What Is IRMAA? A Financial Advisor's Complete Guide to Medicare Surcharges

If you have clients with household income above $206,000, they are almost certainly paying more for Medicare than they need to — and many of them don't know it. The culprit is IRMAA, the Income-Related Monthly Adjustment Amount, and understanding it is one of the highest-value things a financial advisor can do for pre-retiree clients.

What Is IRMAA?

IRMAA stands for Income-Related Monthly Adjustment Amount. It is a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. The Social Security Administration (SSA) determines IRMAA based on your client's Modified Adjusted Gross Income (MAGI) from two years prior.

In plain terms: what your client earned in 2023 determines how much extra they pay for Medicare in 2025.

IRMAA Brackets for 2025

IRMAA is structured in tiers. The more income exceeds the base threshold, the higher the surcharge. Here are the 2025 brackets for individuals and married filing jointly:

Individual (Single / Married Filing Separately)

• ≤ $106,000: No IRMAA — standard Part B premium ($185.00/mo)
• $106,001 – $133,000: +$74.00/mo per person
• $133,001 – $167,000: +$187.00/mo per person
• $167,001 – $200,000: +$300.40/mo per person
• $200,001 – $500,000: +$413.90/mo per person
• > $500,000: +$450.90/mo per person

Married Filing Jointly

• ≤ $212,000: No IRMAA
• $212,001 – $266,000: +$74.00/mo per person
• $266,001 – $334,000: +$187.00/mo per person
• $334,001 – $400,000: +$300.40/mo per person
• $400,001 – $750,000: +$413.90/mo per person
• > $750,000: +$450.90/mo per person

At the highest tier, a married couple pays an extra $10,822/year in Part B surcharges alone — before Part D. That is a material planning opportunity for almost any high-income client.

The IRMAA Cliff: Where the Real Danger Is

IRMAA brackets work like tax brackets in reverse: one dollar of extra income can push a client into the next tier and trigger hundreds of dollars in new surcharges. This is called the IRMAA cliff, and it is one of the most important concepts in retirement income planning.

Consider a married couple earning $265,000 MAGI. They pay zero IRMAA. If their MAGI rises to $266,001 — just $1,001 more — they each jump to Tier 2 and owe an extra $74/month per person, or $1,776/year more.

Common triggers that accidentally push clients over an IRMAA cliff include:

• Roth conversions
• Required Minimum Distributions (RMDs)
• Capital gains from portfolio rebalancing or real estate sales
• Business income spikes
• Social Security benefits becoming taxable

The two-year lookback makes this especially tricky. A client who had a one-time income spike — say, from selling a business in 2023 — will see higher Medicare premiums in 2025 even though their income has since dropped.

Why IRMAA Planning Matters More Than Most Advisors Realize

Many advisors focus on investment returns and overlook Medicare costs entirely. But for a couple entering retirement at 65, IRMAA can represent tens of thousands of dollars in avoidable costs over a 20-year retirement.

Here is a quick illustration:

• A couple at IRMAA Tier 2 (MFJ $266k–$334k) pays $4,488/year extra in Part B surcharges alone
• Over a 20-year retirement, that is nearly $90,000 in additional premiums — before Part D
• A Roth conversion strategy that keeps them at Tier 1 or below could save $1,776 to $4,488 annually

This is exactly the kind of dollar-specific insight that turns a client meeting into a signed engagement.

Strategies to Reduce or Avoid IRMAA

1. Roth Conversion Timing

Converting traditional IRA assets to Roth in years when MAGI is lower — typically the early retirement years before RMDs begin — can reduce future taxable income and keep clients out of higher IRMAA tiers. The key is modeling the trade-off between conversion taxes today versus Medicare surcharges (and RMD taxes) later.

2. Qualified Charitable Distributions (QCDs)

Clients over 70½ can direct up to $105,000 per year from an IRA directly to a qualified charity as a QCD. The QCD satisfies all or part of the RMD without the distribution counting as taxable income — and therefore does not increase MAGI for IRMAA purposes.

3. Capital Gains Harvesting Timing

If a client is close to an IRMAA threshold, large capital gains realizations should be timed carefully. Spreading gains across tax years or harvesting in lower-income years can keep MAGI below the cliff.

4. IRMAA Appeals (Life-Changing Events)

If a client's income dropped significantly since the two-year lookback year — due to retirement, divorce, death of a spouse, or other qualifying life events — they can appeal their IRMAA determination using SSA Form SSA-44. Advisors who know this can save clients thousands in premiums they no longer owe.

How to Model IRMAA for Clients

The challenge with IRMAA planning is that the math involves multiple moving parts: projected MAGI, filing status, Roth conversion amounts, RMD schedules, and benefit year offsets. Doing this in a spreadsheet is time-consuming and prone to error.

Retire360's IRMAA calculator lets you enter a client's MAGI and filing status and instantly see which tier they fall in, their annual surcharge, and exactly how much they would save by reducing income below the next threshold. It is the fastest way to have this conversation with a client in the room.

Key Takeaways for Financial Advisors

• IRMAA is triggered by MAGI from two years prior — plan ahead
• The cliff effect means even $1 of extra income can cost thousands
• Roth conversions, QCDs, and capital gains timing are the main levers
• Clients can appeal IRMAA if income dropped due to a qualifying life event
• At the highest tier, a couple can pay over $10,000/year extra — this is a real planning opportunity

IRMAA is not a tax most clients have heard of, which makes it one of the most powerful planning conversations you can have. The client who learns they can save $3,500/year with a simple income adjustment is not going anywhere.