What You Need to Know About IRMAA (Income-Related Monthly Adjustment Amount)
If you're preparing for or already in retirement, there's a lesser-known Medicare cost that could catch you by surprise: IRMAA—the Income-Related Monthly Adjustment Amount. It’s not a penalty, but it sure can feel like one if you’re hit with it unexpectedly.
Let’s break down what IRMAA is, how it works, who it affects, and—most importantly—how you can plan ahead to potentially reduce its impact on your retirement budget.
What Is IRMAA?
IRMAA is a surcharge that applies to Medicare Part B (outpatient care) and Part D (prescription drug coverage) if your income exceeds certain thresholds. The tricky part? It’s based on your tax return from two years ago, not what you’re earning today.
That means your 2025 Medicare premiums are calculated based on your 2023 income. So even a one-time spike, maybe you sold a business, took a big distribution, or cashed out investments — can lead to much higher Medicare premiums, even if your income has since dropped.
When Does IRMAA Kick In?
Medicare uses your modified adjusted gross income (MAGI) to determine whether you’ll pay an IRMAA surcharge. MAGI includes your regular AGI plus any tax-exempt interest.
For 2025, IRMAA applies if:
You’re married filing jointly with income over $212,000
You’re filing single with income over $106,000
And yes, both spouses pay the surcharge individually if you’re a couple. It’s not a household rate.
How Much Could You Pay?
The IRMAA surcharge is broken into four income tiers, and at the top, the costs are significant:
Part B: $628.90/month (in addition to the standard $185/month premium)
Part D: $85.80/month (on top of your regular plan cost)
For Part B, the entire premium, including the IRMAA amount, is paid directly to the government.
For Part D, it’s a little more complex: you pay your plan premium to your insurer, but the IRMAA surcharge goes straight to Uncle Sam. That means you may get two bills, one from your plan, and one from the government.
How Did IRMAA Start?
IRMAA didn’t just appear out of thin air:
Part B surcharges came from the Medicare Modernization Act of 2003 and started in 2007.
Part D surcharges were added by the Affordable Care Act (ACA) and began in 2011.
Originally, the income brackets adjusted with inflation, but between 2011 and 2019, the ACA froze the thresholds, leading to more people getting hit with IRMAA. Then, in 2018, the Bipartisan Budget Act added a fifth surcharge tier for high earners and froze that threshold until at least 2028.
Why Planning Matters
Since Medicare looks back two years when calculating your premiums, timing is everything. If your income drops due to retirement or another life event, you don’t have to just accept the surcharge.
You may qualify for a waiver if you’ve experienced a “life-changing event” such as:
Retirement
Marriage or divorce
Death of a spouse
Loss of income-producing property
To request a waiver, you’ll need to file Form SSA-44 with Social Security and provide documentation (such as a letter from your employer showing your retirement date). You’ll also need to estimate your new, lower income for the current year.
Take Control of Your Medicare Costs
IRMAA is just one more reason why income planning in retirement is about more than just how much you make, it’s about how your income is reported and when.
If you’re concerned about IRMAA or want help planning around it, let’s talk. I work closely with one of the best Medicare specialists in Oklahoma, which means you won’t have to navigate these complex rules alone. Together, we can help you understand your Medicare options and how your income strategy may affect what you pay.
Visit www.OBWMLLC.com or call our office at (405) 993-6296 to schedule a conversation. We’ll walk you through your options and help you build a retirement strategy that accounts for surprises like IRMAA—so you can retire with confidence.
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Disclosure:
All content discussed in this article is for informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. Opinions expressed are solely those of Olive Branch Wealth Management, LLC and its staff. The information presented is believed to be from reliable sources; however, Olive Branch Wealth Management, LLC makes no representations as to its accuracy or completeness. This article shall not be construed as an offer to sell or a solicitation to purchase any insurance product in any jurisdiction in which the agent is not licensed. Topics should be discussed with a licensed insurance agent, tax professional, or financial adviser before implementation. Olive Branch Wealth Management, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.
