The Truth About IRMAA That Nobody Explains

Is it possible that retirees are wasting their time trying to avoid IRMAA? Or worse, by avoiding IRMAA, are they making decisions today that could actually hurt them later?

Retirees spend a lot of time trying to avoid IRMAA. They limit Roth conversions, carefully manage capital gains, and sometimes make major tax decisions just to stay below one of these Medicare income thresholds.

And sometimes that makes sense.

But sometimes avoiding IRMAA can actually cost you more than paying it.

So let's answer a question that I think gets overlooked: Is IRMAA really that bad? More importantly, when should you try to avoid it, and when might paying IRMAA actually be the better financial decision?

What Is IRMAA?

To understand that, we first need to understand what IRMAA actually is.

At its heart, IRMAA is a means test. Higher-income Medicare beneficiaries are required to pay more for their coverage.

With Medicare Part B, most beneficiaries pay about 25% of the actual cost of their coverage. As your income moves through the IRMAA thresholds, your share increases to about 35%, then 50%, 65%, 80%, and eventually 85%.

So another way to think about IRMAA is that as your income rises, the government reduces the subsidy it provides for your Medicare coverage.

How Does Medicare Determine IRMAA?

So how does Medicare determine whether you owe it?

It generally looks at your modified adjusted gross income, or MAGI, from two years earlier. So your 2026 Medicare premiums are generally based on the income reported on your 2024 tax return.

And if that income crosses one of the IRMAA thresholds, your Part B and Part D premiums increase.

This is where IRMAA gets frustrating, because unlike normal tax brackets, IRMAA creates a cliff.

With an ordinary tax bracket, only the dollars above the threshold are taxed at the higher rate. IRMAA doesn't work that way.

In 2026, for example, a married couple with MAGI of $218,000 stays in the standard Medicare premium tier. But if their MAGI increases to $218,001, each spouse's Part B premium jumps from $202.90 to $284.10 per month. That's about a 40% increase, and they also pick up an additional Part D surcharge.

So I completely understand why retirees pay attention to these thresholds.

If you're sitting right on the edge and you can easily stay below it, you probably should.

But here's where I think things start to go wrong.

People begin treating the IRMAA threshold as a line they can never cross instead of treating IRMAA as another cost of generating additional income.

And I think that's a much better way to analyze it.

How IRMAA Affects Roth Conversions

Suppose you're considering a $100,000 Roth conversion, and those dollars are taxed at 22%. That's $22,000 of federal income tax.

But suppose that conversion also pushes you into a higher IRMAA tier and causes another $3,000 in Medicare premiums.

Now the real cost of that conversion isn't just $22,000. It's $25,000.

So even though you're technically making the conversion in the 22% federal tax bracket, once you account for IRMAA, the effective cost is closer to 25%.

Does that mean you shouldn't do the conversion?

Not necessarily. It simply means IRMAA needs to be included in the cost of the decision.

And this is where Roth conversions provide a good example of why avoiding IRMAA at all costs can be shortsighted.

Let's say a retired couple has an opportunity to make a larger Roth conversion while they're still in a relatively favorable tax situation, but doing so pushes them into the next IRMAA tier.

They could stop the conversion and save a few thousand dollars in Medicare premiums.

But what are they giving up to save that money?
Maybe the conversion reduces their future required minimum distributions. Maybe it reduces taxable income later in retirement. Maybe they're concerned about one spouse eventually becoming a single taxpayer. Maybe they're trying to create more tax diversification. Or maybe they're trying to leave their heirs a more tax-efficient asset.

That's why I don't think the right question is, "Did this Roth conversion trigger IRMAA?"

The better question is, "What is the total cost of this conversion, and what am I getting in return?"

IRMAA is simply one of the costs that should be included in that analysis.

Why Avoiding IRMAA Can Cost You More Later

And that becomes even more important when you look beyond the current year.

If you skip Roth conversions today simply to avoid IRMAA, that money remains in the traditional IRA. That can mean larger RMDs later, more taxable income, and potentially even more IRMAA in future years.

For married couples, there is another issue.

When one spouse dies, the surviving spouse may still have much of the same retirement income and retirement assets, but now that person is filing single with much lower tax and IRMAA thresholds.

So a decision that saves a couple a few thousand dollars in Medicare premiums today could potentially create a much larger problem later.

That's why I think IRMAA has to be viewed as part of the entire retirement tax plan, not as a one-year expense that has to be avoided.

When Should You Try to Avoid IRMAA?

Now, there are absolutely situations where I would try to avoid IRMAA.

If you're just slightly above a threshold and you can reduce your income without giving up anything meaningful, that's an easy decision.

Maybe you make a slightly smaller Roth conversion. Maybe you delay realizing a capital gain. Maybe you harvest a loss or shift some discretionary income into another year.

If a relatively small adjustment saves you thousands of dollars without materially changing the rest of your plan, that's a good trade.

But avoiding IRMAA becomes questionable when the cost of avoiding it is greater than the surcharge itself.

Don't Make Avoiding IRMAA the Goal of Your Retirement Plan

And that's really the framework I want you to take away from this.

Don't think of an IRMAA threshold as a line you can never cross.

Treat the additional Medicare premium as another cost of whatever financial decision you're considering, and then ask whether the benefits justify that cost.

So should you try to avoid IRMAA?

Sometimes, absolutely. But I wouldn't make avoiding IRMAA the goal of your retirement plan.

Instead, ask a different question:

What does avoiding IRMAA cost me? BOLD THIS

If staying below the threshold saves you money without hurting anything else, take the savings.

But if avoiding IRMAA means giving up a valuable planning opportunity or creating a larger problem down the road, then paying the surcharge may be the better decision.

IRMAA matters.

It just shouldn't be the tail that wags the dog.