Most people picture Medicare as roughly the same deal for everyone. You turn 65, you sign up, and the premiums come out of your Social Security check. For a lot of retirees, that is exactly how it works. But above a certain income, Medicare quietly adds a surcharge on top of your Part B and Part D premiums. And the income it looks at is not this year's. It's the income from a tax return you filed two years ago. That lag is why the surcharge blindsides so many people.

The surcharge has a name: IRMAA, the Income-Related Monthly Adjustment Amount. In 2026, the standard Medicare Part B premium is $202.90 a month. Once a married couple's income crosses $218,000, that premium starts to climb, and it keeps climbing through five tiers to nearly $690 a month per person at the top. Part D carries its own smaller surcharge on the same schedule. With two people paying it, the gap between landing just under a line and just over it can cost a surcharge of several thousand dollars a year. 

Here is the part that catches people: these are cliffs, not ramps. Go one dollar over a threshold and you owe the full surcharge for that entire tier, not a few cents on the dollar that crossed. A single Roth conversion, a large capital gain, the sale of a rental, even a healthy year of required withdrawals can push a couple over a line they never saw coming.

And because of the two-year lag, the bump and the bill land in different years. Your 2026 premium is set by your 2024 return. So the retiree who sold a property in 2024, or did a big Roth conversion that year, opens a letter in late 2025 raising the premium for 2026, a year when their income may have already dropped back to normal. 

Picture a Spokane couple, both 66, living comfortably on Social Security and steady withdrawals, with income that usually sits around $200,000 — safely under the line. In 2024, they converted $40,000 to a Roth and sold some appreciated stock, and their income jumped above $218,000 for that one year. Nothing about their lifestyle changed. But in 2026, both of them pay the first IRMAA tier, close to $2,000 in extra premiums between them, for a spike that was already two years behind them.

The good news is that some of the best strategies that reduce IRMAA are real, and most of them happen in the years before you are ever on Medicare. The first, is simply watching the two-year window. Because a big one-time bump in income lands on your premium two years later, timing a Roth conversion or a property sale for a year that was already going to be high can keep you from clearing an extra tier. 

The second, is converting to Roth earlier, in your early 60s before Medicare starts. Those conversions shrink the traditional balances that later force required withdrawals, so the withdrawals that would have pushed your income over a line in your 70s are smaller. 

The third, is giving straight from the IRA. After age 70 1/2, a qualified charitable distribution goes from your account to the charity without ever counting as income, so the giving you planned to do anyway can hold your income under a threshold.

Small income-timing decisions late in the tax year can make a difference. When you are close to a line late in the year, ordinary care with the cliff, deferring a few thousand dollars of income, or holding off on a gain can save far more than the wait costs you.

There is also a relief valve most people never hear about. If your income dropped because of a specific life change — you retired, you stopped working, you lost a pension, or a spouse died — you can ask Social Security to use your current income instead of the two-year-old return. The form is SSA-44, and for a recent retiree whose income fell the year they left work, it can erase a surcharge built on a working year's income.

Medicare's open enrollment runs Oct. 15 through Dec. 7, which makes fall the natural time to look at all of this, not just your drug plan, but the income you are realizing this year, and what it will mean for your premium two years out. 

IRMAA is not a reason to keep your income low. It's a reason to know where the lines are, so you do not cross one by accident. 

Noah Schwab, is a financial adviser and owner at Stewardship Concepts Financial Services, in Spokane. He can be reached at [email protected].