How to Avoid IRMAA: Medicare Surcharge Planning Strategies for Financial Advisors

Back to Resources

A 67-year-old client has a MAGI of $215,000 (married filing jointly).
You recommend a $20,000 Roth conversion to fill the 24% bracket. Good
tax planning. But two years from now, that conversion pushes their 2026
lookback MAGI to $235,000, crossing the $218,000 IRMAA threshold. The
result: $1,148 per person per year in Medicare surcharges. For a couple,
that’s $2,297 per year.

The Roth conversion saved roughly $4,800 in federal taxes at the 24%
bracket. The IRMAA surcharges consumed nearly half of it. And the client
never saw it coming because the IRMAA impact shows up two years after
the conversion, not on the current year’s tax return.

This is the planning trap most advisors miss. Not because IRMAA is
complicated, but because the two-year delay makes it invisible at the
moment of the decision, and impossible to undo retroactively unless
there were also major life changes.

---

What Triggers IRMAA?
How Thresholds Work

IRMAA is triggered when a Medicare beneficiary’s modified adjusted
gross income exceeds specific thresholds. The critical structural
detail: IRMAA thresholds are hard cliffs, not graduated phase-ins.

That means there is no gradual increase. A married couple with
$218,000 in MAGI pays $0 in IRMAA surcharges. At $218,001, they pay
$1,148 per person per year, a combined $2,297. One dollar of additional
income triggers the full surcharge for that tier.

2026 IRMAA Thresholds
(Married Filing Jointly)

MAGI Range	Annual IRMAA Per Person (B + D)	Annual IRMAA Per Couple
$218,000 or less	$0	$0
$218,001 to $274,000	$1,148	$2,297
$274,001 to $342,000	$2,885	$5,770
$342,001 to $410,000	$4,620	$9,240
$410,001 to $749,999	$6,355	$12,710
$750,000 or more	$6,936	$13,872

For single filers, most thresholds are half the joint amounts:
$109,000, $137,000, $171,000, and $205,000. The top tier is $500,000
single / $750,000 joint.

Full bracket tables with Part B and Part D breakdowns are in the 2026 IRMAA Brackets Guide.

---

The IRMAA
Look-Back Period: Why Timing Matters

IRMAA uses a two-year lookback. 2026 Medicare premiums are based on
2024 MAGI. 2027 premiums will use 2025 MAGI.

This creates a planning horizon that most income decisions don’t
naturally account for. When you execute a Roth conversion, sell
appreciated securities, or take a large distribution in 2024, the IRMAA
impact doesn’t appear until 2026. By then, the decision is
irreversible.

Timeline Example

Year	Action	IRMAA Impact
2024	Client has $200,000 base MAGI. You execute a $30,000 Roth conversion. Total MAGI: $230,000.	No IRMAA impact this year (2024 premiums use 2022 MAGI)
2025	Client has $200,000 base MAGI. No conversion.	No IRMAA impact (2025 premiums use 2023 MAGI)
2026	Client has $200,000 base MAGI.	IRMAA Tier 1 triggered: 2024 MAGI of $230,000 exceeds $218,000. Surcharge: $2,297/couple.

The client was $12,000 above the threshold. The Roth conversion saved
approximately $7,200 in federal taxes (at 24%). The IRMAA surcharge cost
$2,297 for that year. Net benefit still positive in this case, but only
because the conversion amount was carefully sized. A slightly larger
conversion, say $45,000, would have pushed MAGI to $245,000 with no
additional IRMAA cost (still Tier 1). But $57,000 would have crossed
into Tier 2 at $274,001, triggering $5,770 per year in surcharges.

The math isn’t complicated. But you have to run it.

---

The
Roth Conversion and IRMAA Interaction: The #1 Planning Trap

Roth conversions are the most common accidental IRMAA trigger because
they directly increase MAGI. Every dollar of Roth conversion adds a
dollar of taxable income to the lookback year.

