IRMAA: When Your Hard-Earned Raise Becomes a Medicare Penalty
Let's talk about something almost nobody explains to you until it's too late: IRMAA. You spent years, maybe decades, working your way up. You put in the overtime, took on the extra responsibility, and later in your career, your salary finally caught up with your effort. You earned every dollar of it. What nobody tells you is that a higher income later in life can turn into a penalty on your Medicare premium. It's called IRMAA, and it's one of the most misunderstood costs of retirement. Once you understand how it works, you can plan around it instead of being caught by surprise.
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It means Medicare charges you more for Part B, which covers your doctor visits, and Part D, which covers your prescriptions, once your income crosses a certain line. You get the same coverage as everyone else. You just pay more for it. And the line isn't based on what you're earning this year — it's based on your tax return from two years ago. Social Security calls this the look-back. So a big withdrawal you take from your 401(k) in 2026, to pay off the house or help the grandkids or finally buy the car you've been eyeing, doesn't cost you anything in 2026. It shows up as a bigger Medicare bill in 2028, long after you've forgotten you even made that decision.
For 2026, the first line sits at $109,000 for a single filer and $218,000 for a married couple filing jointly. Cross it, even by one dollar, and your Part B premium jumps from $202.90 a month to $284.10, with another $14.50 added to Part D. Altogether, that adds up to more than $1,100 a year, and if you're married, both spouses pay it separately. Go higher, past $137,000 single or $274,000 joint, and it climbs past $400 a month. And here's the part that really stings: IRMAA is a cliff, not a slope. One dollar over the line, and you pay the full higher rate for all twelve months. There's no partial punishment. It's all or nothing. If you want the full breakdown of Part B deadlines and penalties on top of this, I covered that here.
Do You Have to Sign Up for Medicare at 65 If You're Still Working?
Here's a question I get all the time. I turn 65, I'm still working, do I have to sign up for Medicare? The honest answer is, it depends, and getting it wrong can cost you either way. If you're still actively working at 65 and covered by your own or your spouse's current employer plan, with 20 or more employees, you can generally delay Part B without penalty. Once that job or that coverage ends, whichever happens first, you get an 8-month window to sign up. It's the same age-gap coverage question I hear constantly from women retiring before a spouse does.
But here's what nobody explains about that window: your employer plan will only reimburse based on what it believes it should pay, because it assumes Medicare is covering its share too. This is called coordination of benefits. If you're eligible for Medicare and haven't signed up, you can end up with a gap where neither plan pays the full bill, and you're the one left covering the difference.
Now, if you retire and go onto COBRA or a retiree health plan instead of staying on active employer coverage, that changes everything. COBRA and retiree coverage do not count as coverage based on current employment, so they do not give you that 8-month delayed enrollment window. If that's your situation, you needed to sign up for Medicare during your regular enrollment period around your 65th birthday. Waiting because you assumed COBRA or retiree coverage bought you time is one of the most common and most expensive mistakes people make.
And if you decide not to sign up for Medicare at all once you're retired? Your other insurance is still going to assume you have it. They'll only pay their portion of a claim, the portion they'd owe after Medicare pays its share, and if you never signed up, that share never gets paid — you do. On top of that, if you miss your window and don't qualify for a Special Enrollment Period, Medicare adds a permanent late enrollment penalty: 10 percent of the standard Part B premium for every full 12-month period you went without coverage, for as long as you have Part B. Pay me now, or pay me later. But you will pay me.
But It's My Money!
I hear you. It's your 401(k). Your retirement. Your money. Nobody's arguing that. But the tax rules don't care whose money it is. They only care what shows up on the return. A withdrawal from a pre-tax account is treated just like a paycheck, and nobody ever explained that to most of us. These rules were written for people who already had professional financial advisors managing their money. They were never explained to the women working the double shifts, raising the babies, and scraping something together after the bills. This is exactly why we're talking about it today.
Real Ways to Avoid the IRMAA Charge
There are legitimate ways to keep your income under that line, and they work best when you plan them years ahead, not the year the bill arrives. Use a Roth account when you can. Qualified Roth withdrawals don't count as income for IRMAA at all, which is why converting some of your traditional 401(k) money to a Roth in your lower-income years, before your big withdrawals start, can pay off for a decade or more. If you're still working, maximize your 401(k) contributions now. Every pre-tax dollar you put in today is a dollar of taxable income you're not reporting later, when it could push you over the line — and it's the same discipline behind building retirement income that outlives your career instead of leaning on one big withdrawal.
