Medicare is not free. For households with considerable wealth approaching retirement, this reality can hit harder than expected. Medicare beneficiaries with incomes above $109,000 for individuals and $218,000 for married couples (if filing jointly) are required to pay higher premiums for Medicare Part B and Part D—sometimes thousands of dollars more annually than standard beneficiaries.
The additional premium amount for higher-income beneficiaries is called the income-related monthly adjustment amount (IRMAA), and it catches many near-retirees off guard. Here’s what makes this complicated: Medicare premiums are tied to your modified adjusted gross income from two years prior. A large Roth conversion or business sale in 2024 can spike your 2026 premiums unexpectedly.
At Godsey & Gibb Wealth Management, we work with affluent near-retirees and current retirees to align healthcare costs, Medicare choices, and tax strategy into a single financial plan.
Key Medicare Parts and Where High Earners Feel the Cost
Understanding Medicare’s structure helps you see where higher income creates higher costs. Here’s a quick breakdown:
Part A (Hospital Coverage)
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Covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services
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Approximately 99% of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment
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If you do not qualify for premium-free Part A, you might be able to buy it for up to $565 each month
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The Medicare Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital is $1,736 in 2026
Part B (Medical Insurance/Outpatient Care)
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Covers physician services, outpatient care, preventive screenings, and durable medical equipment
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The standard monthly premium for Medicare Part B enrollees is $202.90 for 2026, an increase of $17.90 from $185.00 in 2025
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The annual deductible for all Medicare Part B beneficiaries is $283 in 2026, an increase of $26 from the annual deductible of $257 in 2025
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High-income adjustments are layered on top of this base premium
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Medicare beneficiaries may pay a monthly penalty if they do not sign up for Part B when first eligible, and this penalty increases the longer they wait to enroll
Part D (Prescription Drug Coverage)
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Offered through private plans with varying plan premium amounts
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High earners pay an additional amount over their plan’s base premium
Part C (Medicare Advantage) and Medigap Policies
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Offered through private plans with varying plan premium amounts
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These are separate coverage choices from Original Medicare, typically offering a bundle of Part A, B and D coverages plus some extra benefits such as dental, vision, and hearing.
What Counts as “High Income” for Medicare and How IRMAA Works
The Income-Related Monthly Adjustment Amount is a surcharge on Parts B and D premiums for higher-income beneficiaries. The Social Security Administration uses a two-year lookback period to determine Medicare premiums, reviewing MAGI from the tax return filed two years prior.
For IRMAA purposes, MAGI equals your adjusted gross income plus tax-exempt interest—yes, that municipal bond interest still counts here.
For 2026, the income threshold for IRMAA starts at $109,000 for individuals and $218,000 for married couples filing jointly. If your modified adjusted gross income is greater than these thresholds, you will pay higher premiums for Medicare Part B and Part D.
IRMAA operates on a “cliff” system, meaning earning even $1 over a threshold triggers the full surcharge for that entire bracket.
For high-income beneficiaries, the total monthly premium for Medicare Part B can reach up to $689.90 depending on their income level.
| MAGI (Individual) | MAGI (Married Filing Jointly) | Part B Premium | Part D Adjustment |
|---|---|---|---|
| ≤$109,000 | ≤$218,000 | $202.90 | $0.00 |
| $109,001–$137,000 | $218,001–$274,000 | $284.10 | +$14.50 |
| $137,001–$171,000 | $274,001–$342,000 | $405.80 | +$37.50 |
| $171,001–$205,000 | $342,001–$410,000 | $527.50 | +$60.40 |
| $205,001–$499,999 | $410,001–$749,999 | $649.20 | +$83.30 |
| ≥$500,000 | ≥$750,000 | $689.90 | +$91.00 |
Real-World Cost Impact for a High-Income Couple
Consider a married couple filing a joint tax return with $220,000 MAGI in 2024. In 2026, a married couple with a MAGI of $220,000 will pay a Medicare Part B premium of $284.10 a month and an additional $14.50 a month for their selected Part D drug plan. That’s several thousand dollars more annually than standard premiums.
Now consider a couple realizing $550,000 MAGI from a business sale or large capital gain. The 2026 IRMAA surcharges for Medicare Part B will vary based on the beneficiary’s income, with total monthly premiums ranging from $202.90 to $689.90 for high-income beneficiaries. At the upper ranges, a beneficiary pays close to $700 monthly for Part B alone, plus the maximum Part D adjustment.
These costs apply per person—so a high-income married couple feels the surcharge twice. And surcharges are recalculated annually, meaning they can shift as your income changes year to year.
