Key Points
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Medicare has a standard premium it charges for Part B, while Part D costs are plan-specific.
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If you earn too much money, you could face surcharges on Part B and D premiums.
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Withdrawing from savings strategically and choosing the right retirement plan could help you avoid paying more for Medicare.
If you’re on Medicare, you may be used to paying a premium each month for Part B and Part D. You should also expect those premiums to rise over time.
Part B premiums commonly increase year to year. While your Part D premiums aren’t guaranteed to go up, it’s a possibility to prepare for.
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If you earned a lot of money in 2025, you may see your Medicare Part B and Part D costs jump substantially in 2027 thanks to income-related monthly adjustment amounts, or IRMAAs. Those surcharges could really throw your finances for a loop.
How IRMAAs work
IRMAAs are surcharges that are added to the cost of Part B and Part D for people whose income reaches a certain threshold that changes yearly. IRMAAs are also tiered, so while some people who face them may see a modest increase in their Medicare premiums, others might see a much larger increase.
IRMAAs are based on your income from two years prior. So if your income jumped in 2025 because you sold investments, took a large retirement plan withdrawal, or for any other reason, you could be looking at IRMAAs in 2027.
You’ll typically receive a notice if an IRMAA applies to you. But by the time that happens, it may be too late to reverse it (though you are allowed to appeal IRMAAs due to certain life-changing events).
How to avoid IRMAAs
Sometimes, IRMAAs aren’t avoidable. However, there are steps you can take to lower your chances of facing them.
First, be mindful of your retirement plan withdrawals. It pays to read up on annual IRMAA thresholds and keep your income below them if possible.
Another great way to reduce the likelihood of IRMAAs is to keep your retirement savings in a Roth IRA. Roth IRA withdrawals don’t count toward your modified adjusted gross income, which means they won’t push you into IRMAAs even if they’re substantial.
If you have money in a non-retirement account, also be careful when selling investments for more than what you paid for them. Capital gains taxes could raise your income and leave you on the hook for IRMAAs down the line.
At the same time, watch dividend income in a taxable account. Although it’s a good thing in theory, too much of it could lead to IRMAAs as well.
While certain costs associated with Medicare, like premiums, deductibles, and coinsurance, may be unavoidable, you may be able to decrease your chances of facing IRMAAs with careful income and tax planning. If you can’t avoid IRMAAs, it’s important to at least know they exist and account for them in your retirement budget.
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