A client can do almost everything right heading into retirement and still be blindsided by a Medicare bill.

They may have saved consistently, built a thoughtful income plan, delayed Social Security, completed a Roth conversion, sold a business, or realized a large capital gain. Then, two years later, their Medicare Part B and Part D costs jump.

The culprit is often IRMAA — the Income-Related Monthly Adjustment Amount.

During a recent Financial Experts Network webinar, tax expert Larry Pon walked advisors through how IRMAA works, why it catches so many retirees by surprise, and how thoughtful tax planning can help manage the impact.

His central message was simple:

IRMAA should be part of retirement-income planning before the client ever receives a Medicare surcharge notice.

The Two-Year Lookback Is What Catches Clients Off Guard

IRMAA generally looks back two years when determining Medicare surcharges.

That means:

• 2024 income generally determines 2026 IRMAA.
• 2025 income generally determines 2027 IRMAA.
• 2026 income generally determines 2028 IRMAA.

That delay can make the surcharge feel disconnected from the event that caused it.

A client might retire in 2026 and assume Medicare premiums will immediately reflect lower retirement income. But if 2024 was a high-income year, the client may still face higher Medicare premiums until Social Security receives more current information or approves a qualifying redetermination.

For advisors, this makes age 63 a particularly important planning year. A major Roth conversion, business sale, stock-option exercise, or capital gain at age 63 may affect the client’s first year of Medicare premiums at age 65.

IRMAA Looks at More Than Taxable Income

Another common misunderstanding is assuming that IRMAA is based on taxable income.

It generally is not.

For IRMAA purposes, modified adjusted gross income is generally adjusted gross income plus tax-exempt interest.

That means income from several familiar planning areas can push clients into a higher Medicare tier, including:

• Required minimum distributions
• Roth conversions
• Capital gains
• Business income
• Rental income
• Deferred compensation
• Stock options and RSUs
• Taxable interest and dividends
• Tax-exempt municipal bond interest

That last item surprises many clients.

Municipal bond interest may be exempt from federal income tax, but it is still generally included in the IRMAA calculation.

So while municipal bonds may still make sense for other tax reasons, they are not necessarily an IRMAA solution.

IRMAA Has Cliffs, Not Just Gradual Increases

IRMAA does not behave like an ordinary marginal tax bracket.

Once a client crosses into the next income tier, the higher Medicare adjustment may apply for the year.

That makes threshold planning especially important.

A client who is only slightly above an IRMAA cutoff may face a noticeably higher annual Medicare cost than a client who is just below it.

This can create practical year-end planning opportunities around:

• Roth conversion amounts
• Capital-gain realization
• Tax-loss harvesting
• Retirement-plan contributions
• Charitable giving
• Deferred compensation timing

But advisors should be careful not to over-optimize around a single threshold. Avoiding a surcharge is useful, but it should not derail a strategy that may create much larger long-term benefits.

Roth Conversions Need an IRMAA Line Item

Roth conversions came up repeatedly during the session because they are one of the most common planning decisions that can increase IRMAA.

A conversion increases taxable income today, which may increase Medicare premiums two years later.

That additional Medicare cost should be included in the conversion analysis.

But Larry Pon also emphasized that IRMAA should not automatically stop a conversion.

A Roth conversion may still make sense if it:

• Reduces future RMDs
• Lowers lifetime taxes
• Improves survivor tax outcomes
• Builds tax-free retirement assets
• Creates more flexibility later in life
• Improves the tax treatment of inherited assets

The right question is not:

“Will this conversion trigger IRMAA?”

It is:

“Does the lifetime value of the conversion outweigh the additional tax and Medicare cost?”

That is a much better planning framework.

QCDs Can Be Especially Valuable for Charitable Clients

One of the most practical IRMAA strategies discussed was the qualified charitable distribution, or QCD.

For an eligible client age 70½ or older, a QCD allows money to move directly from an IRA to a qualifying charity.

Why is that important?

Because if the client first takes the IRA distribution into income and then makes a charitable gift, the distribution generally increases AGI before the charitable deduction is applied.

A QCD can avoid that income inclusion in the first place.

That may help:

• Satisfy part or all of an RMD
• Reduce AGI
• Reduce IRMAA MAGI
• Potentially keep the client in a lower Medicare tier

For a client who already intends to give to charity, QCDs can be an elegant way to align charitable, tax, and Medicare planning.

HSA Assets Can Become Valuable Retirement Dollars

Health savings accounts can also play an important role in IRMAA planning.

Qualified HSA withdrawals used for eligible medical expenses generally do not increase taxable income.

That means HSA assets may provide a valuable source of retirement healthcare funding without increasing IRMAA MAGI.

Pon encouraged eligible clients to think of the HSA as a long-term retirement asset rather than simply a short-term medical spending account.

That may mean:

• Maximizing contributions while eligible
• Paying current medical costs from other resources when practical
• Saving receipts
• Investing the HSA
• Using accumulated funds later for qualified retirement healthcare expenses

The major caution is Medicare enrollment.

Once a client enrolls in Medicare, HSA contribution eligibility generally ends. That makes the timing of Medicare enrollment, Social Security claiming, and retirement especially important for clients still contributing to HSAs.