Worked Example: The $4,592
Mistake

• Client: Married couple, both age 66,
  Medicare-enrolled
• Base MAGI (no conversion): $215,000 (Social
  Security, pension, investment income)
• Available conversion room to 24% bracket ceiling:
  ~$35,000
• Proposed Roth conversion: $20,000
• Post-conversion MAGI: $235,000

IRMAA result: $235,000 exceeds the $218,000 joint
threshold by $17,000. Tier 1 IRMAA applies: $1,148/person/year =
$2,297/couple/year.

If the client’s MAGI remains above $218,000 for two lookback years
(say the advisor repeats the same conversion the following year), the
total IRMAA cost is $4,594.

The tax savings from a $20,000 conversion at 24%:
$4,800.

Net benefit after IRMAA: $208. Barely worth the
paperwork.

The
Right Approach: Convert to the IRMAA Threshold, Not the Tax Bracket

The correct Roth conversion strategy for many Medicare-age clients
accounts for both the federal tax bracket ceiling and the IRMAA
threshold, then targets the lower of the two.

In this example:

• Tax bracket ceiling (24%): ~$250,000 MAGI
• IRMAA Tier 1 threshold: $218,000 MAGI
• Base MAGI: $215,000
• Maximum IRMAA-safe conversion: $3,000 (to stay at
  or below $218,000)

That $3,000 conversion saves $720 in taxes with zero IRMAA cost. Not
dramatic. But compare it to converting $20,000, saving $4,800 in taxes,
and paying $2,297 in IRMAA surcharges, and the math favors
restraint.

The alternative: convert the full bracket room ($35,000) and accept
the IRMAA cost knowingly. This can be the right call if the client is in
a window where aggressive Roth conversion produces long-term tax savings
that dwarf a year or two of Tier 1 surcharges. But it should be a
deliberate decision, not an oversight.

---

6 Proactive Strategies to
Avoid IRMAA

Strategy
1: Roth Conversion Bracket Filling (Below IRMAA Thresholds)

Convert up to the IRMAA threshold in years where the client’s base
MAGI leaves room, rather than filling to the tax bracket ceiling.

When it works best: Clients with base MAGI between
$180,000 and $218,000 (joint). There’s conversion room, but the IRMAA
ceiling is lower than the tax bracket ceiling.

When to override it: Clients with a short conversion
window (e.g., pre-Social Security claiming, pre-RMD) where aggressive
conversion over 3 to 5 years produces lifetime tax savings that exceed
the IRMAA cost. Run the numbers both ways.

Income Lab’s Tax Lab runs 20 distribution strategies simultaneously
with IRMAA brackets interleaved alongside federal income tax brackets.
This lets you see exactly where the IRMAA thresholds sit relative to the
tax brackets, and target the lower constraint automatically. For more on
Roth conversion strategy, see the Roth Conversion Planning
Guide.

Strategy
2: Income Timing and Capital Gains Management

Defer or accelerate taxable events to avoid stacking income in a
single lookback year.

Practical applications:

• Defer capital gains harvesting to years when the
  client’s base MAGI is lower
• Stagger large distributions across multiple years
  rather than taking lump sums
• Time business income or asset sales to avoid
  clustering with other income events

The key insight: IRMAA doesn’t care about the
composition of income. Capital gains, Roth conversions, pension income,
rental income, Social Security, and traditional IRA distributions all
count toward the same MAGI threshold. Managing the total across years is
what matters.

Strategy 3:
Qualified Charitable Distributions (QCDs)

QCDs allow clients age 70.5 and older to donate up to $111,000 per
year (adjusted for inflation) directly from an IRA to a qualifying
charity. The distribution satisfies RMD requirements but is excluded
from taxable income and MAGI.

IRMAA benefit: A client who donates $20,000 annually
to charity from their IRA via QCD instead of taking the RMD and donating
from cash reduces their MAGI by $20,000. For a client near an IRMAA
threshold, this can be the difference between paying $0 and paying
$2,297 per year.