And if you're 70½ or older, a Qualified Charitable Distribution lets you send money straight from your IRA to a charity — and here's the part that matters to your wallet, not just your conscience: that money never counts as income on your tax return. If you're already required to take money out of that account each year, a QCD lets you satisfy that requirement without it ever touching your IRMAA number. You support a cause you care about, and you protect your Medicare premium at the same time.
Before any large withdrawal, any property sale, any Roth conversion, ask your tax preparer one question: what will this do to my income for the year? Asking it before you act, instead of after, is worth more than anything I can write here.
Already Got Hit? Fight It With Form SSA-44
Here is something most people never hear: you can fight it. If your income has dropped because of a life-changing event, and retiring counts as one, you can ask Social Security to use your newer, lower income instead of that old tax return. The form is called SSA-44, and you can download it directly from Social Security here: ssa.gov/forms/ssa-44.pdf. You generally have 60 days from the date on your IRMAA notice to appeal, and depending on when you retired, you may need to file it two years in a row. If you just retired and got hit with a surcharge based on your old working salary, that form was made for you. File it.
The Bottom Line
Read the fine print. Don't just go by word of mouth. What applied to your mother, your father, your grandparents may not apply to you, because over the years, you've worked your way into a higher income bracket than they ever saw. When someone tells you what their Medicare premium is, that number isn't a promise about yours. Your income determines your reality, and that's exactly why this is worth understanding before the bill shows up.
Frequently Asked Questions About IRMAA
Why is Medicare imposing a penalty on high-income earners?
Medicare's reasoning is that it's a shared program, and people with higher incomes should shoulder a bit more of the cost, similar to how income taxes work on a sliding scale. Whether or not you agree with that reasoning, it's the official rationale, and it's exactly why understanding your income bracket matters more the further your career takes you.
Why is Medicare using my income from two years ago?
The IRS runs about two years behind on finalizing tax returns, so Social Security uses the most recent return the IRS has actually finished processing. This delay is the entire reason a decision you make in 2026 can show up as a bigger bill in 2028.
Do I have to sign up for Medicare at 65 if I'm still working?
Not necessarily, if you have coverage through your own or your spouse's current employer with 20 or more employees. But understand coordination of benefits first: your employer plan will only reimburse based on what it believes it should pay, since it assumes Medicare is covering its share too. And if you're on COBRA or retiree coverage rather than active employer coverage, you do not get a delayed enrollment window at all — you needed to sign up during your regular enrollment period around your 65th birthday.
What happens if I don't sign up for Medicare and I don't have coverage with another carrier?
You risk two costs. First, without any coverage at all, you're paying out of pocket for care Medicare would have covered. Second, if you eventually do sign up outside your enrollment window and didn't qualify for a Special Enrollment Period, you'll likely face a permanent late enrollment penalty, an extra 10 percent added to your Part B premium for every full 12-month period you went without coverage, for as long as you have Part B.
Do 401(k) withdrawals really count as income for IRMAA?
Yes. Every dollar you withdraw from a traditional, pre-tax 401(k), 457, 403(b), or IRA counts as ordinary income on your tax return, and that income is what Medicare looks at. Roth withdrawals are the exception; they don't count.
What are the IRMAA income limits for 2026?
For 2026, the first IRMAA tier begins when income goes above $109,000 for a single filer or $218,000 for a married couple filing jointly. Crossing that first line raises Part B from $202.90 to $284.10 a month and adds $14.50 a month to Part D, over $1,100 a year, per person. Higher income tiers pay more, and the limits adjust most years, so verify the current numbers before making big moves.
Can I get an IRMAA surcharge removed?
Sometimes, yes. If your income dropped because of a life-changing event — retirement, losing a spouse, divorce, losing a pension — you can file Form SSA-44 with Social Security and ask them to use your current, lower income instead. You generally have 60 days from your notice to appeal, and some new retirees need to file it two years in a row.
This article is for education, not personalized financial or tax advice. Medicare amounts reflect 2026 figures and adjust most years. Talk with a tax professional or call 1-800-MEDICARE before making large withdrawals or enrollment decisions.