Many retirees moving to Citrus County are surprised to learn that Medicare is not free. While some beneficiaries expect healthcare costs to decrease in retirement, Medicare Part B premiums, prescription drug costs, and Medicare IRMAA surcharges can significantly increase monthly expenses for higher-income individuals. These additional costs create unexpected “sticker shock” during retirement. Understanding how Medicare IRMAA affects your healthcare costs is an important part of protecting your retirement budget.

This article is part of a Medicare educational series designed to help retirees better understand Medicare costs, enrollment rules, and coverage decisions during retirement.

Why Medicare Isn’t Actually Free

Many individuals are caught off guard when they learn that Medicare Part B is not free, even after paying into the Medicare system during their working years. Medicare Part B covers doctors visits, outpatient services.

Most beneficiaries pay a standard monthly Part B premium that is either deducted directly from their Social Security check or billed quarterly. However, higher-income retirees may pay significantly more due to a Medicare IRMAA surcharge. In addition to Part B costs, beneficiaries may also face prescription drug costs, deductibles, and copays depending on the supplemental coverage they choose.

What is Medicare IRMAA?

The Income-Related Monthly Adjustment Amount is one of the most misunderstood parts of Medicare. Medicare IRMAA is an additional surcharge added to Medicare Part B and Part D premiums when your income exceeds limits set by the Social Security Administration (SSA). Many retirees are caught off guard when they discover their Medicare premiums are higher than expected, especially after years of carefully planning for retirement.

How Medicare IRMAA Is Calculated

The SSA determines your IRMAA surcharge by reviewing your Modified Adjusted Gross Income (MAGI) reported on your federal tax return from two years prior. Your MAGI is calculated from the income reported on your federal tax return. This means your current Medicare premiums are usually based on income you earned two years ago and not what you are earning today.

For many retirees, this creates confusion especially after retirement or a major life change that reduces your income. A large IRA withdrawal, Roth conversion, capital gain, or property sale from two years ago can unexpectedly trigger higher Medicare Part B and Part D premiums for that year.

Over the years, I’ve worked with many Medicare beneficiaries throughout Citrus County who were shocked when their Part B premium was much higher than expected.

One of the most common situations I see is someone who retired recently and assumed their Medicare costs would immediately reflect their new retirement income. Instead, Social Security used tax returns from two years earlier, when they were still working and earning significantly more. The result is often an unexpected IRMAA surcharge.

The good news is that many of these situations can be reviewed, and in some cases, appealed when a qualifying life-changing event has occurred. At Bayside Health Benefits, we help our clients understand their Medicare costs and coverage options. Call (352) 999-2727 or visit BaysideMedicare.com to schedule a no-cost Medicare consultation. Your Medicare Partner for Life™.

Why the Two-Year Lookback Creates “Sticker Shock”

Perhaps the most frustrating element of IRMAA is the “two-year lookback.” If you are planning your budget for this year, the SSA is reviewing your tax return from two years ago. A one-time financial event like selling a property, Roth conversion or IRA withdrawal could result in higher Medicare premiums two years later, even if your income has since dropped significantly.

The Medicare IRMAA system also functions like a “cliff” rather than a gradual slope. If your MAGI is even one dollar over an established threshold, you move into the next bracket and pay the higher surcharge. There is no partial credit for being close to the line.

2026 IRMAA Brackets Continue to Impact High-Income Retirees

The Medicare IRMAA brackets are adjusted yearly. Beneficiaries can review the current IRMAA income brackets and premium amounts directly through the Social Security Administration or Medicare.gov.

IRMAA Appeals and Life-Changing Events

If you have experienced a significant drop in income, you do not have to accept an incorrect or outdated IRMAA determination. The Social Security Administration allows for a formal appeal process known as a “redetermination.”

Many retirees do not realize that Medicare IRMAA decisions can sometimes be appealed after a major life change. If your income has dropped due to one of the listed qualifiers, you may be eligible to request a new determination:

• Death of a spouse
• Marriage or divorce/annulment
• Work stoppage (retirement)
• Work reduction
• Loss of income-producing property
• Loss of pension
• Receipt of a settlement payment

In many cases, retirees are still being charged higher Medicare premiums based on income they no longer receive. Filing Form SSA-44 allows you to provide updated income and request a reduction in the IRMAA surcharge.

