When Robert called our Pasadena office last spring, he was frustrated and confused. He’d just received a letter from Social Security informing him that his Medicare Part B premium would be $594 per month, instead of the standard $185 he expected. That’s an extra $4,908 per year. The culprit? Something called IRMAA that he’d never heard of.
“I did a Roth conversion two years ago because everyone said it was smart tax planning,” Robert explained. “Now I’m being penalized for it? Nobody warned me about this.”
Robert’s story is far from unique. Every year, we meet with Pasadena area retirees who are blindsided by unexpected Medicare premium increases triggered by income events they thought were prudent financial moves. The good news? With proper planning, most of these surprises are completely avoidable.
In this article, we’ll explain exactly what IRMAA is, how it works, what triggers it, and most importantly, how to plan around it so you’re never caught off guard by a four-figure Medicare premium increase.
What Is IRMAA? (In Plain English)
IRMAA stands for Income-Related Monthly Adjustment Amount. Think of it as a Medicare premium surcharge that higher-income retirees pay on top of standard Medicare Part B and Part D premiums.
Here’s the basic concept: Medicare premiums work on a sliding scale based on your income. The more you earn, the more you pay. While most Medicare beneficiaries pay standard premiums, those with higher incomes pay additional surcharges through IRMAA.
IRMAA affects both your Medicare Part B premium (which covers doctor visits and outpatient care) and your Part D premium (prescription drug coverage). The surcharges aren’t small; they can add thousands of dollars to your healthcare costs each year.
Why does IRMAA catch so many people off guard? Three reasons: the two-year lookback period creates a time delay between the income event and the premium increase, the income thresholds aren’t indexed to inflation (though this changed recently), and many financial advisors don’t incorporate Medicare premium planning into retirement strategies.
For retirees in the Greater Los Angeles area, where we’re already dealing with higher housing, property taxes, and everyday expense costs, an unexpected $5,000-$10,000 annual Medicare premium increase can significantly impact retirement cash flow.
The Numbers: 2026 IRMAA Brackets
Let’s look at exactly what you’ll pay in 2026. IRMAA brackets are based on your Modified Adjusted Gross Income (MAGI), which we’ll explain in detail shortly. Here are the 2026 IRMAA brackets:
For Single Filers:
Income up to $106,000: Standard Part B premium of $185/month, standard Part D premium (varies by plan)
Income $106,001 to $133,000: Part B premium of $259/month (+ $74), Part D surcharge of $12.90/month
Income $133,001 to $167,000: Part B premium of $370/month (+ $185), Part D surcharge of $33.30/month
Income $167,001 to $200,000: Part B premium of $481/month (+ $296), Part D surcharge of $53.80/month
Income $200,001 to $500,000: Part B premium of $592/month (+ $407), Part D surcharge of $74.20/month
Income above $500,000: Part B premium of $628/month (+ $443), Part D surcharge of $81.00/month
For Married Filing Jointly:
Income up to $212,000: Standard premiums
Income $212,001 to $266,000: Part B premium of $259/month (+ $74), Part D surcharge of $12.90/month
Income $266,001 to $334,000: Part B premium of $370/month (+ $185), Part D surcharge of $33.30/month
Income $334,001 to $400,000: Part B premium of $481/month (+ $296), Part D surcharge of $53.80/month
Income $400,001 to $750,000: Part B premium of $592/month (+ $407), Part D surcharge of $74.20/month
Income above $750,000: Part B premium of $628/month (+ $443), Part D surcharge of $81.00/month
Here’s what this means in real dollars. A married couple with $350,000 of income pays $11,544 annually in Medicare Part B premiums alone ($481 × 12 months × 2 people), compared to $4,440 for a couple with income below $212,000. That’s a $7,104 difference every year.
Add in Part D surcharges, and the total additional cost can easily exceed $8,000 annually for a couple who crosses into IRMAA territory.
How IRMAA Calculates Your Income (The Two-Year Lookback)
Understanding how Social Security determines whether you owe IRMAA is crucial for planning purposes. The calculation involves two key concepts: Modified Adjusted Gross Income (MAGI) and the two-year lookback rule.
Modified Adjusted Gross Income (MAGI) for IRMAA
For IRMAA purposes, your MAGI is your Adjusted Gross Income (AGI) from your tax return plus any tax-exempt interest income. This is simpler than MAGI calculations for other purposes (like determining Roth IRA eligibility), which is actually helpful.
What counts toward MAGI for IRMAA? Wages and self-employment income, traditional IRA and 401(k) distributions, Roth conversions (yes, even though they’re not “income” in the traditional sense), capital gains from selling stocks, real estate, or other investments, rental income, pension and annuity income, Social Security benefits (the taxable portion), interest and dividend income, and tax-exempt interest from municipal bonds.
