Most of us know Medicare isn’t free. But here’s something that catches a lot of retirees off guard: depending on your income, you might be paying double what your neighbor pays for the exact same coverage.
It all comes down to a little-known surcharge called an IRMAA; an income-related monthly adjustment amount. It’s added on top of your standard Part B premium, and it can hit your wallet hard.
What You’re Already Paying and What You Could Be Charged
This year, the standard monthly premium for Medicare Part B is $202.90. Most enrollees pay that flat rate. Part A, which covers hospital stays, generally has no premium at all.
But if your income crosses certain thresholds, IRMAAs kick in. They apply to both Part B and Part D; though Part B surcharges are the ones that really add up.
IRMAAs are based on your modified adjusted gross income, or MAGI. Here’s how the numbers break down this year:
- IRMAAs apply if your MAGI is over $109,000 for singles, or over $218,000 for couples filing jointly.
- If you’re single with a MAGI of $120,000, your monthly Part B cost goes up by $81.20 bringing your total to $284.10 a month.
- At a MAGI of $150,000 for singles, the surcharge equals the standard premium itself ($202.90) pushing your total to $405.80 a month. That’s exactly double.
- At the highest tier (over $500,000 for singles or over $750,000 for joint filers) the IRMAA alone is $487, and the monthly Part B bill reaches $689.90.
There Are Ways to Lower Your Exposure
Here’s the good news: a higher income doesn’t automatically mean higher Medicare costs. There are smart planning moves that can help.
One important fact to know: withdrawals from a Roth IRA or Roth 401(k) do not count toward your MAGI. If your retirement savings are in Roth accounts, those distributions won’t push you into IRMAA territory.
If your savings are in traditional accounts, you might consider converting them to Roth accounts before you enroll in Medicare. But timing matters here.
IRMAAs are calculated based on your income from two years prior. That means if you do a large Roth conversion at age 63 and then enroll in Medicare at 65, that conversion could trigger higher premiums. It pays to plan carefully.
The bottom line: Medicare costs can be much higher than most people expect. Understanding how IRMAAs work and taking steps to manage your income before you enroll; could protect hundreds of dollars every single month in retirement.