Common mistake: Taking the RMD, paying taxes on it,
then making a separate cash donation and claiming the itemized
deduction. Even if the net tax result is similar, the QCD approach
produces lower MAGI, which is what IRMAA measures.

Strategy 4: HSA
Maximization Before Medicare

Health Savings Account contributions reduce MAGI and grow tax-free.
For clients approaching Medicare (age 63 to 64), maximizing HSA
contributions in the years before Medicare enrollment creates a triple
benefit: current-year MAGI reduction, tax-free growth, and tax-free
qualified distributions in retirement.

2026 HSA contribution limits: $4,300 (individual),
$8,550 (family), plus $1,000 catch-up for age 55+.

Timing note: HSA contributions must stop at least
six months before Medicare enrollment begins. For clients enrolling in
Medicare at 65, the contribution deadline is effectively the month they
turn 64.5. Plan accordingly.

IRMAA connection: Lower MAGI in the pre-Medicare
years reduces the lookback income used for the first years of Medicare
IRMAA determination. Front-loading HSA contributions in the two to three
years before Medicare can directly reduce IRMAA exposure in the first
years after enrollment.

Strategy
5: Accelerate Income Into Pre-Medicare Years

For clients aged 60 to 62 who are not yet on Medicare, front-loading
taxable events into these years creates clean lookback years once
Medicare begins. The two-year lookback means income at age 62 affects
IRMAA at age 64 (before Medicare), but income at age 63 affects IRMAA at
age 65 (first year of Medicare).

Practical applications:

• Front-load Roth conversions into ages 60-62 when
  there is no IRMAA consequence. Convert aggressively at the tax bracket
  ceiling, not the IRMAA ceiling. Once the client is within two years of
  Medicare (age 63+), switch to IRMAA-aware conversion limits.
• Harvest capital gains in pre-Medicare years.
  Rebalance, sell appreciated positions, and reset cost basis while the
  IRMAA lookback has no Medicare premiums to affect.
• Take lump-sum distributions (pension buyouts,
  deferred comp payouts) before age 63 when possible.

Where it fits: Clients with a clear Medicare
enrollment date and flexibility to time income events. The planning
window is narrow (typically 2-4 years) but the IRMAA savings compound
annually once on Medicare.

Where it doesn’t fit: Clients already on Medicare or
within one year of enrollment. The lookback has already captured their
income.

Strategy 6:
Life Insurance Cash Value Withdrawals

Withdrawals from permanent life insurance policies (up to basis) and
policy loans are not included in MAGI. For clients with significant cash
value in whole life or universal life policies, accessing this capital
instead of taking taxable distributions from retirement accounts can
reduce MAGI below IRMAA thresholds.

When it works: Clients with substantial cash value
who need supplemental income for a specific period (bridge to Social
Security claiming, or to avoid a high-MAGI year). The withdrawal doesn’t
appear on the tax return, so it doesn’t affect the IRMAA lookback.

When it doesn’t: Policy loans accrue interest, and
withdrawals above basis are taxable. Coordinate with the client’s
insurance advisor before implementing.

---

How to
Identify At-Risk Clients Across Your Practice

The clients most likely to trigger IRMAA inadvertently share common
profiles:

• MAGI between $180,000 and $230,000 (joint) or $90,000 and
  $115,000 (single). Close enough to a threshold that a single
  planning decision could push them over.
• Active Roth conversion programs. If you’re
  converting annually for clients who are age 63 or older, IRMAA should be
  part of every conversion calculation.
• Approaching or recently started RMDs. RMD income
  stacks on top of Social Security and other income. Clients who were
  safely below thresholds in early retirement can cross into Tier 1 or
  Tier 2 when RMDs begin at 73.
• Recent retirees with variable income. Clients
  transitioning from employment to retirement often have lumpy income
  years (final bonuses, deferred comp, stock option exercises) that create
  IRMAA spikes. Consider IRMAA Appeals (form SSA-44) for these
  clients.
• Widows and widowers. The shift from joint to single
  filing cuts the IRMAA threshold in half while income may not drop
  proportionally. A surviving spouse with $150,000 in MAGI was safely
  below the $218,000 joint threshold but is now $41,000 above the $109,000
  single threshold, triggering Tier 1 IRMAA.

