Most people know that Medicare has premiums. Fewer know that those premiums can be significantly higher depending on your income. The Income-Related Monthly Adjustment Amount — IRMAA — is a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds. If you are planning retirement income withdrawals, Roth conversions, or the sale of a major asset, IRMAA is something you need to understand before you act.
What IRMAA Is and How It Works
Medicare Part B covers outpatient care, doctor visits, and medical equipment. Part D covers prescription drugs. Both have standard premiums set annually by the federal government. In 2024, the standard Part B premium is $174.70 per month. But if your income exceeds a certain level, you pay more — sometimes substantially more.
IRMAA is not a penalty for bad behavior. It is a premium adjustment based on your income from two years ago. Social Security uses your tax return from two years prior — called your Modified Adjusted Gross Income (MAGI) — to determine which IRMAA bracket applies. If you enroll in Medicare in 2024, Social Security is looking at your 2022 return.
2024 IRMAA Brackets: Part B
The IRMAA surcharge applies in tiers. For 2024, the Part B brackets are:
- $103,000 or less (single) / $206,000 or less (joint): Standard premium — $174.70/month
- $103,001–$129,000 / $206,001–$258,000: $244.60/month
- $129,001–$161,000 / $258,001–$322,000: $349.40/month
- $161,001–$193,000 / $322,001–$386,000: $454.20/month
- $193,001–$500,000 / $386,001–$750,000: $559.00/month
- Above $500,000 / above $750,000: $594.00/month
Part D carries a separate IRMAA surcharge on top of your plan’s base premium, ranging from $12.90 to $81.00 per month in 2024. For a married couple both on Medicare, the combined IRMAA exposure can reach $1,000–$1,500 per month at the upper brackets.
What Counts as Income for IRMAA
IRMAA uses your Modified Adjusted Gross Income (MAGI), which for this purpose is your adjusted gross income plus any tax-exempt interest income. This includes:
- Wages and self-employment income
- Traditional IRA and 401(k) withdrawals
- Pension and annuity income
- Social Security benefits (the taxable portion)
- Capital gains from selling stocks, real estate, or other assets
- Required minimum distributions (RMDs)
- Tax-exempt municipal bond interest (added back for MAGI purposes)
Roth IRA withdrawals are not included in MAGI — this is one of the primary tax-planning advantages of Roth accounts in retirement. Roth conversions, however, do count as income in the year they are processed, which is why timing conversions requires awareness of IRMAA brackets.
The Two-Year Lookback: Why It Catches People Off Guard
The two-year lookback is the feature most responsible for IRMAA surprises. Your 2024 premium is based on your 2022 income. If you retired in 2023, you may have had high 2022 earnings that push you into an IRMAA bracket — even though your 2023 and 2024 income are much lower.
Common situations that trigger a surprise IRMAA bill:
- A large Roth conversion in a prior year
- Selling a rental property or business
- A high-earning final year before retirement
- A large capital gains distribution from a mutual fund
- RMDs that push income over a bracket threshold
The important thing to know is that this is not permanent. Once your income drops — and the two-year lookback catches up — your IRMAA surcharge should disappear or decrease. But the transition year can be expensive.
Appealing IRMAA: The Life-Changing Event Exception
If your income has dropped significantly since the tax year being used, you can request that Social Security use more recent income. This is called a Life-Changing Event (LCE) appeal, and it is granted for specific circumstances:
- Retirement or reduced work hours
- Death of a spouse
- Divorce or annulment
- Loss of income-producing property due to disaster or other involuntary event
- Employer settlement payment (lump sum received from employer)
You file the appeal using SSA Form SSA-44. If approved, Social Security uses your current year’s income estimate — or the most recent tax return — instead of the two-year-old return. If you retired in 2023 and your income dropped substantially, this appeal is often worth filing.
IRMAA Planning Strategies
Stay aware of bracket boundaries
Crossing an IRMAA threshold by even one dollar moves your entire Part B premium into the next bracket — it is a cliff, not a slope. If your MAGI is projected to be $127,000 and the next bracket begins at $129,000, there may be value in keeping income just below that threshold. Strategies include deferring a Roth conversion, delaying a capital gain, or increasing charitable contributions through a donor-advised fund.
Time Roth conversions carefully
Roth conversions are one of the best long-term moves for tax efficiency in retirement, but large conversions spike MAGI in the conversion year and can trigger IRMAA two years later. Converting in years when your income is naturally lower — early retirement before RMDs begin, or a year with large deductible expenses — minimizes the IRMAA impact. Spreading conversions across multiple years rather than doing one large conversion often smooths the income curve.
Factor IRMAA into withdrawal sequencing
The order in which you draw from taxable, pre-tax, and Roth accounts affects your MAGI each year. Pre-tax withdrawals count; Roth withdrawals do not. If you have both types of accounts, coordinating withdrawals to stay below IRMAA thresholds while still making progress on Roth conversions is a legitimate planning exercise — one where a tax professional or financial planner can add real value.
The Bottom Line
IRMAA is not a problem for most retirees — only those with income above $103,000 (single) or $206,000 (joint) face it at all. But for those who do, it can add $1,000–$3,000 per year or more per person in Medicare costs. The planning value is not in avoiding IRMAA entirely — some people should be in the higher brackets — but in not being surprised by it, and in making deliberate choices about when and how to realize income.
Further Reading
- The Bridge Years: Health Coverage Before Medicare
- Roth Conversions Explained
- Tax-Efficient Withdrawal Order: Which Accounts to Tap First
- Required Minimum Distributions (RMDs) Explained
- How to Create a Retirement Budget
Money Instructor does not provide tax, legal, or investment advice. This material has been prepared for educational and informational purposes only. You should consult your own advisors regarding your own financial situation.