This article is for general informational and educational purposes only and is not intended as personalized financial advice.
Medicare Choices
Medicare decisions require significant research and evaluation regarding coverage levels, plan selection, and whether supplemental insurance is needed to address potential gaps.
This article does not address individual plan or coverage selection. Instead, it focuses on a specific financial consideration that affects many Medicare beneficiaries: premium costs for Part B coverage. Some of these concepts may also apply to Part D premiums.
If you are eligible for Medicare Part B or Part D, beneficiaries are generally responsible for a portion of total program costs, while the federal government subsidizes the remainder. Premium amounts are adjusted so that higher-income beneficiaries may pay a larger share of total program costs, with government subsidies reduced accordingly.
“IRMAA”
Navigating Medicare costs is an important part of retirement income planning, particularly when considering the relationship between income and Medicare premiums.
A key factor is the Income-Related Monthly Adjustment Amount (IRMAA), which may result in higher Medicare Part B and Part D premiums for individuals above certain income thresholds.
IRMAA operates under a bracketed system in which income (reported two years prior) determines how much an individual must pay toward Medicare Part B and Part D premiums. The standard individual share may represent approximately 25% of total program cost. Depending on income, that share may increase to 35%, 50%, 65%, 80%, or even 85% of total program cost. In certain cases, premiums at the highest tier may be several times higher than the standard amount.
Because IRMAA operates as a tiered “cliff” system, exceeding an income threshold—even by a small amount—may result in a higher premium tier for the entire year.
Certain life events (such as retirement, divorce, or the death of a spouse) may allow individuals to request a reconsideration of their IRMAA determination through Social Security.
How It Works
MAGI Definition for IRMAA
For Medicare purposes, Modified Adjusted Gross Income (MAGI) generally consists of adjusted gross income (AGI) plus tax-exempt interest. MAGI reflects total reported income for a given year and may include the taxable portion of Social Security benefits while excluding non-taxable portions.
MAGI calculations can vary by program, so definitions may differ depending on context.
2025 Medicare Part B Premium Tiers
Medicare Part B premiums are based on MAGI from two years prior. For 2025 premiums, 2023 MAGI is used. Premiums for 2026 will be based on 2024 MAGI.
The standard monthly premium for Medicare Part B in 2025 is $185.00. Higher-income individuals may pay an IRMAA surcharge. Premium figures are based on published CMS guidance for 2025 and are subject to change.
Individual Filers
| 2023 MAGI | Monthly Part B Premium (2025) |
| ≤ $106,000 | $185.00 |
| $106,001 – $133,000 | $259.00 |
| $133,001 – $167,000 | $370.00 |
| $167,001 – $200,000 | $480.90 |
| $200,001 – $499,999 | $591.90 |
| ≥ $500,000 | $628.90 |
Married Filing Jointly
| 2023 MAGI | Monthly Part B Premium (2025) |
| ≤ $212,000 | $185.00 |
| $212,001 – $266,000 | $259.00 |
| $266,001 – $334,000 | $370.00 |
| $334,001 – $400,000 | $480.90 |
| $400,001 – $749,999 | $591.90 |
| ≥ $750,000 | $628.90 |
What About the Future?
A complicating factor in planning is the two-year income lookback used to determine premiums. Additionally, future IRMAA brackets are not published years in advance, which means planning often involves assumptions that may not ultimately reflect actual thresholds.
Medicare premiums for 2026 will be determined by 2024 income. Premiums for 2027 will be based on 2025 income. Income thresholds are generally adjusted annually and may change due to inflation or legislative action.
Estimates for 2026
Preliminary projections from industry sources have suggested a potential 2–3% increase in IRMAA thresholds for 2026 based on 2024 MAGI. These figures are estimates only, are not confirmed, and should not be relied upon for decision-making.
Because 2024 income has already been realized for most individuals, planning flexibility for 2026 premiums may be limited.
Estimates for 2027
Premiums for 2027 will be based on 2025 MAGI, and future IRMAA thresholds cannot be known with certainty. Some advisors suggest exercising caution when projecting threshold increases several years in advance, as conservative assumptions may help account for uncertainty and income variability.
Projections are inherently uncertain, and results will vary. Because IRMAA operates as a tiered system, even small differences in reported income may result in a higher premium tier for a given year. Additionally, the two-year lookback applies, meaning income reported in 2025 will be used to determine Medicare premiums for 2027.
Planning Considerations
Because Medicare premiums are determined by income from two years prior, advance planning may help individuals better anticipate future costs.
If a year includes unusually high income—such as from a Roth conversion, inheritance, capital gains, or large retirement account withdrawals—this may result in higher Medicare premiums in a future year, depending on the applicable thresholds at that time.
Coordinating income events with broader tax planning strategies may help individuals better anticipate potential premium impacts, though outcomes depend on future law and personal circumstances.
In 2025, the difference between the lowest and highest Medicare Part B premiums is $5,326.80 annually per person. Actual differences may vary in future years and by filing status.
While moving from the lowest to the highest tier in a single year may be uncommon, due to the IRMAA threshold structure, relatively small income differences may still produce meaningful cost changes.
Example Illustration (Hypothetical)
The following hypothetical example illustrates how the IRMAA threshold structure may operate in practice.
If a married couple filing jointly reported $266,000 of MAGI in 2023, their 2025 Medicare Part B premium would be $259 per month per person. For two individuals over 12 months, this totals $6,216.
If instead their MAGI were $266,001, premiums would increase to $370 per month per person. Over 12 months for two individuals, that totals $8,880.
In this hypothetical example, a $1 difference in reported income resulted in $2,664 in additional Part B premiums for the year. Part D premiums, if applicable, could further affect total costs.
This example is for illustrative purposes only and does not represent actual outcomes for any specific individual.
It’s Not for Life
IRMAA is evaluated annually. A single year of elevated income generally affects only one future year of Medicare premiums.
Unexpected year-end income or minor reporting differences may affect a single year’s premium calculation. However, these events do not permanently increase premiums.
Establishing a long-term approach to income management may help reduce the frequency of higher-premium years, though results depend on individual circumstances and future policy changes.
Disclosures
The information provided is for general informational purposes only and should not be construed as personalized investment, legal, or tax advice. Medicare rules and premiums are determined by federal law and administered by CMS and SSA. 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 may affect the opinions expressed above. Investment strategies mentioned may not be suitable for all individuals. Readers are encouraged to assess their own financial situations and consult with a qualified tax advisor, CPA, financial planner, or investment manager prior to taking any action based on this information.