The Two-Year Lookback Rule
Here’s where many people get tripped up: Social Security doesn’t look at your current year income to determine IRMAA. They look at your income from two years ago.
In 2026, your Medicare premiums are based on your 2024 tax return. In 2027, they’ll be based on your 2025 return. This creates a significant time lag between the income event and the premium consequence.
Think about what this means: if you turn 65 and enroll in Medicare in 2026, Social Security will pull your 2024 tax return to determine your premiums. Any income events in 2024, like large IRA distributions, Roth conversions, stock option exercises, or property sales, will affect your Medicare premiums for all of 2026.
This two-year lookback is both a challenge and an opportunity. It’s a challenge because the premium increase happens well after the income event, making it easy to forget the connection. But it’s also an opportunity, as you can strategically plan income in the years before Medicare to minimize IRMAA exposure.
California Residents: Special Considerations
While California doesn’t have unique IRMAA rules, our state’s characteristics create specific planning considerations. High property values mean that selling your home can trigger significant capital gains, potentially pushing you into IRMAA territory. If you’ve lived in the Greater Los Angeles area for decades, your home’s appreciation might exceed the $250,000 (single) or $500,000 (married) capital gains exclusion, creating taxable income.
California’s lack of state income tax on Social Security benefits is a plus, but it doesn’t affect the federal MAGI calculation used to determine IRMAA. And for those who work in tech or aerospace (major employers in the Pasadena area), equity compensation adds complexity to income planning as we’ll discuss next.
The IRMAA Triggers That Catch Pasadena Retirees
Let’s explore the most common scenarios that push retirees into IRMAA brackets, often unexpectedly.
The Roth Conversion Trap
Roth conversions are often recommended as smart tax planning, and they can be. But here’s what many people don’t realize: the amount you convert from a traditional IRA to a Roth IRA counts as taxable income for that year, and that income affects your Medicare premiums two years later.
Here’s a real example from our practice: Michael and Susan, both 67, were paying standard Medicare premiums of $185/month each. In 2024, they converted $100,000 from their traditional IRAs to Roth IRAs based on advice from a tax professional who didn’t consider Medicare implications. Their total income for 2024 was $230,000 (including the conversion), comfortably below the $266,000 threshold. No problem, right?
Wrong. They forgot about Susan’s required minimum distribution (RMD) that would start in 2025. In 2025, they had a combined income of $280,000 ($180,000 in regular retirement income plus $100,000 in RMDs). For 2027, their Medicare premiums jumped to $370/month each, an increase of $4,440 annually.
The lesson? Roth conversions are valuable, but timing matters. The ideal time for conversions is often in your early 60s, before Medicare, when you might be in lower tax brackets and have more flexibility with income management.
California Real Estate Sales
Pasadena-area real estate has appreciated dramatically over the past few decades. The median home price in Pasadena exceeds $1 million, and many longtime residents have seen even greater appreciation.
Here’s the scenario we see regularly: A couple downsizes after retirement and sells their longtime home. They exclude $500,000 of gain under the primary residence exclusion, but if their home appreciated by $700,000, they have $200,000 of taxable capital gain. Add that to their regular retirement income, and they may have jumped into a high IRMAA bracket for 2 years (the year of sale and, potentially, the following year if they have other income spikes).
Consider Sarah’s situation: She sold her South Pasadena home in 2024 after living there for 30 years. After the $250,000 exclusion (she was single), she had $220,000 of taxable gain. Combined with her normal retirement income of $90,000, her 2024 MAGI was $310,000. In 2026, her Medicare Part B premium jumped from $185 to $481 monthly, an extra $3,552 for the year.
The planning opportunity? If you’re planning to sell property, consider timing the sale strategically relative to other income events and your Medicare enrollment date. Sometimes waiting a year or accelerating a sale by a year can save thousands in Medicare premiums.
Large IRA Distributions
Whether planned or unplanned, large distributions from traditional IRAs or 401(k)s create IRMAA exposure. Common triggers include one-time expenses like helping adult children with home purchases or paying for major home renovations, required minimum distributions (RMDs) starting at age 73, or taking larger distributions to delay Social Security claiming.
Tom’s story illustrates the issue: At 72, he took a $150,000 distribution from his IRA to help his daughter with a down payment on a home. He was happy to help family, but he didn’t realize that this distribution would push him into the third IRMAA bracket ($167,001 to $200,000 for single filers). His Medicare Part B premium increased by $3,552 for 2026, and because his RMDs pushed him slightly over the threshold again in 2025, he faced another increased premium year in 2027.
Stock Option Exercises and RSU Vesting
This is particularly relevant for Pasadena area retirees given our proximity to major tech companies, aerospace firms, and defense contractors. Many of our clients have spent careers at companies like JPL, Caltech, or various tech firms, accumulating significant equity compensation.
