IRMAA: the Medicare surcharge with a two-year memory
Medicare is not one-price-fits-all. If your income is high enough, the government adds a monthly surcharge to your Part B and Part D premiums called the Income-Related Monthly Adjustment Amount, or IRMAA. Two things make IRMAA a favorite trap in retirement planning: it is a cliff, not a phase-in, and it is based on your income from two years ago.
How the surcharge works
Everyone on Medicare Part B pays a standard premium — $202.90 per month for 2026. Above certain income thresholds, IRMAA adds a per-person surcharge on top of that, plus a separate surcharge on Part D drug coverage. For 2026, the first tier begins when modified adjusted gross income (MAGI) exceeds $109,000 for a single filer or $218,000 for a joint return. Crossing that line adds $81.20 per month to Part B and $14.50 per month to Part D — roughly $1,148 per year, per person. A married couple who are both on Medicare pays it twice: about $2,297 per year for crossing one threshold by a single dollar.
The tiers escalate from there. At the top — MAGI above $500,000 single or $750,000 joint for 2026 — the surcharges reach $487.00 per month for Part B and $91.00 for Part D, more than tripling the standard premium. For IRMAA purposes, MAGI is your adjusted gross income plus tax-exempt interest, so municipal bond income counts too.
The two-year memory
Here is the part that surprises people: your premium this year is set by your tax return from two years earlier. Your 2026 Medicare premiums are based on the MAGI shown on your 2024 return — the most recent one the IRS had on file when premiums were set. There is no averaging and no forgiveness for a one-time spike: a single high-income year echoes into your Medicare bill 24 months later.
The flip side is that IRMAA has no long-term memory either. One expensive year buys exactly one expensive premium year, two years later; when your income drops back below the thresholds, the surcharge disappears. The tier boundaries are also indexed for inflation annually, so a plan that sits just under a boundary today gets a little breathing room each year — the figures above are for 2026.
Why a Roth conversion at 63 raises premiums at 65
A Roth conversion is taxed as ordinary income in the year of the conversion, which means it lands squarely in MAGI. Convert a large amount at age 63 and nothing happens immediately — you are not on Medicare yet. But at 65 you enroll, and Medicare looks back two years to price your premium… straight at the conversion year. A conversion that pushed your age-63 MAGI over a tier boundary buys you a full year of surcharges at 65, on both spouses if both are enrolled.
This is not a reason to avoid conversions — often the lifetime tax savings dwarf a year or two of IRMAA. It is a reason to size them deliberately: many planners treat age 63 (Medicare age minus two) as the year the IRMAA meter quietly starts running, and aim conversions to finish just under a tier boundary rather than just over it. If your income later drops because of a life-changing event such as retirement, you can ask Social Security to use a more recent year instead — but a voluntary Roth conversion does not qualify.
Try it in Deorbit Plan
The simulator charges IRMAA automatically, per person, using each path’s MAGI from two years earlier and the 2026 tier tables (indexed with simulated inflation). Open the Strategy panel and turn on Roth conversions — either a fixed annual amount or fill-bracket — and set the “Stay this far below the nearest cliff” margin, which caps conversions so MAGI keeps a safety buffer below the nearest ACA or IRMAA boundary. Then use the Strategy Lab sweep to compare conversion strategies side by side and watch how lifetime spending, taxes, and Medicare surcharges trade off.
Educational content only — not financial, tax, or investment advice.
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