Form SSA-44 Can Help — But Only in Specific Situations

One of the most important parts of the webinar involved Form SSA-44.

Clients often hear that they can “appeal IRMAA” if their income later falls.

That is only partly true.

SSA-44 is specifically designed for certain recognized life-changing events that cause income to decline, such as:

• Retirement or work stoppage
• Reduced work hours
• Marriage
• Divorce or annulment
• Death of a spouse
• Loss of pension income
• Certain qualifying losses of income-producing property
• Certain employer settlement payments

The form allows Social Security to consider more recent income rather than automatically relying on the older tax return.

But not every one-time income event qualifies.

A voluntary home sale, Roth conversion, capital gain, inherited IRA distribution, or large taxable withdrawal is not automatically a qualifying event just because the income will not repeat.

That distinction is crucial.

Documentation Can Make or Break an IRMAA Redetermination

Pon strongly emphasized documentation.

When a client has a qualifying life-changing event, the goal is not simply to tell Social Security that income has fallen.

The client should be prepared to prove it.

Useful documentation may include:

• Employer retirement letters
• Final pay stubs
• Reduced-hours documentation
• Pension correspondence
• Marriage or divorce documents
• Death certificates
• Tax returns or transcripts
• A detailed projection of expected MAGI

Pon recommended building the projected income estimate from the prior tax return and showing exactly what has changed.

That makes the request more credible and gives Social Security a clearer basis for evaluating it.

Large Asset Sales Can Create a Medicare Surprise

Selling a business, home, investment property, or concentrated stock position can create a large capital gain — and a large IRMAA surprise two years later.

A home sale is a particularly common example.

Clients may assume the Section 121 home-sale exclusion eliminates the entire gain. Sometimes it does not.

That is why basis records matter.

Major improvements such as:

• Additions
• Remodeling
• Roof replacement
• Structural improvements
• Certain landscaping costs

may increase basis and reduce the taxable gain.

Advisors can add value simply by encouraging clients to maintain these records long before the house is sold.

Deferred Compensation and Stock Compensation Deserve Extra Attention

For executives and business owners, the biggest IRMAA problems may come from compensation rather than investments.

A large nonqualified deferred-compensation payment at retirement may create a significant MAGI spike.

Likewise, stock-option exercises or RSU vesting may generate substantial W-2 income.

Before a client retires, advisors should review:

• Deferred compensation elections
• Lump-sum versus installment options
• Vesting schedules
• Stock-option exercise plans
• Expected retirement-year income
• Medicare lookback years

The earlier those decisions are modeled, the more planning flexibility the client may have.

Medicare Advantage Does Not Eliminate IRMAA

Another misconception addressed during the webinar was whether clients enrolled in Medicare Advantage avoid IRMAA.

They generally do not.

Medicare Advantage beneficiaries still typically pay the Part B premium. If their income is high enough, the Part B IRMAA adjustment can still apply.

That makes IRMAA relevant even for clients who are not enrolled in Original Medicare with a Medigap policy.

The Bigger Lesson: IRMAA Is a Planning Cost, Not a Planning Goal

Perhaps the most useful takeaway from the session was philosophical.

IRMAA matters.

It should be modeled.

It should be discussed.

But it should not become the client’s entire financial strategy.

A client should not avoid a good Roth conversion, sell the wrong investment, skip a sound business decision, or restructure an estate plan solely to save a year of Medicare surcharges.

The goal is not to minimize IRMAA at all costs.

The goal is to make better financial decisions with IRMAA included in the analysis.

For advisors, that means connecting Medicare premiums with tax planning, Roth conversions, charitable giving, HSAs, retirement dates, portfolio decisions, and large income events.

When that planning begins early, IRMAA becomes much less likely to be an unpleasant surprise.

Five Questions Advisors Frequently Hear About IRMAA

1. What income does Medicare use to calculate IRMAA?

Social Security generally uses modified adjusted gross income from the tax return two years before the premium year. For IRMAA, MAGI generally equals adjusted gross income plus tax-exempt interest.

2. Can a Roth conversion increase Medicare premiums?

Yes. A Roth conversion increases taxable income and can raise IRMAA two years later. However, that does not necessarily make the conversion a bad strategy. Advisors should compare the additional Medicare cost with the conversion’s potential lifetime tax benefits.

3. Can clients appeal IRMAA if their income drops after retirement?

Potentially. Form SSA-44 may be used when a recognized life-changing event, such as retirement or work reduction, causes income to decline. A one-time capital gain or Roth conversion by itself generally does not qualify as a life-changing event.

4. Can QCDs help reduce IRMAA?

Yes. For eligible clients, a qualified charitable distribution can satisfy charitable goals and potentially count toward an RMD without increasing AGI in the same way as an ordinary taxable IRA withdrawal.

5. Does IRMAA apply to Medicare Advantage?

Medicare Advantage participants generally still pay the Part B premium, so they can still be subject to the Part B IRMAA adjustment. The surcharge is tied to Medicare Part B and Part D costs rather than being avoided simply by choosing Medicare Advantage.