By Marc C. Shaffer
Marc C. Shaffer is a financial advisor in Overland Park, Kansas, working with clients in the Kansas City area, Phoenix, and Utah Valley.
A client originally based in Overland Park who retired to Florida called recently, frustrated and confused. He had just received notice that his Medicare premiums were going up significantly due to IRMAA, the Income-Related Monthly Adjustment Amount. He believed the increase was tied to capital gains activity in his portfolio and assumed we had caused it.
At first glance, that didn’t make sense. The gains we had realized in his managed accounts were modest.
After digging deeper, the story became clearer. He had triggered additional gains on his own, outside of the portfolio we manage. Those gains, combined with everything else, pushed his income into a higher IRMAA bracket.
That conversation was a good reminder of how IRMAA works and how easy it is for income decisions to ripple into areas that aren’t always top of mind.
What Is IRMAA and Why Does It Matter?
IRMAA is an additional surcharge applied to Medicare Part B and Part D premiums when your income exceeds certain thresholds. These surcharges are based on your modified adjusted gross income (MAGI) from two years prior. For example, 2026 Medicare premiums are based on your 2024 income.
The impact can be meaningful. Based on the 2026 brackets:
- At higher income levels, Part B surcharges can reach $487.00 per month
- Part D surcharges can reach $91.00 per month
And for married couples, those surcharges effectively double.
Check out this flowchart: Will I Avoid IRMMA Surcharges On Medicare Part B & Part D?
What IRMAA Can Cost on an Annual Basis
The monthly surcharges tend to get the most attention, though the annual impact is what often catches people off guard. At the higher end of the 2026 IRMAA brackets:
- Part B surcharge: $487.00 per month
- Part D surcharge: $91.00 per month
That totals $578 per month per person in additional Medicare costs. On an annual basis, that comes to:
- $6,936 per year per person
For a married couple, that number can reach:
- $13,872 per year in combined surcharges
Putting That in Context
For a retiree living on $100,000 per year, IRMAA at the higher brackets can represent a meaningful portion of total income:
- $6,936 is nearly 7% of annual income for an individual
- $13,872 is nearly 14% of annual income for a couple
And that is just the surcharge. It does not include the base Medicare premiums or other healthcare-related expenses. This is where the issue becomes more than a line item. It starts to influence cash flow, withdrawal strategy, and how retirees think about discretionary spending.
How IRMAA Brackets Work
The structure is tiered. Once your income crosses a threshold, the surcharge increases stepwise. For 2026, IRMAA begins when income exceeds:
- $109,000 for single filers
- $218,000 for married filing jointly
From there, surcharges increase across multiple brackets as income rises. One important nuance is how the system behaves at each threshold. Crossing a bracket by even a small amount can move you into the next level, which may materially increase your premiums.
What Counts Toward IRMAA Income?
IRMAA is based on modified adjusted gross income, which includes more than just wages or portfolio withdrawals. In many cases, income that feels one-time or strategic can still count. Common contributors include:
- Capital gains from investment sales
- Roth conversions
- Required minimum distributions (RMDs)
- Interest and dividend income
- Rental income
- Business income
- Stock option exercises or RSU vesting
In the situation with our client, capital gains were the driver. The gains inside the portfolio we manage were limited, but additional gains realized elsewhere ultimately pushed total income into a higher bracket.
The Coordination Challenge
This situation highlights something we see often. Financial decisions made in isolation can have unintended consequences. When different accounts, advisors, or strategies operate independently, it becomes harder to see the full picture. A single transaction may seem reasonable on its own. When combined with other income sources, it can create a different outcome. IRMAA is one of the areas where coordination matters. At the same time, there are limits. Even with thoughtful planning, not everything can be anticipated or controlled. Life changes, market opportunities, and personal decisions all play a role.
Income Planning After Age 65
Once Medicare begins, income planning tends to take on a different level of importance. It can be helpful to think about income in layers:
- Baseline income such as Social Security or pensions
- Planned distributions from retirement accounts
- Strategic moves such as Roth conversions or asset sales
- Unplanned income such as business income or one-time gains
Each layer may interact with IRMAA in different ways. Some years may naturally fall into higher income ranges. In other years, there may be opportunities to manage income more deliberately, depending on broader goals.
Situations That May Trigger Higher IRMAA
There are several scenarios where individuals may unintentionally cross into higher IRMAA brackets:
- Large One-Time Transactions
- Selling a business, real estate, or a concentrated stock position can create a spike in income.
- Portfolio Repositioning
- Rebalancing or diversifying a portfolio may generate capital gains, especially in taxable accounts.
- Roth Conversions
- These can be a valuable long-term planning tool, though they increase taxable income in the year executed.
- Stock Compensation Events
- RSUs, stock options, or deferred compensation can significantly impact reported income.
- Required Minimum Distributions
- As RMDs begin, they can push income higher, particularly when combined with other sources. Each of these may be appropriate depending on the situation. The key is understanding how they fit into the broader income picture.
- When IRMAA Might Be Adjusted
- There are limited cases where IRMAA surcharges may be reduced.
The Social Security Administration allows appeals for certain life-changing events, such as:
- Retirement
- Divorce
- Death of a spouse
- Loss of income-producing property
In those situations, individuals may request a reassessment using Form SSA-44. This can be helpful when current income is meaningfully lower than the income used to calculate the surcharge.
Questions Worth Asking
For those approaching or already in retirement, IRMAA can become an ongoing planning consideration. It may be worth reflecting on:
- How is my income expected to change over the next few years?
- Are there any planned transactions that could increase taxable income?
- Am I coordinating decisions across all accounts and advisors?
- Are there years where higher income may make sense strategically?
- How do healthcare costs fit into my broader retirement plan?
These are not always straightforward questions, and the answers often vary based on individual circumstances.
Bringing It All Together
The client conversation that prompted this discussion ended on a constructive note. Once we walked through the full picture, the source of the issue became clear. It also opened the door for better coordination going forward.
IRMAA is one of those areas where small decisions can have larger ripple effects. It sits at the intersection of tax planning, investment management, and retirement income planning. Many families find that having a coordinated approach helps bring more clarity to decisions like these.
This is often where working with a financial advisor or financial planner becomes valuable, particularly when navigating retirement income planning and managing the details that come with it. We work with clients in Kansas City, Phoenix, Utah Valley and beyond in navigating these decisions.