If a client is already paying IRMAA surcharges due to a qualifying
life-changing event (retirement, divorce, death of a spouse), they may
be eligible to file Form SSA-44 for immediate relief. See the IRMAA Appeal Guide for the
step-by-step process.

---

Tools That Model
IRMAA Impact Automatically

Most planning software treats IRMAA as an afterthought, if it models
it at all. The Tax Lab in Income Lab integrates IRMAA brackets directly
into the Roth conversion optimization workflow. When you run bracket
management strategies, IRMAA thresholds appear alongside federal income
tax brackets, so you can see both constraints simultaneously and target
the binding one.

For clients who’ve already crossed a threshold and qualify for an
appeal, Penny’s IRMAA Appeal Calculator
generates SSA-44 filing instructions with estimated savings during a
client meeting. It handles the reactive side; the Tax Lab handles the
proactive side. Together, they cover both dimensions of IRMAA
planning.

---

Common Mistakes
Advisors Make with IRMAA

Mistake 1: Ignoring IRMAA in Roth conversion
analysis. The tax savings from a conversion are calculated
immediately. The IRMAA cost appears two years later. If you only model
the tax impact, you’re overstating the net benefit.

Mistake 2: Treating IRMAA thresholds as gradual.
They’re cliffs. There’s no marginal increase. You’re either paying $0 or
$1,148 per person. Plan accordingly.

Mistake 3: Forgetting the two-year lookback when clients
retire mid-year. A client who retires in July 2025 still has a
full year of 2024 employment income as their 2026 lookback. The IRMAA
surcharge applies to 2026 even though the client has been retired for 18
months. (This is where the SSA-44 appeal process becomes valuable.)

Mistake 4: Not accounting for the widow/widower
trap. When a spouse dies, the surviving spouse shifts from
joint to single filing. The IRMAA threshold drops from $218,000 to
$109,000. Income doesn’t always drop proportionally. Review every
widowed client’s IRMAA exposure.

Mistake 5: Running IRMAA analysis only once. IRMAA
exposure changes as income sources shift (Social Security claiming, RMD
onset, pension start dates). Recheck annually, especially for clients
within $30,000 of a threshold.

---

Key Takeaways

1. IRMAA thresholds are cliffs, not gradients. One
   dollar over the line costs $1,148 per person per year. Plan to the
   threshold, not just the tax bracket.

2. Roth conversions are the #1 accidental IRMAA
   trigger. For clients age 63+, every conversion should be sized
   against both the tax bracket ceiling and the IRMAA threshold.

3. The two-year lookback creates a delayed impact.
   Income decisions in 2024 affect Medicare premiums in 2026. Model
   forward, not just current year.

4. Six strategies work proactively: Roth conversion
   bracket filling, income timing, QCDs, HSA maximization, pre-Medicare
   income acceleration, and life insurance cash value. The right mix
   depends on the client’s income composition and proximity to
   thresholds.

5. If a client is already paying IRMAA due to a
   life-changing event, file
   Form SSA-44. It takes 15 minutes and can save thousands per
   year.

For advisors evaluating tools that handle the Roth conversion side of
this analysis, see our guides to Roth conversion planning
software and the best Roth
conversion software for financial advisors.

---

Want to see IRMAA bracket management integrated with Roth
conversion planning? Book a walkthrough
and we’ll show you how Tax Lab and Penny handle both sides of the IRMAA
equation.

---

All IRMAA bracket figures reflect 2026 CMS data. Thresholds and
surcharges are updated annually. HSA contribution limits reflect 2026
IRS guidance. This content is for educational purposes and does not
constitute tax or legal advice. Consult your client’s tax advisor for
situation-specific guidance.