Most retirees encounter Medicare as a coverage decision — which plan, which prescription drug formulary, whether to choose Original Medicare or Medicare Advantage. Very few encounter it as an income planning decision. And yet, for a significant number of retirees, Medicare is one of the most direct ways their income choices in one year translate into real costs two years later. The mechanism is called IRMAA — the Income-Related Monthly Adjustment Amount — and it arrives quietly, without warning, in a letter from Social Security.
If your income in 2024 exceeded certain thresholds, your Medicare Part B and Part D premiums in 2026 are higher than the standard rate. Not because your coverage changed. Not because you made a Medicare decision differently. Because a financial event two years ago — a Roth conversion, a property sale, a Required Minimum Distribution, a deferred compensation payout — pushed your adjusted gross income above a bracket the government uses to calculate your healthcare costs today.
How IRMAA Actually Works
Medicare Part B premiums are not flat. They start at a standard base rate and increase in tiers based on your modified adjusted gross income from two years prior. In 2026, the standard Part B premium is approximately $185 per month per person. But for individuals whose 2024 MAGI exceeded roughly $106,000 — or couples exceeding $212,000 — that premium climbs. At the highest income tier, a single retiree can pay more than $600 per month for Part B alone — more than three times the standard rate.
Part D premiums follow a similar structure. The surcharges from both programs are added directly to your Social Security payment — meaning your monthly check is reduced before it arrives. Many retirees notice the difference before they understand the cause.
The Two-Year Lag Is the Trap
The feature of IRMAA that catches most retirees off guard is not the surcharge itself — it is the timing. Medicare uses your tax return from two years ago to set your current premiums. This means that a large income event in any given year does not affect your Medicare bill until two years later, when the connection is easy to miss.
“The Health Basilisk tightens gradually, not all at once. By the time most retirees feel the constriction, the income event that caused it is two years in the past.”
Consider a retiree who executes a large Roth conversion in 2024 — a strategically sound decision to reduce future tax exposure. The conversion increases their 2024 MAGI. Their 2025 Medicare premiums are unaffected. But in 2026, they receive a letter from Social Security informing them their Part B premium has increased by $200 per month. Per person. That is $4,800 per year for a couple — a cost directly traceable to a decision made two years earlier that may not have fully accounted for the Medicare interaction.
What Triggers IRMAA
IRMAA is not limited to Roth conversions. Any event that increases modified adjusted gross income can trigger a surcharge two years later. Common triggers include Required Minimum Distributions — which begin at age 73 and increase in size over time — large capital gains from the sale of appreciated assets, rental income, deferred compensation payouts, inherited IRA distributions, and pension income. For retirees with multiple income sources, these can stack in ways that push MAGI across multiple IRMAA tiers simultaneously.
Questions to Ask About Your IRMAA Exposure
- What was your modified adjusted gross income in the two most recent tax years?
- Are there income events coming in the next one to two years — RMDs, property sales, conversions — that could push you into a higher IRMAA tier?
- Has your advisor modeled your Medicare premium trajectory alongside your income plan?
- If you’ve had a significant income change since the lookback year, have you filed a Life-Changing Event appeal with Social Security?
The Appeal Option Most People Don’t Know Exists
If your income has decreased significantly since the lookback year — due to retirement, the death of a spouse, divorce, or loss of income — you may be eligible to appeal your IRMAA determination using a Life-Changing Event form. Social Security can use more recent income information to recalculate your premium if your circumstances have materially changed. This option is underutilized because most retirees don’t know it exists until after they’ve paid higher premiums for months.
How the REGAL Framework Addresses This
Within the Retire REGAL® framework, Medicare and IRMAA are treated as income planning variables, not administrative tasks. Every significant income decision — conversion timing, RMD management, asset sale sequencing — is evaluated through the lens of its two-year Medicare impact alongside its immediate tax effect. The goal is not to avoid income, but to sequence it in a way that minimizes unintended consequences across realms. The Health Basilisk does not constrict dramatically. It tightens incrementally, in ways that are entirely predictable if you know where to look — and entirely avoidable if you plan accordingly.
