The information provided is for general informational purposes only and should not be construed as personalized investment, legal, or tax advice. Additionally, this article was written on 9/25/2025. All opinions expressed are subject to change without notice based on market, economic, legislative, or political conditions. While data from third-party sources is believed to be reliable, its accuracy, completeness, or reliability cannot be guaranteed. Legislation, regulatory, tax, legal or other policies are subject to change without notice and any of those changes may affect the opinions of the article below. Investment strategies mentioned may not be suitable for all individuals. Investors should assess their own financial situations and consult with a qualified tax advisor, CPA, financial planner, or investment manager to help answer questions about specific situations or needs prior to taking any action based upon this information.
Medicare Choices
Medicare choices require significant research and decision making concerning what level of coverage is right for you, which plans to apply for, and what possible supplementary insurance you may need to fill any gaps in coverage. This article can’t help you choose which programs you may need but instead covers a very specific financial concern applicable to many many Medicare subscribers, premium costs for Part B coverage. It can also apply to the somewhat less common Part D premiums as well
If you are eligible for Medicare Part B or D, you are usually required to pay at least 25% of the program cost, while the government foots the bill for the remaining 75%. These amounts are adjusted so that higher-income beneficiaries of the program pay more for their healthcare.with the government paying less.
“IRMAA”
Navigating Medicare costs is a critical part of retirement income planning, especially when considering the relationship between your income and your Medicare premiums. The key concern is something known as the Income-Related Monthly Adjustment Amount (IRMAA), which can significantly increase your Medicare Part B and Part D premiums.
Essentially, IRMAA is a bracketed system whereby your income determines how much you need to pay towards Medicare Part B and D premiums. The higher income you reported two years ago may mean instead of paying 25% of the program cost, you need to pay premiums equivalent to 35%, 50%, 65%, 80%, or even 85% of the total program cost instead. This means your Medicare premium could multiply by as much as 3.4x!
How It Works
MAGI Definition for IRMAA: MAGI for Medicare purposes is generally your adjusted gross income (AGI) plus tax-exempt interest and dividends. Essentially MAGI represents the total income you “made” in a given year. This would include any taxable portion of your Social Security Income (SSI), but exclude untaxed SSI. (MAGI for different purposes has slightly different calculations and if you see that MAGI includes untaxed SSI, it is talking about a different program)
The IRMAA “Cliff” The IRMAA is structured as a “cliff,” meaning if your MAGI is even a single dollar over a tier’s threshold, you will have to pay the higher premium for the entire year.
2025 Medicare Part B Premium Tiers
Medicare Part B premiums are based on your modified adjusted gross income (MAGI) from two years prior. For 2025 premiums, your 2023 MAGI is used, 2026 will be based on your 2024 MAGI. The standard monthly premium for Medicare Part B in 2025 is $185.00. However, individuals with a higher MAGI in 2023 will pay an IRMAA surcharge.
| Filing Status | MAGI from 2023 | Monthly Part B Premium (2025) |
| Individual | Less than or equal to $106,000 | $185.00 |
| Above $106,000 to $133,000 | $259.00 | |
| Above $133,000 to $167,000 | $370.00 | |
| Above $167,000 to $200,000 | $480.90 | |
| Above $200,000 to less than $500,000 | $591.90 | |
| $500,000 or more | $628.90 | |
| Married Filing Jointly | Less than or equal to $212,000 | $185.00 |
| Above $212,000 to $266,000 | $259.00 | |
| Above $266,000 to $334,000 | $370.00 | |
| Above $334,000 to $400,000 | $480.90 | |
| Above $400,000 to less than $750,000 | $591.90 | |
| $750,000 or more | $628.90 |
What About the Future
A difficult part of this from a planning perspective is the two year lookback. What makes it even more difficult is the brackets are not published two years ahead so some assumptions and educated guess work need to be used to make the most of planning for these costs. The Medicare premiums you pay for 2026 will be determined by your 2024 income, and your premiums for 2027 will be based on your 2025 income. The limits for these tiers are subject to change each year based on inflation.
Estimates for 2026
Unofficial reports are estimating a 2-3% increase in the IRMAA brackets for 2026 based on filers’ 2024 MAGI. Projections for the first IRMAA adjustment occur at $109,000 for single filers and $218,000 for married filing jointly. This is not confirmed and should not be used for actions at this time. Little can be done though, because 2024 has come and gone and those numbers, for most, are locked in.
Estimates for 2027
The premiums for 2027 will be based on your 2025 MAGI. There is no way to know for sure what the thresholds will be. Most prudent advisors caution not to use more than 1% adjustment for increasing these thresholds this far out without significantly risking tipping over into the next IRMAA bracket. The same two-year look-back applies, so your income planning for 2025 is a crucial step in managing your 2027 Medicare costs.
Planning Considerations
Since your Medicare premiums for a given year are based on your income from two years prior, financial planning is essential to manage your future costs. If you expect to have a year with particularly high income—from a Roth conversion, a large capital gain, or a significant IRA withdrawal—it could result in significantly higher Medicare premiums two years later. In 2025, the difference in the lowest and highest Part B premiums was $5,326.80 a year. (Keep in mind this figure could be as much as double for a married couple filing jointly.)
While jumping from the lowest to the highest tier in a given year is unlikely, due to the IRMAA structure as a “cliff,” small accounting differences could still have significant consequences.
If a married couple filing jointly made $266,000 in 2023, their Medicare Part B costs would be $259/month for 12 months for 2 people or $6,216. If instead, their tax return showed a MAGI of $266,001, the Medicare Part B premiums alone would be $370/month for 12 months for 2 people or $8,880.
That $1 in reported income just cost this couple $2,664 in Part B Premiums!!!
And keep in mind, this figure does not include the difference if that couple were enrolled in Medicare Part D as well.
It’s Not For Life
A potentially bright way of looking at this complicated and restrictive planning is simply that, mistakes happen and plans sometimes don’t work out, especially if trying to do everything on your own. If you have a surprise dividend on Dec 30, or one extra hour at a part time job, or a deduction did not go through on your income as planned, these mistakes will not cost you every year for the rest of your life. IRMAA is reevaluated every year and a spike in reported income one year will only affect that one year of premiums two years later. What is important is establishing a pattern and a plan to consistently take advantage of lower Medicare premiums as many of those years as you can.