Most people assume Medicare is a fixed cost. You turn 65, you enroll, you pay the standard premium. Simple.
It's not simple. And the people who find out the hard way — usually when they open a letter from Social Security telling them their Medicare premiums just jumped by several hundred dollars a month, are almost always people who did something financially smart the year before. Sold a rental property. Took a large IRA distribution. Did a Roth conversion. Had a great year in their business.
The mechanism that causes this is called IRMAA, the Income-Related Monthly Adjustment Amount. It's one of the most consequential and least-understood features of the Medicare system. And if you're within ten years of retirement, you need to understand it before it catches you off guard.
What IRMAA Is (And Why It Exists)
Medicare Part B covers outpatient medical services, doctor visits, lab tests, preventive care. Part D covers prescription drugs. Both have standard monthly premiums that most enrollees pay.
But Congress decided, back in 2003, that higher-income retirees should pay more. The result is a tiered system where your Medicare premiums can vary dramatically based on your income, and where crossing a threshold by even one dollar can trigger a significant jump in what you owe.
Here's what the 2025 IRMAA tiers look like for married couples filing jointly:
| Modified Adjusted Gross Income (MAGI) | Part B Premium (per person/month) | Additional vs. Standard |
|---|---|---|
| Up to $212,000 | $185.00 | $0 |
| $212,001 – $266,000 | $259.00 | +$74.00 |
| $266,001 – $334,000 | $370.00 | +$185.00 |
| $334,001 – $400,000 | $481.00 | +$296.00 |
| $400,001 – $750,000 | $592.00 | +$407.00 |
| Over $750,000 | $628.90 | +$443.90 |
The Two-Year Lookback: The Part That Surprises Everyone
Here's the feature of IRMAA that catches people completely off guard: your Medicare premiums in any given year are based on your income from two years prior.
Your 2026 Medicare premiums are based on your 2024 tax return. Your 2027 premiums are based on 2025. And so on.
This means that a one-time income event, a large Roth conversion, a business sale, a rental property sale, an unusually large RMD, can trigger IRMAA surcharges two years later, long after you've forgotten about the transaction that caused them.
I had a client who was meticulous about his tax planning. He was doing annual Roth conversions, carefully staying within his target bracket. But he also had a rental property he'd been meaning to sell, and when the market was right, he sold it. The gain pushed his income well above the first IRMAA threshold. Two years later, his Medicare premiums jumped. He wasn't surprised, we had planned for it, but he told me it was the kind of thing that would have blindsided him completely if we hadn't been watching it.
That's the scenario I see play out regularly with people who haven't integrated their tax planning and their healthcare planning. They make a smart financial decision without realizing that the Medicare consequences won't show up for two years.
The Roth Conversion Interaction
This is where IRMAA planning gets genuinely complex, and where having a coordinated strategy matters enormously.
Roth conversions are one of the most powerful tax-planning tools available to pre-retirees and early retirees. The idea, converting pre-tax IRA money to Roth while you're in a low-income window, is sound. But every dollar you convert is added to your MAGI for that year. And if that conversion pushes you over an IRMAA threshold, you'll pay for it two years later in higher Medicare premiums.
This doesn't mean you shouldn't do Roth conversions. It means you need to do them with full awareness of the IRMAA thresholds, and with a strategy for managing your income across multiple years rather than optimizing each year in isolation.
The goal is to convert as much as possible while staying below the thresholds that trigger meaningful surcharges. For many couples, that means converting up to the first IRMAA threshold, $212,000 in combined income, and stopping there.
What You Can Do About IRMAA
The good news is that IRMAA is largely manageable with proper planning. Here's how I approach it with clients:
Know your thresholds. The first IRMAA cliff for married couples is currently around $212,000 in MAGI. Know where you stand relative to that number in any year you're making significant financial decisions.
Plan income across multiple years. Rather than optimizing each year independently, think about your income trajectory over a 3–5 year window. A large one-time event might be worth spreading across multiple years if it keeps you below a threshold.
Account for the two-year lookback in your Roth conversion strategy. If you're planning a large conversion, model the Medicare impact two years out, not just the current-year tax impact.
Use IRMAA appeals when appropriate. If your income drops significantly due to a qualifying life event, retirement, divorce, death of a spouse, loss of income, you can appeal your IRMAA surcharge using Form SSA-44. Social Security will use your more recent income rather than the two-year lookback.
Coordinate asset sales with your income plan. If you're planning to sell a rental property, a business, or a concentrated stock position, the timing of that sale relative to your retirement and Medicare enrollment matters.
The Bigger Picture
IRMAA is a perfect illustration of why retirement planning has to be done holistically. Your tax decisions affect your healthcare costs. Your healthcare costs affect your income needs. Your income needs affect your Social Security strategy. Your Social Security strategy affects your tax picture.
These aren't separate conversations. They're the same conversation.
The retirees who get this right aren't necessarily the ones with the most money or the most sophisticated investments. They're the ones who've taken the time to understand how all the pieces interact, and who've built a plan that coordinates those pieces intentionally rather than managing them in isolation.
Jason Rindskopf is the founder of Two Waters Wealth Management and creator of the SMART Retirement Blueprint®. He works with high-achieving professionals and couples in the Charlotte, NC area who are within 10 years of retirement or recently retired. If you'd like to talk through your Medicare and tax coordination strategy, book a complimentary consultation here.