger higher Medicare premiums through IRMAA.

Are Long-Term Care Insurance benefits taxable?

Most benefits paid from tax-qualified Long-Term Care Insurance policies are received income tax-free under federal tax rules. This includes many traditional LTC policies and qualifying hybrid life insurance or annuity-based long-term care products.

Can Roth conversions increase Medicare premiums?

Yes. Although Roth IRA withdrawals may be tax-free later, the Roth conversion itself is generally taxable. A large conversion can increase MAGI and potentially trigger IRMAA surcharges in future years.

Why should Medicare and long-term care planning be discussed together?

Many retirees view Medicare and long-term care as separate issues. In reality, how you pay for future care can directly impact your taxable income and Medicare premiums. A coordinated retirement strategy can help protect assets, manage taxes, and reduce the risk of unexpected IRMAA surcharges.

Can IRMAA reduce my Social Security benefit?

Yes. Medicare Part B and Part D premiums, including any IRMAA surcharges, are typically deducted directly from your Social Security benefit. As premiums rise, your net Social Security payment may be reduced.

Is IRMAA something only wealthy retirees need to worry about?

Not necessarily. Rising retirement account balances, required minimum distributions, investment gains, property sales, and even one-time income events can push middle- and upper-middle-income retirees into IRMAA territory. Careful tax planning becomes increasingly important as retirement progresses.