How Social Security Decides Your Medicare Premiums (and When They Can Change)
The Social Security Administration automatically pulls your recent federal tax return information from the Internal Revenue Service to determine if IRMAA applies. For 2026 premiums, they generally use your 2024 individual tax return filed in 2025. For some with delayed filings, the 2023 taxable year may still drive the calculation.
Beneficiaries receive a letter explaining how their income translated into specific premium amounts. Amended returns or corrections can change the calculation, but only if you proactively supply documentation to Social Security.
Which Tax Year Matters for My Medicare Premium? For 2026 coverage, Social Security primarily uses your 2024 tax return. The two-year lookback means your income from years prior directly affects what you pay today.
High-income individuals are not protected by the “hold harmless” provision, which means their Social Security checks may decrease if Medicare premiums rise more than the cost-of-living adjustment.
When Your Income Drops: Life-Changing Events and IRMAA Relief
If your income has fallen significantly due to certain qualifying life changing event situations, you can request a new determination to reduce your IRMAA. Qualifying events for IRMAA appeals include retirement, divorce, the death of a spouse, and loss of income-producing property.
Individuals can appeal IRMAA surcharges using Form SSA-44 if their income drops due to qualifying life events. You’ll need supporting documentation such as employer separation letters, a death certificate, or a separate tax return showing reduced income.
This is especially relevant for new retirees whose last high-earning year from their employer still shows up in the two-year lookback, but whose current income is much lower.
How Retirement Income Decisions Can Accidentally Push Up Medicare Costs
In retirement, “income” becomes a mix of Social Security benefits, pensions, IRA and 401(k) withdrawals, dividends, interest, capital gains, and Roth conversions. Each can affect MAGI and IRMAA when your income rises above threshold levels.
High-income individuals must prepare for Medicare’s Income-Related Monthly Adjustment Amount, which increases Part B and Part D premiums based on modified adjusted gross income.
Common Income Surprises That Trigger IRMAA:
- Large Roth conversion in a single tax year
- Selling a business or rental property with significant capital gains
- Exercising stock options
- Portfolio rebalancing that realizes gains
- Required Minimum Distributions beginning at age 73
RMDs can push MAGI higher later in retirement—precisely when healthcare services utilization often increases. The government determines these thresholds annually, so planning ahead can pay dividends.
Coordinating Tax Strategy and Medicare Timing
Intentionally timing Roth conversions, charitable gifts, or asset sales before or after certain years can help manage IRMAA exposure across a multi-year benefit period. Some high-income near-retirees accept a couple of years of higher premiums in exchange for long-term tax benefits—but this should be an informed choice within a broader plan.
This coordination requires both tax projection work and understanding Medicare’s two-year lookback. It’s an area where a wealth advisor and CPA team working together can add significant value, helping persons navigate deductibles and coverage costs while optimizing their overall tax situation.
Integrating Medicare and Healthcare Costs Into a High-Net-Worth Retirement Plan
For wealthier households, Medicare is one slice of a larger healthcare picture that may include Medigap policies or Medicare Advantage, long-term care considerations, HSA balances, and self-funded out-of-pocket costs from Medicaid services transitions.
Think of Medicare premiums and IRMAA as a recurring, semi-predictable expense in your retirement cash-flow plan—not an afterthought. Part D beneficiaries and Part B users alike need this factored into projections.
High earners may prioritize access to preferred doctors and hospital networks, travel flexibility between states, and protecting a spouse. Coverage decisions should align with those values.
Questions to Ask Yourself:
- What will my MAGI likely equal at age 65?
- Do I expect any large income events between ages 63–67?
- How do Medicare premiums fit into my lifetime tax plan?
- What happens to my spouse’s benefits and coverage if I pass away first?
How Godsey & Gibb Wealth Management Supports High-Income Near-Retirees
Godsey & Gibb focuses on clients approaching or in retirement, living near Richmond, VA; Greenville, SC; Jacksonville, FL; and Phoenix, AZ.
Our in-house collaboration between wealth advisors, financial planners, and CPAs allows us to design coordinated strategies that consider investment management, tax planning, and Medicare-related income thresholds together. A separate return filed one way versus another can mean thousands in Medicare costs.
Our risk-aware investment approach can be tailored with the goal of generating needed retirement income while managing realized gains and distributions that might influence IRMAA. We help clients model multi-year retirement income scenarios incorporating RMDs, Roth conversion windows, Social Security timing, and expected Medicare premiums—so you can see how different paths affect taxes, healthcare costs, and legacy plans.
Because our tax preparation services are integrated with investment advisory for clients, adjustments such as amended returns or documentation for life-changing events can be handled cohesively rather than as disconnected steps.
If you’re a high earner concerned about Medicare costs, taxes, and multi-generational wealth, we invite you to contact Godsey & Gibb Wealth Management for a conversation on weaving Medicare and broader healthcare needs into a comprehensive, family-focused financial plan.