Summary:
- The Basics of Medicare
- The Costs of Medicare
- What is an IRMAA
- Ways to Plan for IRMAAs
- Examples
The Basics of Medicare
Before we get into explaining what an IRMAA is, it’s important to have a basic understanding of the basics of Medicare and its associated costs.
Medicare is a federal health insurance program for people who are 65 or older, and for some younger people who meet qualifying criteria. It comes in several parts:
- Part A covers hospital expenses, stays at skilled nursing facilities, hospice care, and some in-home health care.
- Part B covers doctor visits, outpatient care like x-rays, and durable medical equipment.
- “Part C” refers to Medicare Advantage plans which are offered by private insurance companies. These plans roll your Medicare coverage experience into a bundled experience. Advantage plans offer benefits beyond the coverage offered by Part A and Part B alone, but you still need to be enrolled in Part A and Part B!
- Medigap/Supplement policies are federally standardized supplemental coverage sold by private insurance companies. They offer additional benefits in addition to Part A and Part B.
- Part D covers prescription drugs.
Typically, you’ll choose to go one of two routes, you can combine:
- Part A, Part B, and Part C (which usually covers prescription coverage!), or
- Part A, Part B, a Medigap/Supplement, and Part D.
The Cost of Medicare
Of course, each part of Medicare comes with its own cost. Here in Washington state in 2025, the costs could look like this:
- Part A is usually free! This depends on how long you or your spouse has paid into Medicare. If you don’t qualify for premium-free Part A, you can pay for it, and the cost varies.
- Part B starts at $185 per month. This amount is set by the federal government every calendar year and does change annually.
- “Part C” Advantage plans range in price, with many plans being offered at $0 a month. The national average monthly price for an Advantage plan is $17 in 2025.
- Medigap/Supplement policies range greatly in coverage and in price, from $50-$300 per month.
- Part D range from $0-$100 per month.
So What is an IRMAA?
Now that we’ve reviewed the expected costs of all the parts of Medicare, we’re ready to get to the point: what is an IRMAA? IRMAA stands for Income-Related Monthly Adjustment Amount. An IRMAA is basically a surcharge that can apply to your Part B premiums and your Part D premiums, based on your recent income. To put it plainly, the higher your income in the years leading up to your retirement, the higher your Part B and Part D premiums. Let’s take a closer look.
IRMAAs are based off your income from two years ago. For example, if you turn 65 in 2025, when you enroll in Medicare your Part B and Part D premiums for the duration of 2025 will be based off the total income you made in 2023. Your 2026 premiums will be based off the total income you made in 2024, and so on.
The amount of the IRMAA depends on how much money you made in the look-back year. Here’s the table from 2025 that sets IRMAAs for Part B premiums based off 2023 income:
A new table with new IRMAA table with updated brackets and rates is published each year.
If you haven’t heard of IRMAAs before you turn 65 in 2025 and earned more than $106,000 in 2023 (if you filed your taxes individually that year), you may be in for a nasty surprise when your Part B premium is higher than the baseline $185 per month. It’s important to be aware of the IRMAA table and how it plays a role in your Medicare costs as you make plans for retirement.
Planning for IRMAAs
If you find yourself subject to an IRMAA you may wonder if there’s any action you can take to reduce or eliminate the adjustment. The good news is that there is one way you can potentially plan for (and perhaps prevent) an IRMAA.
There is a form called an SSA-44. This form allows you to document a life-changing event and elect to have your IRMAA based on the previous year’s income rather than two-years prior. If you filed an SSA-44 in 2025, your IRMAA would be based on 2024 total income instead of 2023. If your income in 2024 was less than 2023, that could leave you with a less substantial IRMAA in 2025!
Of course, only certain life-changing events qualify, they are:
- Marriage
- Divorce
- Death of your spouse
- Work Stoppage or Reduction (for you or your spouse)
- Loss of income-producing property NOT due to sale
- Loss of pension income (for you or your spouse)
- Receipt of an employer settlement payment (for you or your spouse)
If utilizing an SSA-44 will result in a lower IRMAA depends greatly on your individual scenario. Here is are some examples:
Let’s say that a couple has filed their taxes jointly in 2023 and their combined income was $300,000. Let’s also say that they got divorced in 2024 and are now filing their taxes individually, with one of them earning $100,000 in 2024 and the other earning $200,000. The one who is now making $100,000 could file an SSA-44 because they experienced a qualifying life-changing event (divorce), and if approved, have their 2025 IRMAA based off their 2024 income instead of the joint $300,000 income from 2023.
Let’s say that a couple who files their taxes jointly every year are 66 and 65 years old. Let’s say that in 2023 they were both working and earned $300,000 total. One retired in early 2024, reducing their household income to $150,000 in 2024. The other plans to retire in 2025. Their 2025 IRMAAs would normally be based on their earnings in 2023 ($300,000). But, if they file individual SSA-44s based on their recent work stoppage, their individual IRMAAs would both be based on their income from 2024 ($150,000).
Of course, these are just the basics of IRMAAs, and the SSA-44 is just one tool in your toolkit for preparing for them! Long-term tax planning can also play a big role in planning for IRMAAs. If you are curious about IRMAAs, or wondering if an SSA-44 fits into your financial plan, reach out to us.