Stock options and RSUs create taxable income when exercised or vested. For those approaching Medicare age, this can be a significant IRMAA trigger.
Take Jennifer’s example: At 64, she exercised non-qualified stock options she’d held for years, generating $180,000 of ordinary income (the difference between the exercise price and the market value). Combined with her $140,000 salary, her 2024 income was $320,000. When she enrolled in Medicare at 65 in 2026, her monthly premium was $481 instead of the $185 she’d budgeted for, a $3,552 annual surprise.
The planning principle? Exercise options and manage RSU vesting strategically before age 63 (to avoid IRMAA impact at 65) or after you’re already in Medicare if waiting is feasible.
The Compounding Effect
Here’s what makes IRMAA particularly costly: multiple income spikes in consecutive years create multi-year premium impacts. If you have high income in 2024 and 2025, you’ll face elevated Medicare premiums in both 2026 and 2027. For a couple, this can mean $15,000 to $20,000 in additional healthcare costs over those two years.
Strategic Planning to Minimize IRMAA
The best approach to IRMAA is to avoid or minimize exposure through proactive planning. Let’s explore strategies for different life stages.
Pre-Medicare Planning (Ages 59 to 64)
Your late 50s and early 60s represent a golden opportunity for income management because you’re not yet subject to Medicare premium consequences.
This is often the ideal time for Roth conversions. You can convert traditional IRA funds to a Roth IRA without worrying about Medicare premium impacts. You’re potentially in lower tax brackets than during peak earning years, and you have time for the converted funds to grow tax-free before you need them.
This is also a strategic time to realize capital gains. Consider harvesting appreciated investments, selling rental properties, or exercising stock options. The income won’t affect Medicare premiums if it occurs more than two years before enrollment.
For those with significant traditional IRA or 401(k) balances, systematic distributions in your early 60s can reduce the accounts before RMDs begin at age 73. This “bracket management” can prevent being pushed into higher IRMAA brackets later. And if you’re planning major purchases or gifts, timing them before Medicare enrollment can help avoid the IRMAA impact of large IRA distributions.
The Critical Year 65 Period
The year you turn 65 and the two years before it (ages 63 and 64) are critical for IRMAA planning.
Your income at ages 63 and 64 determines your Medicare premiums at ages 65 and 66, respectively. If possible, minimize extraordinary income during these years. Defer bonuses to age 62 or earlier if your employer allows it, delay significant financial gifts that require IRA distributions, and postpone selling appreciated assets unless you can structure the sale to minimize taxable gain.
If you’re still working at 65, understand how your employment affects both Medicare enrollment timing and premium calculations. Your income at 65 determines your premiums at 67, creating a longer planning horizon.
Ongoing Income Management While on Medicare
Once you’re enrolled in Medicare, income management becomes an annual consideration. Model your income two years forward to anticipate IRMAA impacts. If you’re planning a $100,000 distribution in 2026, keep in mind it will affect your 2028 Medicare premiums. Spread large distributions across multiple years when possible. Instead of taking $150,000 in one year, consider $75,000 in two consecutive years if both amounts keep you below the next IRMAA threshold.
Coordinate RMDs with other income sources. If you have flexibility about when to take additional IRA distributions, take them in years when your RMD alone doesn’t push you into the next IRMAA bracket. Use tax-free income sources strategically: Roth IRA distributions, HSA withdrawals for qualified medical expenses, and life insurance cash value loans don’t count toward MAGI.
Multi-Year Tax and Medicare Planning
The most effective approach integrates tax planning and Medicare premium planning into a comprehensive multi-year strategy. Create income projections from age 60 through 75 or beyond, mapping out RMDs, Social Security claiming timing, planned large purchases or gifts, and potential Roth conversion amounts.
Model different scenarios to find the optimal balance between current-year taxes and future Medicare premiums. Sometimes paying slightly more in taxes now saves significantly in Medicare premiums later. The goal is to minimize the total cost of taxes and Medicare premiums over your retirement.
This type of planning is complex and benefits greatly from professional guidance. The payoff, however, can easily be tens of thousands of dollars in savings over your retirement.
When Life Changes: The IRMAA Appeal Process
Sometimes life doesn’t cooperate with our careful planning. Major life changes can cause your income to drop significantly, potentially making you eligible for lower Medicare premiums despite what your tax return from two years ago shows.
Qualifying Life-Changing Events
Social Security recognizes specific life events that may justify an IRMAA appeal: marriage, divorce or annulment, death of a spouse, work stoppage or work reduction, loss of income-producing property due to disaster or other circumstances beyond your control, loss of pension income, and employer settlement payment received because of an employer’s bankruptcy or reorganization.
Notice what’s not on this list: voluntary retirement, elective Roth conversions, selling investment property, or helping children financially. These voluntary choices don’t qualify for appeals, even though they might significantly increase your income in a given year.
