The Medicare program covers many healthcare costs for retirees, but not all of them. For this reason, planning to cover your share of medical expenses is an important part of the retirement planning process.
Your retirement plan needs to account for monthly premiums, deductibles, and coinsurance amounts. If you have a high income, you may also need to adjust your retirement plan to include IRMAA.
What Is IRMAA?
IRMAA is an acronym for Income Related Monthly Adjustment Amount, and it represents a calculation that can have a significant impact on your healthcare costs. Due to IRMAA, some higher earners will pay higher premiums for Medicare Parts B and D.
To determine if an IRMAA applies to you, and to prepare for it, you must first understand why it exists and how it works. We’ll start with a brief history.
History of the IRMAA
When Medicare was established, the federal government decided to pay 100% of costs for hospital care and 75% of costs for other medical services. These later became known as Medicare Part A and Part B, respectively. The other 25% of Medicare Part B was covered by monthly premiums from beneficiaries.
IRMAA was introduced as a part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and took effect in 2007. It requires high earners to pay more than their 25% share to reduce costs for lower earners.
The Medicare Modernization Act also introduced Medicare Part D, which covers prescription drugs. IRMAA was expanded to apply to Medicare Part D in the Affordable Care Act. Now, high earners pay additional premiums for both Medicare Part B and Part D.
Who Could Owe an IRMAA?
As previously mentioned, IRMAA applies to individuals with high incomes, but what does ‘high’ mean in this context? To answer this question, you will need information from The Centers for Medicare and Medicaid Services [CMS]. Each year, they identify the income levels that will require an individual to owe an IRMAA and release tables that detail the IRMAA that these individuals will owe.
In 2025, if you file taxes as Single or Married Filing Separately, you will not owe an IRMAA if your income is below $106,000. A higher threshold applies for those who file taxes as Married Filing Jointly and it is $212,000. These amounts are based on your Modified Adjusted Gross Income [MAGI] from your tax return two years ago. Your MAGI is determined by adding line 2a for Nontaxable Interest to line 11 for Adjusted Gross Income from your tax form 1040.
There are several tiers of IRMAA and the highest applies to those who file as Single and earn over $500,000, Married Filing Jointly and earn over $750,000, and Married Filing Separately and earn over $394,001. These thresholds are reviewed each year and adjusted for inflation if necessary.
For a full list of IRMAA amounts and who owes them, reference our article, Medicare Premiums and Coinsurance in 2025.
Can You Appeal IRMAA?
You can appeal IRMAA in certain circumstances – like a life changing event that impacts your income. These life-changing events include:
- the death of a spouse.
- marriage.
- divorce.
- you or your spouse have stopped working.
- you or your spouse have reduced the number of hours worked.
- the loss of pension.
- the loss of settlement payment from a current or former employer due to closure or bankruptcy.
- the loss of income-producing property due to natural disaster, disease, fraud, or other circumstances.
You may also be able to appeal IRMAA if your tax return from two years ago is no longer an accurate representation of your income. For example, you may be able to appeal IRMAA if you filed an amended return or have a more recent tax return that shows lower income. To process an appeal, file form SSA-44 with your local Social Security office.
Your Medicare premiums, including IRMAA, are an important part of your expenses in retirement. This makes them vital to your overall retirement plan. Fortunately, an experienced financial advisor can help you adjust your retirement plan to account for Medicare premiums and IRMAA.
Get Answers to Your Medicare Questions with Meld Financial
At Meld Financial, our team of tax, legal, and investment professionals can answer your most pressing Medicare questions. We have spent four decades helping clients optimize their government benefits and have the experience to help you too.
Throughout our decades of helping clients, we have created a unique wealth management program called Financial Fingerprint®. It brings together the most important aspects of your financial life into one easy to understand plan.
To learn more about Financial Fingerprint® and get started, contact a member of our team today.
