Your Medicare premium just went up, and you have no idea why. It's probably not this year's income — it's likely a tax return from two years ago finally catching up with you.
IRMAA — Income-Related Monthly Adjustment Amount — is an extra charge on top of standard Medicare Part B and Part D premiums, triggered when your income crosses certain thresholds. The more your income exceeds the threshold, the more you pay, in tiers.
Most retirees have never heard the term until the letter shows up.
IRMAA isn't based on your income this year. It's based on your tax return from two years ago. That delay is what catches people off guard.
This is exactly why a single large, one-time income event — even a smart one, like a Roth conversion — can have a Medicare consequence that shows up years later if it isn't planned around.
IRMAA is based on Modified Adjusted Gross Income — wages, interest, dividends, capital gains, Required Minimum Distributions, and other taxable income on your return.
What doesn't count: Roth IRA distributions and properly structured life insurance policy loans generally aren't reported as taxable income, so they don't add to the MAGI figure that determines your IRMAA tier — one of the reasons tax-free income sources matter more once Medicare enters the picture.
Appeals — IRMAA can sometimes be appealed following a life-changing event like retirement, divorce, or the death of a spouse that reduced your income after the year used in the calculation.
Proactive planning — the more reliable path. Spreading large income events like Roth conversions across multiple years, rather than doing it all at once, can keep you from crossing a threshold in any single year.
An extra premium on top of standard Medicare Part B and Part D when income exceeds certain thresholds — higher income tiers pay progressively more.
It's calculated using a tax return from two years earlier, so a one-time income event can trigger a higher premium well after the fact.
Modified Adjusted Gross Income — wages, interest, dividends, capital gains, and RMDs. Roth distributions and policy loans generally don't count.
Appeals are possible after certain life-changing events. Otherwise, spreading large income events over multiple years is the more reliable approach.
A brief conversation can show you your current IRMAA exposure and how to plan around it before it hits.
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