How to File an IRMAA Appeal
If you’ve experienced a qualifying life event, you can request a reduction in your IRMAA using Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event). You can file this form online through your “my Social Security” account, in person at your local Social Security office, or by mail or fax.
The key to a successful appeal is providing clear documentation. For work stoppage or reduction, provide your final pay stub or a letter from your employer. For loss of pension income, submit documentation from the pension provider showing the reduction or termination. For divorce, include your divorce decree. For the death of a spouse, provide the death certificate.
Social Security typically processes appeals within 60 days, though complex cases may take longer. If approved, the adjustment is usually retroactive to the month you filed the appeal.
Success Rates and Realistic Expectations
Appeals based on clear-cut qualifying events with proper documentation generally succeed. The process is relatively straightforward when you legitimately meet the criteria. However, appeals based on voluntary income decisions are routinely denied. Saying “I didn’t realize this Roth conversion would affect my Medicare premiums” won’t get you an IRMAA reduction.
Here’s a real example: Margaret’s husband passed away in March 2025. Her 2024 tax return (filed jointly) showed income of $290,000, putting her in the second IRMAA bracket for 2026. As a widow in 2025, her actual income was only $80,000. She filed an SSA-44 form documenting her husband’s death and her reduced income. Social Security approved her appeal, and her 2026 premiums were recalculated based on her current lower income rather than her 2024 joint return. This saved her about $2,220 for the year.
The lesson? If you experience a true life-changing event, don’t assume you’re stuck with high IRMAA. File the appeal with proper documentation.
Integrating IRMAA Planning into Your Retirement Strategy
IRMAA planning shouldn’t happen in isolation. It needs to be part of your comprehensive retirement income strategy.
The Five-Year Income Projection
We recommend our clients maintain rolling five-year income projections that account for all sources: RMDs (which increase annually), Social Security benefits, pension income, investment income, planned IRA distributions, anticipated capital gains, and extraordinary income events (Roth conversions, property sales, helping family).
This projection helps you visualize how income decisions today affect Medicare premiums in the future. It’s a powerful tool for making informed choices.
Modeling IRMAA Impact in Retirement Planning Software
Comprehensive financial planning software should incorporate Medicare premium estimates based on projected income. If your advisor’s retirement projection assumes you’ll pay standard Medicare premiums but your projected income suggests IRMAA exposure, the plan underestimates your costs.
For a couple with a $300,000 annual income, the difference between planning with standard premiums ($4,440/year) and actual IRMAA premiums ($8,880/year) is $4,440 annually. Over 20 years of retirement, failing to account for this adds up to $88,800 in underestimated costs.
Working with Your Advisory Team
IRMAA planning requires coordination among your financial advisor, tax professional, and, if applicable, your estate planning attorney. Your financial advisor should project future income and identify potential IRMAA triggers. Your tax professional should incorporate Medicare premium planning into tax strategy, particularly around Roth conversions and timing of income recognition. And your estate attorney should understand how gifting strategies might create income (via IRA distributions) that triggers IRMAA.
The best outcomes occur when these professionals communicate and develop integrated strategies rather than working in silos.
Regular Strategy Reviews
Your IRMAA exposure can change as circumstances evolve. Plan to review your Medicare premium situation at least annually, and certainly whenever you’re considering a significant financial decision like selling property, exercising stock options, making large gifts, or changing your Social Security claiming strategy.
Key Takeaways
Let’s distill this complex topic down to essential principles.
IRMAA is an income-based Medicare premium surcharge that can add thousands to your annual healthcare costs. The two-year lookback means today’s income decisions affect Medicare premiums two years from now, requiring forward planning. Common triggers include Roth conversions, property sales, large IRA distributions, and equity compensation events.
The ages 59 to 64 represent a planning opportunity window when income strategies won’t affect Medicare premiums. Life-changing events may qualify you for an IRMAA appeal, but voluntary financial decisions don’t. Effective planning requires integrating Medicare premium considerations into your comprehensive retirement strategy.
The difference between reactive and proactive IRMAA planning can easily be $30,000-$50,000 or more over the course of retirement. Given Greater Los Angeles’s already high cost of living, minimizing unnecessary Medicare premium expenses helps your retirement dollars go further.
Ready to Ensure Medicare Premium Surprises Don’t Derail Your Retirement Plan?
At Mission Street Wealth, we incorporate comprehensive Medicare planning, including IRMAA analysis, into every retirement strategy we develop. We’ll review your projected income over the next decade, identify potential IRMAA triggers, and develop strategies to minimize unnecessary premium increases while optimizing your overall tax situation.
Don’t let a $5,000 annual Medicare premium increase surprise you. Schedule a consultation with our Pasadena team to discuss your specific situation and develop a proactive plan. Let’s make sure your healthcare costs don’t undermine your retirement security.