How IRMAA Works and Why Two Years Matters
Medicare Part B premiums for most beneficiaries are $202.90 per month in 2026. For higher-income beneficiaries, IRMAA adds a monthly surcharge on top of that standard premium. The surcharge is determined by your Modified Adjusted Gross Income (MAGI) from two years prior - so your 2026 Medicare premium is based on your 2024 income. This two-year lookback creates a trap that catches many retirees by surprise. A one-time Roth conversion, an inherited IRA distribution, a home sale, or a business sale in 2024 can spike income enough to push you into a higher IRMAA tier - and you will not see the bill until your 2026 Medicare statement arrives. By then, the triggering event is two years old and may be long forgotten. For 2026, the IRMAA tiers for single filers are based on 2024 MAGI. Those with 2024 MAGI at or below $109,000 pay only the standard $202.90 monthly Part B premium. The first surcharge tier - for MAGI between $109,001 and $137,000 - adds $81.20 per month per person. That is $974 per year per person, or $1,949 for a married couple where both are on Medicare. The highest tier, for MAGI above $500,000, adds $487 per month per person - nearly $5,850 per year per person extra just for Part B.
Key Stat: The top IRMAA tier in 2026 adds $487.00 per month per person to Medicare Part B premiums. A married couple at that income level pays an additional $11,688 per year in Part B surcharges alone, on top of the standard $4,869.60 in base premiums.
The Cliff Effect: Why One Dollar Over Costs Thousands
IRMAA is not a gradual phase-in like income tax brackets. It is a series of cliffs. At each threshold, even a single dollar of additional MAGI triggers the full surcharge for that entire tier. This makes the value of staying just below a threshold extremely high. For a married couple in 2026, the first IRMAA tier kicks in at $218,001 MAGI. A couple at exactly $218,000 pays the standard premium. A couple at $218,001 pays an additional $81.20 per person per month - $1,949 per year combined - for the same Medicare coverage. That is $1,949 that could have been avoided by reducing MAGI by $2. The implication is that income planning around IRMAA thresholds is not a minor refinement. Staying below each threshold has a specific, quantifiable dollar value worth engineering your income to capture.
Income Sources That Count Toward IRMAA - and Those That Do Not
IRMAA is based on MAGI, defined for this purpose as adjusted gross income plus tax-exempt interest. Traditional IRA withdrawals, pension income, wages, capital gains, Social Security benefits (the taxable portion), and even municipal bond interest all count. Roth IRA withdrawals do not. Policy loans from a life insurance policy do not.
- Map your expected 2026 MAGI and check it against the 2028 IRMAA thresholds (2-year lag)
- Plan Roth conversions and other income spikes in years when they will not push you over a threshold
- Consider taking capital gains in installments across multiple years rather than all at once
- Replace taxable IRA withdrawals with Roth distributions to lower MAGI
- If a life event dropped your income significantly, file SSA Form 44 to appeal the IRMAA bracket
- Account for both Part B and Part D surcharges - both increase at each tier
Life-Changing Events and How to Appeal
The two-year lookback is not absolute. If a qualifying life-changing event caused your income to drop significantly since the year used to calculate IRMAA, you can file an appeal using SSA Form 44. Qualifying events include retirement, reduction in work hours, divorce, death of a spouse, loss of income-producing property, and loss of pension income. The appeal process asks the SSA to use your current or most recent year's income rather than the two-year lookback. For a retiree who worked through 2024 earning $200,000 and then retired at the start of 2025 with income dropping to $60,000, filing SSA Form 44 can eliminate the IRMAA surcharge almost immediately. Most people do not know this appeal exists, and SSA does not proactively offer it - you must initiate it.
Multi-Year Income Planning to Stay Below Thresholds
The most reliable way to avoid IRMAA is to project income two years ahead and plan accordingly. If you are considering a large Roth conversion, model the MAGI impact in the conversion year and then check whether that income will trigger IRMAA two years later. If you are planning a home sale, calculate the capital gain and consider whether a Section 121 exclusion ($250,000 single, $500,000 married) keeps you below the nearest threshold. Tax-free income sources are particularly valuable in this context because they do not appear in MAGI. Roth IRA withdrawals are the most common example. Indexed Universal Life Insurance policy loans are another - they generate income that covers living expenses without adding a single dollar to MAGI, making it impossible for them to trigger an IRMAA tier. Health Savings Account distributions for qualified medical expenses also exclude from MAGI. Building a retirement income mix that relies on these non-MAGI sources - at least in years when taxable income runs high - can be worth thousands in avoided IRMAA surcharges annually.
The IUL Solution: Policy loans from an Indexed Universal Life Insurance policy do not count toward MAGI for any federal income tax or IRMAA purposes. This makes IUL policy loans one of the few sources of supplemental retirement income that can never trigger an IRMAA tier jump, no matter how much you draw. For retirees who are close to a threshold - say, projecting MAGI of $215,000 against the $218,001 married threshold - drawing an additional $10,000 in living expenses from an IUL loan versus a traditional IRA withdrawal is the difference between zero IRMAA surcharge and $1,949 in annual surcharges. This is the specific scenario where a pre-funded IUL policy provides clear, quantifiable value.
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