IRMAA: How Higher Income Can Increase Your Medicare Costs—and How Roth Planning Can Help
Many retirees are surprised to learn that Medicare is not a flat-cost program. For higher-income individuals, premiums for Medicare Part B and Part D can increase significantly due to a provision known as IRMAA.
Understanding how IRMAA works is essential for effective retirement planning—especially when evaluating Traditional versus Roth strategies.
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It is an additional surcharge applied to:
- Medicare Part B (medical insurance), and
- Medicare Part D (prescription drug coverage)
This means that individuals with higher income pay more for Medicare coverage than those with lower income.
How IRMAA Is Determined
IRMAA is based on your Modified Adjusted Gross Income (MAGI), which generally includes:
- Adjusted gross income, and
- Tax-exempt interest
Importantly, Medicare uses a two-year lookback. For example, your 2026 Medicare premiums are based on your 2024 income.
IRMAA operates in tiers. If your income exceeds certain thresholds, your premiums increase—not gradually, but in steps. Even a small increase in income can push you into a higher tier and result in a noticeable increase in annual Medicare costs.
What Triggers IRMAA Increases?
Several common retirement planning strategies can increase MAGI and potentially trigger higher IRMAA tiers, including:
- Required minimum distributions (RMDs)
- Traditional IRA withdrawals
- Roth IRA conversions
- Capital gains
This creates a situation where decisions intended to improve long-term tax outcomes may also increase near-term Medicare costs.
Why IRMAA Matters Even More After the First Death
For married couples, IRMAA planning becomes even more important when one spouse dies.
After the first death:
- The surviving spouse typically files as Single
- IRMAA income thresholds are significantly lower
- Income often does not decrease proportionally
As a result, the surviving spouse may be pushed into higher IRMAA tiers more easily, increasing Medicare premiums at a time when household income and resources may already be under pressure.
Where Roth Planning Comes In
One of the most effective ways to manage IRMAA exposure is through thoughtful use of Roth strategies.
Qualified distributions from Roth accounts:
- Are not included in taxable income
- Are not included in IRMAA calculations
This means that Roth assets can provide income in retirement without increasing Medicare premiums.
By contrast, distributions from Traditional IRAs increase taxable income and may push a retiree into a higher IRMAA tier.
The Planning Opportunity
Effective retirement planning is not just about minimizing income taxes. It is also about managing how different income sources interact over time.
Roth strategies can help:
- Smooth taxable income across years
- Reduce exposure to IRMAA surcharges
- Provide flexibility in retirement income planning
- Protect the surviving spouse from higher Medicare costs
Bottom Line
Higher taxable income can increase Medicare costs—and Roth planning can help manage both.
For advisors and clients alike, IRMAA is an important reminder that retirement income decisions have broader implications. Understanding these interactions can lead to more informed strategies and better long-term outcomes.