Here’s a startling fact: Your income from two years ago could significantly impact your Medicare costs today. But did you know that overlooking this detail might lead to unexpected financial burdens? Medicare enrollment for 2026 kicks off on October 15, and your 2024 income will play a pivotal role in determining whether you’ll face the Medicare surcharge, officially known as the Income-Related Monthly Adjustment Amount (IRMAA). This isn’t just a minor fee—it can more than double your standard monthly premiums for health coverage and nearly double your prescription drug costs. And this is the part most people miss: IRMAA is based on a two-year lookback, meaning your financial decisions today could haunt your Medicare bills tomorrow.
But here’s where it gets controversial: While only about 8% of Medicare enrollees currently pay the Part B surcharge, that number has skyrocketed from 1.7 million in 2007 to 5.1 million today. By 2034, projections suggest it could hit 8.6 million. Even more concerning, nearly 4.5 million Americans already pay the Part D drug plan surcharge, with forecasts reaching 7.7 million in the next decade. This raises a critical question: Are retirees being blindsided by these escalating costs, and what can they do to prepare?
Let’s break it down. Medicare premiums are expected to surge by a near-record amount next year, potentially devouring a significant chunk of the Social Security cost-of-living adjustment (COLA) that older Americans rely on. As John Jones, an investment adviser at Heritage Financial, puts it, “Medicare is taken out of Social Security, so it can be very painful. Social Security could do nothing but pay for Medicare.” This stark reality underscores the importance of proactive planning.
How much could IRMAA cost you? While the 2026 income thresholds aren’t finalized, estimates from the Medicare Trustees Report provide a glimpse. For instance, individuals earning between $109,001 and $137,000 (or couples filing jointly with $218,001 to $274,000) could face an additional $82.60 monthly for health coverage and $14.50 for drug coverage. At the higher end, those earning over $500,001 (or couples over $750,001) might pay an extra $495.60 per month for health coverage and $85.80 for drugs. That’s a hefty bill, especially for retirees on fixed incomes.
So, how can seniors avoid these surcharges? Michael Chuah, an attorney at Paxterra Law, emphasizes the need for strategic planning. “People often overlook IRMAA and get these surprises,” he says. One effective strategy is Roth conversions, which move money from pre-tax accounts to post-tax Roth accounts, helping to keep future income—and IRMAA—lower. However, this isn’t a one-size-fits-all solution. Roth conversions require careful timing and cash to pay taxes upfront, and they count as taxable income in the year of conversion.
Nick Bour, CEO of Inspire Wealth, suggests contributing up to one-third of your retirement savings to Roth accounts before retiring and considering conversions early in retirement when income is typically lower. But here’s the catch: If you’re already 62 and haven’t started, time is of the essence. While major shifts may not be feasible in just one or two years, you can still mitigate IRMAA by working less to lower your income or strategically timing Roth conversions.
And this is the part most people miss: You can appeal IRMAA if you’ve experienced a life-changing event, such as marriage, divorce, or a significant loss of income. As Jones explains, “You can camouflage Roth conversions by doing them in a high-income year and then appealing IRMAA the following year when your income drops.” This tactic, while complex, could save you thousands.
So, what’s the bottom line? Medicare surcharges are no small matter, and they’re only expected to grow. Whether you’re 30 or 62, now is the time to plan. But here’s a thought-provoking question: Are current Medicare policies fair to retirees, or do they place an undue burden on those who’ve spent a lifetime saving? Let us know your thoughts in the comments—we’d love to hear your perspective.
