For many retirees, Medicare is seen as a financial relief — dependable coverage with predictable costs. But if you’re not careful, your Medicare Part B and Part D premiums can quietly eat away at your retirement savings, especially if your income is higher than average.
The key trigger is capital gains — such as converting retirement accounts or realizing large gains near retirement age. You could unknowingly trigger much higher Medicare premiums due to something called IRMAA.
This article will explain:
• What IRMAA is and how it affects Medicare premiums
• How capital gains and income surges increase your costs
• Planning strategies like Roth conversions and tax timing to reduce exposure
• 2025 IRMAA thresholds to watch for
What Is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge added to your Medicare Part B (medical insurance) and Part D (prescription drug coverage) premiums if your income is above certain thresholds.
IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. So, your 2025 Medicare premiums are based on your 2023 tax return.
If you earn above those income brackets, your premiums can increase significantly — sometimes by hundreds of dollars per month.
2025 IRMAA Income Thresholds
IRMAA is tied to your Modified Adjusted Gross Income (MAGI), not directly to tax brackets. But because it’s income-driven, it often overlaps with higher federal tax brackets.
For 2025 (based on 2023 income):
| Filing Status | MAGI Range (2023) | Part B Premium (2025) | Part D Surcharge (2025) | Approx. Federal Tax Bracket |
|---|---|---|---|---|
| Single ≤ $106,000 | ≤ $106,000 | $185 | Plan premium only | 22% |
| Married ≤ $212,000 | ≤ $212,000 | $185 | Plan premium only | 22% |
| Single $106,001–$133,000Married $212,001–$266,000 | — | $259 | +$13.70 | 24% |
| Single $133,001–$167,000Married $266,001–$334,000 | — | $370 | +$35.30 | 24–32% |
| Single $167,001–$200,000Married $334,001–$400,000 | — | $480.90 | +$57.00 | 32% |
| Single $200,001–$499,999Married $400,001–$749,999 | — | $591.90 | +$78.60 | 35% |
| Single ≥ $500,000Married ≥ $750,000 | — | $628.90 | +$85.80 | 37% |
Note: While the federal tax brackets adjust annually for inflation, the IRMAA thresholds have not been updated since 2023. The same $106,000 (single) and $212,000 (married filing jointly) thresholds still apply as the baseline.
Key Point: Even a temporary income spike — from selling your home, an IRA distribution, or capital gains — can push you into a higher IRMAA tier for an entire year.
Why This Matters: High Premiums Drain Retirement Wealth
Here’s how it plays out:
– MAGI Spike: Capital gains are included in Modified Adjusted Gross Income (MAGI), which IRMAA uses to determine Medicare premiums.
– Two-Year Lag: The income from the sale affects premiums two years later, so retirees often don’t see it coming.
– Middle-Class Vulnerability: A retiree near the IRMAA threshold can be pushed into higher tiers by a modest gain, increasing premiums significantly.
– Temporary but Costly: The increase usually lasts one year but can reduce Social Security benefits and strain fixed-income budgets.
Example: If you file jointly and your MAGI rises above $394,600 in 2023 due to an investment sale, in 2025 you could pay:
– $500+/mo for Part B
– $80–100+/mo for Part D
That’s over $7,000/year in extra Medicare costs — not including Medigap or Supplemental Insurance premiums.
How to Plan Ahead and Avoid High Premiums
- Watch Your Income at Age 63
Since Medicare uses a 2-year look-back, the year you turn 63 is crucial. If you turn 65 in 2025, Medicare looks at your 2023 income — making ages 62–63 key planning years. You can view Medicare enrollment checklist here
Social Class vs. IRMAA Impact
| Class | Typical Income Range | IRMAA Risk | Impact on Retirement |
|---|---|---|---|
| Low Income | < $50,000 | None | Minimal Medicare costs |
| Middle Class | $50,000 – $100,000 | Low | Standard premiums apply |
| Upper-Middle Class | $100,000 – $250,000 | Moderate | IRMAA tiers 1–3 possible |
| High Net Worth | $250,000+ | High | IRMAA tiers 4–5 likely |
- Use Roth Conversions Strategically
Roth conversions can help reduce Required Minimum Distributions (RMDs) later in retirement, lowering MAGI and IRMAA risk. Staying under $106,000 (single) or $212,000 (married) during conversion years can minimize future surcharges.
- Avoid Capital Gains in Key Years
Large investment sales during the two years before turning 65 could push your MAGI over an IRMAA tier. If possible, time sales before age 63 or spread gains over multiple tax years.
- Be Cautious with Home Sales
Under the updated law, up to $750,000 (single) or $1,500,000 (married) in capital gains from selling a primary residence is tax-exempt. However, high-value home sales could still push income over IRMAA thresholds. Consult a tax advisor to structure sales efficiently.
Why Supplemental Insurance Buyers Should Care
Many retirees concerned about IRMAA are not considering Medicare Advantage — they’re focused on Supplemental Insurance (Medigap). This group often has higher assets and is more likely to cross IRMAA thresholds. For them, proactive tax planning and Medicare planning should go hand in hand.
Final Thoughts
Medicare is often seen as a standard expense, but for middle- and higher-income retirees, Part B and D premiums can quietly drain retirement wealth.
By planning before age 65, especially around ages 62–63, you can:
– Reduce your future Medicare premiums
– Avoid IRMAA surcharges
– Keep more of your hard-earned savings
Let SFIB Help You Navigate Medicare Planning
Whether you’re considering a Roth conversion, selling assets, or approaching Medicare eligibility, our team can help you design a personalized strategy that protects your retirement income. Always consult with your tax and financial advisor for tailored advice.
Schedule a free consultation with one of our Florida Medicare experts today.
