By W Financial Advisors • Wealth Wednesday Brief • 3–5 min read
SCENARIO
"Why did my Medicare premiums almost double this year?" Frank asked his advisor, clearly frustrated. He was 68, in excellent health, and hadn't had any major life changes.
His advisor pulled up the Medicare billing notice. The reason: Frank had sold a rental property two years earlier, generating a one-time capital gain of $180,000. That income had pushed him into an IRMAA bracket, and Medicare had been waiting two years to present the bill.
"You should have told me about this," Frank said.
His advisor made a note to himself: next time a client has a large one-time income event, the Medicare conversation happens immediately.
THE CONCEPT
IRMAA, the Income-Related Monthly Adjustment Amount, is a surcharge added to standard Medicare Part B (outpatient medical coverage) and Part D (prescription drug coverage) premiums for beneficiaries above certain income thresholds.
Medicare uses your Modified Adjusted Gross Income (MAGI) from two years before to determine your IRMAA status. In 2024, the standard Medicare Part B premium is $174.70 per month. Individuals above the first IRMAA threshold pay significantly more, with the highest-income beneficiaries potentially paying over $550 per month for Part B alone.
IRMAA brackets for 2024 (individual filer, subject to annual adjustment):
- $103,000 or less: Standard premium ($174.70/mo)
- $103,001–$129,000: $244.60/mo
- $129,001–$161,000: $349.40/mo
- $161,001–$193,000: $454.20/mo
- Above $193,000: $559.00/mo
For married couples filing jointly, the thresholds are approximately doubled. IRMAA applies per person, so both members of a couple in a high-income year may each face surcharges.
EXAMPLE
Consider Sandra and Tom, both 70 and both on Medicare. In 2023, with a base income of approximately $160,000 combined, they did a $120,000 Roth conversion, bringing their combined MAGI to approximately $280,000. In 2025, Medicare reviews their 2023 income and applies IRMAA surcharges.
Instead of the standard $174.70 per month for Part B, each of them now pays $489.00 per month (the third IRMAA tier for married filing jointly, per 2024 CMS brackets). For the two of them combined, that is an additional $628.60 per month, or more than $7,500 per year, attributable largely to that Roth conversion.
The conversion may still have been worth it depending on their overall tax picture. But if the advisor had modeled the IRMAA impact in advance, they might have split the conversion across two years, keeping MAGI below the higher IRMAA threshold each year and reducing the premium impact.
STRATEGY
Planning around IRMAA involves a few key approaches:
- Know the brackets and model your income. Before any significant income event (Roth conversion, sale of property, large IRA withdrawal), calculate your projected MAGI and check whether the event pushes you into or through an IRMAA bracket.
- Spread income events over multiple years. A large Roth conversion in a single year might be better executed spread across two or three years, keeping MAGI below IRMAA thresholds each year and reducing the premium impact.
- Account for the two-year lag. IRMAA is based on income from the two years prior. If you have a large income event this year, start planning for the Medicare premium consequences now.
- Appeal if circumstances change. If your income has decreased significantly since the year Medicare is using (due to retirement, death of spouse, divorce, or other qualifying events), you can appeal for a reassessment using more recent income figures. This is an underutilized option.
COMMON MISTAKE
The most common IRMAA mistake is a large, unplanned income event (a property sale, estate distribution, or large Roth conversion) that was not modeled against Medicare premium thresholds in advance. Many of these events are entirely predictable and plannable. A thoughtful advisor will include IRMAA thresholds in any significant income event analysis.
A second mistake is not appealing when eligible. If your income from two years ago was unusually high due to a one-time event and your income has since normalized, filing a Life Changing Event appeal with Social Security (which administers IRMAA on behalf of Medicare) may reset your premiums to the standard level.
KEY TAKEAWAY
IRMAA is a real and sometimes significant cost that can follow large income events by two years; understanding the thresholds and modeling your income in advance may help you avoid premium surcharges that would otherwise come as an unpleasant surprise.
SOURCES & REFERENCES
1. Centers for Medicare & Medicaid Services. 2024 Medicare Parts A & B Premiums and Deductibles. Figures subject to annual adjustment. cms.gov.
This article is for informational and educational purposes only and should not be construed as personalized investment, tax, or financial advice. All examples are hypothetical and for illustrative purposes only. Please consult a qualified financial professional regarding your individual situation.
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