How to Use Form SSA-44 to Request a Redetermination

To initiate an appeal, you must file Form SSA-44, “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event.” This form allows you to document the specific event and your expected income for the current year. You must provide supporting evidence, such as a retirement letter or a termination notice. If approved, your premiums will be adjusted to reflect the revised event.

IRMAA Planning for Retirees on Florida’s Nature Coast

Many retirees relocating to Homosassa, Crystal River, Inverness, Lecanto, and surrounding Nature Coast communities experience major income changes during the years leading up to Medicare enrollment.

Retirement payouts, pension elections, IRA withdrawals, Roth conversions, property sales, and investment gains can all affect the income Social Security reviews when determining whether an IRMAA surcharge applies.

Because Social Security bases IRMAA on prior tax returns, many retirees discover too late that income earned before retirement is still affecting what they pay today.

Understanding this rule before you enroll can help you avoid surprises and identify opportunities to request a redetermination when appropriate. Once you understand how IRMAA works, the next step is learning how future income decisions may affect your Medicare premiums.

Financial Planning Can Help Reduce Future IRMAA Costs

Because Medicare IRMAA is based on your Modified Adjusted Gross Income (MAGI), retirement income planning becomes extremely important. Not every increase can be avoided but understanding how taxable income affects Medicare premiums may help better plan major financial decisions over time. Many beneficiaries are shocked to learn that even a one-time income spike can affect your costs for more than a year.

The Impact of Roth IRA Conversions and Capital Gains on IRMAA

Roth IRA conversions allow you to pay taxes on retirement savings now to enjoy tax-free withdrawals later. However, a large conversion counts as income and could trigger the IRMAA surcharge. Similarly, if you sell a secondary property or a portfolio of stocks, the capital gains count toward your MAGI. You must plan these events carefully, perhaps spacing them out over several years to keep your MAGI below the thresholds that trigger higher Medicare premiums.

Managing Pension Checks and Social Security Benefits Around IRMAA “Cliffs”

Your Social Security benefits, pension checks may all count toward your MAGI. Because Medicare IRMAA works in “cliffs,” even a small increase can push someone into a higher bracket. Since you have less control over guaranteed income sources, focus your planning on discretionary withdrawals from IRAs or 401(k) plans. If you are nearing a threshold, consider withdrawing only what you need to meet your living expenses, leaving the rest to grow until a year when your other income sources are lower.

Conclusion: Understanding Medicare IRMAA Before Retirement Matters

Many retirees are not aware that Medicare is not free and that higher-income beneficiaries may pay even more due to Medicare IRMAA surcharges. Understanding how your MAGI, retirement income, and the two-year lookback affect Medicare Part B and Part D premiums can help you better prepare for future healthcare costs and avoid unexpected surprises during retirement.

Medicare is a powerful tool, but like any tool, its effectiveness depends on how well you understand it. Reviewing your income, retirement timing, and coverage options early may help you make more informed financial decisions and avoid unnecessary premium increases later.

Need Help Understanding Medicare IRMAA or Your Coverage Options?

If you have questions about Medicare IRMAA, Medicare enrollment, Medicare Supplement Plans or Medicare Advantage Plan options in Citrus County, Bayside Health Benefits is available to help you better understand your options and costs before making important Medicare decisions.

Next in this Medicare Education Series:

Article II of V — Aging Into Medicare: Turning 65, Delaying Medicare with Employer Coverage, Veterans Benefits, SSDI/SSI Eligibility, Enrollment Timelines, and Avoiding Lifetime Late Enrollment Penalties

About Dayna Schafer

Dayna Schafer is a Certified Medicare Insurance Planner™ and founding member of Bayside Health Benefits in Homosassa, FL. With over 25 years of experience, Dayna has guided thousands of Medicare beneficiaries across Florida in choosing coverage with clarity and confidence. A member of the RISE Community and contracted with 11 insurers, she is known for her integrity, personal guidance, and dedication to finding the right fit for each client’s healthcare needs. Learn more at www.baysidemedicare.com.