Key Takeaways

• If your income is above certain thresholds, Medicare charges you higher monthly premiums for Parts B and D in 2025. These surcharges are known as IRMAA (Income-Related Monthly Adjustment Amount).

• Income is based on your tax return from two years ago, meaning your 2023 income determines your 2025 premiums. However, there are ways to request a reassessment if your income has dropped.

Understanding Why Higher Earners Pay More for Medicare

Medicare is designed as a universal health program for those aged 65 and older, as well as certain younger individuals with disabilities. While many assume everyone pays the same amount, Medicare actually charges higher-income individuals more for certain parts of coverage.

This policy is enforced through the Income-Related Monthly Adjustment Amount (IRMAA), which increases your premiums for Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage) if your income exceeds set thresholds.

How IRMAA Works in 2025

In 2025, IRMAA applies if your Modified Adjusted Gross Income (MAGI) from 2023 exceeds:

• $103,000 for individuals

• $206,000 for married couples filing jointly

If your income is above these limits, you’ll pay more each month for your Medicare Part B and D coverage. These adjustments are tiered, so the higher your income, the more you’ll pay.

The Five IRMAA Income Tiers for 2025

Medicare uses five income brackets to determine your premium adjustments. The more you earn above the base level, the more you pay. These tiers can significantly raise your monthly premiums.

How Much More You’ll Pay

Exact dollar amounts depend on your income bracket, but in general:

• Part B premiums increase by hundreds of dollars per month for top earners.

• Part D premiums rise by additional surcharges depending on your income.

These costs are added to the standard premiums. The total can be substantial, especially for couples filing jointly.

Why It Might Not Feel Fair

On the surface, IRMAA seems logical—higher earners contribute more to help fund Medicare. However, many people feel it’s not applied fairly. Here’s why:

Income Is Based on Two-Year-Old Data

Your premiums in 2025 are based on your income from 2023. If you retired or experienced a major drop in income since then, you may be paying more than you should. This lag creates frustration for those whose financial situation has changed significantly.

Sudden Life Changes Aren’t Accounted for Automatically

Medicare does allow you to request a reconsideration if you’ve had a qualifying life-changing event (such as retirement, death of a spouse, or loss of income-producing property). However, the process isn’t automatic and requires paperwork, which many people find burdensome or confusing.

IRMAA Doesn’t Consider Expenses

MAGI includes all taxable income but doesn’t account for how much of it you actually get to keep. For instance, you may have high medical expenses or care costs, but if your income is high on paper, you’ll still face IRMAA.

What Counts as Income for IRMAA

The formula Medicare uses to calculate MAGI includes:

• Wages

• Social Security benefits (taxable portion)

• Required Minimum Distributions (RMDs) from retirement accounts

• Capital gains

• Dividends and interest

• Rental income

• Withdrawals from traditional IRAs and 401(k)s

Importantly, Roth IRA withdrawals do not count toward MAGI, which can be a planning opportunity.

Ways to Reduce or Avoid IRMAA in the Future

Planning ahead can help reduce your Medicare costs in future years. While you can’t change the past, these strategies can make a difference going forward:

1. Roth Conversions

Converting traditional IRA assets to Roth accounts before you enroll in Medicare can help reduce taxable income in retirement. While you’ll pay taxes at the time of conversion, future withdrawals won’t count toward MAGI.

2. Delay Social Security Benefits

Delaying your Social Security benefits until age 70 reduces the number of years you report those benefits as taxable income, which could lower your MAGI in early retirement years.

3. Manage RMDs Carefully

Once you reach age 73, you’re required to take minimum distributions from tax-deferred accounts. These count as income and can trigger IRMAA. Consider Qualified Charitable Distributions (QCDs) or other distribution timing strategies to keep income under the thresholds.

4. Tax-Efficient Withdrawals

Strategically withdrawing from taxable accounts before tax-deferred accounts or combining withdrawals from different sources may help keep your MAGI under IRMAA thresholds.

5. Sell Investments Strategically

Capital gains from selling stocks or real estate can count toward MAGI. Spacing out sales or using loss harvesting may help manage these impacts.

Requesting a Reconsideration for IRMAA

If you believe your current income doesn’t reflect your 2023 tax return, you can file a form with Social Security requesting a reduction in your IRMAA surcharge. The form used is SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event).

Qualifying life-changing events include:

• Retirement

• Marriage or divorce

• Death of a spouse

• Loss of income-producing property

• Loss of pension income

• Employer settlement payment

When applying, you’ll need to provide documentation of the life event and evidence of your reduced income.

How You’re Notified About IRMAA

The Social Security Administration notifies you if you’re subject to IRMAA. You’ll receive a letter outlining your income and how your premiums were calculated. These notices usually arrive at the end of the year or early the next year.

It’s important to review this notice carefully and appeal if you believe there is an error or your situation has changed.

The Long-Term Impact of IRMAA

Even though IRMAA affects only a minority of Medicare beneficiaries, the number has grown. As more retirees draw income from taxable sources, especially RMDs and investments, more people find themselves crossing the income thresholds.

In addition:

• IRMAA thresholds are not adjusted as generously as other tax thresholds, meaning more people can be pushed into higher tiers due to inflation alone.

• Medicare premiums, including IRMAA surcharges, are deducted from your Social Security check, reducing your net benefit.

This makes it even more important to incorporate Medicare premium planning into your overall retirement strategy.

Why You Should Take IRMAA Seriously

Ignoring IRMAA planning can result in thousands of dollars in avoidable costs over your retirement. Even if you’re not subject to IRMAA now, one-time events or large withdrawals from retirement accounts can quickly push your income over the line.

If you’re nearing retirement or already enrolled in Medicare, reviewing your tax strategy annually can help keep your premiums under control.

What to Do If You’re Not Sure

If you’re uncertain whether IRMAA applies to you, or if you’re planning for retirement and want to avoid it, speak with a licensed agent listed on this website. They can help you:

• Understand your income thresholds

• Review your Medicare premium notices

• Explore options to reduce or appeal IRMAA

Proactive planning makes a measurable difference—and you don’t have to do it alone.

Taking Control of Your Medicare Costs

IRMAA is one of those hidden costs of retirement that can catch you off guard. But with some understanding and foresight, you can manage its impact—or even avoid it. The key is knowing how income affects your premiums and planning around it.

Reach out to a licensed agent listed on this website to get help interpreting your situation, appealing an IRMAA decision, or optimizing your income strategy for lower Medicare costs.