Medicare & IRMAA Planning

Understanding How Retirement Income Affects Your Medicare Costs

Medicare is an important part of retirement, but understanding what you'll pay for coverage isn't always straightforward. While many retirees expect Medicare premiums to be relatively predictable, higher-income individuals may face additional costs based on their income.

These additional charges, known as Income-Related Monthly Adjustment Amounts (IRMAA), can increase Medicare Part B and Part D premiums. Because Medicare generally uses tax information from two years earlier, financial decisions made today may affect your healthcare costs in the future.

At Andstead Advisors, we help retirees and pre-retirees understand how Medicare premiums fit into their broader financial plan. By considering the relationship between income, taxes, and healthcare expenses, we help you prepare for potential premium increases and evaluate planning opportunities before they arise.

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Why Medicare & IRMAA Planning Matters

Healthcare costs are an important consideration in retirement, and Medicare premiums can be influenced by more than the coverage you select. Withdrawals from retirement accounts, Roth conversions, investment income, and other financial decisions may increase your income enough to trigger higher premiums.

Without understanding these connections, you could face unexpected Medicare costs even when your income increase is temporary. Planning ahead can help you evaluate how financial decisions may affect your premiums and avoid unnecessary surprises.

Thoughtful Medicare and IRMAA planning can help you:

+ Understand how Medicare Part B and Part D premiums are determined
+ Identify income levels that may trigger higher Medicare premiums
+ Evaluate how Roth conversions and retirement withdrawals affect IRMAA
+ Prepare for the impact of Required Minimum Distributions on Medicare costs
+ Consider the timing of financial decisions before Medicare eligibility
+ Explore opportunities to manage future income-related premium increases

The goal isn't simply to avoid higher Medicare premiums. It's to make informed financial decisions that consider healthcare costs alongside your taxes, retirement income, and long-term goals.

Looking Beyond Your Medicare Premium

IRMAA can create an unexpected connection between your financial decisions and your healthcare expenses. A large retirement account withdrawal, a Roth conversion, or the sale of an appreciated investment may increase your modified adjusted gross income enough to affect your Medicare premiums two years later.

For some retirees, paying higher premiums in a particular year may be a reasonable tradeoff for achieving another financial objective. For others, adjusting the timing or amount of taxable income may help manage future costs.

Certain life-changing events, such as retirement or a reduction in work hours, may also provide an opportunity to request that Social Security reconsider an IRMAA determination.

We help you understand these tradeoffs and evaluate Medicare-related costs within the context of your overall retirement plan, rather than making decisions based on premiums alone.

How Andstead Helps

Understand Your Medicare Premium Exposure

We help you understand how Medicare Part B and Part D premiums work, including how IRMAA is calculated and which income thresholds may affect your costs.

Evaluate Income-Related Planning Decisions

We review how Roth conversions, retirement withdrawals, investment gains, and other income events may influence your Medicare premiums, helping you consider the potential costs before making decisions.

Prepare for Changes in Retirement Income

We consider how retirement, Social Security, Required Minimum Distributions, and other financial transitions may change your income and affect future Medicare premiums.

Coordinate Medicare Costs With Your Financial Plan

We incorporate Medicare premium considerations into your broader retirement income and tax planning, helping you evaluate tradeoffs and coordinate with tax or Medicare professionals when appropriate.

Part of a Bigger Retirement Strategy

Medicare premiums are just one component of your retirement expenses, but they can be influenced by decisions involving your savings, investments, and taxable income.

Explore how these related retirement planning services work together.

Retirement Distribution Planning

Develop a coordinated strategy for turning your retirement savings and investments into income while managing taxes and long-term financial needs.

Retirement Distribution Planning

Required Minimum Distribution Planning

Understand how mandatory retirement account withdrawals can affect your income and taxes, and how to plan for their impact.

Required Minimum Distribution Planning

Roth Conversion Planning

Learn how strategically converting Traditional IRA assets to Roth accounts may create greater flexibility in managing future retirement income and taxes.

Roth Conversion Planning

Retirement Tax Planning

Explore when to claim Social Security benefits and how to coordinate them with your other retirement income sources.

Retirement Tax Planning

Retirement Planning

See how Andstead brings retirement income, investments, taxes, Social Security, and other financial considerations together into a comprehensive retirement strategy.

Retirement Planning

Social Security Planning

Evaluate when to claim Social Security benefits and how to coordinate them with your other retirement income sources.

Social Security Planning

Frequently Asked Questions

1. What is IRMAA, and how does it affect Medicare premiums?

IRMAA stands for Income-Related Monthly Adjustment Amount. It's an additional charge applied to Medicare Part B and Part D premiums for individuals whose income exceeds certain thresholds. The amount is based on your modified adjusted gross income and can change from year to year.

2. How does Medicare determine whether I owe IRMAA?

Medicare generally uses your federal tax return from two years earlier to determine whether IRMAA applies. For example, your 2026 Medicare premiums are generally based on your 2024 income. This means retirement income decisions can affect your premiums well after the income is received.

3. Can Roth conversions increase my Medicare premiums?

Yes. Roth conversions generally increase taxable income in the year of conversion, which may result in higher Medicare premiums two years later. However, conversions may also provide long-term tax planning benefits, so the potential IRMAA impact should be evaluated alongside your broader retirement strategy.

4. Can I reduce IRMAA after I retire?

Potentially. If your income decreases because of a qualifying life-changing event, such as retirement or a reduction in work hours, you may be eligible to request a new IRMAA determination from Social Security. Eligibility depends on your circumstances and applicable requirements.

5. Do Required Minimum Distributions affect Medicare premiums?

Yes. RMDs from tax-deferred retirement accounts generally increase taxable income, which can push your income above an IRMAA threshold. Planning ahead may help you understand how future required withdrawals could affect Medicare premiums and evaluate opportunities to manage those costs.

6. When should I begin planning for Medicare and IRMAA?

It's helpful to begin reviewing Medicare considerations before turning 65, particularly if you're approaching retirement or considering major financial decisions. Understanding how income affects premiums can help you evaluate Roth conversions, retirement withdrawals, and other strategies before they influence future Medicare costs.

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Plan for Healthcare Costs With Greater Clarity

Medicare premiums can be affected by financial decisions made years before you receive the bill. Understanding those connections can help you anticipate expenses, evaluate your options, and make more informed choices about your retirement income.

From our Denver Tech Center office, Andstead Advisors helps retirees and pre-retirees throughout Colorado and across the country coordinate Medicare-related financial considerations with their broader retirement plans.

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